Oppenheimer Capital Appreciation Fund

6308 South Tuscan Way, Englewood, Colorado 80112
1-800-525-7048

Statement of Additional Information dated December 28, 2001

         This  Statement  of  Additional  Information  is  not a  Prospectus.  This  document  contains  additional
information  about the Fund and  supplements  information in the  Prospectus  dated December 28, 2001. It should be
read  together  with the  Prospectus.  You can obtain the  Prospectus  by  writing  to the Fund's  Transfer  Agent,
OppenheimerFunds  Services,  at P.O. Box 5270,  Denver,  Colorado  80217,  or by calling the Transfer  Agent at the
toll-free   number  shown  above,   or  by  downloading  it  from  the   OppenheimerFunds   Internet  web  site  at
www.oppenheimerfunds.com.

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

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

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

Appendix A: Industry Classifications....................................................................  A-1
Appendix B: Special Sales Charge Arrangements and Waivers...............................................  A-2







ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

         The investment  objective,  the principal investment policies and the main risks of the Fund are described
in the  Prospectus.  This  Statement  of  Additional  Information  contains  supplemental  information  about those
policies and risks and the types of securities  that the Fund's  investment  Manager,  OppenheimerFunds,  Inc., 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 Manager may
use in selecting  portfolio  securities  will vary over time. The Fund is not required to use all of the investment
techniques  and  strategies  described  below at all  times in  seeking  its goal.  It may use some of the  special
investment techniques and strategies at some times or not at all.

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

         |X|  Investments  in Equity  Securities.  The Fund focuses its  investments in equity  securities.  Equity
securities include common stocks,  preferred stocks,  rights and warrants,  and securities  convertible into common
stock.  The Fund's  investments  may include stocks of companies of all market  capitalization  ranges:  small-cap,
mid-cap and large-cap.  At times, the Fund may increase its emphasis on equity  investments in securities of one or
more capitalization  ranges,  based upon the Manager's judgment of where are the best market  opportunities to seek
the Fund's  objective.  It may use some of the specific  investment  techniques and strategies some times or not at
all.

         In selecting  securities for the Fund's portfolio,  the Manager  evaluates a number of factors,  including
among them:
         |_|  the history of the issuer's operations and financial results,
         |_|  prospects for the industry of which the issuer is part,
         |_|  pending product developments and those of competitors,
         |_|  the effect of general market and economic conditions on the issuer's business,
         |_|  legislative proposals that might affect the issuer, and
         |_|  the issuer's current financial condition.

         Current income is not a criterion used to select equity securities.  However,  certain debt securities may
be selected for the Fund's  portfolio for defensive  purposes  (including debt securities that the Manager believes
may offer some opportunities for capital appreciation when stocks are disfavored).

         The Fund can invest in  securities of small cap issuers  (having  market  capitalizations  of less than $1
billion).  Securities of small  capitalization  issuers may be subject to greater price  volatility in general than
securities of large-cap and mid-cap  companies.  Therefore,  to the degree that the Fund has investments in smaller
capitalization  companies  at times of market  volatility,  the Fund's  share price may  fluctuate  more.  As noted
below, the Fund limits investments in unseasoned small cap issuers.

                  |_|  Convertible  Securities.  While  convertible  securities are a form of debt security in many
cases,  their conversion  feature (allowing  conversion into equity  securities) causes them to be regarded more as
"equity  equivalents."  As a  result,  the  rating  assigned  to the  security  has less  impact  on the  Manager's
investment  decision  with  respect to  convertible  securities  than in the case of  non-convertible  fixed income
securities.  To determine whether  convertible  securities should be regarded as "equity  equivalents," the Manager
examines the following factors:
(1)      whether,  at the option of the investor,  the convertible  security can be exchanged for a fixed number of
              shares of common stock of the issuer,
(2)      whether the issuer of the  convertible  securities  has restated its earnings per share of common stock on
              a fully diluted basis (considering the effect of conversion of the convertible securities), and
(3)      the extent to which the  convertible  security  may be a  defensive  "equity  substitute,"  providing  the
              ability to participate in any appreciation in the price of the issuer's common stock.

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

         |X|  Foreign  Securities.  The Fund can  purchase  equity  securities  issued  or  guaranteed  by  foreign
companies  or debt  securities  issued  by  foreign  governments.  "Foreign  securities"  include  equity  and debt
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 or that are listed on
a U.S. securities exchange or traded in the U.S.  over-the-counter  markets are not considered "foreign securities"
for the purpose of the Fund's investment  allocations.  That is because they are not subject to many of the special
considerations and risks, discussed below, that apply to foreign securities traded and held abroad.

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

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

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

         |X| Portfolio  Turnover.  "Portfolio  turnover"  describes the rate at which the Fund traded its portfolio
securities  during its last fiscal year.  For example,  if a fund sold all of its  securities  during the year, its
portfolio  turnover  rate would have been 100%.  The Fund's  portfolio  turnover rate will  fluctuate  from year to
year,  although the Fund does not expect to have a portfolio  turnover rate of more than 100%  annually.  Increased
portfolio  turnover  creates  higher  brokerage and  transaction  costs for the Fund,  which may reduce its overall
performance.  Additionally,  the  realization  of capital  gains from selling  portfolio  securities  may result in
distributions of taxable  long-term capital gains to shareholders,  since the Fund will normally  distribute all of
its capital gains realized each year, to avoid excise taxes under the Internal Revenue Code.

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

         |X| Investing in Small,  Unseasoned  Companies.  The Fund can invest in  securities  of small,  unseasoned
companies.  These are companies that have been in operation for less than three years,  including the operations of
any  predecessors.  Securities of these  companies  may be subject to  volatility in their prices.  They may have a
limited trading market,  which may adversely  affect the Fund's ability to dispose of them and can reduce the price
the Fund might be able to obtain  for them.  Other  investors  that own a  security  issued by a small,  unseasoned
issuer for which there is limited  liquidity  might trade the security  when the Fund is  attempting  to dispose of
its  holdings  of that  security.  In that case the Fund might  receive a lower price for its  holdings  than might
otherwise be obtained. The Fund currently intends to invest no more than 5% of its net assets in those securities.

         |X| Repurchase Agreements.  The Fund can acquire securities subject to repurchase agreements.  It might do
so for  liquidity  purposes to meet  anticipated  redemptions  of Fund  shares,  or pending the  investment  of the
proceeds  from sales of Fund  shares,  or pending the  settlement  of  portfolio  securities  transactions,  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 Fund's Board of Trustees 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 can also  acquire  restricted  securities  through  private  placements.  Those  securities  have
contractual  restrictions on their public resale.  Those  restrictions might limit the Fund's ability to dispose of
the securities and might lower the amount the Fund could realize upon the sale.

         The Fund has limitations  that apply to purchases of restricted  securities,  as stated in the Prospectus.
Those  percentage  restrictions  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.  As a fundamental  policy,  these loans are limited to not more than 25% of the value of the Fund's total
assets.  The Fund currently  does not intend to engage in loans of  securities,  but if it does so, such loans will
not likely exceed 5% of the Fund's total assets.

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

         When it lends  securities,  the Fund  receives  amounts  equal to the  dividends  or  interest  on  loaned
securities.  It also  receives  one or more of (a)  negotiated  loan  fees,  (b)  interest  on  securities  used as
collateral,  and (c) interest on any short-term debt securities  purchased with such loan  collateral.  Either type
of  interest  may be  shared  with  the  borrower.  The  Fund  may also  pay  reasonable  finder's,  custodian  and
administrative  fees in  connection  with these  loans.  The terms of the Fund's loans must meet  applicable  tests
under the Internal  Revenue Code and must permit the Fund to reacquire  loaned  securities  on five 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| Debt  Securities.  While the Fund does not invest for the purpose of seeking current income,  at times
certain debt  securities may be selected for  investment by the Fund for defensive  purposes,  as described  below.
For example,  when the stock market is volatile,  or when the portfolio manager believes that growth  opportunities
in stocks are not attractive,  certain debt securities  might provide not only offer  defensive  opportunities  but
also some  opportunities  for capital  appreciation.  These  investments could include corporate bonds and notes of
U.S.  companies,  as well as U.S.  government  securities,  especially  zero-coupon or "stripped" U. S.  government
securities.  It is not expected that this will be a significant  portfolio strategy of the Fund under normal market
circumstances.

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

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

         Investing in zero-coupon  securities  could cause the Fund to recognize  income and make  distributions to
shareholders  before it receives  any cash  payments on the  zero-coupon  investment.  To generate  cash to satisfy
those  distribution  requirements,  the Fund might have to sell portfolio  securities  that it otherwise might have
continued to hold or to use cash flows from other sources such as the sale of Fund shares.

                  |_| Credit Risk. Debt  securities are subject to credit risk.  Credit risk relates to the ability
of the issuer of a debt  security to make  interest or  principal  payments on the  security as they become due. If
the issuer fails to pay  interest,  the Fund's  income may be reduced and if the issuer  fails to repay  principal,
the value of that bond and of the Fund's  shares may be  reduced.  The  Manager  may rely to some  extent on credit
ratings by  nationally  recognized  rating  agencies in evaluating  the credit risk of securities  selected for the
Fund's  portfolio.  It may also use its own research and analysis.  Many factors affect an issuer's ability to make
timely payments, and the credit risks of a particular security may change over time.

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

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

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

         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.

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

         To terminate its  obligation  on a call it has written,  the Fund 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 may 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 a loss if it sells the
underlying  investment.  That loss will be equal to the sum of the sale price of the underlying  investment and the
premium received minus the sum of the exercise price and any transaction costs the Fund incurred.

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

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

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

         The Fund can buy puts whether or not it holds the underlying  investment in its  portfolio.  When the Fund
purchases  a put,  it pays a premium  and,  except  as to puts on  indices,  has the  right to sell the  underlying
investment to a seller of a put on a  corresponding  investment  during the put period at a fixed  exercise  price.
Buying a put on  securities  or futures the Fund owns enables the Fund to attempt to protect  itself during the put
period  against a decline  in the value of the  underlying  investment  below the  exercise  price by  selling  the
underlying  investment  at the  exercise  price to a seller of a  corresponding  put.  If the  market  price of the
underlying  investment  is equal to or above the  exercise  price and,  as a result,  the put is not  exercised  or
resold,  the put will become  worthless at its  expiration  date.  In that case the Fund will have paid the premium
but lost the right to sell the underlying  investment.  However, the Fund 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  could affect its portfolio  turnover  rate and brokerage  commissions.  The
exercise of calls written by the Fund might cause the Fund to sell related  portfolio  securities,  thus increasing
its turnover  rate. The exercise by the Fund of puts on securities  will cause the sale of underlying  investments,
increasing  portfolio  turnover.  Although  the  decision  whether to  exercise a put it holds is within the Fund's
control,  holding a put might cause the Fund to sell the related  investments  for reasons  that would not exist in
the absence of the put.

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

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

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

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

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

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

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

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

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

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

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

         The Fund could also use forward  contracts to lock in the U.S. dollar value of portfolio  positions.  This
is called a "position  hedge." When the Fund believes  that foreign  currency  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.

         |_|  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 adviser as the
Fund (or an adviser that is an affiliate of the Fund's  adviser).  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.

         |_| 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  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  reinvest cash received from the sale of other  portfolio
securities. The Fund can buy:
         |_|   high-quality (rated in the top 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,
         |_|   commercial paper  (short-term,  unsecured,  promissory notes of domestic or foreign companies) rated
               in the top rating category of a nationally recognizes rating organization,
         |_|   debt  obligations  of  corporate  issuers,  rated  investment  grade  (rated at least Baa by Moody's
               Investors  Service,  Inc. or at least BBB by Standard & Poor's  Corporation,  or a comparable rating
               by another rating  organization),  or unrated  securities  judge by the Manager to have a comparable
               quality to rated securities in those categories,
         |_|   preferred stocks,
         |_|   certificates  of deposit and  bankers'  acceptances  of domestic  and foreign  banks and savings and
               loan associations, and
         |_|   repurchase agreements.

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

Investment Restrictions

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

|_|      The Fund  cannot  buy  securities  issued  or  guaranteed  by any one  issuer if more than 5% of its total
              assets would be invested in  securities  of that issuer or if it would then own more than 10% of that
              issuer's voting  securities.  That restriction  applies to 75% of the Fund's total assets.  The limit
              does  not  apply  to  securities   issued  by  the  U.S.   Government  or  any  of  its  agencies  or
              instrumentalities or securities of other investment companies.
|_|      The Fund cannot make loans except as permitted by the Act.  Permitted  loans under the Act include the (a)
              lending of  securities,  (b)  through  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)1,   and   (d)
              through repurchase agreements.
|_|      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.)
|_|      The Fund cannot  concentrate  investments.  That means it cannot invest 25% or more of its total assets in
              companies in any one industry.  This  requirement does not apply to investments in other mutual funds
              as permitted below.
|_|      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.
|_|      The Fund cannot  invest in real estate or in interests in real estate.  Readily-marketable  securities  of
              companies  holding real estate or interests in real estate are not  considered to be  investments  in
              real estate.
|_|      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.

How the Fund is Managed

Organization and History.  The Fund is an open-end,  diversified  management  investment  company with an unlimited
number of authorized shares of beneficial  interest.  The Fund was organized as a Maryland  corporation in 1980 and
reorganized as a Massachusetts business trust in 1987.

         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 2person, to the extent permitted by law.

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
Trustees or Directors of the following New York-based Oppenheimer funds2:

Oppenheimer California Municipal Fund                     Oppenheimer International Growth Fund
Oppenheimer Capital Appreciation Fund                     Oppenheimer International Small Company Fund
Oppenheimer Capital Preservation Fund                     Oppenheimer Money Market Fund, Inc.
Oppenheimer Concentrated Growth Fund                      Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund                       Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund                                Oppenheimer Multi-State Municipal Trust
Oppenheimer Emerging Growth Fund                          Oppenheimer Municipal Bond Fund
Oppenheimer Emerging Technologies Fund                    Oppenheimer New York Municipal Fund
Oppenheimer Enterprise Fund                               Oppenheimer Series Fund, Inc.
Oppenheimer Europe Fund                                   Oppenheimer Special Value Fund
Oppenheimer Global Fund                                   Oppenheimer Trinity Core Fund
Oppenheimer Global Growth & Income Fund                   Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer Gold & Special Minerals Fund                  Oppenheimer Trinity Value Fund
Oppenheimer Growth Fund                                   Oppenheimer U.S. Government Trust


         Messrs.  Murphy,  Spiro, Wixted,  Zack, Bishop,  Farrar and Molleur and Ms. Feld and Ms. Ives respectively
hold the same offices with the other New  York-based  Oppenheimer  funds as with the Fund. As of December __, 2001,
the  Trustees  and  officers of the Fund as a group owned of record or  beneficially  less than 1% of each class of
shares of the Fund. The foregoing  statement does not reflect  ownership of shares of the Fund held of record by an
employee  benefit plan for  employees of the Manager,  other than the shares  beneficially  owned under the plan by
the officers of the Fund listed  above.  Mr.  Murphy and Mr. Zack are  trustees of that plan.  Ms.  Putnam,  as the
Fund's portfolio manager, receives advice and counsel from other members of the Manager's Equity Department.

Leon Levy, Chairman of the Board of Trustees, Age: 76.
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners,  L.P.  (investment  partnership) (since 1982) and Chairman of Avatar Holdings,
Inc. (real estate development).

Donald W. Spiro, Vice Chairman of the Board of Trustees, Age: 76.
399 Ski Trail, Smoke Rise, New Jersey 07405
Formerly he held the following  positions:  Chairman Emeritus (August 1991 - August 1999),  Chairman (November 1987
-  January  1991)  and a  director  (January  1969 -  August  1999)  of the  Manager;  President  and  Director  of
OppenheimerFunds  Distributor,  Inc., a subsidiary of the Manager and the Fund's  Distributor  (July 1978 - January
1992).

John V. Murphy*, President and Trustee, Age: 52.
498 7th Avenue, New York, New York 10018
Chairman and Chief Executive Officer and director (since July 2001) and President (since August 2000) of the
Manager; President and a trustee of other Oppenheimer funds; President and a director (since July 2001) of
Oppenheimer Acquisition Corp., the Manager's parent holding company, and of Oppenheimer Partnership Holdings,
Inc. (since July 2001), a holding company subsidiary of the Manager; Chairman and a director (since July 2001) of
Shareholder Services, Inc. and of Shareholder Financial Services, Inc., transfer agent subsidiaries of the
Manager; President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset
Management, Inc., an investment adviser subsidiary of the Manager; President and a director (since July 2001) of
OppenheimerFunds Legacy Program, a charitable trust program established by the Manager; a director (since
November 2001) of Trinity Investment Management Corp. and Tremont Advisers, Inc., investment advisory affiliates
of the Manager, and of OAM Institutional, Inc. (since November 2001), an investment advisory subsidiary of the
Manager, and of HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001),
investment adviser subsidiaries of the Manager; 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 the Manager; 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 advisor; Chief Operating Officer (from 1993 to 1996) of Concert Capital
Management, Inc., an investment advisor.

Robert G. Galli, Trustee, Age: 68.
19750 Beach Road, Jupiter, FL 33469
A Trustee or  Director  of other  Oppenheimer  funds.  Formerly  he held the  following  positions:  Vice  Chairman
(October  1995 - December  1997) and  Executive  Vice  President  (December  1977 - October  1995) of the  Manager;
Executive Vice President and a director (April 1986 - October 1995) of HarbourView Asset Management Corporation.

Phillip A. Griffiths, Trustee, Age: 63.
97 Olden Lane, Princeton, N. J. 08540
The  Director of the  Institute  for  Advanced  Study,  Princeton,  N.J.  (since 1991) and a member of the National
Academy of Sciences  (since  1979);  formerly  (in  descending  chronological  order) a director  of Bankers  Trust
Corporation,  Provost and Professor of Mathematics at Duke University,  a director of Research Triangle  Institute,
Raleigh, N.C., and a Professor of Mathematics at Harvard University.

Benjamin Lipstein, Trustee, Age: 78.
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business Administration, New York University.

Elizabeth B. Moynihan, Trustee, Age: 72.
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and  architectural  historian;  a trustee of the Freer  Gallery of Art  (Smithsonian  Institute),  Executive
Committee of Board of Trustees of the National  Building  Museum;  a member of the Trustees  Council,  Preservation
League of New York State.
Kenneth A. Randall, Trustee, Age: 74.
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion  Resources,  Inc. (electric utility holding company),  Dominion Energy, Inc. (electric power
and oil & gas  producer),  and Prime Retail,  Inc. (real estate  investment  trust);  formerly  President and Chief
Executive Officer of The Conference Board, Inc.  (international  economic and business  research) and a director of
Lumbermens  Mutual  Casualty  Company,  American  Motorists  Insurance  Company and American  Manufacturers  Mutual
Insurance Company.

Edward V. Regan, Trustee, Age: 71.
40 Park Avenue, New York, New York 10016
Chairman of Municipal  Assistance  Corporation  for the City of New York;  Senior  Fellow of Jerome Levy  Economics
Institute, Bard College; a director of RBAsset (real estate manager); a director of OffitBank;  Trustee,  Financial
Accounting Foundation (FASB and GASB);  President,  Baruch College of the City University of New York; formerly New
York State Comptroller and trustee, New York State and Local Retirement Fund.

Russell S. Reynolds, Jr., Trustee, Age: 70.
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship  Search Group, Inc.  (corporate  governance  consulting and executive  recruiting);  a
director of Professional Staff Limited (a U.K. temporary staffing company);  a life trustee of International  House
(non-profit educational organization), and a trustee of the Greenwich Historical Society.

Clayton K. Yeutter, Trustee, Age: 71.
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel,  Hogan & Hartson (a  Washington,  D.C. law firm).  Other  directorships:  Allied Zurich Pl.c;  ConAgra,
Inc.; FMC Corporation;  Farmers Group Inc.;  Oppenheimer  Funds; Texas Instruments  Incorporated;  Weyerhaeuser Co.
and Zurich Allied AG.

Jane Putnam, Vice President and Portfolio Manager, Age: 40.
498 Seventh Avenue, New York, New York 10018
Vice  President of the Manager  (since  October  1995);  and officer and portfolio  manager of another  Oppenheimer
fund;  before  joining  the  Manager in May 1994,  she was a  portfolio  manager  and equity  research  analyst for
Chemical Bank (June 1989 - May 1994).

Brian W. Wixted, Treasurer and Principal Financial and Accounting Officer, 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 PIMCO 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).

Robert G. Zack, Secretary, Age: 53.
498 Seventh Avenue, New York, New York 10018
Senior Vice President  (since May 1985) and Acting General Counsel (since November 2001) of the Manager;  Associate
General  Counsel of the Manager (May 1981 - October  2001);  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.

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.

              The Board of Trustees has an Audit Committee,  a Study Committee and a Proxy  Committee.  The members
of the Audit  Committee are Kenneth A. Randall,  Benjamin  Lipstein and Edward V. Regan.  The Audit  Committee held
______  meetings  during the Fund's  fiscal year ended  __________.  The Audit  Committee  provides  the Board with
recommendations  regarding the selection of the Fund's  independent  auditor.  The Audit Committee also reviews the
scope and results of audits and the audit fees  charged and reviews  reports  from the Fund's  independent  auditor
concerning the Fund's internal accounting procedures and controls.

              The members of the Proxy  Committee  are Edward V.  Regan,  Russell S.  Reynolds,  Jr. and Clayton K.
Yeutter.  The Proxy  Committee  held  __________  meetings  during the Fund's  fiscal year ended  ___________.  The
Proxy Committee provides the Board with recommendations for proxy voting and monitors proxy voting by the Fund.

              The  members  of the Study  Committee  are  Robert G.  Galli,  Benjamin  Lipstein  and  Elizabeth  B.
Moynihan.  The Study  Committee  held  __________  meetings  during the Fund's fiscal year ended  ___________.  The
Study  Committee  evaluates  and  reports  to the  Board  on the  Fund's  contractual  arrangements  including  the
Investment  Advisory and  Distribution  Agreements,  transfer  and  shareholder  agency  agreements  and  custodian
agreements as well as the policies and  procedures  adopted by the Fund to comply with the  Investment  Company Act
of 1940 and other applicable law.

         |X|  Remuneration of Trustees.  The officers of the Fund and certain Trustees of the Fund (Mr. Murphy and,
prior to July 31, 1999,  Mr.  Spiro) who are  affiliated  with the Manager  receive no salary or fee from the Fund.
The remaining  Trustees of the Fund received the compensation  shown below. The compensation from the Fund was paid
during its fiscal year ended August 31, 2000. The  compensation  from all of the New York-based  Oppenheimer  funds
(including  the Fund) was  received  as a director,  trustee or member of a committee  of the boards of those funds
during the calendar year 1999.








------------------------------------ -------------------------- ------------------------- ----------------------------
                                                                                                     Total
                                                                       Retirement                Compensation
                                                                        Benefits                   from all
                                      Aggregate Compensation        Accrued as Part       New York based Oppenheimer
Trustee's Name                              from Fund1                  of Fund                Funds (29 Funds)2
and Position                                                            Expenses
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Leon Levy                                    $144,340                   $144,340                   $171,950

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Robert G. Galli 3                             $3,604                     $3,604                    $191,134

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Phillip Griffiths4                             $996                       $996                      $59,529

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Benjamin Lipstein                             $99,910                   $99,910                    $148,639

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Elizabeth B. Moynihan                         $49,836                   $49,836                    $104,695

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Kenneth A. Randall                            $77,433                   $77,444                     $96,034

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Edward V. Regan                               $37,318                   $37,318                     $94,995

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Russell S. Reynolds, Jr.                      $29,257                   $29,257                     $71,069

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Donald Spiro                                  $1,138                     $1,138                     $63,435

------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Clayton K. Yeutter 5                          $30,347                   $30,347                     $71,069

------------------------------------ -------------------------- ------------------------- ----------------------------
1Aggregate  compensation includes fees, deferred  compensation,  if any, and retirement plan benefits accrued for a
Trustee/Director, if any, for the fiscal year ended 8/31/01.
2For the 2000 calendar year.
3Total compensation for the 2000 calendar year includes $86,439  compensation  received for serving as a Trustee or
director of 10 other Oppenheimer Funds.
4Includes $14,807 deferred under Deferred Compensation Plan described below.
5Includes $3,001 deferred under Deferred Compensation Plan described below.

         |X|  Retirement  Plan for Trustees.  The Fund has adopted a retirement  plan that provides for payments to
retired  Trustees.  Payments  are up to 80% of the  average  compensation  paid  during a  Trustee's  five years of
service in which the  highest  compensation  was  received.  A Trustee  must  serve as  trustee  for any of the New
York-based  Oppenheimer  funds  for at least 15  years to be  eligible  for the  maximum  payment.  Each  Trustee's
retirement  benefits  will  depend on the  amount of the  Trustee's  future  compensation  and  length of  service.
Therefore the amount of those  benefits  cannot be determined at this time, nor can we estimate the number of years
of credited service that will be used to determine those benefits.

         |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.

         |X| Major  Shareholders.  As of December 12,  2000,  the only persons who owned of record or were known by
the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares were:

         Mark  Curran,  Trustee,  Boeing  Co.  Master  Trust,  200  Newport  Avenue  Extension,  North  Quincy,  MA
         02171-2102, who owned 20,182,236.196 Class Y shares (86.05% of the Class Y shares then outstanding).

         MassMutual  Life  Insurance  Co.,  Separate  Investment  Account,  1295  State  Street,   Springfield,  MA
         01111-0001, which owned 2,865,067.934 Class Y shares (12.21% of the Class Y shares then outstanding).

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

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

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

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

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

      The Fund pays  expenses  not  expressly  assumed by the Manager  under the advisory  agreement.  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 assets of the Fund as a whole.  The fees are  allocated to each class of shares based upon
the relative proportion of the Fund's net assets represented by that class.

  ------------------------------------------ -------------------------------------------------------------------
           Fiscal Year ended 8/31:                     Management Fees Paid to OppenheimerFunds, Inc.
  ------------------------------------------ -------------------------------------------------------------------
  ------------------------------------------ -------------------------------------------------------------------
                    1999                                                        $16,112,987
  ------------------------------------------ -------------------------------------------------------------------
  ------------------------------------------ -------------------------------------------------------------------
                    2000                                                        $29,201,218
  ------------------------------------------ -------------------------------------------------------------------
  ------------------------------------------ -------------------------------------------------------------------
                    2001                                                        $35,024,076
  ------------------------------------------ -------------------------------------------------------------------

         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  adviser 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  adviser or general  distributor.  If the Manager shall no longer act as investment adviser to the Fund,
the Manager may withdraw the right of the Fund to use the name "Oppenheimer" as part of its name.

Brokerage Policies of the Fund

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

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

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

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

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

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

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

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

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

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

  ------------------------------------- ---------------------------------------------------------------------------
        Fiscal Year Ended 8/31:                       Total Brokerage Commissions Paid by the Fund1
  ------------------------------------- ---------------------------------------------------------------------------
  ------------------------------------- ---------------------------------------------------------------------------
                  1999                                                  $3,367,722
  ------------------------------------- ---------------------------------------------------------------------------
  ------------------------------------- ---------------------------------------------------------------------------
                  2000                                                 $4,345,7712
  ------------------------------------- ---------------------------------------------------------------------------
  ------------------------------------- ---------------------------------------------------------------------------
                  2001                                                  $5,996,124
  ------------------------------------- ---------------------------------------------------------------------------
  1Amounts do not include spreads or commissions on principal transactions on a net trade basis.
  2In the fiscal year ended  8/31/00,  the amount of  transactions  directed to brokers for  research  services was
  $1,755,063,004 and the amount of the commissions paid to broker-dealers for those services was $2,261,853.

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.

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




  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
                   Aggregate     Class A Front-End      Concessions      Concessions on   Concessions on     Concessions
  Fiscal Year      Front-End       Sales Charges     on Class A Shares   Class B Shares   Class C Shares     on Class N
  Ended 8/31:    Sales Charges      Retained by         Advanced by        Advanced by      Advanced by        Shares
                  on Class A        Distributor         Distributor1      Distributor1     Distributor1      Advanced by
                    Shares                                                                                  Distributor1
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
      1998        $4,755,096          $1,345,699          $482,064         $5,767,387        $479,256             $
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
      1999        $5,517,361         $1,584,9462          $990,319         $6,605,832        $506,690             $
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
      2000        $9,222,674         $2,675,878          $1,710,262        $12,986,219      $1,180,044            $
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
      2001        $10,082,655        $2,828,156          $1,634,569        $16,125,855      $1,835,899        $75,4702
  ------------- ---------------- ------------------- ------------------- ---------------- ---------------- ----------------
  1 The Distributor  advances  concession  payments to dealers for certain sales of Class A shares and for sales of
  Class B, Class C and Class N shares from its own resources at the time of sale.
  2 The inception date of Class N shares was March 1, 2001.
  3 Includes amounts retained by a broker/dealer that is an affiliate of the Distributor.

  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
                      Class A Contingent        Class B Contingent        Class C Contingent       Class N Contingent
    Fiscal Year     Deferred Sales Charges    Deferred Sales Charges    Deferred Sales Charges   Deferred Sales Charges
    Ended 8/31:     Retained by Distributor   Retained by Distributor   Retained by Distributor  Retained by Distributor
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
        1998                 None                    $263,911                   $25,640                     $
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
        1999                $18,001                  $727,007                   $39,179                     $
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
        2000                $35,205                 $1,325,150                  $46,952                     $
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------
        2001                $99,138                 $2,111,146                 $116,686                    $47
  ----------------- ------------------------ -------------------------- ------------------------ ------------------------

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.

         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 acquired.

      For the fiscal year ended August 31, 2000  payments  under the Class A Plan totaled  $6,679,168  all of which
was paid by the  Distributor  to  recipients.  That  included  $405,591  paid to an affiliate of the  Distributor's
parent  company.  Any  unreimbursed  expenses the  Distributor  incurs with respect to Class A shares in any fiscal
year cannot be recovered in subsequent  years.  The Distributor  may not use payments  received the Class A Plan to
pay any of its interest expenses, carrying charges, or other financial costs, or allocation of overhead.

         |_| Class B, Class C and Class N Service and  Distribution  Plan Fees.  Under each plan,  service fees and
distribution  fees  are  computed  on the  average  of the net  asset  value of  shares  in the  respective  class,
determined  as of the  close  of each  regular  business  day  during  the  period.  The  Class C plan  allows  the
Distributor  to be reimbursed  for its services and costs in  distributing  Class C shares and servicing  accounts.
The  Class B 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 the 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 advanced  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  commission 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
and/or Class N service fee and the  asset-based  sales  charge to the dealer  quarterly in lieu of paying the sales
commissions and service fee in advance at the time of purchase.

      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     commissions    to    authorized     brokers    and    dealers    at    the    time    of
            sale                                              and pays service fees as described above,
o        may finance  payment of sales  commissions  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.


--------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
                    Distribution Fees Paid to the Distributor in the Fiscal Year Ended 8/31/01
                                                                       Distributor's
-------------------------                                                Aggregate              Distributor's
                            Total Payments    Amount Retained by   Unreimbursed Expenses    Unreimbursed Expenses
                              Under Plan          Distributor            Under Plan         as % of Net Assets of
                                                                                                    Class
Class:
-------------------------- ------------------ -------------------- ----------------------- -------------------------
-------------------------- ------------------ -------------------- ----------------------- -------------------------
Class B Plan                  $12,648,587         $10,375,861           $22,812,921                 1.84%
-------------------------- ------------------ -------------------- ----------------------- -------------------------
-------------------------- ------------------ -------------------- ----------------------- -------------------------
Class C Plan                  $3,997,529          $1,289,829             $3,394,731                 0.80%
-------------------------- ------------------ -------------------- ----------------------- -------------------------
-------------------------- ------------------ -------------------- ----------------------- -------------------------
Class N Plan                    $7,904              $6,201                $46,201                     %
-------------------------- ------------------ -------------------- ----------------------- -------------------------

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

Performance of the Fund

Explanation  of  Performance  Terminology.  The  Fund  uses  a  variety  of  terms  to  illustrate  its  investment
performance.  Those terms include  "cumulative  total return," "average annual total return," "average annual total
return at net asset  value"  and  "total  return at net asset  value."  An  explanation  of how total  returns  are
calculated  is set forth below.  The charts below show the Fund's  performance  as of the Fund's most recent fiscal
year end. You can obtain current  performance  information by calling the Fund's  Transfer Agent at  1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at HTTP://WWW.OPPENHEIMERFUNDS.COM.
                                                         -------------------------------

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

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

         |_| Total returns measure the  performance of a hypothetical  account in the Fund over various periods and
do not show the performance of each  shareholder's  account.  Your account's  performance  will vary from the model
performance  data if your  dividends  are  received in cash,  or you buy or sell shares  during the period,  or you
bought your shares at a different time and price than the shares used in the model.
         |_| 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,  ten years).  An average  annual total return shows the average rate of return
for each year in a period that would produce the cumulative total return over the entire period.  However,  average
annual total returns do not show actual year-by-year  performance.  The Fund uses standardized calculations for its
total returns as prescribed by the SEC. The methodology is discussed below.

         In  calculating  total  returns  for Class A  shares,  the  current  maximum  sales  charge of 5.75% (as a
percentage  of the  offering  price) is deducted  from the  initial  investment  ("P")  (unless the return is shown
without sales charge,  as described  below).  For Class B shares,  payment of the  applicable  contingent  deferred
sales  charge is applied,  depending on the period for which the return is shown:  5.0% in the first year,  4.0% in
the  second  year,  3.0% in the third and fourth  years,  2.0% in the fifth  year,  1.0% in the sixth year and none
thereafter.  For Class C shares,  the 1%  contingent  deferred  sales charge is deducted for returns for the 1-year
period.  For Class N shares,  the 1% contingent  deferred sales charge is deducted for returns for the one-year 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:

                                            1/n
                                        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.


----------------------------------------------------------------------------------------------------------------------
                               The Fund's Total Returns for the Periods Ended 8/31/015
----------------------------------------------------------------------------------------------------------------------
--------------- --------------------------- --------------------------------------------------------------------------
                 Cumulative Total Returns                         Average Annual Total Returns
                   (10 years or Life of
    Class                 Class)
  Of Shares
--------------- --------------------------- --------------------------------------------------------------------------
--------------- --------------------------- ----------------------- ----------------------- --------------------------
                                                                            5-Year                   10-Year
                                                    1-Year            (or life-of-class)       (or life-of-class)
--------------- --------------------------- ----------------------- ----------------------- --------------------------
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
                After Sales     Without     After       Without     After       Without     After Sales     Without
                   Charge     Sales Charge  Sales       Sales       Sales       Sales          Charge        Sales
                                              Charge      Charge      Charge      Charge                    Charge
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
Class A         284.94%(1)    308.42%(1)    -30.62%     -26.38%     15.33%      16.70%      14.43%        15.10%
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
Class B         135.00%(2)    136.00%(2)    -30.21%     -26.95%     15.54%(2)   15.76%(2)      15.77%       15.86%
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
Class C         212.16% (3)   212.16% (3)   -27.60%     -26.95%     15.71%      15.77%      15.82%(3)     15.82%(3)
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
Class N         -10.84%(4)    -9.94%(4)     N/A         N/A         N/A         N/A             N/A           N/A
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
Class Y         N/A           50.34% (5)    N/A         -26.12%     N/A         11.24%          N/A           N/A
--------------- ------------- ------------- ----------- ----------- ----------- ----------- ------------- ------------
1. Inception A:  01/22/81
2. Inception B:  11/01/95
3. Inception C:  12/01/93
4. Inception N:   03/01/01
5. Inception Y:  11/03/97

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

         |_|  Lipper  Rankings.  From time to time the Fund may  publish  the  ranking  of the  performance  of its
classes of shares by Lipper  Analytical  Services,  Inc.  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.  Lipper currently
ranks the Fund's performance  against all other capital  appreciation  funds. The Lipper  performance  rankings are
based on total returns that include the  reinvestment  of capital gain  distributions  and income  dividends but do
not take sales charges or taxes into consideration.  Lipper also publishes  "peer-group" indices of the performance
of all mutual  funds in a category  that it monitors  and averages of the  performance  of the funds in  particular
categories.

         |_|  Morningstar  Rankings.  From time to time the Fund may publish the star ranking of the performance of
its classes of shares by  Morningstar,  Inc., an independent  mutual fund  monitoring  service.  Morningstar  ranks
mutual funds in broad investment  categories:  domestic stock funds,  international stock funds, taxable bond funds
and municipal bond funds. The Fund is 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 Rating TM 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 rankings,  Morningstar  also  categorizes  and compares a fund's 3-year  performance  based on
Morningstar's  classification of the fund's  investments and investment  style,  rather than how a fund defines its
investment objective.  Morningstar's four broad categories (domestic equity,  international equity,  municipal bond
and taxable  bond) are each  further  subdivided  into  categories  based on types of  investments  and  investment
styles.  Those  comparisons by Morningstar are based on the same risk and return  measurements as its star rankings
but do not consider the effect of sales charges.

         |_| Performance  Rankings and Comparisons by Other Entities and  Publications.  From time to time the Fund
may include in its advertisements and sales literature  performance  information about the Fund cited in newspapers
and other  periodicals  such as The New York Times,  The Wall Street Journal,  Barron's,  or similar  publications.
That information may include  performance  quotations from other sources,  including  Lipper and  Morningstar.  The
performance of the Fund's classes of shares may be compared in  publications  to the  performance of various market
indices or other  investments,  and  averages,  performance  rankings or other  benchmarks  prepared by  recognized
mutual fund statistical services.
         Investors may also wish to compare the returns on the Fund's share  classes to the return on  fixed-income
investments  available  from banks and  thrift  institutions.  Those  include  certificates  of  deposit,  ordinary
interest-paying  checking and savings  accounts,  and other forms of fixed or variable time  deposits,  and various
other  instruments  such as Treasury  bills.  However,  the Fund's  returns and share price are not  guaranteed  or
insured  by the FDIC or any other  agency  and will  fluctuate  daily,  while bank  depository  obligations  may be
insured by the FDIC and may  provide  fixed  rates of return.  Repayment  of  principal  and payment of interest on
Treasury securities is backed by the full faith and credit of the U.S. government.

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

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


ABOUT YOUR ACCOUNT

How to Buy Shares

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

AccountLink.  When shares are purchased  through  AccountLink,  each purchase must be at least $25.  Shares will be
purchased two regular  business days  following the regular  business day you instruct the  Distributor 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
3 days after the transfers are  initiated.  If the proceeds of the ACH transfer are not received on a timely basis,
the Distributor  reserves the right to cancel the purchase order.  The Distributor and the Fund are not responsible
for any delays in purchasing shares resulting from delays in ACH transmissions.

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

         |X| Right of  Accumulation.  To qualify for the lower sales charge rates that apply to larger purchases of
Class A shares, you and your spouse can add together:
         |_|  Class A, Class B and Class N 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
         |_|  current  purchases of Class A, Class B and Class N shares of the Fund and other  Oppenheimer funds to
              reduce the sales charge rate that applies to current purchases of Class A shares, and
         |_|  Class A,  Class B and Class N 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 Rochester Municipals
Oppenheimer Emerging Growth Fund                              Oppenheimer Senior Floating Rate Fund
Oppenheimer Emerging Technologies Fund                        Oppenheimer Small Cap Value Fund
Oppenheimer Enterprise Fund                                   Oppenheimer Special Value Fund
Oppenheimer Europe Fund                                       Oppenheimer Strategic Income Fund
Oppenheimer Global Fund                                       Oppenheimer Total Return Fund, Inc.
Oppenheimer Global Growth & Income Fund                       Oppenheimer Trinity Core Fund
Oppenheimer Gold & Special Minerals Fund                      Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer Growth Fund                                       Oppenheimer Trinity Value Fund
Oppenheimer High Yield Fund                                   Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Municipal Fund                       Oppenheimer Value Fund
Oppenheimer International Bond Fund                           Limited-Term New York Municipal Fund
Oppenheimer International Growth Fund                         Rochester Fund Municipals
Oppenheimer International Small Company Fund                  OSM1- Gartmore Millennium Growth Fund
Oppenheimer Limited-Term Government Fund                      OSM1 - Jennison Growth Fund
Oppenheimer Main Street Growth & Income Fund                  OSM1 - Mercury Advisors S&P 500 Index
Oppenheimer Main Street Opportunity Fund                      OSM1 - Mercury Advisors Focus Growth Fund
Oppenheimer Main Street Small Cap Fund                        OSM1 - QM Active Balanced Fund
Oppenheimer MidCap Fund                                       OSM1 - Salomon Brothers Capital Fund
Oppenheimer Multiple Strategies Fund
And the following money market funds:

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

1 - "OSM" stands for Oppenheimer Select Managers

         There is an  initial  sales  charge on the  purchase  of Class A shares of each of the  Oppenheimer  funds
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.

         |X| 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 commissions  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  commissions  allowed or paid to the dealer over the amount of commissions
that apply to the actual amount of purchases.  The excess  commissions  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  commissions  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  thirteen-month
Letter of Intent period, the escrowed shares will be promptly released to the investor.

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

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

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

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

Asset  Builder  Plans.  To establish an Asset Builder Plan to buy shares  directly  from a bank  account,  you must
enclose a check (the  minimum  $25) for the initial  purchase  with your  application.  Shares  purchased  by Asset
Builder  Plan  payments  from bank  accounts  are  subject to the  redemption  restrictions  for  recent  purchases
described in the  Prospectus.  Asset Builder Plans are available only if your bank is an ACH member.  Asset Builder
Plans may not be used to buy shares for OppenheimerFunds  employer-sponsored  qualified retirement accounts.  Asset
Builder  Plans also enable  shareholders  of  Oppenheimer  Cash  Reserves to use their fund account to make monthly
automatic purchases of shares of up to four other Oppenheimer funds.

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

         Before you establish Asset Builder  payments,  you should obtain a prospectus of the selected fund(s) from
your  financial  advisor (or the  Distributor)  and  request an  application  from the  Distributor.  Complete  the
application  and return it. You may change  the amount of your Asset  Builder  payment or you can  terminate  these
automatic  investments  at any time by writing to the  Transfer  Agent.  The Transfer  Agent  requires a reasonable
period  (approximately  15 days) after receipt of your  instructions to implement them. The Fund reserves the right
to amend, suspend, or discontinue offering Asset Builder plans at any time without prior notice.

Retirement  Plans.  Certain  types of  retirement  plans are entitled to purchase  shares of the Fund without sales
charge or at reduced sales charge rates,  as described in Appendix 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. 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 and Class N shares  and the  dividends  payable on Class B, Class C and Class N shares  will be
reduced by incremental  expenses borne solely by that class.  Those expenses include the asset-based  sales charges
to which Class B, Class C and Class N 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
for selling from his or her firm 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.

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

o        to all rollover IRAs,
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 _ to this Statement of Additional Information) which
              have entered into a special agreement with the Distributor for that purpose,
o        to Retirement Plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, the
              recordkeeper or the plan sponsor for which has entered into a special agreement with the
              Distributor,
o        to Retirement Plans of a plan sponsor where the aggregate assets of all such plans invested in the
              Oppenheimer funds is $500,000 or more,
o        to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the purchase with the redemption
              proceeds of Class A shares of one or more Oppenheimer funds.
o        to certain customers of broker-dealers and financial advisors that are identified in a special agreement
              between the broker-dealer or financial advisor and the Distributor for that purpose.

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

         |_|  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 value 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,  and the values of some of the Fund's  portfolio
securities  may change  significantly  on those  days,  the Fund's net asset  value per share may be  significantly
affected on such days when  shareholders may not purchase or redeem shares.  Additionally,  trading on European and
Asian stock exchanges and  over-the-counter  markets  normally is completed  before the close of The New York Stock
Exchange.

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

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

         |_| 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 last sale  information is not available on a valuation  date, they are valued at the last reported sale
                   price  preceding the valuation  date if it is within the spread of the closing "bid" and "asked"
                   prices on the valuation date or, if not,  at the closing "bid" price on the valuation date.
         |_|  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.

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

Reinvestment  Privilege.  Within  six  months  of a  redemption,  a  shareholder  may  reinvest  all or part of the
redemption proceeds of:
         |_| 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 or Class Y shares.  The Fund may  amend,  suspend  or cease  offering  this  reinvestment
privilege at any time as to shares redeemed after the date of such amendment, suspension or cessation.

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

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

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

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



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

         If less than all shares  held in an account  are  transferred,  and some but not all shares in the account
would be subject to a  contingent  deferred  sales  charge if  redeemed  at the time of  transfer,  the  priorities
described  in the  Prospectus  under "How to Buy Shares" for the  imposition  of the Class B 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 imposition of the contingent  deferred sales charge on such
withdrawals  (except  where the  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., 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.

         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 (except the Fund) without being
subject to an initial 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 6 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 or Class C 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 or the Class C 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

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

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

Tax Status of the Fund's  Dividends  and  Distributions.  The Federal tax  treatment  of the Fund's  dividends  and
capital gains distributions is briefly highlighted in the Prospectus.

         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.


         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.  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.

         The Fund  intends  to  qualify  as a  "regulated  investment  company"  under the  Internal  Revenue  Code
(although it reserves the right not to qualify).  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 the Fund's shares are held in a retirement  account or the  shareholder  is otherwise
exempt from tax). If the Fund qualifies as a "regulated  investment  company"  under the Internal  Revenue Code, it
will not be liable for  Federal  income  taxes on  amounts  paid by it as  dividends  and  distributions.  The Fund
qualified as a regulated  investment  company in its last fiscal year. The Internal  Revenue Code contains a number
of complex tests relating to  qualification  which the Fund might not meet in any particular year. If it did not so
qualify,  the Fund would be treated for tax purposes as an ordinary  corporation  and receive no tax  deduction for
payments made to shareholders.

         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.

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


INDEPENDENT AUDITORS' REPORT

================================================================================
The Board of Trustees and Shareholders of Oppenheimer Capital Appreciation Fund:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Capital Appreciation Fund, including the statement of investments,
as of August 31, 2001, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2001, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
   In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Capital Appreciation Fund as of August 31, 2001, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.


KPMG LLP

Denver, Colorado
September 24, 2001


STATEMENT OF INVESTMENTS        August 31, 2001


                                                                      Market Value
                                                             Shares     See Note 1
==================================================================================

 Common Stocks--87.0%
----------------------------------------------------------------------------------
 Basic Materials--1.0%
----------------------------------------------------------------------------------
 Chemicals--0.4%
 IMC Global, Inc.                                           401,000   $  4,735,810
----------------------------------------------------------------------------------
 PPG Industries, Inc.                                       300,000     16,236,000
                                                                      ------------
                                                                        20,971,810

----------------------------------------------------------------------------------
 Paper--0.6%
 International Paper Co.                                    800,000     32,096,000
----------------------------------------------------------------------------------
 Capital Goods--7.1%
----------------------------------------------------------------------------------
 Aerospace/Defense--0.4%
 Boeing Co.                                                 200,000     10,240,000
----------------------------------------------------------------------------------
 Northrop Grumman Corp.                                     133,400     10,938,800
                                                                      ------------
                                                                        21,178,800

----------------------------------------------------------------------------------
 Electrical Equipment--1.1%
 General Electric Co.                                       550,000     22,539,000
----------------------------------------------------------------------------------
 SPX Corp.(1)                                                60,060      6,981,975
----------------------------------------------------------------------------------
 Vishay Intertechnology, Inc.(1)                          1,535,000     35,811,550
                                                                      ------------
                                                                        65,332,525

----------------------------------------------------------------------------------
 Industrial Services--1.3%
 Philadelphia Suburban Corp.                                149,100      4,115,160
----------------------------------------------------------------------------------
 Waste Management, Inc.                                   2,200,000     68,046,000
                                                                      ------------
                                                                        72,161,160

----------------------------------------------------------------------------------
 Manufacturing--4.3%
 Flextronics International Ltd.(1)                        1,860,000     40,808,400
----------------------------------------------------------------------------------
 Honeywell International, Inc.                            1,100,000     40,986,000
----------------------------------------------------------------------------------
 Mettler-Toledo International, Inc.(1)                      527,350     24,136,810
----------------------------------------------------------------------------------
 Millipore Corp.                                            281,000     17,829,450
----------------------------------------------------------------------------------
 Sanmina Corp.(1)                                         3,693,700     66,523,537
----------------------------------------------------------------------------------
 Tyco International Ltd.                                  1,009,791     52,458,642
                                                                      ------------
                                                                       242,742,839

----------------------------------------------------------------------------------
 Communication Services--0.6%
----------------------------------------------------------------------------------
 Telecommunications: Long Distance--0.1%
 WorldCom, Inc./WorldCom Group(1)                           617,000      7,934,620
----------------------------------------------------------------------------------
 Telecommunications: Wireless--0.5%
 Vodafone Group plc, Sponsored ADR                        1,323,300     26,664,495
----------------------------------------------------------------------------------
 Consumer Cyclicals--9.3%
----------------------------------------------------------------------------------
 Autos & Housing--0.5%
 Centex Corp.                                               182,690      8,001,822
----------------------------------------------------------------------------------
 Ethan Allen Interiors, Inc.                                615,160     21,715,148
                                                                      ------------
                                                                        29,716,970

12 | OPPENHEIMER CAPITAL APPRECIATION FUND

                                                                      Market Value
                                                             Shares     See Note 1
----------------------------------------------------------------------------------
 Consumer Services--1.1%
 Omnicom Group, Inc.                                        790,000   $ 61,454,100
----------------------------------------------------------------------------------
 Leisure & Entertainment--2.7%
 Carnival Corp.                                           2,670,000     83,517,600
----------------------------------------------------------------------------------
 Fairmont Hotels & Resorts, Inc.(1)                         355,000      8,262,951
----------------------------------------------------------------------------------
 Harley-Davidson, Inc.                                      710,000     34,498,900
----------------------------------------------------------------------------------
 Host Marriott Corp.                                      2,225,000     28,480,000
                                                                      ------------
                                                                       154,759,451

----------------------------------------------------------------------------------
 Media--2.5%
 Kadant, Inc.(1)                                            210,196      2,911,215
----------------------------------------------------------------------------------
 McGraw-Hill Cos., Inc. (The)                             1,090,000     64,582,500
----------------------------------------------------------------------------------
 News Corp. Ltd. (The), Sponsored ADR                     2,300,000     74,957,000
                                                                      ------------
                                                                       142,450,715

----------------------------------------------------------------------------------
 Retail: Specialty--2.5%
 Circuit City Stores, Inc./Circuit City Group               765,000     12,775,500
----------------------------------------------------------------------------------
 Gap, Inc.                                                2,200,000     43,230,000
----------------------------------------------------------------------------------
 Home Depot, Inc.                                           600,000     27,570,000
----------------------------------------------------------------------------------
 Nike, Inc., Cl. B                                          490,000     24,500,000
----------------------------------------------------------------------------------
 Rite Aid Corp.(1)                                        1,100,000      8,734,000
----------------------------------------------------------------------------------
 Tiffany & Co.                                              900,000     28,035,000
                                                                      ------------
                                                                       144,844,500

----------------------------------------------------------------------------------
 Consumer Staples--15.1%
----------------------------------------------------------------------------------
 Beverages--2.4%
 Anheuser-Busch Cos., Inc.                                1,760,000     75,750,400
----------------------------------------------------------------------------------
 PepsiCo, Inc.                                            1,300,000     61,100,000
                                                                      ------------
                                                                       136,850,400

----------------------------------------------------------------------------------
 Broadcasting--7.0%
 Adelphia Communications Corp., Cl. A(1)                    903,000     28,489,650
----------------------------------------------------------------------------------
 Cablevision Systems Corp., Cl. A(1)                        900,000     42,030,000
----------------------------------------------------------------------------------
 Clear Channel Communications, Inc.(1)                    1,697,440     85,330,309
----------------------------------------------------------------------------------
 Comcast Corp., Cl. A Special(1)                          4,900,000    179,487,000
----------------------------------------------------------------------------------
 Fox Entertainment Group, Inc., A Shares(1)                 700,000      17,164,00
----------------------------------------------------------------------------------
 Hispanic Broadcasting Corp.(1)                           1,177,925     24,312,372
----------------------------------------------------------------------------------
 Univision Communications, Inc., Cl. A(1)                   770,000     22,969,100
                                                                      ------------
                                                                       399,782,431

----------------------------------------------------------------------------------
 Entertainment--3.3%
 Royal Caribbean Cruises Ltd.                             2,700,000     63,018,000
----------------------------------------------------------------------------------
 Viacom, Inc., Cl. B(1)                                   3,000,000    127,200,000
                                                                      ------------
                                                                       190,218,000

13 | OPPENHEIMER CAPITAL APPRECIATION FUND

STATEMENT OF INVESTMENTS        Continued

                                                                      Market Value
                                                             Shares     See Note 1
----------------------------------------------------------------------------------
 Food--0.2%
 Sysco Corp.                                                360,000   $ 10,087,200
----------------------------------------------------------------------------------
 Food & Drug Retailers--2.2%
 CVS Corp.                                                  900,000     32,499,000
----------------------------------------------------------------------------------
 Kroger Co. (The)(1)                                      1,260,000     33,541,200
----------------------------------------------------------------------------------
 Safeway, Inc.(1)                                         1,376,000     62,071,360
                                                                      ------------
                                                                       128,111,560

----------------------------------------------------------------------------------
 Energy--5.9%
----------------------------------------------------------------------------------
 Energy Services--1.9%
 BJ Services Co.(1)                                       1,020,000     22,878,600
----------------------------------------------------------------------------------
 Halliburton Co.                                            860,000     23,959,600
----------------------------------------------------------------------------------
 Noble Drilling Corp.(1)                                    437,510     11,900,272
----------------------------------------------------------------------------------
 PanCanadian Energy Corp.(1)                                971,280     22,713,954
----------------------------------------------------------------------------------
 Rowan Cos., Inc.(1)                                        550,000      8,552,500
----------------------------------------------------------------------------------
 Schlumberger Ltd.                                          164,060      8,038,940
----------------------------------------------------------------------------------
 Varco International, Inc.(1)                               600,000      9,108,000
                                                                      ------------
                                                                       107,151,866

----------------------------------------------------------------------------------
 Oil: Domestic--2.6%
 Amerada Hess Corp.                                         700,000     54,397,000
----------------------------------------------------------------------------------
 Exxon Mobil Corp.                                        2,200,000     88,330,000
----------------------------------------------------------------------------------
 Suncor Energy, Inc.                                        224,370      6,248,705
                                                                      ------------
                                                                       148,975,705

----------------------------------------------------------------------------------
 Oil: International--1.4%
 TotalFinaElf SA, Sponsored ADR                           1,080,000     79,758,000
----------------------------------------------------------------------------------
 Financial--12.6%
----------------------------------------------------------------------------------
 Banks--2.3%
 Bank of America Corp.                                      780,000     47,970,000
----------------------------------------------------------------------------------
 Bank One Corp.                                           1,000,000     34,690,000
----------------------------------------------------------------------------------
 J.P. Morgan Chase & Co.                                  1,100,000     43,340,000
----------------------------------------------------------------------------------
 TCF Financial Corp.                                        109,900      4,989,460
                                                                      ------------
                                                                       130,989,460

----------------------------------------------------------------------------------
 Diversified Financial--6.9%
 Citigroup, Inc.                                          3,010,000    137,707,500
----------------------------------------------------------------------------------
 Concord EFS, Inc.(1)                                       550,520     28,885,784
----------------------------------------------------------------------------------
 Fannie Mae                                                 700,000     53,347,000
----------------------------------------------------------------------------------
 Freddie Mac                                              1,320,000     83,001,600
----------------------------------------------------------------------------------
 Schwab (Charles) Corp.                                   2,700,000     33,642,000
----------------------------------------------------------------------------------
 USA Education, Inc.                                        700,000     55,447,000
                                                                      ------------
                                                                       392,030,884

14 | OPPENHEIMER CAPITAL APPRECIATION FUND

                                                                      Market Value
                                                             Shares     See Note 1
----------------------------------------------------------------------------------
 Insurance--2.8%
 American International Group, Inc.                         900,000   $ 70,380,000
----------------------------------------------------------------------------------
 Everest Re Group Ltd.                                      290,000     18,821,000
----------------------------------------------------------------------------------
 Willis Group Holdings Ltd.(1)                              599,420     11,275,090
----------------------------------------------------------------------------------
 XL Capital Ltd., Cl. A                                     740,000     61,420,000
                                                                      ------------
                                                                       161,896,090

----------------------------------------------------------------------------------
 Real Estate Investment Trusts--0.6%
 Boston Properties, Inc.                                    925,000     36,445,000
----------------------------------------------------------------------------------
 Healthcare--11.0%
----------------------------------------------------------------------------------
 Healthcare/Drugs--6.8%
 Andrx Group(1)                                             333,120     23,415,005
----------------------------------------------------------------------------------
 Genzyme Corp. (General Division)(1)                        597,110     33,820,310
----------------------------------------------------------------------------------
 GlaxoSmithKline plc, ADR                                   690,000     36,535,500
----------------------------------------------------------------------------------
 HCA, Inc.                                                  260,000     11,892,400
----------------------------------------------------------------------------------
 IDEC Pharmaceuticals Corp.(1)                              540,490     32,034,842
----------------------------------------------------------------------------------
 Johnson & Johnson                                        2,189,000    115,382,190
----------------------------------------------------------------------------------
 Perrigo Co.(1)                                           1,175,370     18,970,472
----------------------------------------------------------------------------------
 Pfizer, Inc.                                             2,260,000     86,580,600
----------------------------------------------------------------------------------
 Serono SA, Sponsored ADR                                 1,200,000     27,840,000
                                                                      ------------
                                                                       386,471,319

----------------------------------------------------------------------------------
 Healthcare/Supplies & Services--4.2%
 Applera Corp./Applied Biosystems Group                   1,310,000     32,763,100
----------------------------------------------------------------------------------
 Biomet, Inc.                                             1,298,775     35,885,153
----------------------------------------------------------------------------------
 Covance, Inc.(1)                                           910,000     17,490,200
----------------------------------------------------------------------------------
 HEALTHSOUTH Corp.(1)                                       710,000     12,836,800
----------------------------------------------------------------------------------
 McKesson Corp.                                             790,000     31,007,500
----------------------------------------------------------------------------------
 Medtronic, Inc.                                            970,000     44,173,800
----------------------------------------------------------------------------------
 PerkinElmer, Inc.                                          708,580     22,731,246
----------------------------------------------------------------------------------
 Stryker Corp.                                              741,080     40,633,416
                                                                      ------------
                                                                       237,521,215

----------------------------------------------------------------------------------
 Technology--20.2%
----------------------------------------------------------------------------------
 Computer Hardware--0.3%
 SanDisk Corp.(1)                                           825,000     16,920,750
----------------------------------------------------------------------------------
 Taiwan Semiconductor Manufacturing Co. Ltd., ADR           120,000      1,557,600
                                                                      ------------
                                                                        18,478,350

----------------------------------------------------------------------------------
 Computer Services--0.8%
 First Data Corp.                                           666,000     43,856,100

15 | OPPENHEIMER CAPITAL APPRECIATION FUND

STATEMENT OF INVESTMENTS        Continued

                                                                      Market Value
                                                             Shares     See Note 1
----------------------------------------------------------------------------------
 Computer Software--9.1%
 AOL Time Warner, Inc.(1)                                 5,300,000   $197,955,000
----------------------------------------------------------------------------------
 Cadence Design Systems, Inc.(1)                          1,400,000     30,772,000
----------------------------------------------------------------------------------
 Check Point Software Technologies Ltd.(1)                  755,150     24,157,249
----------------------------------------------------------------------------------
 Electronic Arts, Inc.(1)                                   843,230     48,662,803
----------------------------------------------------------------------------------
 Microsoft Corp.(1)                                       2,900,000    165,445,000
----------------------------------------------------------------------------------
 Oracle Corp.(1)                                            400,000      4,884,000
----------------------------------------------------------------------------------
 Peoplesoft, Inc.(1)                                        770,000     26,549,600
----------------------------------------------------------------------------------
 Veritas Software Corp.(1)                                  796,533     22,876,428
                                                                      ------------
                                                                       521,302,080

----------------------------------------------------------------------------------
 Communications Equipment--4.3%
 CIENA Corp.(1)                                             700,000     11,984,000
----------------------------------------------------------------------------------
 Cisco Systems, Inc.(1)                                   3,350,000     54,705,500
----------------------------------------------------------------------------------
 Extreme Networks, Inc.(1)                                1,140,500     18,213,785
----------------------------------------------------------------------------------
 L.M. Ericsson Telephone Co., ADR, Cl. B                    950,000      4,731,000
----------------------------------------------------------------------------------
 Lucent Technologies, Inc.                                1,590,000     10,843,800
----------------------------------------------------------------------------------
 Newport Corp.                                              500,000      9,060,000
----------------------------------------------------------------------------------
 Nokia Corp., Sponsored ADR, A Shares                     4,120,000     64,848,800
----------------------------------------------------------------------------------
 QUALCOMM, Inc.(1)                                        1,200,000     70,620,000
                                                                      ------------
                                                                       245,006,885

----------------------------------------------------------------------------------
 Electronics--5.7%
 Analog Devices, Inc.(1)                                    440,000     21,023,200
----------------------------------------------------------------------------------
 Atmel Corp.(1)                                           3,228,100     30,957,479
----------------------------------------------------------------------------------
 Cypress Semiconductor Corp.(1)                           1,050,000     22,690,500
----------------------------------------------------------------------------------
 International Rectifier Corp.(1)                           790,000     29,214,200
----------------------------------------------------------------------------------
 Micron Technology, Inc.(1)                               1,300,000     48,893,000
----------------------------------------------------------------------------------
 National Semiconductor Corp.(1)                          1,020,000     33,711,000
----------------------------------------------------------------------------------
 RF Micro Devices, Inc.(1)                                1,740,000     44,300,400
----------------------------------------------------------------------------------
 Texas Instruments, Inc.                                    800,000     26,480,000
----------------------------------------------------------------------------------
 Thermo Electron Corp.(1)                                   330,000      7,151,100
----------------------------------------------------------------------------------
 Vitesse Semiconductor Corp.(1)                           1,200,000     17,520,000
----------------------------------------------------------------------------------
 Waters Corp.(1)                                          1,280,000     42,406,400
                                                                      ------------
                                                                       324,347,279

----------------------------------------------------------------------------------
 Transportation--0.4%
----------------------------------------------------------------------------------
 Railroads & Truckers--0.2%
 Canadian Pacific Ltd.(1)                                   710,000     13,328,818
----------------------------------------------------------------------------------
 Shipping--0.2%
 Expeditors International of Washington, Inc.               250,000     12,715,000


16 | OPPENHEIMER CAPITAL APPRECIATION FUND

                                                                      Market Value
                                                             Shares     See Note 1
----------------------------------------------------------------------------------
 Utilities--3.8%

----------------------------------------------------------------------------------
 Electric Utilities--1.2%
 Duke Energy Corp.                                        1,600,000 $   62,896,000
----------------------------------------------------------------------------------
 Potomac Electric Power Co.                                 190,260      4,278,947
                                                                    --------------
                                                                        67,174,947

----------------------------------------------------------------------------------
 Gas Utilities--2.6%
 El Paso Corp.                                            1,600,000     77,744,000
----------------------------------------------------------------------------------
 Enron Corp.                                                800,000     27,992,000
----------------------------------------------------------------------------------
 Kinder Morgan, Inc.                                        210,000     11,676,000
----------------------------------------------------------------------------------
 Williams Cos., Inc. (The)                                  910,000     29,620,500
                                                                    --------------
                                                                       147,032,500
                                                                    --------------
 Total Common Stocks (Cost $5,246,682,395)                           4,961,839,074

                                                          Principal
                                                             Amount
==================================================================================
 U.S. Government Obligations--0.5%

 U.S. Treasury Nts., 6.375%, 4/30/02 (Cost $29,883,766) $30,000,000     30,601,200

==================================================================================
 Structured Instruments--0.6%

 Credit Suisse First Boston Corp. (New York Branch),
 Carnival Corp. Equity Linked Nts., 7%, 7/17/02(2)       15,000,834     21,001,168
----------------------------------------------------------------------------------
 Merrill Lynch & Co., Inc., Medium-Term Stock Linked Nts.,
 Series B, 7%, 7/8/02 (linked to the performance of
 The Gap, Inc. common stock)                             15,000,000     10,500,000
                                                                    --------------
 Total Structured Instruments (Cost $30,000,834)                        31,501,168

==================================================================================
 Short-Term Notes--8.2%

 Barton Capital Corp.:
 3.52%, 10/4/01                                          25,000,000     24,919,333
 3.65%, 9/7/01                                           50,000,000     49,969,583
----------------------------------------------------------------------------------
 Corporate Receivables Corp.:
 3.46%, 10/10/01                                         25,000,000     24,906,292
 3.49%, 10/2/01                                          50,000,000     49,849,736
----------------------------------------------------------------------------------
 CXC, Inc.:
 3.47%. 10/1/01                                          25,000,000     24,927,708
 3.48%, 10/4/01                                          50,000,000     49,840,500
----------------------------------------------------------------------------------
 GOVCO, Inc.:
 3.52%, 10/3/01                                          50,000,000     49,843,556
 3.64%, 9/11/01                                          25,000,000     24,974,722
----------------------------------------------------------------------------------
 Greyhawk Funding LLC:
 3.45%, 10/12/01                                         40,000,000     39,842,833
 3.50%, 10/18/01                                         40,000,000     39,817,222
----------------------------------------------------------------------------------
 National Rural Utilities Cooperative
 Finance Corp., 3.63%, 9/10/01                           33,000,000     32,970,053
----------------------------------------------------------------------------------
 Sheffield Receivables Corp., 3.69%, 9/6/01              35,000,000     34,982,063
----------------------------------------------------------------------------------
 Verizon Network Funding, 3.64%, 9/14/01                 20,900,000     20,872,528
                                                                    --------------
 Total Short-Term Notes (Cost $467,716,129)                            467,716,129

17 | OPPENHEIMER CAPITAL APPRECIATION FUND

STATEMENT OF INVESTMENTS        Continued

                                                        Principal     Market Value
                                                           Amount       See Note 1
==================================================================================
 Repurchase Agreements--3.4%
 Repurchase agreement with PaineWebber, Inc.,
 3.67%, dated 8/31/01, to be repurchased at
 $195,201,566 on 9/4/01, collateralized by
 Federal National Mortgage Assn., 6%-6.50%,
 8/1/16-6/1/31, with a value of $199,573,457
 (Cost $195,122,000)                                 $195,122,000   $  195,122,000

----------------------------------------------------------------------------------
 Total Investments, at Value (Cost $5,969,405,124)           99.7%   5,686,779,571
----------------------------------------------------------------------------------
 Other Assets Net of Liabilities                              0.3       18,603,011
                                                     -----------------------------
 Net Assets                                                 100.0%  $5,705,382,582
                                                     =============================

Footnotes to Statement of Investments

1. Non-income-producing security.
2. Identifies issues considered to be illiquid--See Note 6 of Notes to Financial
Statements.

See accompanying Notes to Financial Statements.

18 | OPPENHEIMER CAPITAL APPRECIATION FUND

STATEMENT OF ASSETS AND LIABILITIES  August 31, 2001


==================================================================================
 Assets

 Investments, at value (cost $5,969,405,124)--
 see accompanying statement                                         $5,686,779,571
----------------------------------------------------------------------------------
 Cash                                                                       63,817
----------------------------------------------------------------------------------
 Receivables and other assets:
 Shares of beneficial interest sold                                     25,527,791
 Investments sold                                                       22,580,083
 Interest and dividends                                                  5,178,122
 Other                                                                     388,822
                                                                    --------------
 Total assets                                                        5,740,518,206

==================================================================================
 Liabilities

 Payables and other liabilities:
 Investments purchased                                                  21,260,510
 Shares of beneficial interest redeemed                                 10,144,233
 Distribution and service plan fees                                      2,016,598
 Trustees' compensation                                                    765,116
 Transfer and shareholder servicing agent fees                             404,459
 Shareholder reports                                                        38,870
 Other                                                                     505,838
                                                                    --------------
 Total liabilities                                                      35,135,624

==================================================================================
 Net Assets                                                         $5,705,382,582
                                                                    ==============

==================================================================================
 Composition of Net Assets

 Paid-in capital                                                    $5,855,824,694
----------------------------------------------------------------------------------
 Accumulated net investment loss                                          (739,767)
----------------------------------------------------------------------------------
 Accumulated net realized gain (loss) on investments and
 foreign currency transactions                                         132,954,948
----------------------------------------------------------------------------------
 Net unrealized appreciation (depreciation) on investments
 and translation of assets and liabilities denominated in
 foreign currencies                                                   (282,657,293)
                                                                    --------------
 Net Assets                                                         $5,705,382,582
                                                                    ==============

19 | OPPENHEIMER CAPITAL APPRECIATION FUND

STATEMENT OF ASSETS AND LIABILITIES  Continued


===============================================================================================
 Net Asset Value Per Share

 Class A Shares:
 Net asset value and redemption price per share (based on net assets of
 $3,055,197,170 and 74,319,407 shares of beneficial interest outstanding)                $41.11
 Maximum offering price per share (net asset value plus sales charge
 of 5.75% of offering price)                                                             $43.62
-----------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of
 $1,242,098,454 and 31,774,279 shares of beneficial interest outstanding)                $39.09
-----------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $426,476,160
 and 11,036,377 shares of beneficial interest outstanding)                               $38.64
-----------------------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $6,790,836           $41.05
 and 165,428 shares of beneficial interest outstanding)
-----------------------------------------------------------------------------------------------
 Class Y Shares:
 Net asset value, redemption price and offering price per share (based on net
 assets of $974,819,962 and 23,459,182 shares of beneficial interest
 outstanding)                                                                            $41.55

See accompanying Notes to Financial Statements.

20 | OPPENHEIMER CAPITAL APPRECIATION FUND

STATEMENT OF OPERATIONS  For the Year Ended August 31, 2001


==================================================================================
 Investment Income

 Interest                                                          $    39,704,570
----------------------------------------------------------------------------------
 Dividends (net of foreign withholding taxes of $261,631)               39,471,531
                                                                   ---------------
 Total income                                                           79,176,101

==================================================================================
 Expenses

 Management fees                                                        35,024,076
----------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                 7,637,291
 Class B                                                                12,648,587
 Class C                                                                 3,997,529
 Class N                                                                     7,904
----------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                 5,239,603
 Class B                                                                 2,040,275
 Class C                                                                   653,404
 Class N                                                                     3,741
 Class Y                                                                   241,405
----------------------------------------------------------------------------------
 Shareholder reports                                                     1,755,268
----------------------------------------------------------------------------------
 Trustees' compensation                                                    679,230
----------------------------------------------------------------------------------
 Custodian fees and expenses                                                85,828
----------------------------------------------------------------------------------
 Other                                                                     778,544
                                                                   ---------------
 Total expenses                                                         70,792,685
 Less reduction to custodian expenses                                      (43,775)
                                                                   ---------------
 Net expenses                                                           70,748,910

==================================================================================
 Net Investment Income                                                   8,427,191

==================================================================================
 Realized and Unrealized Gain (Loss)

 Net realized gain (loss) on:
 Investments                                                           217,642,403
 Foreign currency transactions                                          (1,164,791)
                                                                   ---------------
 Net realized gain (loss)                                              216,477,612

----------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on:
 Investments                                                        (2,129,820,226)
 Translation of assets and liabilities denominated
 in foreign currencies                                                     (34,160)
                                                                   ---------------
 Net change                                                         (2,129,854,386)
                                                                   ---------------
 Net realized and unrealized gain (loss)                            (1,913,376,774)

==================================================================================
 Net Decrease in Net Assets Resulting from Operations              $(1,904,949,583)
                                                                   ===============

See accompanying Notes to Financial Statements.

21 | OPPENHEIMER CAPITAL APPRECIATION FUND

STATEMENTS OF CHANGES IN NET ASSETS



 Year Ended August 31,                                         2001           2000
==================================================================================

 Operations

 Net investment income (loss)                        $    8,427,191 $   (5,304,730)
----------------------------------------------------------------------------------
 Net realized gain (loss)                               216,477,612    610,521,636
----------------------------------------------------------------------------------
 Net change in unrealized appreciation
 (depreciation)                                      (2,129,854,386) 1,150,983,759
                                                     -----------------------------
 Net increase (decrease) in net assets resulting
 from operations                                     (1,904,949,583) 1,756,200,665

==================================================================================
 Dividends and/or Distributions to Shareholders

 Distributions from net realized gain:
 Class A                                               (315,580,814)  (156,146,182)
 Class B                                               (125,027,291)   (44,540,426)
 Class C                                                (38,476,846)   (13,722,828)
 Class N                                                         --             --
 Class Y                                               (110,054,951)   (34,586,462)

==================================================================================
 Beneficial Interest Transactions

 Net increase (decrease) in net assets resulting
 from beneficial interest transactions:
 Class A                                                742,228,163    665,798,352
 Class B                                                436,276,561    530,123,230
 Class C                                                189,865,151    155,176,037
 Class N                                                  7,285,737             --
 Class Y                                                143,938,999    632,947,701

==================================================================================
 Net Assets

 Total increase (decrease)                             (974,494,874) 3,491,250,087
----------------------------------------------------------------------------------
 Beginning of period                                  6,679,877,456  3,188,627,369
                                                     -----------------------------
 End of period (including accumulated net investment
 loss of $739,767 and $277,880, respectively)        $5,705,382,582 $6,679,877,456
                                                     =============================

See accompanying Notes to Financial Statements.

22 | OPPENHEIMER CAPITAL APPRECIATION FUND

FINANCIAL HIGHLIGHTS


 Class A      Year Ended August 31,                      2001            2000            1999            1998           1997
 ===========================================================================================================================

 Per Share Operating Data
 Net asset value, beginning of period                  $62.12          $44.73          $32.53          $38.63         $30.81
 ---------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                             .10            (.02)           (.04)            .17            .18
 Net realized and unrealized gain (loss)               (15.86)          20.63           14.87           (1.55)         11.36
                                                       ---------------------------------------------------------------------
 Total income (loss) from
 investment operations                                 (15.76)          20.61           14.83           (1.38)         11.54
 ---------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                      --              --            (.09)           (.15)          (.17)
 Distributions from net realized gain                   (5.25)          (3.22)          (2.54)          (4.57)         (3.55)
                                                       ---------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                        (5.25)          (3.22)          (2.63)          (4.72)         (3.72)
 ---------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                        $41.11          $62.12          $44.73          $32.53         $38.63
                                                       =====================================================================

 ===========================================================================================================================
 Total Return, at Net Asset Value(1)                   (26.38)%         48.01%          47.36%          (4.06)%        40.52%

 ===========================================================================================================================
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)          $3,055,197      $3,648,961      $2,071,317      $1,233,958     $1,179,362
 ---------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                 $3,255,995      $2,898,088      $1,788,774      $1,352,628     $  985,813
 ---------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income (loss)                            0.28%              0%          (0.05)%          0.48%          0.53%
 Expenses                                                1.03%           1.06%           1.04%           1.00%(3)       1.01%(3)
 ---------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                   46%             44%             59%             60%            66%

1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additonal shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not annualized
for periods of less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.


23 | OPPENHEIMER CAPITAL APPRECIATION FUND

FINANCIAL HIGHLIGHTS  Continued


 Class B      Year Ended August 31,                        2001           2000            1999          1998           1997
 ==========================================================================================================================

 Per Share Operating Data
 Net asset value, beginning of period                    $59.80         $43.48          $31.85        $38.07         $30.56
 --------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                              (.07)          (.20)           (.21)         (.02)           .07
 Net realized and unrealized gain (loss)                 (15.39)         19.74           14.38         (1.62)         11.05
                                                         ------------------------------------------------------------------
 Total income (loss) from
 investment operations                                   (15.46)         19.54           14.17         (1.64)         11.12
 --------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                        --             --              --          (.01)          (.06)
 Distributions from net realized gain                     (5.25)         (3.22)          (2.54)        (4.57)         (3.55)
                                                         ------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                          (5.25)         (3.22)          (2.54)        (4.58)         (3.61)
 --------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                          $39.09         $59.80          $43.48        $31.85         $38.07
                                                         ==================================================================

 ==========================================================================================================================
 Total Return, at Net Asset Value(1)                     (26.95)%        46.88%          46.20%        (4.86)%        39.30%

 ==========================================================================================================================
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)            $1,242,098     $1,333,387        $531,625      $193,638        $52,220
 --------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                   $1,265,753     $  922,480        $372,157      $132,908        $23,678
 --------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment loss                                      (0.48)%        (0.76)%         (0.86)%       (0.37)%        (0.33)%
 Expenses                                                  1.80%          1.83%           1.84%         1.81%(3)       1.86%(3)
 --------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                     46%            44%             59%           60%            66%

1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additonal shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not annualized
for periods of less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

24 | OPPENHEIMER CAPITAL APPRECIATION FUND


 Class C      Year Ended August 31,                        2001          2000         1999           1998            1997
 ========================================================================================================================

 Per Share Operating Data
 Net asset value, beginning of period                    $59.19        $43.06       $31.57         $37.76          $30.27
 ------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                              (.01)         (.18)        (.23)          (.03)            .01
 Net realized and unrealized gain (loss)                 (15.29)        19.53        14.26          (1.59)          11.03
                                                         ----------------------------------------------------------------
 Total income (loss) from
 investment operations                                   (15.30)        19.35        14.03          (1.62)          11.04
 ------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                        --            --           --             --              --
 Distributions from net realized gain                     (5.25)        (3.22)       (2.54)         (4.57)          (3.55)
                                                         ----------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                          (5.25)        (3.22)       (2.54)         (4.57)          (3.55)
 ------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                          $38.64        $59.19       $43.06         $31.57          $37.76
                                                         ================================================================

 ========================================================================================================================
 Total Return, at Net Asset Value(1)                     (26.95)%       46.89%       46.16%         (4.84)%         39.35%

 ========================================================================================================================
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)              $426,476      $402,442     $165,231        $76,058         $36,148
 ------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $400,009      $278,800     $126,443        $61,503         $19,508
 ------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment loss                                      (0.48)%       (0.76)%      (0.86)%        (0.36)%         (0.32)%
 Expenses                                                  1.80%         1.83%        1.85%          1.82%(3)        1.85%(3)
 ------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                     46%           44%          59%            60%             66%

1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additonal shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not annualized
for periods of less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

25 | OPPENHEIMER CAPITAL APPRECIATION FUND

FINANCIAL HIGHLIGHTS  Continued


                                                  Period Ended
 Class N                                    August 31, 2001(1)
==============================================================

 Per Share Operating Data

 Net asset value, beginning of period                   $45.58
--------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment loss                                      (.01)
 Net realized and unrealized gain (loss)                 (4.52)
                                                        ------
 Total income (loss) from investment operations          (4.53)
--------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                       --
 Distributions from net realized gain                       --
                                                        ------
 Total dividends and/or distributions to shareholders       --
--------------------------------------------------------------
 Net asset value, end of period                         $41.05
                                                        ======

==============================================================
Total Return, at Net Asset Value(2)                      (9.94)%

==============================================================
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)               $6,791
--------------------------------------------------------------
 Average net assets (in thousands)                      $3,173
--------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment loss                                     (0.11)%
 Expenses                                                 1.36%
--------------------------------------------------------------
 Portfolio turnover rate                                    46%

1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.

See accompanying Notes to Financial Statements.

26 | OPPENHEIMER CAPITAL APPRECIATION FUND


 Class Y     Year Ended August 31,                            2001              2000            1999         1998(1)
====================================================================================================================

 Per Share Operating Data
 Net asset value, beginning of period                       $62.51            $44.81          $32.56          $40.15
--------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .27               .13             .13             .30
 Net realized and unrealized gain (loss)                    (15.98)            20.79           14.85           (3.11)
                                                            --------------------------------------------------------
 Total income (loss) from investment operations             (15.71)            20.92           14.98           (2.81)
--------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                           --                --            (.19)           (.21)
 Distributions from net realized gain                        (5.25)            (3.22)          (2.54)          (4.57)
                                                            --------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                             (5.25)            (3.22)          (2.73)          (4.78)
--------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                             $41.55            $62.51          $44.81          $32.56
                                                            ========================================================

====================================================================================================================
 Total Return, at Net Asset Value(2)                        (26.12)%           48.64%          47.90%          (7.45)%

====================================================================================================================
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)               $  974,820        $1,295,087        $420,455        $180,512
--------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                      $1,095,575        $  855,270        $307,498        $139,050
--------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        0.66%             0.45%           0.30%           0.75%
 Expenses                                                     0.66%             0.64%           0.68%           0.69%(4)
--------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        46%               44%             59%             60%

1. For the period from November 3, 1997 (inception of offering) to August 31,
1998.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

27 | OPPENHEIMER CAPITAL APPRECIATION FUND

NOTES TO FINANCIAL STATEMENTS

================================================================================
1. Significant Accounting Policies
Oppenheimer Capital Appreciation Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund's investment objective is to seek capital appreciation. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
   The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class
A shares are sold at their offering price, which is normally net asset value
plus a front-end sales charge. Class B, Class C and Class N shares are sold
without a front-end sales charge but may be subject to a contingent deferred
sales charge (CDSC). Class N shares are sold only through retirement plans.
Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have identical
rights to earnings, assets and voting privileges, except that each class has
its own expenses directly attributable to that class and exclusive voting
rights with respect to matters affecting that class. Classes A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.
--------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).

28 | OPPENHEIMER CAPITAL APPRECIATION FUND

--------------------------------------------------------------------------------
Structured Notes. The Fund invests in structured notes whose market values and
redemption prices are linked to the market value of specific securities. The
structured notes are leveraged, which increases the Fund's exposure to changes
in prices of the underlying securities and increases the volatility of each
note's market value relative to the change in the underlying security prices.
Fluctuations in value of these securities are recorded as unrealized gains and
losses in the accompanying financial statements. The Fund records a realized
gain or loss when a structured note is sold or matures. As of August 31, 2001,
the market value of these securities comprised 0.6% of the Fund's net assets,
and resulted in unrealized gains in the current period of $1,500,334.
--------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
   The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains
and losses in the Fund's Statement of Operations.
--------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires its custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of the collateral declines,
or if the seller enters an insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
--------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
--------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.

29 | OPPENHEIMER CAPITAL APPRECIATION FUND

NOTES TO FINANCIAL STATEMENTS  Continued

================================================================================
1. Significant Accounting Policies Continued
Trustees' Compensation. The Fund has adopted an unfunded retirement plan for
the Fund's independent Board of Trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During the
year ended August 31, 2001, the Fund's projected benefit obligations were
increased by $474,179 and payments of $12,292 were made to retired trustees,
resulting in an accumulated liability of $739,802 as of August 31, 2001.
   The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Board of Trustees in shares of one
or more Oppenheimer funds selected by the trustee. The amount paid to the Board
of Trustees under the plan will be determined based upon the performance of the
selected funds. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share.
--------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
--------------------------------------------------------------------------------
Classification of Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes primarily because of the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes. The
character of dividends and distributions made during the fiscal year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividends and distributions, the fiscal year in which amounts are distributed
may differ from the fiscal year in which the income or realized gain was
recorded by the Fund.
   The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 2001, amounts have been reclassified to reflect an
increase in paid-in capital of $15,509,985, a decrease in accumulated net
investment income of $8,889,078, and a decrease in accumulated net realized
gain on investments of $6,620,907. This reclassification includes $15,509,985
distributed in connection with Fund share redemptions which increased paid-in
capital and reduced accumulated net realized gain. Net assets of the Fund were
unaffected by the reclassifications.

30 | OPPENHEIMER CAPITAL APPRECIATION FUND

--------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
--------------------------------------------------------------------------------
Security Transactions. Security transactions are accounted for as of trade date.
Gains and losses on securities sold are determined on the basis of identified
cost.
--------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

31 | OPPENHEIMER CAPITAL APPRECIATION FUND

NOTES TO FINANCIAL STATEMENTS  Continued

================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:


                                            Year Ended August 31, 2001(1)           Year Ended August 31, 2000
                                    Shares                         Amount             Shares            Amount
--------------------------------------------------------------------------------------------------------------

Class A
Sold                            22,608,674                 $1,080,716,997         21,248,494    $1,161,716,520
Dividends and/or
distributions reinvested         6,337,191                    296,137,035          2,997,611       146,972,843
Redeemed                       (13,365,396)                  (634,625,869)       (11,817,625)     (642,891,011)
                               -------------------------------------------------------------------------------
Net increase (decrease)         15,580,469                 $  742,228,163         12,428,480    $  665,798,352
                               ===============================================================================

--------------------------------------------------------------------------------------------------------------
Class B
Sold                            12,135,550                 $  557,398,730         12,651,311    $  670,804,410
Dividends and/or
distributions reinvested         2,633,268                    117,655,350            907,173        43,064,587
Redeemed                        (5,291,430)                  (238,777,519)        (3,488,619)      (183,745,767)
                               -------------------------------------------------------------------------------
Net increase (decrease)          9,477,388                 $  436,276,561         10,069,865    $  530,123,230
                               ===============================================================================

--------------------------------------------------------------------------------------------------------------
Class C
Sold                             5,484,946                 $  247,461,141          4,959,476    $  257,314,222
Dividends and/or
distributions reinvested           812,514                     35,888,768            280,983        13,200,947
Redeemed                        (2,060,592)                   (93,484,758)        (2,278,272)     (115,339,132)
                               -------------------------------------------------------------------------------
Net increase (decrease)          4,236,868                 $  189,865,151          2,962,187    $  155,176,037
                               ===============================================================================

--------------------------------------------------------------------------------------------------------------
Class N
Sold                               178,524                 $    7,841,445                 --    $           --
Dividends and/or
distributions reinvested                --                             --                 --                --
Redeemed                           (13,096)                      (555,708)                --                --
                               -------------------------------------------------------------------------------
Net increase (decrease)            165,428                 $    7,285,737                 --    $           --
                               ===============================================================================

--------------------------------------------------------------------------------------------------------------
Class Y
Sold                             7,131,501                 $  354,385,311         12,933,936    $  723,894,124
Dividends and/or
distributions reinvested         2,298,717                    108,246,627            703,262        34,586,461
Redeemed                        (6,689,239)                  (318,692,939)        (2,302,166)     (125,532,884)
                               -------------------------------------------------------------------------------
Net increase (decrease)          2,740,979                 $  143,938,999         11,335,032    $  632,947,701
                               ===============================================================================

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

32 | OPPENHEIMER CAPITAL APPRECIATION FUND

================================================================================
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended August 31, 2001, were
$3,428,733,360 and $2,453,054,235, respectively.

As of August 31, 2001, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $5,984,595,716 was:

         Gross unrealized appreciation              $ 425,881,547
         Gross unrealized depreciation               (723,697,692)


         Net unrealized appreciation (depreciation) $(297,816,145)
                                                    =============

================================================================================
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee of
0.75% of the first $200 million of average annual net assets, 0.72% of the next
$200 million, 0.69% of the next $200 million, 0.66% of the next $200 million,
0.60% of the next $700 million, 0.58% of the next $1.0 billion, 0.56% of the
next $2.0 billion, 0.54% of average annual net assets over $4.5 billion.
Starting January 1, 2001, the rate was revised to be 0.54% of average annual
net assets over $4.5 billion to $8.5 billion and 0.52% of average annual net
assets over $8.5 billion. The Fund's management fee for the year ended August
31, 2001, was an annualized rate of 0.58%.
--------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS an agreed upon per account fee.
--------------------------------------------------------------------------------
Distribution and Service Plan Fees. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.

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


                      Aggregate          Class A    Commissions     Commissions     Commissions     Commissions
                      Front-End        Front-End     on Class A      on Class B      on Class C      on Class C
                  Sales Charges    Sales Charges         Shares          Shares          Shares          Shares
                     on Class A      Retained by    Advanced by     Advanced by     Advanced by     Advanced by
Year Ended               Shares      Distributor    Distributor(1)  Distributor(1)  Distributor(1)  Distributor(1)
------------------------------------------------------------------------------------------------------------------

August 31, 2001     $10,082,655       $2,828,156     $1,634,569     $16,125,855      $1,835,899         $75,470

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


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

August 31, 2001       $99,138         $2,111,146            $116,686                $47

33 | OPPENHEIMER CAPITAL APPRECIATION FUND

NOTES TO FINANCIAL STATEMENTS  Continued

================================================================================
4. Fees and Other Transactions with Affiliates Continued
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.
--------------------------------------------------------------------------------
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. The Class A service plan permits reimbursements
to the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares purchased. 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 of the Fund. For the year ended August 31,
2001, payments under the Class A plan totaled $7,637,291, all of which were
paid by the Distributor to recipients, and included $461,442 paid to an
affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years.
--------------------------------------------------------------------------------
Class B, Class C and Class N Distribution and Service 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 Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. 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 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 asset-based sales charges from
the Fund under the plans. If any 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. The plans allow for the carryforward of distribution expenses, to
be recovered from asset-based sales charges in subsequent fiscal periods.

34 | OPPENHEIMER CAPITAL APPRECIATION FUND

Distribution fees paid to the Distributor for the year ended August 31, 2001,
were as follows:


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

Class B Plan          $12,648,587       $10,375,861    $22,812,921           1.84%
Class C Plan            3,997,529         1,289,829      3,394,731           0.80
Class N Plan                7,904             6,201         46,201           0.68

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

================================================================================
6. Illiquid Securities
As of August 31, 2001, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of August
31, 2001, was $21,001,168, which represents 0.37% of the Fund's net assets.

35 | OPPENHEIMER CAPITAL APPRECIATION FUND

NOTES TO FINANCIAL STATEMENTS  Continued

================================================================================
7. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.08% per annum.
   The Fund had no borrowings outstanding during the year ended or at August
31, 2001.


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







                                                       B-11
Appendix B

                          OppenheimerFunds Special Sales Charge Arrangements and Waivers

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

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

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

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

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

__________

1.       Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
2.       In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end fund, references
     to contingent deferred sales charges mean the Fund's Early Withdrawal Charges and references to
     "redemptions" mean "repurchases" of shares.
3. 
An “employee benefit plan” means any plan or arrangement, whether or
not it is “qualified” under the Internal Revenue Code, under which
Class A shares of an Oppenheimer fund or funds are purchased by a fiduciary or
other administrator for the account of participants who are employees of a
single employer or of affiliated employers. These may include, for example,
medical savings accounts, payroll deduction plans or similar plans. The fund
accounts must be registered in the name of the fiduciary or administrator
purchasing the shares for the benefit of participants in the plan.



4. 
The term “Group Retirement Plan” means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship, members
and employees of a partnership or association or other organized group of
persons (the members of which may include other groups), if the group has made
special arrangements with the Distributor and all members of the group
participating in (or who are eligible to participate in) the plan purchase Class
A 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 A 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 A shares at net asset value but subject to the Class A contingent
deferred sales charge.



                   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 commission described in the Prospectus under “Class A
Contingent Deferred Sales Charge.”3 This waiver provision
applies to: 

|_|      Purchases of Class A shares aggregating $1 million or more.
|_| Purchases by a
Retirement Plan (other than an IRA or 403(b)(7) custodial plan) that: (1) buys
shares costing $500,000 or more, or (2) has, at the time of purchase, 100 or
more eligible employees or total plan assets of $500,000 or more, 

                    or
(3)      certifies to the Distributor that it projects to have annual plan purchases of $200,000 or more.
|_|      Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases are made:
(1)      through a broker, dealer, bank or registered investment adviser that has made special arrangements with
                    the Distributor for those purchases, or
(2) 
by a direct rollover of a distribution from a qualified Retirement Plan if the
administrator of that Plan has made special arrangements with the Distributor
for those purchases.



        |_|
Purchases of Class A shares by Retirement Plans that have any of the following
record-keeping arrangements: 

(1) 
The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc.
(“Merrill Lynch”) on a daily valuation basis for the Retirement Plan.
On the date the plan sponsor signs the record-keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets invested in
(a) mutual funds, other than those advised or managed by Merrill Lynch Asset
Management, L.P. (“MLAM”), 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 MLAM (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 May 1, 1999. 





                             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
commissions 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
commissions 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.4
(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.5
  
(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.



|_|




         Distributions 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.6
(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.7
(9)      On account of the participant's 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) 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, but
excluding distributions made because of the Plan’s elimination as
investment options under the Plan of all of the Oppenheimer funds that had been
offered.



(13) 
For distributions from a participant’s account under an Automatic
Withdrawal Plan after the participant reaches age 59½ , 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.



  
|_|
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, Class C and Class N 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 Quest Small Cap Value Fund
   Oppenheimer Quest Balanced Value Fund                    Oppenheimer Quest Global Value Fund
   Oppenheimer Quest Opportunity Value Fund

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

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

        All
of the funds listed above are referred to in this Appendix as the “Former
Quest for Value Funds.” The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either: 

|_|      acquired by such shareholder pursuant to an exchange of shares of an Oppenheimer fund that was one of
              the Former Quest for Value Funds, or
|_| 
purchased by such shareholder by exchange of shares of another Oppenheimer fund
that were acquired pursuant to the merger of any of the Former Quest for Value
Funds into that other Oppenheimer fund on November 24, 1995.



A.  Reductions or Waivers of Class A Sales Charges.

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

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

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






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

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

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

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

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

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

        |X|
Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with: |_| 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.



        |X|
Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995: 

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

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

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

|_|      the Manager and its affiliates,
|_| 
present or former officers, directors, trustees and employees (and their
“immediate families” as defined in the Fund’s Statement of
Additional Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them or the prior investment advisor of the Fund
for their employees,



|_| 
registered management investment companies or separate accounts of insurance
companies that had an agreement with the Fund’s prior investment advisor or
distributor for that purpose,



|_| 
dealers or brokers that have a sales agreement with the Distributor, if they
purchase shares for their own accounts or for retirement plans for their
employees,



|_| 
employees and registered representatives (and their spouses) of dealers or
brokers described in the preceding section or financial institutions that have
entered into sales arrangements with those dealers or brokers (and whose
identity is made known to the Distributor) or with the Distributor, but only if
the purchaser certifies to the Distributor at the time of purchase that the
purchaser meets these qualifications,



|_| 
dealers, brokers, or registered investment advisors that had entered into an
agreement with the Distributor or the prior distributor of the Fund specifically
providing for the use of Class M shares of the Fund in specific investment
products made available to their clients, and



|_| 
dealers, brokers or registered investment advisors that had entered into an
agreement with the Distributor or prior distributor of the Fund’s shares to
sell shares to defined contribution employee retirement plans for which the
dealer, broker, or investment advisor provides administrative services.








-------------------------------------------------------------------------------------------------------------------
Oppenheimer
Capital Appreciation Fund

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

Internet Web
Site:

         WWW.OPPENHEIMERFUNDS.COM
         ------------------------

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

Distributor

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

Transfer Agent

         OppenheimerFunds Services
         P.O. Box 5270
         Denver, Colorado 80217
         1-800-525-7048

Custodian Bank

         The Bank of New York
         One Wall Street
         New York, New York 10015

Independent
Auditors

         KPMG  LLP
         707 Seventeenth Street
         Denver, Colorado 80202

Legal Counsel

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


1234


PX320.1201



__________

1. The interfund
lending program is subject to approval by the Securities and Exchange
Commission. The Fund will not engage in interfund lending until such approval
has been granted. 

3 However, that
commission 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. 4 This
provision does not apply to IRAs. 

5 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.
6 This provision does not apply to IRAs.
7 This provision does not apply to loans from 403(b)(7) custodial plans.
8 This provision
does not apply to 403(b)(7) custodial plans if the participant is less than age
55, nor to IRAs.