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

Oppenheimer Real Estate Fund

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

6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048

Statement of Additional Information dated February 28, 2002

     This Statement of Additional Information is not a Prospectus. This document
contains  additional  information about the Fund and supplements  information in
the  Prospectus  dated  February 28, 2002.  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.

Contents
                                                                            Page
About the Fund

Additional Information About the Fund's Investment Policies and Risks...........2
     The Fund's Investment Policies.............................................2
     Other Investment Techniques and Strategies.................................2
     Investment Restrictions....................................................18
How the Fund is Managed ........................................................19
     Organization and History...................................................19
     Trustees and Officers of the Fund..........................................21
     The Manager................................................................25
Brokerage Policies of the Fund..................................................27
Distribution and Service Plans..................................................29
Performance of the Fund.........................................................33


About Your Account

How To Buy Shares...............................................................37
How To Sell Shares..............................................................46
How To Exchange Shares..........................................................51
Dividends, Capital Gains and Taxes..............................................54
Additional Information About the Fund...........................................58


Financial Information About the Fund

Independent Auditors' Report....................................................59
Financial Statements............................................................60


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  portfolio  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 Fund's portfolio manager,  who is employed by
Cornerstone Real Estate Advisers,  Inc. (the  "Subadviser") may use in selecting
portfolio securities will vary over time. The Fund is not required to use all of
the investment techniques and strategies described below at all times in seeking
its goal. It may use some of the special investment techniques and strategies at
some  times or not at all.  The  following  investment  policies  are  principal
investment policies.



     |X|  Real  Estate  Investment  Trusts.   REITs  are  sometimes   informally
characterized  as EQUITY REITs,  MORTGAGE REITs and HYBRID REITs. An EQUITY REIT
invests  primarily  in the fee  ownership  or  leasehold  ownership  of land and
buildings and derives its income  primarily from rental  income.  An EQUITY REIT
may also realize capital gains (or losses) by selling real estate  properties in
its portfolio that have  appreciated (or  depreciated) in value. A MORTGAGE REIT
invests  primarily in mortgages on real estate,  which may secure  construction,
development or long-term  loans.  A MORTGAGE REIT  generally  derives its income
primarily  from interest  payments on the credit it has extended.  A HYBRID REIT
combines the  characteristics  of EQUITY REITs and MORTGAGE REITs,  generally by
holding both ownership  interests and mortgage  interests in real estate.  It is
anticipated,  although not required,  that under normal circumstances a majority
of the Fund's investments in REITs will consist of EQUITY REITs.


     |X| Portfolio  Turnover.  "Portfolio  turnover" describes the rate at which
the Fund  traded its  portfolio  securities  during its last  fiscal  year.  For
example,  if a fund sold all of its  securities  during the year,  its portfolio
turnover  rate would have been 100%.  The Fund's  portfolio  turnover  rate will
fluctuate from year to year,  although the Fund might have a portfolio  turnover
rate of more than 100% annually.  Increased  portfolio  turnover  creates higher
brokerage  and  transaction  costs for the Fund,  which could reduce its overall
performance.  Additionally,  the  realization  of  capital  gains  from  selling
portfolio  securities may result in distributions of taxable  long-term  capital
gains to  shareholders,  since  the Fund  will  normally  distribute  all of its
capital  gains  realized  each year,  to avoid  excise  taxes under the Internal
Revenue Code.

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



     |X| Foreign Securities.  The Fund can purchase securities issued by foreign
real  estate  companies.  "Foreign  securities"  include  equity  securities  of
companies  organized  under the laws of countries  other than the United States.
They  may  be  traded  on  foreign  securities   exchanges  or  in  the  foreign
over-the-counter markets.

     Securities of foreign issuers that are  represented by American  Depository
Receipts are not considered  "foreign  securities" for the purpose of the Fund's
investment  allocations.  That is  because  they are not  subject to many of the
special  considerations  and  risks,  discussed  below,  that  apply to  foreign
securities traded and held abroad.


     Depository Receipts involve the same risks as investing directly in foreign
securities.   Those  risks  are  discussed  in  the  Prospectus  under  "Foreign
Investing."  ADRs are  receipts  typically  issued by an American  bank or trust
company  that  show  evidence  of  underlying  securities  issued  by a  foreign
corporation. The issuers of unsponsored Depository Receipts are not obligated to
disclose material information in the United States, and therefore,  there may be
less information available regarding such issuers.


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

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

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


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


     |X|  Repurchase  Agreements.  The Fund can  acquire  securities  subject to
repurchase  agreements.  It may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities  transactions,
or for 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 10% of its net assets to be subject
to repurchase  agreements having a maturity beyond seven days. There is no limit
on the  amount of the  Fund's  net  assets  that may be  subject  to  repurchase
agreements having maturities of seven days or less.

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

     |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  Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of  registering  restricted  securities  may be  negotiated by the Fund with the
issuer at the time the Fund  buys the  securities.  When the Fund  must  arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse  between the time the  decision is made to sell the  security and the
time the security is  registered  so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.

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

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

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


     |X| Loans of Portfolio  Securities.  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 in the coming
year,  but if it does so,  such  loans  will  likely not 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
finders' , custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable  tests under the Internal Revenue
Code and must  permit  the Fund to  reacquire  loaned  securities  on five days'
notice or in time to vote on any important matter.


     |X| Borrowing  for Leverage.  The Fund has the ability to borrow 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. Under current regulatory requirements, borrowings can be made only to the
extent  that the value of the Fund's  assets,  less its  liabilities  other than
borrowings,  is equal to at least 300% of all borrowings (including the proposed
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|  Non-Diversification  of  Investments.   The  Fund  is  operated  as  a
"non-diversified"  portfolio. As a non-diversified  investment company, the Fund
may be subject  to  greater  risks  than a  diversified  company  because of the
possible  fluctuation in the values of securities of fewer issuers.  However, at
the close of each fiscal  quarter at least 50% of the value of the Fund's  total
assets will be represented  by one or more of the  following:  (i) cash and cash
items, including receivables;  (ii) U.S. government securities; (iii) securities
of other regulated  investment  companies;  and (iv) securities (other than U.S.
government securities and securities of other regulated investment companies) of
any one or more issuers which meet the following limitations:  (a) the Fund will
not invest more than 5% of its total assets in the securities of any such issuer
and (b) the entire  amount of the  securities  of such issuer  owned by the Fund
will not represent more than 10% of the  outstanding  voting  securities of such
issuer.  Additionally,  not more than 25% of the value of a Fund's  total assets
may be invested in the securities of any one issuer.


     |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.

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

     |X| Hedging.  Although the Fund does not  anticipate  the  extensive use of
hedging instruments, the Fund can use hedging instruments. 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:

sell futures contracts,
buy puts on such futures or on securities, or
write covered calls on securities or futures.  Covered calls may also be used to
increase the Fund's income,  but the portfolio manager does not expect to engage
extensively in that practice.

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

buy futures, or
buy calls on such futures or on securities.

     The Fund is not  obligated  to use hedging  instruments,  even though it is
permitted  to use them in the  Manager's  discretion,  as described  below.  The
Fund'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 may buy and sell futures contracts that relate to (1)
broadly-based  stock indices  (these are referred to as "stock index  futures"),
(2) other broadly-based  securities indices (these are referred to as "financial
futures")  and  (3)  foreign  currencies  (these  are  referred  to as  "forward
contracts").

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

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

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


     No 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  index
options,  securities options, currency options,  commodities options and options
on the other types of futures described above.

     o Writing Covered Call Options.  The Fund can write (that is, sell) covered
calls. If the Fund sells a call option, it must be covered.  That means the Fund
must own the security subject to the call while the call is outstanding, or, for
certain types of calls, the call may be covered by segregating  liquid assets to
enable the Fund to satisfy its  obligations if the call is exercised.  Up to 25%
of the Fund's total assets may be subject to calls the Fund writes.

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


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


     To terminate its obligation on a call it has written, the Fund 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.


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

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

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

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


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

     |_|  Purchasing  Calls and Puts. The Fund can purchase calls on securities,
broadly-based  securities indices,  foreign currencies and futures. It may do so
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 on  securities,  broadly-based  securities  indices,
foreign  currencies  and  futures,  whether  or  not  it  holds  the  underlying
investment in its  portfolio.  When the Fund  purchases a put, it pays a premium
and,  except  as to puts  on  indices,  has the  right  to sell  the  underlying
investment  to a seller of a put on a  corresponding  investment  during the put
period at a fixed exercise price. Buying a put on securities or futures the Fund
owns enables the Fund to attempt to protect itself during the put period against
a decline in the value of the underlying  investment below the exercise price by
selling  the  underlying  investment  at the  exercise  price to a  seller  of a
corresponding put. If the market price of the underlying  investment is equal to
or above the  exercise  price  and,  as a result,  the put is not  exercised  or
resold,  the put will become  worthless at its expiration date. In that case the
Fund  will  have  paid the  premium  but lost the  right to sell the  underlying
investment.  However,  the Fund 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  held  in a
segregated  account by its custodian  bank) upon conversion or exchange of other
foreign currency held in its portfolio.

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


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

     The Fund's option  activities might 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 put, or buys or sells an  underlying  investment  in  connection
with the  exercise  of a call or put.  Those  commissions  could be  higher on a
relative  basis  than  the  commisions  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 additional appreciation in excess
of the covered  call price 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  to
its custodian  bank assets  having a value equal to the aggregate  amount of the
Fund's commitment under forward contracts.  The Fund will not enter into forward
contracts or maintain a net exposure to such  contracts if the  consummation  of
the contracts  would obligate the Fund to deliver an amount of foreign  currency
in  excess of the  value of the  Fund's  portfolio  securities  or other  assets
denominated  in that  currency  or another  currency  that is the subject of the
hedge.


     However,  to avoid excess  transactions and transaction costs, the Fund may
maintain  a net  exposure  to  forward  contracts  in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that  excess.  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.

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


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

     The Fund can  enter  into swap  transactions  with  certain  counterparties
pursuant to master netting agreements.  A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral  agreement.  If amounts are payable on a  particular  date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that  currency  shall be the net amount.  In  addition,  the master
netting  agreement  may provide that if one party  defaults  generally or on one
swap,  the  counterparty  can terminate all of the swaps with that party.  Under
these  agreements,  if a default results in a loss to one party,  the measure of
that  party's  damages is  calculated  by  reference  to the  average  cost of a
replacement  swap for each swap. It is measured by the  mark-to-market  value at
the time of the  termination of each swap. The gains and losses on all swaps are
then netted, and the result is the  counterparty's  gain or loss on termination.
The  termination of all swaps and the netting of gains and losses on termination
is generally referred to as "aggregation."

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


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

     Under the Investment Company Act, when the Fund purchases a future, it must
maintain cash or readily  marketable  short-term  debt  instruments in an amount
equal to the market  value of the  securities  underlying  the future,  less the
margin  deposit  applicable  to it. The account must be a segregated  account or
accounts  held by the  Fund's  custodian  bank.  The Fund  will  maintain  other
segregated accounts in appropriate cases.


     |_| 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  company  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    (rated   in   the   top   two    rating    categories    of
     nationally-recognized  rating  organizations or deemed by the Manager to be
     of comparable  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.

     These  short-term debt  securities  would 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.  If
securities of foreign companies are selected,  the issuer must have assets of at
least (U.S.) $1 billion.

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:

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 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| Does the Fund  Have  Additional  Fundamental  Policies?  The  following
investment  restrictions are fundamental policies of the Fund as contemplated by
the Investment Company Act of 1940 (the "Act"). The limitations of the following
policies may be changed to the extent that the corresponding policies of the Act
are changed by amendment, exemptive or interpretive relief.


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 50% of the Fund's total assets. The
     limit does not apply to securities issued by the U.S.  government or any of
     its  agencies  or  instrumentalities  or  securities  of  other  investment
     companies.

o    The Fund cannot make loans except as permitted by the Act.  Permitted loans
     under the Act include (a) the lending of  securities,  (b) the  purchase of
     debt  instruments or similar  evidences of  indebtedness,  (c) an interfund
     lending program (if applicable) with other affiliated funds,  provided that
     no such loan may be made if, as a result, the aggregate of such loans would
     exceed 33 1/3% of the value of its total  assets  (taken at market value at
     the time of such loans), and (d) through repurchase agreements.
o    The Fund cannot  borrow  except as permitted by the Act.  Currently the Act
     permits loans only from banks and/or  affiliated  investment  companies and
     only to the extent that the value of its assets less its liabilities  other
     than borrowing is equal to at least 300% of all  borrowings  (including the
     proposed borrowing.)

o    The Fund will  concentrate  investments in the real estate  industry.  That
     means it will invest 25% or more of its total  assets in  companies  in the
     real estate industry.

o    The Fund cannot invest in other  investment  companies except to the extent
     permitted  by the Act.  The Fund would be  permitted  under this  policy to
     invest  its assets in the  securities  of one or more  open-end  management
     investment  company  for  which the  Manager,  one of its  affiliates  or a
     successor is the investment adviser or sub-adviser. That fund or funds must
     have substantially the same fundamental investment objective,  policies and
     limitations as the Fund.  This policy also would permit the Fund to adopt a
     "master-feeder"  structure.  Under  that  structure,  the  Fund  would be a
     "feeder" fund and would invest all of its assets in a single pooled "master
     fund" in which other feeder funds could also invest.  This could enable the
     Fund to take advantage of potential  operational  and cost  efficiencies in
     the master-feeder  structure. The Fund has no present intention of adopting
     the  master-feeder  structure.  If it  did  so,  the  Prospectus  and  this
     Statement of Additional Information would be revised accordingly.  The Fund
     cannot underwrite  securities of other companies except as permitted by the
     Act. 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.
     Securities  issued by  companies  which  invest in real estate or interests
     therein,  or securities  directly or  indirectly  secured by real estate or
     interests therein are not considered to be investments in real estate.
o    The Fund cannot issue "senior  securities," except as permitted by the Act.
     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.

Non-Fundamental 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  with the  exception  of the  borrowing
policy.  The Fund need not sell securities to meet the percentage  limits if the
value of the investment increases in proportion to the size of the Fund.

     For purposes of the Fund's policy not to concentrate its investments except
in the real  estate  industry  as  described  above,  the Fund has  adopted  the
industry classifications set forth in Appendix A to this Statement of Additional
Information.  The industry  classifications  may be changed from time to time by
the Fund.

How the Fund is Managed

Organization and History.  The Fund is an open-end,  non-diversified  management
investment  company with an unlimited number of authorized  shares of beneficial
interest.  The Fund was organized as a Massachusetts  business trust on November
27, 2001.

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

     Classes of Shares. The Board of Trustees has the power, without shareholder
approval,  to divide unissued  shares of the Fund into two or more classes.  The
Board has done so, and the Fund  currently has 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.

     The Trustees are authorized 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.

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

     Shareholders  have the right,  upon the  declaration  in writing or vote of
two-thirds  of the  outstanding  shares of the Fund,  to remove a  Trustee.  The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of its outstanding shares.
If the  Trustees  receive a request from at least 10  shareholders  stating that
they wish to communicate with other  shareholders to request a meeting to remove
a Trustee,  the  Trustees  will then  either  make the Fund's  shareholder  list
available  to  the  applicants  or  mail  their   communication   to  all  other
shareholders at the applicants'  expense.  The  shareholders  making the request
must have been  shareholders for at least six months and must hold shares of the
Fund  valued  at  $25,000  or more or  constituting  at least  1% of the  Fund's
outstanding  shares,  whichever is less. 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.  However,  this does not cover the prohibited acts referred to
in sections 17(h) and (i) under the Investment Company Act of 1940.

Trustees  and Officers of the Fund.  The Fund's  Trustees and officers and their
principal  occupations and business affiliations and occupations during the past
five years are listed  below.  Trustees  denoted  with an asterisk (*) below are
deemed to be "interested  persons" of the Fund under the Investment Company Act.
All of the  Trustees  are also  trustees or  directors  of the  following  Board
IV-based Oppenheimer funds:

                         Tremont Market Neutral Fund LLC
                          Tremont Opportunity Fund LLC
                          Oppenheimer Real Estate Fund

     Messrs. Murphy, Bishop, Farrar, Molleur, Wixted and Zack and Mses. Feld and
Ives who are officers of the Fund,  respectively  hold the same offices with the
other  Oppenheimer  funds.  As of the  date  of  this  Statement  of  Additional
Information,  the  Trustees  and the  officers of the Fund as a group owned less
than 1% of the outstanding shares of the Fund.

Robert G. Zack,  Trustee,  Vice President and Secretary,  (Since  November 2001)
Age: 53. 498 Seventh Avenue, New York, New York 10018
Acting General Counsel (From November 1, 2001), Senior Vice President (since May
1985),  Associate  General  Counsel  (From May 1981 until  November  1, 2001) of
OppenheimerFunds, Inc.; Assistant Secretary of Shareholder Services, Inc. (since
May  1985),   Shareholder  Financial  Services,   Inc.  (since  November  1989);
OppenheimerFunds  International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.

Denis R. Molleur, Trustee,  Assistant Secretary,  (Since November 2001) Age: 44.
498 Seventh Avenue, New York, New York 10018
Vice President and Senior  Counsel of the Manager (since July 1999);  an officer
of other Oppenheimer  funds;  formerly a Vice President and Associate Counsel of
the Manager (September 1991 - July 1999).


Dina C. Lee, Trustee, Age: 31.
498 Seventh Avenue, New York, New York 10018
Assistant  Vice  President  and  Assistant  Counsel of the Manager;  Formerly an
attorney and Assistant Secretary of Van Eck Global (until December 2000).


John V. Murphy, President, Age 52.
498 Seventh Avenue, New York, New York 10018.
Chairman  and  Chief  Executive  Officer  and  director  (since  July  2001) and
President  (since  August  2000)  of  OFI;  President  and a  trustee  of  other
Oppenheimer  funds;  President and a director  (since July 2001) of  Oppenheimer
Acquisition Corp., OFI's parent holding company, and of Oppenheimer  Partnership
Holdings,  Inc. (since July 2001), a holding company subsidiary of OFI; Chairman
and  a  director  (since  July  2001)  of  Shareholder  Services,  Inc.  and  of
Shareholder  Financial  Services,  Inc.,  transfer  agent  subsidiaries  of OFI;
President  (since  November  1,  2001)  and a  director  (since  July  2001)  of
Oppenheimer Real Asset  Management,  Inc., an investment  adviser  subsidiary of
OFI;  President  and a director  (since  July 2001) of  OppenheimerFunds  Legacy
Program,  a  charitable  trust  program  established  by OFI; a director  (since
November 2001) of Trinity  Investment  Management  Corp.  and Tremont  Advisers,
Inc.,  investment  advisory  affiliates of OFI, and of OAM  Institutional,  Inc.
(since  November  2001),  an  investment  advisory  subsidiary  of  OFI,  and of
HarbourView  Asset  Management  Corporation  and OFI Private  Investments,  Inc.
(since July 2001),  investment  adviser  subsidiaries of OFI; formerly President
and trustee (from November 1999 to November 2001) of MML Series  Investment Fund
and  MassMutual  Institutional  Funds,  open-end  investment  companies;   Chief
Operating  Officer  (August 2000 - July 2001) of OFI;  Executive  Vice President
(from 1995 to 1997) of MassMutual Financial Group;  Executive Vice President and
Chief Operating Officer (from 1995 to 1997) of David L. Babson & Company, an
investment  adviser;  Chief  Operating  Officer  (from  1993 to 1996) of Concert
Capital Management, Inc., an investment adviser.

Scott Westphal, Portfolio Manager, Age: 45.
405 Lexington Avenue, New York, NY 10174
Managing Director (since August 1999) of the SubAdvisor;  an officer and manager
of other  Cornerstone real estate  securities  portfolios;  prior to joining the
SubAdvisor in August 1999,  he was an Executive  Vice  President at Jones,  Lang
&  Wootton  (March  1998 - July 1999);  prior to that,  he was a Senior Vice
President at Cohen & Steers Capital Management (May 1994 - March 1998).

Brian W. Wixted, Treasurer, Age: 42.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
(since March 1999) of  HarbourView  Asset  Management  Corporation,  Shareholder
Services,  Inc.,  Oppenheimer  Real Asset  Management  Corporation,  Shareholder
Financial  Services,  Inc. and Oppenheimer  Partnership  Holdings,  Inc., of OFI
Private   Investments,   Inc.   (since  March  2000)  and  of   OppenheimerFunds
International  Ltd.  and  Oppenheimer  Millennium  Funds plc  (since  May 2000);
Treasurer and Chief  Financial  Officer  (since May 2000) of  Oppenheimer  Trust
Company; Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp.
and of Centennial Asset Management Corporation;  an officer of other Oppenheimer
funds;  formerly Principal and Chief Operating Officer,  Bankers Trust Company -
Mutual Fund  Services  Division  (March 1995 - March 1999);  Vice  President and
Chief  Financial  Officer  of  CS  First  Boston  Investment   Management  Corp.
(September 1991 - March 1995).

Katherine P. Feld, Assistant Secretary, Age: 43.
498 Seventh Avenue, New York, New York 10018
Vice  President  and Senior  Counsel of the  Manager  (since  July  1999);  Vice
President of OppenheimerFunds Distributor, Inc. (since June 1990); an officer of
other Oppenheimer funds;  formerly a Vice President and Associate Counsel of the
Manager (June 1990 - July 1999).

Kathleen T. Ives, Assistant Secretary, Age: 36.
6803 South Tucson Way, Englewood, CO 80112
Vice  President  and  Assistant  Counsel of the Manager  (since  June 1998);  an
officer of other  Oppenheimer  funds;  formerly an Assistant  Vice President and
Assistant  Counsel of the  Manager  (August  1997 - June  1998);  and  Assistant
Counsel of the Manager (August 1994 - August 1997).


Robert J. Bishop, Assistant Treasurer, Age: 43.
6803 South Tucson Way, Englewood, Colorado 80112

Vice  President  of the  Manager/Mutual  Fund  Accounting  (since May 1996);  an
officer of other Oppenheimer funds;  formerly an Assistant Vice President of the
Manager/Mutual  Fund Accounting (April 1994 - May 1996) and a Fund Controller of
the Manager.


Scott T. Farrar, Assistant Treasurer, Age: 36.
6803 South Tucson Way, Englewood, Colorado 80112

Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer  Millennium  Funds plc (since October 1997); an officer
of  other  Oppenheimer  Funds;  formerly  an  Assistant  Vice  President  of the
Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund Controller of
the Manager.

     Committees of the Board of Trustees.  The Trustees have  appointed an Audit
Committee,  comprised  of  Messers  Wold,  Wickler  and  Abdow,  all of whom are
independent  Trustees.  The Audit Committee is scheduled to meet one time during
the fiscal year ended  April 30,  2002.  The Board of  Trustees  does not have a
standing nominating or compensation committee.

     The Audit Committee furnishes the Board with recommendations  regarding the
selection of the  independent  auditor.  Other  functions of the Audit Committee
include:  (i)  reviewing  the scope and  results  of audits  and the audit  fees
charged;  (ii) reviewing reports from the Fund's  independent  auditor regarding
the adequacy of the Fund's  internal  accounting  procedures  and controls;  and
(iii)  establishing  a  separate  line  of  communication   between  the  Fund's
independent auditors and its Non-Affiliated Trustees.

     Based on the Audit Committee's recommendation, the Board of Trustees of the
Fund,  including a majority of the  Non-Affiliated  Trustees,  at a meeting held
February 12,  2002,  selected  Ernst &  Young LLP ("Ernst  &  Young") as
auditors  of the Fund.  Ernst &  Young also  serves as auditors  for certain
other funds for which the Manager acts as investment advisor.

     It is anticipated the Ernst & Young will perform audit services for the
Fund  including  the audit of the  Fund's  financial  statements,  review of the
Fund's annual  report and  registration  statement  amendment,  consultation  on
financial  accounting  and  reporting  matters,  and meetings  with the Board of
Trustees.

     |X|  Remuneration of Trustees.  The officers of the Fund and one Trustee of
the Fund (Mr.  Murphy) who are affiliated  with the Manager receive no salary or
fee  from  the  Fund.   The  remaining   Trustees  will  receive  the  estimated
compensation shown below during the Fund's fiscal year ending April 30, 2003. As
of the date of this  Statement of  Additional  Information  the Fund has paid no
compensation  to the  Trustees  because  the  Fund is a new  fund  with no prior
operations.

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


                                                          Total
                              Estimated                Compensation
                         Aggregate Compensation       From all Board IV
Trustee's Name                From Fund1                Oppenheimer
And Position                                          Funds (3 Funds)2

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

                              $7,333                      $18,000

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

                              $7,333                      $18,000

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

                              $7,333                      $18,000

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

                              $7,333                      $18,000

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

1.  Estimated Aggregate Compensation Annual retainer fees and meeting fees
2.  Estimated annual compensation assuming attendance at quarterly meetings

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

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


     Trustee  Ownership  of Shares of the Fund and  other  Board IV  Oppenheimer
Funds.  As of date of this  Statement of  Additional  Information,  each Trustee
owned of record or  beneficially  the dollar  range  indicated  of shares of the
Fund, and on an aggregate basis shares in any of the Board IV-based  Oppenheimer
Funds.

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

Name of Trustee         Dollar Range of Fund    Dollar Range of Shares Owned in
                        Shares Owned            any of the Board IV-based
                                                Oppenheimer Funds.

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

                       None                       None


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

                       None                       None


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

                       None                       None


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

                       None                       None


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

                       None                        None

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

     |X| Major  Shareholders.  As of the date of this  Statement  of  Additional
Information,  OppenheimerFunds,  Inc. was the only  shareholder of record of the
Fund.

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


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

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


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

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


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


     The  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.

     For the initial  approval of the Fund's  investment  advisory  agreement in
February  2002,  the Board  considered,  with its  counsel:  (i) the quality and
extent of the services to be provided to the Fund by the Manager; (ii) the depth
of  organization,  expertise and experience of the Manager;  (iii) the financial
resources of the Manager;  (iv) the ability of the Manager to retain and attract
qualified personnel; (v) the performance of assets managed by the Manager in the
Fund's  investment  style;  (vi)  benefits  derived  by  the  Manager  from  its
relationship  with the  Fund,  including  receipt  of  tangible  and  intangible
research by allocating the Fund's  brokerage per section 28(e) of the Securities
Exchange Act of 1934;  and (vii) the overall  experience  and  reputation of the
Manager in providing  such services to investment  companies.  In addition,  the
Board reviewed and discussed the terms and conditions of the investment advisory
agreement. Based upon its review, the Board of Trustees concluded that the terms
of the Fund's investment advisory agreement are reasonable, fair and in the best
interests of the Fund and its  shareholders,  and that the fees provided therein
are fair and  reasonable  in light of the usual and  customary  charges  made by
others for services of the same nature and quality.


The  Sub-Advisor.  The Sub Advisor is a wholly owned subsidiary of Massachusetts
Mutual Life Insurance Company ("MassMutual"), the parent company of the Manager.

     The Sub-Advisory  Agreement.  Under the Sub-Advisory  Agreement between the
Manager and the Sub-Advisor,  the Sub-Advisor shall regularly provide investment
advice with respect to the Fund and invest and reinvest cash, securities and the
property  comprising  the assets of the Fund.  The  Sub-Advisor  also  agrees to
provide assistance in the distribution and marketing of the Fund.


     Under the  Sub-Advisory  Agreement,  the Manager  pays the  Sub-Advisor  an
annual fee in monthly installments, based on the average daily net assets of the
Fund. The fee paid to the Sub-Advisor  under the Sub-Advisory  Agreement is paid
by the Manager, not by the Fund. The Adviser will pay the SubAdviser a fee equal
to 40% of the investment  management fee collected by the Adviser from the Fund,
which shall be calculated after any investment management fee waivers (voluntary
or  otherwise).  Notwithstanding  the  foregoing,  if the  Adviser,  without the
SubAdviser's  concurrence,   agrees  to  voluntarily  waive  a  portion  of  the
investment  management  fee the  Fund is  required  to pay to the  Adviser,  the
SubAdviser's fee hereunder shall be based upon the investment management fee the
Fund would have to pay  exclusive of any such waiver agreed to by the Adviser in
its sole  descretion."


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

Brokerage Policies of the Fund


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

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


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


Brokerage  Practices  Followed by the  Sub-Advisor.  The  Sub-Advisor  allocates
brokerage for the Fund subject to the provisions of the  Sub-Advisory  Agreement
and the procedures  and rules  described  above.  Generally,  the  Sub-Advisor's
portfolio   traders   allocate   brokerage   based  upon  best   execution   and
recommendations from research.  In certain instances,  the portfolio manager may
directly place trades and allocate brokerage.  In either case, the Sub-Advisor's
executive officers supervise the allocation of brokerage.

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


     The Sub-Advisor serves as investment manager to MassMutual,  and may in the
future  act  as  investment  manager  to  others.  It is  the  practice  of  the
Sub-Advisor to allocate purchase or sale  transactions  among the Fund and other
clients  whose  assets  it  manages  in a  manner  it deems  equitable.  If such
securities  are  purchased  for the  clients  at or about  the same  time,  such
purchases  normally  will be  combined  to the extent  practicable,  and will be
allocated  as nearly as  practicable  on a pro rata basis in  proportion  to the
amounts to be purchased  for each. In  determining  the amounts to be purchased,
the  Sub-Advisor  considers  several  main  factors,  including  the  respective
investment  objectives,  the relative size of portfolio  holdings of the same or
comparable  securities,  the  availability of cash for  investment,  the size of
investment   commitments   generally  held  and  the  opinions  of  the  persons
responsible for managing the portfolios of the Fund and other client's accounts.

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

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


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

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

     The Board of Trustees permits the Sub-Advisor to use stated  commissions on
secondary fixed-income agency trades to obtain research if the broker represents
to the  Sub-Advisor  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 Sub-Advisor 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  broadens  the  scope  and
supplements the research  activities of the Sub-Advisor.  That research provides
additional views and comparisons for consideration, and helps the Sub-Advisor to
obtain market  information  for the valuation of securities that are either held
in the Fund's  portfolio or are being  considered for purchase.  The Sub-Advisor
provides  information to the Manager and the Board about the commissions paid to
brokers furnishing such services, together with the Sub-Advisor's representation
that the  amount of such  commissions  was  reasonably  related  to the value or
benefit of such services.


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.  Expenses
normally attributable to sales are borne by the Distributor.

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.  Each plan has also been  approved  by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable  class.  The shareholder  votes for the plans were cast by the
Manager as the sole initial holder of each class of shares of the Fund.


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


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

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

     While the Plans are in effect,  the  Treasurer  of the Fund  shall  provide
separate  written  reports  on the  plans  to the  Board  of  Trustees  at least
quarterly  for its review.  The Reports  shall detail the amount of all payments
made under a plan, the purpose for which the payments were made and the identity
of each recipient of a payment. The reports on the Class B Plan and Class C Plan
shall also include the Distributor's  distribution costs for that quarter and in
the case of the Class B plan the  amount  of those  costs  for  previous  fiscal
periods that have been carried forward.  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 plan for a class, no payment will be made to any recipient in any
quarter in which the  aggregate net asset value of all Fund shares of that class
held by the  recipient  for itself and its  customers  does not exceed a minimum
amount,  if  any,  that  may be set  from  time to  time  by a  majority  of the
Independent Trustees.  The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.

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

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

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

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

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

     The asset-based  sales charges on Class B, Class C and Class N shares allow
investors to buy shares  without a front-end  sales  charge  while  allowing the
Distributor  to  compensate  dealers that sell those  shares.  The Fund pays the
asset-based  sales  charges to the  Distributor  for its  services  rendered  in
distributing  Class B, Class C and Class N shares.  The payments are made to the
Distributor in recognition that the Distributor:

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

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

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

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

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.  For periods of less than one year,
the Fund may quote its  performance on a  non-annualized  basis.  You can obtain
current  performance  information  by  calling  the  Fund's  Transfer  Agent  at
1.800.525.7048.

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

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

Totalreturns 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.

The  Fund's performance  returns do not reflect the effect of taxes on dividends
     and capital gains distributions.

An   investment  in the Fund is not insured by the FDIC or any other  government
     agency.  The principal value of the Fund's shares and total returns are not
     guaranteed and normally will fluctuate on a daily basis.

When an  investor's  shares  are  redeemed,  they may be worth more or less than
     their  original  cost.  Total  returns for any given past period  represent
     historical  performance   information  and  are  not,  and  should  not  be
     considered, a prediction of future returns.

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


     |X| Total Return Information.  There are different types of "total returns"
to measure  the  Fund's  performance.  Total  return is the change in value of a
hypothetical  investment  in the Fund  over a given  period,  assuming  that all
dividends and capital gains  distributions  are reinvested in additional  shares
and that  the  investment  is  redeemed  at the end of the  period.  Because  of
differences  in expenses  for each class of shares,  the total  returns for each
class are separately  measured.  The cumulative total return measures the change
in value over the entire period (for example, 10 years). An average annual total
return  shows the  average  rate of return for each year in a period  that would
produce the  cumulative  total return over the entire period.  However,  average
annual total returns do not show actual year-by-year performance.  The Fund uses
standardized  calculations  for its total  returns as prescribed by the SEC. The
methodology is discussed below.


     In calculating total returns for Class A shares,  the current maximum sales
charge of 5.75% (as a  percentage  of the offering  price) is deducted  from the
initial  investment  ("P") (unless the return is shown without sales charge,  as
described  below).  For Class B shares,  payment  of the  applicable  contingent
deferred  sales charge is applied,  depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth  years,  2.0%  in the  fifth  year,  1.0%  in the  sixth  year  and  none
thereafter.  For Class C 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 and life-of-class
periods as applicable. There is no sales charge for Class Y shares.

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

                     ERV - 1 = AVERAGE ANNUAL TOTAL RETURN
                     -------
                         P

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


                             ERV - P = TOTAL RETURN
                            ---------
                                 P


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


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


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


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

     Morningstar  proprietary  star rankings  reflect  historical  risk-adjusted
total  investment  return.  For each  fund with at least a  three-year  history,
Morningstar  calculates a Morningstar  RatingTM metric each month by subtracting
the return on a 90-day U.S. Treasury Bill from the fund's  load-adjusted  return
for the same period, and then adjusting this excess return for risk. The top 10%
of funds in each broad asset  class  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. 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 Ratings metrics.

     The Fund may also  compare  its  performance  to that of other funds in its
Morningstar  category,  in addition  to its star  ratings.  Those  total  return
rankings  are  percentages  from one percent to one hundred  percent and are not
risk adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds in the same category performed better than it did.

     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.

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

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

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

How to Buy Shares

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

AccountLink.  When shares are purchased through AccountLink,  each purchase must
be at least  $5,000.  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. That instruction must be received prior to the close
of The New York  Stock  Exchange  that day.  Dividends  will  begin to accrue on
shares  purchased  with the proceeds of ACH  transfers on the business day after
the shares are  purchased.  The Exchange  normally  closes at 4:00 P.M., but may
close  earlier on certain  days.  The  proceeds of ACH  transfers  are  normally
received  by the Fund three  days  after the  transfers  are  initiated.  If the
proceeds of the ACH transfer are not received on a timely basis, the Distributor
reserves the right to cancel the purchase  order.  The  Distributor and the Fund
are not responsible for any delays in purchasing shares resulting from delays in
ACH transmissions.

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

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

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

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


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

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


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

1 - "OSM" stands for Oppenheimer Select Managers

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

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

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

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

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

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

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

Terms of Escrow That Apply to Letters of Intent.

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


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


     3.  If,  at the end of the 13 month  Letter  of  Intent  period  the  total
purchases  pursuant  to the Letter are less than the  intended  purchase  amount
specified in the Letter,  the investor must remit to the  Distributor  an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales  charges  which would have been paid if the total amount
purchased  had been made at a single  time.  That sales charge  adjustment  will
apply to any shares  redeemed  prior to the  completion  of the  Letter.  If the
difference  in sales charges is not paid within 20 days after a request from the
Distributor  or  the  dealer,  the  Distributor  will,  within  60  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.


     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)  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.


Retirement  Plans.  Certain types of  retirement  plans are entitled to purchase
shares of the Fund without  sales charge or at reduced  sales charge  rates,  as
described in Appendix B to this  Statement of  Additional  Information.  Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily  valuation  basis by Merrill Lynch
Pierce Fenner &  Smith,  Inc.  ("Merrill  Lynch") or an  independent  record
keeper that has a contract or special  arrangement with Merrill Lynch. If on the
date the plan sponsor signed the Merrill Lynch record keeping service  agreement
the plan has less than $3 million in assets (other than assets invested in money
market funds) invested in applicable  investments,  then the retirement plan may
purchase only Class B shares of the Oppenheimer  funds.  Any retirement plans in
that  category  that  currently  invest  in Class B shares of the Fund will have
their  Class B shares  converted  to Class A shares of the Fund when the  plan's
applicable investments reach $5 million.


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

Classes of Shares.  Each class of shares of the Fund  represents  an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder  privileges and features.  The net income  attributable  to Class B,
Class C, Class N or Class Y shares and the  dividends  payable on Class B, Class
C,  Class N or Class Y 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 than another.

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

|X| Class A Shares Subject to a Contingent  Deferred Sales Charge. For purchases
of Class A shares 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 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.

     Class B Conversion.  Under current  interpretations  of applicable  federal
income tax law by the Internal Revenue Service, the conversion of Class B shares
to Class A shares  after six  years is not  treated  as a taxable  event for the
shareholder.  If  those  laws or the IRS  interpretation  of those  laws  should
change,  the automatic  conversion  feature may be suspended.  In that event, no
further conversions of Class B shares would occur while that suspension remained
in effect. Although Class B shares could then be exchanged for Class A shares on
the basis of relative net asset value of the two classes, without the imposition
of a sales charge or fee, such exchange could constitute a taxable event for the
holder, 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,
o    to  all  direct  rollovers  from  OppenheimerFunds-sponsored  Pinnacle  and
     Ascender retirement plans,
o    to all trustee-to-trustee IRA transfers,
o    to all 90-24 type 403(b) transfers,
o    to Group  Retirement  Plans (as defined in Appendix C to this  Statement of
     Additional  Information)  which have entered into a special  agreement with
     the Distributor for that purpose,
o    to  Retirement  Plans  qualified  under  Sections  401(a)  or 401(k) of the
     Internal  Revenue Code, the  recordkeeper or the plan sponsor for which has
     entered into a special agreement with the Distributor,
o    to Retirement  Plans of a plan sponsor  where the  aggregate  assets of all
     such plans invested in the Oppenheimer funds is $500,000 or more,
o    to  OppenheimerFunds-sponsored  Ascender  401(k)  plans  that  pay  for the
     purchase  with the  redemption  proceeds  of Class A shares  of one or more
     Oppenheimer funds.
o    to certain  customers of  broker-dealers  and  financial  advisors that are
     identified in a special  agreement  between the  broker-dealer or financial
     advisor and the Distributor for that purpose.

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

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


     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).

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

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


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

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


Equity securities traded on a U.S.  securities  exchange or on NASDAQ are valued
as follows:


(1)  if last sale information is regularly reported, they are valued at the last
     reported sale price on the  principal  exchange on which they are traded or
     on NASDAQ, as applicable, on that day, or
(2)  if 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.

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.

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.


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.


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.

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

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


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

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


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


How to Sell Shares


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


Reinvestment  Privilege.  Within six months of a redemption,  a shareholder  may
reinvest all or part of the redemption proceeds of:

     Class A shares purchased  subject  to an  initial  sales  charge or Class A
          shares on which a contingent deferred sales charge was paid, or
     Class B shares that were  subject to the Class B contingent deferred  sales
          charge when redeemed.

     The reinvestment may be made without sales charge only in Class A shares of
the Fund or any of the other Oppenheimer funds into which shares of the Fund are
exchangeable as described in "How to Exchange Shares" below.  Reinvestment  will
be at the net asset value next computed  after the Transfer  Agent  receives the
reinvestment  order.  The  shareholder  must  ask the  Transfer  Agent  for that
privilege at the time of reinvestment. This privilege does not apply to Class C,
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,  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 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 $500 or such lesser amount as the Board
may fix.  The Board will not cause the  involuntary  redemption  of shares in an
account if the  aggregate  net asset value of such  shares has fallen  below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the  requirements  for any notice to be given to the
shareholders  in question (not less than 30 days).  The Board may  alternatively
set  requirements  for the shareholder to increase the investment,  or set other
terms and conditions so that the shares would not be involuntarily redeemed.

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

     If less than all shares  held in an account are  transferred,  and some but
not all shares in the account  would be subject to a contingent  deferred  sales
charge if redeemed at the time of  transfer,  the  priorities  described  in the
Prospectus  under "How to Buy Shares" for the imposition of the Class B, Class N
or Class C 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,  403(b)(7)  custodial  plans,  401(k) plans or
pension   or   profit-sharing   plans   should   be   addressed   to   "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must:



     (1)  state the reason for the distribution;
     (2)  state the owner's  awareness of tax penalties if the  distribution  is
          premature; and
     (3)  conform  to  the  requirements  of  the  plan  and  the  Fund's  other
          redemption requirements.

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

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

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

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


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

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


     The Fund cannot guarantee  receipt of a payment on the date requested.  The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice.  Because of the sales charge  assessed on Class A
share purchases,  shareholders  should not make regular additional Class A share
purchases while participating in an Automatic  Withdrawal Plan. Class B, 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 $25.  Instructions should be
provided   on   the   OppenheimerFunds   application   or   signature-guaranteed
instructions.  Exchanges made under these plans are subject to the  restrictions
that  apply  to  exchanges  as set  forth  in "How to  Exchange  Shares"  in the
Prospectus and below in this Statement of Additional Information.


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

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

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

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

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


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


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

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

How to Exchange Shares

     As stated in the  Prospectus,  shares of a particular  class of Oppenheimer
funds having more than one class of shares may be  exchanged  only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class  designation are deemed "Class A" shares for this
purpose.  You can obtain a current list showing  which funds offer which classes
by calling the Distributor at 1.800.525.7048.


     o    All of the  Oppenheimer  funds currently offer Class A, B and C shares
          except  Oppenheimer  Money Market Fund, Inc.,  Oppenheimer Real Estate
          Fund,  Centennial  Money Market  Trust,  Centennial  Tax Exempt Trust,
          Centennial  Government  Trust,  Centennial  New York Tax Exempt Trust,
          Centennial  California Tax Exempt Trust, and Centennial  America Fund,
          L.P., which only offer Class A shares.

o    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    Only certain  Oppenheimer  funds  currently  offer Class Y shares.  Class Y
     shares of  Oppenheimer  Real Asset Fund may not be exchanged  for shares of
     any other fund.
o    Only certain  Oppenheimer  funds currently offer Class N shares,  which are
     only offered to retirement  plans as described in the  Prospectus.  Class N
     shares can be exchanged only for Class N shares of other Oppenheimer funds.
o    Class M shares of Oppenheimer  Convertible Securities Fund may be exchanged
     only  for  Class A  shares  of  other  Oppenheimer  funds.  They may not be
     acquired by exchange of shares of any class of any other  Oppenheimer funds
     except Class A shares of Oppenheimer  Money Market Fund or Oppenheimer Cash
     Reserves acquired by exchange of Class M shares.
o    Class X shares of Limited  Term New York  Municipal  Fund can be  exchanged
     only for Class B shares of other  Oppenheimer funds and no exchanges may be
     made to Class X shares.
o    Shares of Oppenheimer  Capital  Preservation  Fund may not be exchanged for
     shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
     Oppenheimer  Limited-Term  Government  Fund.  Only  participants in certain
     retirement  plans may purchase shares of Oppenheimer  Capital  Preservation
     Fund, and only those  participants may exchange shares of other Oppenheimer
     funds for shares of Oppenheimer Capital Preservation Fund.
o    Class A shares of Oppenheimer  Senior  Floating Rate Fund are not available
     by exchange of shares of Oppenheimer Money Market Fund or Class A shares of
     Oppenheimer  Cash  Reserves.  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    Class A, Class B, Class C and Class Y Shares of Oppenheimer Select Managers
     Mercury  Advisors  S&P Index Fund and  Oppenheimer  Select  Managers QM
     Active  Balanced  Fund are  only  available  to  retirement  plans  and are
     available  only by  exchange  from  the  same  class  of  shares  of  other
     Oppenheimer funds held by retirement plans.
o    Class A shares of Oppenheimer funds may be exchanged at net asset value for
     shares of any money market fund offered by the  Distributor.  Shares of any
     money market fund  purchased  without a sales  charge may be exchanged  for
     shares of Oppenheimer funds offered with a sales charge upon payment of the
     sales charge. They may also be used to purchase shares of Oppenheimer funds
     subject to an early withdrawal charge or contingent deferred sales charge.

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

     Shares of the Fund acquired by reinvestment  of dividends or  distributions
from any of the other  Oppenheimer  funds or from any unit investment  trust for
which  reinvestment  arrangements  have been made  with the  Distributor  may be
exchanged at net asset value for shares of any of the Oppenheimer funds.

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


How Exchanges Affect Contingent  Deferred Sales Charges.  No contingent deferred
sales charge is imposed on exchanges of shares of any class purchased subject to
a contingent  deferred sales charge.  However,  when Class A shares  acquired by
exchange of Class A shares of other  Oppenheimer  funds  purchased  subject to a
Class A contingent  deferred  sales charge are redeemed  within 18 months of the
end of the  calendar  month of the  initial  purchase of the  exchanged  Class A
shares, the Class A contingent  deferred sales charge is imposed on the redeemed
shares.  The Class B  contingent  deferred  sales  charge is  imposed on Class B
shares acquired by exchange if they are redeemed within six years of the initial
purchase of the exchanged Class B shares. The Class C contingent  deferred sales
charge is imposed on Class C shares  acquired by  exchange if they are  redeemed
within 12 months of the initial  purchase of the exchanged Class C shares.  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.


     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.

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

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

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


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

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

     |X| Qualification as a Regulated  Investment Company.  The Fund has elected
to be taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a regulated investment company, the Fund is
not subject to federal  income tax on the portion of its net  investment  income
(that is, taxable interest, dividends, and other taxable ordinary income, net of
expenses)  and  capital  gain net income  (that is, the excess of net  long-term
capital  gains  over net  short-term  capital  losses)  that it  distributes  to
shareholders.  That qualification  enables the Fund to "pass through" its income
and realized  capital gains to  shareholders  without having to pay tax on them.
This avoids a "double tax" on that income and capital gains,  since shareholders
normally  will be taxed on the dividends and capital gains they receive from the
Fund  (unless  their  Fund  shares  are  held  in a  retirement  account  or the
shareholder is otherwise  exempt from tax). The Internal Revenue Code contains a
number of complex tests relating to  qualification  that the Fund might not meet
in a particular year. If it did not qualify as a regulated  investment  company,
the Fund would be treated for tax purposes as an ordinary  corporation and would
receive no tax deduction for payments made to shareholders.

     To qualify as a regulated  investment company,  the Fund must distribute at
least 90% of its investment  company  taxable  income (in brief,  net investment
income and the excess of net short-term  capital gain over net long-term capital
loss)  for  the  taxable  year.  The  Fund  must  also  satisfy   certain  other
requirements of the Internal  Revenue Code,  some of which are described  below.
Distributions  by the Fund made  during the  taxable  year or,  under  specified
circumstances, within twelve 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, U.S. government  securities,  securities of other regulated
investment  companies,  and  securities  of other  issuers.  As to each of those
issuers, the Fund must not have invested more than 5% of the value of the Fund's
total assets in  securities  of each such issuer and the Fund must not hold more
than 10% of the outstanding  voting securities of each such issuer. No more than
25% of the value of its total  assets may be invested in the  securities  of any
one issuer  (other  than U.S.  government  securities  and  securities  of other
regulated  investment  companies),  or in two or more  issuers  which  the  Fund
controls and which are engaged in the same or similar trades or businesses.  For
purposes of this test,  obligations  issued or guaranteed by certain agencies or
instrumentalities  of  the  U.S.  government  are  treated  as  U.S.  government
securities.

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

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

     Special  provisions of the Internal  Revenue Code govern the eligibility of
the  Fund's  dividends  for  the  dividends-received   deduction  for  corporate
shareholders.  Long-term  capital gains  distributions  are not eligible for the
deduction.  The amount of  dividends  paid by the Fund that may  qualify for the
deduction is limited to the aggregate  amount of qualifying  dividends  that the
Fund derives  from  portfolio  investments  that the Fund has held for a minimum
period,  usually 46 days. A corporate  shareholder  will not be eligible for the
deduction  on  dividends  paid on Fund shares  held for 45 days or less.  To the
extent the Fund's  dividends are derived from gross income from option premiums,
interest  income or  short-term  gains from the sale of  securities or dividends
from foreign  corporations,  those dividends will not qualify for the deduction.
Since it is  anticipated  that most of the Fund's  income  will be derived  from
interest it receives on its  investments,  the Fund does not anticipate that its
distributions will qualify for this 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  long-term
capital  gain. It does not 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, it is expected that the Fund also will elect to have  shareholders
of record on the last day of its  taxable  year  treated  as if each  received a
distribution of their pro rata share of such gain. 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  and remit to the
U.S.  Treasury 31% of ordinary income dividends and capital gains  distributions
and the proceeds of the redemption of shares,  paid to any  shareholder  (1) who
has failed to provide a correct,  certified taxpayer  identification number, (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).

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

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

     |X| Foreign Shareholders. Taxation of a shareholder who under United States
law  is a  nonresident  alien  individual,  foreign  trust  or  estate,  foreign
corporation,  or foreign partnership depends on whether the shareholder's income
from the Fund is effectively  connected with a U.S. trade or business carried on
by such shareholder.

     If the income from the Fund is not effectively  connected with a U.S. trade
or business carried on by a foreign shareholder,  ordinary income dividends paid
to such foreign shareholder will be subject to U.S. withholding tax. The rate of
the tax  depends  on a  number  of  factors.  If the  income  from  the  Fund is
effectively  connected  with a U.S.  trade or  business  carried on by a foreign
shareholder,  then ordinary income  dividends,  capital gain dividends,  and any
gains  realized  upon the sale of  shares of the Fund  will be  subject  to U.S.
federal  income  tax at the  rates  applicable  to  U.S.  citizens  or  domestic
corporations.

     In the  case  of a  foreign  non-corporate  shareholder,  the  Fund  may be
required to withhold U.S.  federal income tax at a rate of 31% on  distributions
that are otherwise  exempt from  withholding tax (or taxable at a reduced treaty
rate) unless the  shareholder  furnishes  the Fund with proper  notification  of
their foreign status.

     The tax  consequences  to a  foreign  shareholder  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 advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.


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


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

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


The Board of Trustees and Shareholder
Oppenheimer Real Estate Fund:



Denver, Colorado
_______ ______, 2002

                          Oppenheimer Real Estate Fund

                       Statement of Assets and Liabilities






                                   Appendix A

                            Industry Classifications


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

                                   Appendix B

         OppenheimerFunds Special Sales Charge Arrangements and Waivers

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

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

For the purposes of some of the waivers  described  below and in the  Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans:

(1)  plans  qualified  under Sections  401(a) or 401(k) of the Internal  Revenue
     Code,
(2)  non-qualified deferred compensation plans,
(3)  employee benefit plans4
(4)  Group Retirement Plans5
(5)  403(b)(7) custodial plan accounts
(6)  Individual  Retirement Accounts ("IRAs"),  including traditional IRAs, Roth
     IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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

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

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

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

     There is no initial  sales  charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent  deferred  sales charge if redeemed  within 18
months of the end of the calendar month of their  purchase,  as described in the
Prospectus (unless a waiver described  elsewhere in this Appendix applies to the
redemption).  Additionally,  on shares  purchased  under these  waivers that are
subject to the Class A contingent  deferred sales charge,  the Distributor  will
pay the  applicable  concession  described  in the  Prospectus  under  "Class  A
Contingent Deferred Sales Charge."6 This waiver provision applies to:

-    Purchases of Class A shares aggregating $1 million or more.
-    Purchases  of Class A shares by a  Retirement  Plan that was  permitted  to
     purchase  such  shares  at net  asset  value but  subject  to a  contingent
     deferred sales charge prior to March 1, 2001.
-    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).
-    Purchases by a Retirement  Plan whose record  keeper had a  cost-allocation
     agreement with the Transfer Agent on or before March 1, 2001.

II. Waivers of Class A Sales Charges of Oppenheimer Funds

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

Class A shares purchased by the following investors are not subject to any Class
A sales  charges  (and  no  concessions  are  paid  by the  Distributor  on such
purchases):

-    The Manager or its affiliates.

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

-    Registered  management  investment  companies,   or  separate  accounts  of
     insurance companies having an agreement with the Manager or the Distributor
     for that purpose.

-    Dealers or brokers that have a sales  agreement  with the  Distributor,  if
     they  purchase  shares for their own accounts or for  retirement  plans for
     their employees.

-    Employees and registered  representatives (and their spouses) of dealers or
     brokers  described above or financial  institutions  that have entered into
     sales  arrangements  with such dealers or brokers (and which are identified
     as such to the  Distributor)  or with the  Distributor.  The purchaser must
     certify to the Distributor at the time of purchase that the purchase is for
     the purchaser's  own account (or for the benefit of such employee's  spouse
     or minor children).

-    Dealers, brokers, banks or registered investment advisors that have entered
     into an agreement with the Distributor  providing  specifically for the use
     of shares of the Fund in particular  investment  products made available to
     their  clients.  Those  clients may be charged a  transaction  fee by their
     dealer, broker, bank or advisor for the purchase or sale of Fund shares.

-    Investment  advisors  and  financial  planners  who  have  entered  into an
     agreement for this purpose with the Distributor and who charge an advisory,
     consulting  or other fee for their  services  and buy  shares for their own
     accounts or the accounts of their clients.

-    "Rabbi trusts" that buy shares for their own accounts, if the purchases are
     made  through a broker or agent or other  financial  intermediary  that has
     made special arrangements with the Distributor for those purchases.

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

-    Directors,  trustees,  officers or full-time employees of OpCap Advisors or
     its affiliates,  their relatives or any trust,  pension,  profit sharing or
     other benefit plan which beneficially owns shares for those persons.

-    Accounts for which Oppenheimer Capital (or its successor) is the investment
     advisor (the Distributor  must be advised of this  arrangement) and persons
     who are  directors  or  trustees  of the  company  or  trust  which  is the
     beneficial owner of such accounts.

-    A unit investment trust that has entered into an appropriate agreement with
     the Distributor.

-    Dealers,  brokers,  banks,  or  registered  investment  advisers  that have
     entered into an agreement  with the  Distributor  to sell shares to defined
     contribution  employee  retirement  plans for which the  dealer,  broker or
     investment adviser provides administration services.

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

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

Class A shares issued or purchased in the following transactions are not subject
to  sales  charges  (and no  concessions  are  paid by the  Distributor  on such
purchases):

-    Shares  issued  in  plans  of  reorganization,   such  as  mergers,   asset
     acquisitions and exchange offers, to which the Fund is a party.
-    Shares  purchased by the  reinvestment of dividends or other  distributions
     reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer
     Cash   Reserves)  or  unit   investment   trusts  for  which   reinvestment
     arrangements have been made with the Distributor.
-    Shares  purchased  through a broker-dealer  that has entered into a special
     agreement with the Distributor to allow the broker's  customers to purchase
     and pay for  shares  of  Oppenheimer  funds  using the  proceeds  of shares
     redeemed in the prior 30 days from a mutual fund (other than a fund managed
     by the Manager or any of its subsidiaries) on which an initial sales charge
     or contingent  deferred sales charge was paid.  This waiver also applies to
     shares  purchased by exchange of shares of  Oppenheimer  Money Market Fund,
     Inc. that were  purchased and paid for in this manner.  This waiver must be
     requested when the purchase order is placed for shares of the Fund, and the
     Distributor may require evidence of qualification for this waiver.
-    Shares  purchased  with the  proceeds  of maturing  principal  units of any
     Qualified Unit Investment Liquid Trust Series.
-    Shares purchased by the reinvestment of loan repayments by a participant in
     a Retirement Plan for which the Manager or an affiliate acts as sponsor.

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

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

-    To make Automatic  Withdrawal Plan payments that are limited annually to no
     more than 12% of the account value adjusted annually.
-    Involuntary  redemptions  of  shares  by  operation  of law or  involuntary
     redemptions of small accounts  (please refer to "Shareholder  Account Rules
     and Policies," in the applicable fund Prospectus).
-    For distributions  from Retirement Plans,  deferred  compensation  plans or
     other employee benefit plans for any of the following purposes:

(1)  Following the death or disability (as defined in the Internal Revenue Code)
     of the participant or beneficiary. The death or disability must occur after
     the participant's account was established.
(2)  To return excess contributions.
(3)  To return contributions made due to a mistake of fact.
(4)  Hardship withdrawals, as defined in the plan.7
(5)  Under a Qualified  Domestic  Relations  Order,  as defined in the  Internal
     Revenue Code, or, in the case of an IRA, a divorce or separation  agreement
     described in Section 71(b) of the Internal Revenue Code.
(6)  To meet the minimum distribution requirements of the Internal Revenue Code.
(7)  To make  "substantially  equal  periodic  payments" as described in Section
     72(t) of the Internal Revenue Code.
(8)  For loans to participants or beneficiaries.
(9)  Separation from service.8
(10) Participant-directed redemptions to purchase shares of a mutual fund (other
     than a fund managed by the Manager or a  subsidiary  of the Manager) if the
     plan has made special arrangements with the Distributor.

(11) Plan termination or "in-service  distributions," if the redemption proceeds
     are rolled over directly to an OppenheimerFunds-sponsored IRA.
-    For  distributions  from  Retirement  Plans  having  500 or  more  eligible
     employees,   except   distributions  due  to  termination  of  all  of  the
     Oppenheimer funds as an investment option under the Plan.
-    For distributions  from 401(k) plans sponsored by broker-dealers  that have
     entered into a special agreement with the Distributor allowing this waiver.

III. Waivers of Class B, 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,  including a trustee of a
     grantor  trust or revocable  living trust for which the trustee is also the
     sole  beneficiary.  The death or disability  must have  occurred  after the
     account was established,  and for disability you must provide evidence of a
     determination of disability by the Social Security Administration.

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

-    Redemptions  of Class B shares held by  Retirement  Plans whose records are
     maintained on a daily  valuation  basis by Merrill Lynch or an  independent
     record keeper under a contract with Merrill Lynch.

-    Redemptions of Class C shares of  Oppenheimer  U.S.  Government  Trust from
     accounts of clients of  financial  institutions  that have  entered  into a
     special arrangement with the Distributor for this purpose.

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

-    Distributions9  from Retirement  Plans or other employee  benefit plans for
     any of the following purposes:
(1)  Following the death or disability (as defined in the Internal Revenue Code)
     of the participant or beneficiary. The death or disability must occur after
     the participant's account was established in an Oppenheimer fund.
(2)  To return excess contributions made to a participant's account.
(3)  To return contributions made due to a mistake of fact.
(4)  To make hardship withdrawals, as defined in the plan.10
(5)  To make  distributions  required under a Qualified Domestic Relations Order
     or, in the case of an IRA, a divorce or separation  agreement  described in
     Section 71(b) of the Internal Revenue Code.
(6)  To meet the minimum distribution requirements of the Internal Revenue Code.
(7)  To make  "substantially  equal  periodic  payments" as described in Section
     72(t) of the Internal Revenue Code.
(8)  For loans to participants or beneficiaries.11
(9)  On account of the participant's separation from service.12
(10) Participant-directed redemptions to purchase shares of a mutual fund (other
     than a fund managed by the Manager or a subsidiary of the Manager)  offered
     as an investment  option in a Retirement  Plan if the plan has made special
     arrangements with the Distributor.
(11) Distributions  made  on  account  of a  plan  termination  or  "in-service"
     distributions,  if the  redemption  proceeds are rolled over directly to an
     OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible  employees,
     except  distributions  made  because  of  the  elimination  of  all  of the
     Oppenheimer funds as an investment option under the Plan.
(13) For  distributions   from  a  participant's   account  under  an  Automatic
     Withdrawal  Plan after the  participant  reaches age 59 1/2, as long as the
     aggregate value of the  distributions  does not exceed 10% of the account's
     value, adjusted annually.
(14) 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.
(15) For distributions  from 401(k) plans sponsored by broker-dealers  that have
     entered  into a special  arrangement  with the  Distributor  allowing  this
     waiver.
-    Redemptions  of  Class B  shares  or  Class C  shares  under  an  Automatic
     Withdrawal  Plan  from  an  account  other  than a  Retirement  Plan if the
     aggregate value of the redeemed shares does not exceed 10% of the account's
     value annually.

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

The  contingent  deferred  sales  charge  is also  waived on Class B and Class C
shares sold or issued in the following cases:

     -    Shares sold to the Manager or its affiliates.
     -    Shares sold to registered  management investment companies or separate
          accounts of insurance  companies  having an agreement with the Manager
          or the Distributor for that purpose.
     -    Shares issued in plans of reorganization to which the Fund is a party.
     -    Shares  sold to present or former  officers,  directors,  trustees  or
          employees (and their "immediate  families" as defined above in Section
          I.A.) of the Fund, the Manager and its affiliates and retirement plans
          established by them for their employees.

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

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

Oppenheimer Quest Value Fund, Inc.
Oppenheimer Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

     -- Waiver of Class A Sales Charges for Certain Shareholders. Class A shares
purchased by the  following  investors are not subject to any Class A initial or
contingent deferred sales charges:

     -    Shareholders  who  were  shareholders  of the AMA  Family  of Funds on
          February 28, 1991 and who  acquired  shares of any of the Former Quest
          for Value Funds by merger of a portfolio of the AMA Family of Funds.
     -    Shareholders who acquired shares of any Former Quest for Value Fund by
          merger of any of the portfolios of the Unified Funds.

     --  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:

     -    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
     -    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:

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

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

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

The initial and  contingent  deferred  sale charge rates and waivers for Class A
and Class B shares described in the respective  Prospectus (or this Appendix) of
the  following  Oppenheimer  funds  (each is  referred  to as a  "Fund"  in this
section):

     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.

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

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

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

Oppenheimer  Convertible  Securities  Fund  (referred  to as the  "Fund" in this
section)  may sell Class M shares at net asset value  without any initial  sales
charge to the classes of investors  listed  below who,  prior to March 11, 1996,
owned shares of the Fund's  then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:

-    the Manager and its affiliates,
-    present or former  officers,  directors,  trustees and employees (and their
     "immediate  families"  as  defined in the Fund's  Statement  of  Additional
     Information)  of the Fund, the Manager and its  affiliates,  and retirement
     plans  established by them or the prior investment  advisor of the Fund for
     their employees,
-    registered   management   investment  companies  or  separate  accounts  of
     insurance  companies that had an agreement with the Fund's prior investment
     advisor or distributor for that purpose,
-    dealers or brokers that have a sales  agreement  with the  Distributor,  if
     they  purchase  shares for their own accounts or for  retirement  plans for
     their employees,
-    employees and registered  representatives (and their spouses) of dealers or
     brokers described in the preceding  section or financial  institutions that
     have entered  into sales  arrangements  with those  dealers or brokers (and
     whose identity is made known to the  Distributor) or with the  Distributor,
     but  only if the  purchaser  certifies  to the  Distributor  at the time of
     purchase that the purchaser meets these qualifications,
-    dealers,  brokers, or registered  investment advisors that had entered into
     an agreement  with the  Distributor  or the prior  distributor  of the Fund
     specifically  providing  for  the  use of  Class M  shares  of the  Fund in
     specific investment products made available to their clients, and
-    dealers, brokers or registered investment advisors that had entered into an
     agreement with the Distributor or prior distributor of the Fund's shares to
     sell shares to defined contribution employee retirement plans for which the
     dealer, broker, or investment advisor provides administrative services.

--------

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

Oppenheimer Real Estate Fund

Investment Advisor
         OppenheimerFunds, Inc.
         498 Seventh Avenue
         New York, New York 10018

Subadviser
         Cornerstone Real Estate Advisers, Inc.
         405 Lexington Avenue - 35th Floor
         New York, New York 10174-3559

Distributor
         OppenheimerFunds Distributor, Inc.
         498 Seventh Avenue
         New York, New York 10018

Transfer Agent
         OppenheimerFunds Services
         P.O. Box 5270
         Denver, Colorado 80217
         1.800.525.7048


Custodian Bank
         Citibank, N.A.
         399 Park Avenue
         New York, New York 10043


Independent Auditors

         Ernst & Young, LLP
         787 Seventh Avenue
         New York, NY 10019


Legal Counsel
         Mayer, Brown & Platt
         1675 Broadway
         New York, New York 10019-5820


PX0590.0202