Quest For Value Funds

497 1 body.htm REVISED SAIS WITH FINANCIALS Quest For Value Funds

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Oppenheimer Quest Opportunity Value FundSM (A series of Oppenheimer
Quest for Value Funds)
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6803 S. Tucson Way, Centennial, CO 80112
1.800.CALL OPP (225.5677)

Statement of Additional Information dated February 23, 2005, revised April 15, 2005

This Statement of Additional Information is not a Prospectus. This document contains
additional information about the Fund and supplements information in the Prospectus dated
February 23, 2005. It should be read together with the Prospectus, which may be obtained
by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free number shown
above, or by downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

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

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

Financial Information About the Fund
Independent Registered Public Accounting Firm's Report....................
Financial Statements......................................................
Appendix A: Ratings Definitions........................................A-1
Appendix B: Corporate Industry Classifications.........................B-1
Appendix C: Special Sales Charge Arrangements and Waivers..............C-1

ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

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

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

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

|X| Investments in Equity Securities. The Fund does not limit its investments in equity
securities to issuers having a market capitalization of a specified size or range, and
therefore the Fund can invest in securities of small-, mid- and large-capitalization
issuers. At times, the Fund may increase the relative emphasis of its equity investments in
securities of one or more capitalization ranges, based upon the Manager judgment of where
the best market opportunities are to seek the Fund's objective. At times, the market may
favor or disfavor securities of issuers of a particular capitalization range, and
securities of small-capitalization issuers may be subject to greater price volatility in
general than securities of larger companies. Therefore, if the Fund has substantial
investments in smaller-capitalization companies at times of market volatility, the Fund's
share price could fluctuate more than that of funds focusing on larger-capitalization
issuers.

o Value Investing. In selecting equity investments for the Fund's portfolio, the
portfolio manager currently uses a value investing style. In using a value approach, the
portfolio manager seeks stock and other equity securities that appear to be temporarily
undervalued, by various measures, such as price/earnings ratios. This approach is subject
to change and may not necessarily be used in all cases. Value investing seeks stocks having
prices that are low in relation to their real worth or future prospects, in the hope that
the Fund will realize appreciation in the value of its holdings when other investors
realize the intrinsic value of the stock.
Some of the measures used to identify these securities include, among others:
o Price/Earnings ratio, which is the stock's price divided by its earnings per share. A
stock having a price/earnings ratio lower than its historical range, or the
market as a whole or that of similar companies, may offer attractive investment
opportunities.
o Price/book value ratio, which is the stock price divided by the book value of the
company per share, which measures the company's stock price in relation to its
asset value.
o Dividend Yield is measured by dividing the annual dividend by the stock price per
share.
o Valuation of Assets, which compares the stock price to the value of the company's
underlying assets, including their projected value in the marketplace and
liquidation value.

o Preferred Stocks. Preferred stocks are equity securities but have certain attributes
of debt securities. Preferred stock, unlike common stock, has a stated dividend rate
payable from the corporation's earnings. Preferred stock dividends may be cumulative or
non-cumulative, participating, or auction rate. "Cumulative" dividend provisions require
all or a portion of prior unpaid dividends to be paid before the issuer can pay dividends
on common shares.

If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock may have
mandatory sinking fund provisions, as well as provisions for their call or redemption prior
to maturity which can have a negative effect on their prices when interest prior to
maturity rates decline. Preferred stock may be "participating" stock, which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.

Preferred stocks are equity securities because they do not constitute a liability of
the issuer and therefore do not offer the same degree of protection of capital as debt
securities and may not offer the same degree of assurance of continued income as debt
securities. The rights of preferred stock on distribution of a corporation's assets in the
event of its liquidation are generally subordinate to the rights associated with a
corporation's debt securities. Preferred stock generally has a preference over common stock
on the distribution of a corporation's assets in the event of its liquidation.

o Rights and Warrants. The Fund can invest up to 5% of its total assets in warrants but
no more than 2% of its total assets may be invested in warrants that are not listed on The
New York Stock Exchange or The American Stock Exchange. Those percentage limitations are
fundamental policies. 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.

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

The value of a convertible security is a function of its "investment value" and its
"conversion value." If the investment value exceeds the conversion value, the security will
behave more like a debt security, and the security's price will likely increase when
interest rates fall and decrease when interest rates rise. If the conversion value exceeds
the investment value, the security will behave more like an equity security: it will likely
sell at a premium over its conversion value, and its price will tend to fluctuate directly
with the price of the underlying security. Convertible securities are subject to credit
risks and interest rate risk as discussed below under "Investments in Debt Securities."

While some convertible securities are a form of debt security in many cases, their
conversion feature (allowing conversion into equity securities) causes them to be regarded
by the Manager more as "equity equivalents." In those cases, the credit rating assigned to
the security has less impact on the Manager's investment decision 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.

|X| Investments in Debt Securities. The Fund can invest in a variety of domestic and
foreign debt securities, including mortgage-backed securities, investment-grade corporate
debt securities and U.S. government securities. It might do so to seek its objective if
and at times when the portfolio manager believes that debt securities are preferable to
equity investments. The Fund can also invest in those debt securities and other
high-quality short-term debt securities including money market instruments for liquidity or
defensive purposes. Foreign debt securities are subject to the risks of foreign investing
described below. In general, domestic and foreign debt securities are also subject to two
additional types of risks: credit risk and interest rate risk.

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

o Interest Rate Risk. Interest rate risk refers to the fluctuations in value of debt
securities resulting from the inverse relationship between price and yield. For example,
an increase in general interest rates will tend to reduce the market value of
already-issued fixed-income investments, and a decline in general interest rates will tend
to increase their value. In addition, debt securities with longer maturities, which tend to
have higher yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.

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

o Mortgage-Related Securities. Mortgage-related securities are a form of derivative
investment collateralized by pools of commercial or residential mortgages. Pools of
mortgage loans are assembled as securities for sale to investors by government agencies or
entities or by private issuers. These securities include collateralized mortgage
obligations ("CMOs"), mortgage pass-through securities, stripped mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs") and other
real estate-related securities.

Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk (depending on
the nature of the issuer) but are subject to interest rate risks and prepayment risks, as
described in the Prospectus.

As with other debt securities, the prices of mortgage-related securities tend to move
inversely to changes in interest rates. The Fund can buy mortgage-related securities that
have interest rates that move inversely to changes in general interest rates, based on a
multiple of a specific index. Although the value of a mortgage-related security may decline
when interest rates rise, the converse is not always the case.

In periods of declining interest rates, mortgages are more likely to be prepaid.
Therefore, a mortgage-related security's maturity can be shortened by unscheduled
prepayments on the underlying mortgages. Therefore, it is not possible to predict
accurately the security's yield. The principal that is returned earlier than expected may
have to be reinvested in other investments having a lower yield than the prepaid security.
Therefore, these securities may be less effective as a means of "locking in" attractive
long-term interest rates, and they may have less potential for appreciation during periods
of declining interest rates, than conventional bonds with comparable stated maturities.

Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's shares. If a
mortgage-related security has been purchased at a premium, all or part of the premium the
Fund paid may be lost if there is a decline in the market value of the security, whether
that results from interest rate changes or prepayments on the underlying mortgages. In the
case of stripped mortgage-related securities, if they experience greater rates of
prepayment than were anticipated, the Fund may fail to recoup its initial investment on the
security.

If interest rates rise rapidly, prepayments may occur at a slower rate than expected
and the expected maturity of long-term or medium-term securities could lengthen as a
result. Generally, that would cause their value and the prices of the Fund's share to
fluctuate more widely in response to changes in interest rates.

As with other debt securities, the values of mortgage-related securities may be
affected by changes in the market's perception of the creditworthiness of the entity
issuing the securities or guaranteeing them. Their values may also be affected by changes
in government regulations and tax policies.

o Collateralized Mortgage Obligations. CMOs are multi-class bonds that are backed by
pools of mortgage loans or mortgage pass-through certificates. They may be collateralized
by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae, or Freddie
Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing Administration or
guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities, or
(5) any combination of these.

Each class of CMO, referred to as a "tranche," is issued at a specific coupon rate
and has a stated maturity or final distribution date. Principal prepayments on the
underlying mortgages may cause the CMO to be retired much earlier than the stated maturity
or final distribution date. The principal and interest on the underlying mortgages may be
allocated among the several classes of a series of a CMO in different ways. One or more
tranches may have coupon rates that reset periodically at a specified increase over an
index. These are floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an applicable
index. The coupon rate on these CMOs will increase as general interest rates decrease.
These are usually much more volatile than fixed rate CMOs or floating rate CMOs.

|X| U.S. Government Securities. These are securities issued or guaranteed by the U.S.
Treasury or other U.S. government agencies or federally-chartered entities referred to as
"instrumentalities." The obligations of U.S. government agencies or instrumentalities in
which the Fund can invest may or may not be guaranteed or supported by the "full faith and
credit" of the United States. "Full faith and credit" means generally that the taxing
power of the U.S. government is pledged to the payment of interest and repayment of
principal on a security. If a security is not backed by the full faith and credit of the
United States, the owner of the security must look principally to the agency issuing the
obligation for repayment. The owner might not be able to assert a claim against the United
States if the issuing agency or instrumentality does not meet its commitment. The Fund
will invest in securities of U.S. government agencies and instrumentalities only if the
Manager is satisfied that the credit risk with respect to the agency or instrumentality is
minimal.

o U.S. Treasury Obligations. These include Treasury bills (which have maturities of one
year or less when issued), Treasury notes (which have maturities of from one to ten years
when issued), and Treasury bonds (which have maturities of more than ten years when
issued). Treasury securities are backed by the full faith and credit of the United States
as to timely payments of interest and repayments of principal. They also can include U. S.
Treasury securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S.
Treasury securities described below, and Treasury Inflation-Protection Securities ("TIPS").

o Treasury Inflation-Protection Securities. The Fund can buy these U.S. Treasury
securities, called "TIPS," that are designed to provide an investment vehicle that is not
vulnerable to inflation. The interest rate paid by TIPS is fixed. The principal value
rises or falls semi-annually based on changes in the published Consumer Price Index. If
inflation occurs, the principal and interest payments on TIPS are adjusted to protect
investors from inflationary loss. If deflation occurs, the principal and interest payments
will be adjusted downward, although the principal will not fall below its face amount at
maturity.

o Obligations Issued or Guaranteed by U.S. Government Agencies or Instrumentalities.
These include direct obligations and mortgage-related securities that have different
levels of credit support from the government. Some are supported by the full faith and
credit of the U.S. government, such as Government National Mortgage Association
pass-through mortgage certificates (called "Ginnie Maes"). Some are supported by the right
of the issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are supported only by
the credit of the entity that issued them, such as Federal Home Loan Mortgage Corporation
obligations ("Freddie Macs").

o U.S. Government Mortgage-Related Securities. The Fund can invest in a variety of
mortgage-related securities that are issued by U.S. government agencies or
instrumentalities, some of which are described below.

o GNMA Certificates. The government National Mortgage Association ("GNMA") is a
wholly-owned corporate instrumentality of the United States within the U.S. Department of
Housing and Urban Development. GNMA's principal programs involve its guarantees of
privately-issued securities backed by pools of mortgages. Ginnie Maes are debt securities
representing an interest in one or a pool of mortgages that are insured by the Federal
Housing Administration or the Farmers Home Administration or guaranteed by the Veterans
Administration.

The Ginnie Maes in which the Fund can invest are of the "fully modified pass-through"
type. They provide that the registered holders of the Certificates will receive timely
monthly payments of the pro-rata share of the scheduled principal payments on the
underlying mortgages, whether or not those amounts are collected by the issuers. Amounts
paid include, on a pro-rata basis, any prepayment of principal of such mortgages and
interest (net of servicing and other charges) on the aggregate unpaid principal balance of
the Ginnie Mae, whether or not the interest on the underlying mortgages has been collected
by the issuers.

The Ginnie Maes purchased by the Fund are guaranteed as to timely payment of
principal and interest by GNMA. In giving that guaranty, GNMA expects that payments
received by the issuers of Ginnie Maes on account of the mortgages backing the Ginnie Maes
will be sufficient to make the required payments of principal of and interest on those
Ginnie Maes. However, if those payments are insufficient, the guaranty agreements between
the issuers of the Certificates and GNMA require the issuers to make advances sufficient
for the payments. If the issuers fail to make those payments, GNMA will do so.

Under Federal law, the full faith and credit of the United States is pledged to the
payment of all amounts that may be required to be paid under any guaranty issued by GNMA as
to such mortgage pools. An opinion of an Assistant Attorney General of the United States,
dated December 9, 1969, states that such guaranties "constitute general obligations of the
United States backed by its full faith and credit." GNMA is empowered to borrow from the
United States Treasury to the extent necessary to make any payments of principal and
interest required under those guaranties.

Ginnie Maes are backed by the aggregate indebtedness secured by the underlying
FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the extent of payments
received by the issuers on account of such mortgages, Ginnie Maes do not constitute a
liability of those issuer, nor do they evidence any recourse against those issuers.
Recourse is solely against GNMA. Holders of Ginnie Maes (such as the Fund) have no
security interest in or lien on the underlying mortgages.

Monthly payments of principal will be made, and additional prepayments of principal
may be made, to the Fund with respect to the mortgages underlying the Ginnie Maes held by
the Fund. All of the mortgages in the pools relating to the Ginnie Maes in the Fund are
subject to prepayment without any significant premium or penalty, at the option of the
mortgagors. While the mortgages on 1-to-4-family dwellings underlying certain Ginnie Maes
have a stated maturity of up to 30 years, it has been the experience of the mortgage
industry that the average life of comparable mortgages, as a result of prepayments,
refinancing and payments from foreclosures, is considerably less.

o Federal Home Loan Mortgage Corporation Certificates. FHLMC, a corporate
instrumentality of the United States, issues FHLMC Certificates representing interests in
mortgage loans. FHLMC guarantees to each registered holder of a FHLMC Certificate timely
payment of the amounts representing a holder's proportionate share in:
(i) interest payments less servicing and guarantee fees,
(ii) principal prepayments and
(iii) the ultimate collection of amounts representing the holder's proportionate interest
in principal payments on the mortgage loans in the pool represented by
the FHLMC Certificate, in each case whether or not such amounts are
actually received.

The obligations of FHLMC under its guarantees are obligations solely of FHLMC and are
not backed by the full faith and credit of the United States.

o Federal National Mortgage Association (Fannie Mae) Certificates. Fannie Mae, a
federally-chartered and privately-owned corporation, issues Fannie Mae Certificates which
are backed by a pool of mortgage loans. Fannie Mae guarantees to each registered holder
of a Fannie Mae Certificate that the holder will receive amounts representing the holder's
proportionate interest in scheduled principal and interest payments, and any principal
prepayments, on the mortgage loans in the pool represented by such certificate, less
servicing and guarantee fees, and the holder's proportionate interest in the full
principal amount of any foreclosed or other liquidated mortgage loan. In each case the
guarantee applies whether or not those amounts are actually received. The obligations of
Fannie Mae under its guarantees are obligations solely of Fannie Mae and are not backed by
the full faith and credit of the U.S. or any of its agencies or instrumentalities other
than Fannie Mae.

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

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

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

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

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

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

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

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

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

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

Increased portfolio turnover creates higher brokerage and transaction costs for the
Fund. 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| Foreign Securities. The Fund can purchase equity and debt securities issued by
foreign companies or foreign governments or their agencies. "Foreign securities" include
equity and debt securities of companies organized under the laws of countries other than
the United States and debt securities of foreign governments and their agencies and
instrumentalities. Those securities may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.

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

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

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

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

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

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

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

o Special Risks of Emerging Markets. Emerging and developing markets abroad may also
offer special opportunities for growth investing but have greater risks than more
developed foreign markets, such as those in Europe, Canada, Australia, New Zealand and
Japan. There may be even less liquidity in their securities markets, and settlements of
purchases and sales of securities may be subject to additional delays. They are subject to
greater risks of limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be subject to the risk
of greater political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. The Manager will consider these factors when
evaluating securities in these markets, because the selection of those securities must be
consistent with the Fund's goal of growth of capital.

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

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

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

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

|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.

|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund can invest in securities
on a "when-issued" basis and can purchase or sell securities on a "delayed-delivery" or
"forward commitment" basis. When-issued and delayed-delivery are terms that refer to
securities whose terms and indenture are available and for which a market exists, but which
are not available for immediate delivery.

When such transactions are negotiated, the price (which is generally expressed in
yield terms) is fixed at the time the commitment is made. Delivery and payment for the
securities take place at a later date. The securities are subject to change in value from
market fluctuations during the period until settlement. The value at delivery may be less
than the purchase price. For example, changes in interest rates in a direction other than
that expected by the Manager before settlement will affect the value of such securities and
may cause a loss to the Fund. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund from the investment.
No income begins to accrue to the Fund on a when-issued security until the Fund receives
the security at settlement of the trade.

The Fund can engage in when-issued transactions to secure what the Manager considers
to be an advantageous price and yield at the time of entering into the obligation. When the
Fund enters into a when-issued or delayed-delivery transaction, it relies on the other
party to complete the transaction. Its failure to do so may cause the Fund to lose the
opportunity to obtain the security at a price and yield the Manager considers to be
advantageous.

When the Fund engages in when-issued and delayed-delivery transactions, it does so
for the purpose of acquiring or selling securities consistent with its investment objective
and policies for its portfolio or for delivery pursuant to options contracts it has entered
into, and not for the purpose of investment leverage. Although the Fund will enter into
delayed-delivery or when-issued purchase transactions to acquire securities, it may dispose
of a commitment prior to settlement. If the Fund chooses to dispose of the right to acquire
a when-issued security prior to its acquisition or to dispose of its right to delivery or
receive against a forward commitment, it may incur a gain or loss.

At the time the Fund makes the commitment to purchase or sell a security on a
when-issued or delayed-delivery basis, it records the transaction on its books and reflects
the value of the security purchased in determining the Fund's net asset value. In a sale
transaction, it records the proceeds to be received. The Fund will identify on its books
liquid assets at least equal in value to the value of the Fund's purchase commitments until
the Fund pays for the investment. The Fund will not enter into when-issued commitments if
more than 15% of the Fund's net assets would be committed under these transactions.

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

Short Sales. The Fund may make short sales of securities, either as a hedge against
potential declines in value of a portfolio security or to realize appreciation when a
security that the Fund does not own declines in value. When the Fund makes a short sale, it
borrows the security sold short and delivers it to the broker-dealer through which it made
the short sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to turn over any payments received on such borrowed securities to the
lender of the securities.

When the Fund makes short sales of securities, it segregates liquid securities in
an amount that equals the current market value of the security sold short. The segregated
assets are marked to market daily.
The Fund secures its obligation to replace the borrowed security by depositing collateral
with the broker-dealer, usually in cash, U.S. Government securities or other liquid
securities similar to those borrowed. With respect to the uncovered short positions, a Fund
is required to deposit similar collateral with its custodian, if necessary, to the extent
that the value of both collateral deposits in the aggregate is at all times equal to at
least 100% of the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which the Fund borrowed the security,
regarding payment over of any payments received by the Fund on such security, a Fund may
not receive any payments (including interest) on its collateral deposited with such
broker-dealer.

Because making short sales in securities that it does not own exposes a Fund to the
risks associated with those securities, such short sales involve speculative exposure risk.
As a result, if a Fund makes short sales in securities that increase in value, it will
likely underperform similar mutual funds that do not make short sales in securities they do
not own. A Fund will incur a loss as a result of a short sale if the price of the security
increases between the date of the short sale and the date on which the Fund replaces the
borrowed security. A Fund will realize a gain if the security declines in price between
those dates. There can be no assurance that a Fund will be able to close out a short sale
position at any particular time or at an acceptable price. Although a Fund's gain is
limited to the price at which it sold the security short, its potential loss is limited
only by the maximum attainable price of the security, less the price at which the security
was sold and may, theoretically, be unlimited. The Fund's total short positions are
limited to 25% of the Fund's net assets.

A Fund may also make short sales "against the box" without being subject to such
limitations imposed on other short sale transactions. In this type of short sale, at the
time of the sale, the Fund owns or has the immediate and unconditional right to acquire the
identical security at no additional cost.

Derivatives. The Fund can invest in a variety of derivative investments to seek income or
for hedging purposes. Some derivative investments the Fund can use are the hedging
instruments described below in this Statement of Additional Information.

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

Other derivative investments the Fund can invest in include mortgage-related
securities (described above) and "index-linked" notes. Principal and/or interest payments
on these notes depend on the performance of an underlying index. Currency-indexed
securities are another derivative the Fund may use. Typically these are short-term or
intermediate-term debt securities. Their value at maturity or the rates at which they pay
income are determined by the change in value of the U.S. dollar against one or more foreign
currencies or an index. In some cases, these securities may pay an amount at maturity based
on a multiple of the amount of the relative currency movements. This type of index security
offers the potential for increased income or principal payments but at a greater risk of
loss than a typical debt security of the same maturity and credit quality.

|X| Credit Derivatives. The Fund may enter into credit default swaps, both directly
("unfunded swaps") and indirectly in the form of a swap embedded within a structured note
("funded swaps"), to protect against the risk that a security will default. Unfunded and
funded credit default swaps may be on a single security, or on a basket of securities. The
Fund pays a fee to enter into the swap and receives a fixed payment during the life of the
swap. The Fund may take a short position in the credit default swap (also known as
"buying credit protection"), or may take a long position in the credit default swap note
(also known as "selling credit protection").

The Fund would take a short position in a credit default swap (the "unfunded swap")
against a long portfolio position to decrease exposure to specific high yield issuers. If
the short credit default swap is against a corporate issue, the Fund must own that
corporate issue. However, if the short credit default swap is against sovereign debt, the
Fund may own either: (i) the reference obligation, (ii) any sovereign debt of that foreign
country, or (iii) sovereign debt of any country that the Manager determines is closely
correlated as an inexact bona fide hedge.

If the Fund takes a short position in the credit default swap, if there is a credit
event (including bankruptcy, failure to timely pay interest or principal, or a
restructuring), the Fund will deliver the defaulted bonds and the swap counterparty will
pay the par amount of the bonds. An associated risk is adverse pricing when purchasing
bonds to satisfy the delivery obligation. If the swap is on a basket of securities, the
notional amount of the swap is reduced by the par amount of the defaulted bond, and the
fixed payments are then made on the reduced notional amount.

Taking a long position in the credit default swap note (i.e., purchasing the "funded
swap") would increase the Fund's exposure to specific high yield corporate issuers. The
goal would be to increase liquidity in that market sector via the swap note and its
associated increase in the number of trading instruments, the number and type of market
participants, and market capitalization.

If the Fund takes a long position in the credit default swap note, if there is a
credit event the Fund will pay the par amount of the bonds and the swap counterparty will
deliver the bonds. If the swap is on a basket of securities, the notional amount of the
swap is reduced by the par amount of the defaulted bond, and the fixed payments are then
made on the reduced notional amount.

The Fund will invest no more than 25% of its total assets in "unfunded" credit
default swaps. The Fund will limit its investments in "funded" credit default swap notes to
no more than 10% of its total assets.

Other risks of credit default swaps include the cost of paying for credit protection
if there are no credit events, pricing transparency when assessing the cost of a credit
default swap, counterparty risk, and the need to fund the delivery obligation (either cash
or the defaulted bonds, depending on whether the Fund is long or short the swap,
respectively).

|X| Hedging. Although the Fund can use hedging instruments, it is not obligated to
use them in seeking its objective. To attempt to protect against declines in the market
value of the Fund's portfolio, to permit the Fund to retain unrealized gains in the value
of portfolio securities that 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) an
individual stock ("single stock futures"), (3) bond indices (these are referred to as "bond
index futures"), (4) debt securities (these are referred to as "interest rate futures"),
(5) foreign currencies (these are referred to as "forward contracts") and (6) commodities.

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

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

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

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

Put and Call Options. The Fund can buy and sell certain kinds of put options ("puts")
and call options ("calls"). The Fund can buy and sell exchange-traded and over-the-counter
put and call options, including 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 35% 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 can sell put options. A put option on securities
gives the purchaser the right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option period. The Fund will not write puts if,
as a result, more than 25% of the Fund's net assets would be required to be segregated to
cover such put options.

If the Fund writes a put, the put must be covered by segregated liquid assets. The
premium the Fund receives from writing a put represents a profit, as long as the price of
the underlying investment remains equal to or above the exercise price of the put. However,
the Fund also assumes the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even if the value of the
investment falls below the exercise price. If a put the Fund has written expires
unexercised, the Fund realizes a gain in the amount of the premium less the transaction
costs incurred. If the put is exercised, the Fund must fulfill its obligation to purchase
the underlying investment at the exercise price. That price will usually exceed the market
value of the investment at that time. In that case, the Fund may incur 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 identify liquid assets on its books 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 an investment the Fund does not own (such as an index or future)
permits the Fund either to resell the put or to buy the underlying investment and sell it
at the exercise price. The resale price will vary inversely to the price of the underlying
investment. If the market price of the underlying investment is above the exercise price
and, as a result, the put is not exercised, the put will become worthless on its expiration
date.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Under interpretations of the staff of the SEC regarding applicable provisions of the
Investment Company Act, when the Fund purchases a future, it must identify liquid assets on
its books in an amount equal to the purchase price of the future, less the margin deposit
applicable to it.

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

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

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

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

|X| 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.

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

The majority of these transactions run from day to day, and delivery pursuant to the
resale typically occurs within one to five days of the purchase. Repurchase agreements
having a maturity beyond seven days are subject to the Fund's limits on holding illiquid
investments. 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 monitor the vendor's creditworthiness to confirm
that the vendor is financially sound and will continuously monitor the collateral's value.

Pursuant to an exemptive order issued by the Securities and Exchange Commission
("SEC"), the Fund, along with other affiliated entities managed by the Manager, may
transfer uninvested cash balances into one or more joint repurchase accounts. These
balances are invested in one or more repurchase agreements, secured by U.S. government
securities. Securities that are pledged as collateral for repurchase agreements are held by
a custodian bank until the agreements mature. Each joint repurchase arrangement requires
that the market value of the collateral be sufficient to cover payments of interest and
principal; however, in the event of default by the other party to the agreement, retention
or sale of the collateral may be subject to legal proceedings.

o Reverse Repurchase Agreements. The Fund can use reverse repurchase agreements on debt
obligations it owns. Under a reverse repurchase agreement, the Fund sells an underlying
debt obligation and simultaneously agrees to repurchase the same security at an agreed-upon
price at an agreed-upon date. The Fund will identify on its books liquid assets in an
amount sufficient to cover its obligations under reverse repurchase agreements, including
interest, until payment is made to the seller.

These transactions involve the risk that the market value of the securities sold by
the Fund under a reverse repurchase agreement could decline below the price at which the
Fund is obligated to repurchase them. These agreements are considered borrowings by the
Fund and will be subject to the asset coverage requirement under the Fund's policy on
borrowing discussed below.

|X| Illiquid and Restricted Securities. To enable the Fund to sell its holdings of a
restricted security not registered under the Securities Act of 1933, the Fund may have to
cause those securities to be registered. The expenses of registering restricted securities
may be negotiated by the Fund with the issuer at the time the Fund buys the securities.
When the Fund must arrange registration because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell the security
and the time the security is registered so that the Fund could sell it. The Fund would bear
the risks of any downward price fluctuation during that period.

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

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

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

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

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

|X| Temporary Defensive and Interim Investments. When market, economic or political
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 and the types of money market instruments described above. The Fund can also
purchase these securities for liquidity purposes to meet cash needs due to the redemption
of Fund shares, or to hold while waiting to reinvest cash received from the sale of other
portfolio securities. The Fund's temporary defensive investments can include the following
short-term (maturing in one year or less) dollar-denominated debt obligations:
o obligations issued or guaranteed by the U. S. government or its instrumentalities or
agencies,
o commercial paper (short-term, unsecured, promissory notes of domestic or foreign
companies) rated in the top two rating categories of a nationally-recognized
rating organization,
o short-term debt obligations of corporate issuers, rated investment grade (rated at
least Baa by Moody's or at least BBB by Standard & Poor's, or a comparable rating
by another rating organization), or unrated securities judged by the Manager to
have a comparable quality to rated securities in those categories,
o certificates of deposit and bankers' acceptances of domestic and foreign banks
having total assets in excess of $1 billion, and
o repurchase agreements.

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

Other Investment Restrictions

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

The Fund's investment objective is a fundamental policy. Other policies described in
the Prospectus or this Statement of Additional Information are "fundamental" only if they
are identified as such. The Fund's Board of 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 principal investment policies are described in the
Prospectus.

|X| Does the Fund Have Additional Fundamental Policies? The following investment
restrictions are fundamental policies of the Fund.

o The Fund cannot buy securities issued or guaranteed by any one issuer if more than 5%
of its total assets would be invested in securities of that issuer. This limitation applies
to 75% of the Fund's total assets.

o The Fund cannot purchase more than 10% of any class of security of any issuer. All
outstanding debt securities and all preferred stock of an issuer is considered as one
class. This restriction does not apply to securities issued by the U.S. government or any
of its agencies or instrumentalities.

o The Fund cannot concentrate its investments. That means it cannot invest 25% or more
of its total assets in any industry. However, there is no limitation on investments in U.S.
government securities. Moreover, if deemed appropriate for seeking its investment
objective, the Fund may invest less than 25% of its total assets (valued at the time of
investment) in any one industry classification used by the Fund for investment purposes.
Under this restriction, a foreign government is considered an "industry."

o The Fund cannot borrow money in excess of one third of the value of its total assets.
The Fund can borrow only from banks and only as a temporary measure for extraordinary or
emergency purposes. The Fund will make no additional investments while borrowings exceed 5%
of the Fund's total assets. The Fund can borrow only if it maintains a 300% ratio of assets
to borrowings at all times in the manner set forth in the Investment Company Act of 1940.

o The Fund cannot make loans to any person or individual. However, portfolio securities
may be loaned by the Fund within the limits set forth in the Prospectus and Statement of
Additional Information.

o The Fund cannot invest in real estate or real estate limited partnerships (direct
participation programs). However, the Fund can purchase securities of issuers that engage
in real estate operations and securities that are secured by real estate or interests in
real estate.

o The Fund cannot invest for the purpose of exercising control or management of another
company.

o The Fund cannot underwrite securities of other companies. A permitted exception is in
case it is deemed to be an underwriter under the Securities Act of 1933 when reselling any
securities held in its own portfolio.

o The Fund cannot invest in or hold securities of any issuer if officers and Trustees
of the Fund or officers and directors of its Manager individually beneficially own more
than 1/2 of 1% of the securities of that issuer and together own more than 5% of the
securities of that issuer.

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

o The Fund cannot purchase warrants that would cause more than 5% of the Fund's total
assets to be invested in warrants, or more than 2% of its total assets to be invested in
warrants that are not listed on The New York Stock Exchange or The American Stock Exchange.

o The Fund cannot pledge its assets, or assign or otherwise encumber its assets in an
amount in excess of 10% of the value of its net assets. It can pledge, assign or encumber
its assets only to secure borrowings that comply with the limits set forth in the Fund's
Prospectus and Statement of Additional Information.

o The Fund cannot issue senior securities (as defined in the Investment Company Act of
1940). However, the Fund can enter into repurchase agreements, borrow money in accordance
with the restrictions set forth in its other fundamental policies and lend its portfolio
securities.

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

o The Fund cannot invest in interests in oil, gas or other mineral exploration or
development programs or leases.

o The Fund cannot invest in securities of other registered investment companies or
registered unit investment trusts in reliance on sub-paragraph (F) or (G) of section
12(d)(1) of the Investment Company Act.

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

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

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

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

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

A list of the top 20 portfolio securities holdings (based on invested assets), listed by
security or by issuer, as of the end of each month, may be disclosed to third parties
(subject to the procedures below) no sooner than 15 days after month-end. The top 20
holdings also shall be posted on the Companies' website at www.oppenheimerfunds.com in the
"Fund Profiles" section. Other general information about a Fund's portfolio investments,
such as portfolio composition by asset class, industry, country, currency, credit rating or
maturity, may also be posted with a 15-day lag.

Except under special limited circumstances discussed below, month-end lists of a Fund's
complete portfolio holdings may be disclosed no sooner than 30-days after the relevant
month-end, subject to the procedures below. If they have not been disclosed publicly, they
may be disclosed pursuant to special requests for legitimate business reasons, provided
that:

o The third-party recipient must first submit a request for release of Fund portfolio
holdings, explaining the business reason for the request;
o Senior officers (a Senior Vice President or above) in the Manager's Portfolio and
Legal departments must approve the completed request for release of Fund portfolio
holdings; and
o The third-party recipient must sign the Manager's portfolio holdings non-disclosure
agreement before receiving the data, agreeing to keep confidential information
that is not publicly available regarding a Fund's holdings and agreeing not to
trade directly or indirectly based on the information.

Complete Fund portfolio holdings positions may be released to the following categories of
entities or individuals on an ongoing basis, provided that such entity or individual either
(1) has signed an agreement to keep such information confidential and not trade on the
basis of such information or (2) is subject to fiduciary obligations, as a member of the
Fund's Board, or as an employee, officer and/or director of the Manager, Distributor, or
Transfer Agent, or their respective legal counsel, not to disclose such information except
in conformity with these policies and procedures and not to trade for his/her personal
account on the basis of such information:

o Employees of the Fund's Manager, Distributor and Transfer Agent who need to have
access to such information (as determined by senior officers of such entity),
o The Fund's certified public accountants and auditors,
o Members of the Fund's Board and the Board's legal counsel,
o The Fund's custodian bank,
o A proxy voting service designated by the Fund and its Board,
o Rating/ranking organizations (such as Lipper and Morningstar),
o Portfolio pricing services retained by the Manager to provide portfolio security
prices, and
o Dealers, to obtain bids (price quotations, because securities are not priced by the
Fund's regular pricing services).

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

Portfolio holdings information (which may include information on individual securities
positions or multiple securities) may be provided to the entities listed below (1) by
portfolio traders employed by the Manager in connection with portfolio trading, and (2) by
the members of the Manager's Security Valuation Group and Accounting Departments in
connection with portfolio pricing or other portfolio evaluation purposes:

o Brokers and dealers in connection with portfolio transactions (purchases and sales)
o Brokers and dealers to obtain bids or bid and asked prices (if securities held by a
Fund are not priced by the fund's regular pricing services)
o Dealers to obtain price quotations where the fund is not identified as the owner

Portfolio holdings information (which may include information on a Fund's entire portfolio
or individual securities therein) may be provided by senior officers of the Manager or
attorneys on the legal staff of the Manager, Distributor, or Transfer Agent, in the
following circumstances:

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

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

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

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

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

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management investment
company. The Fund is one of three series of Oppenheimer Quest For Value Funds (the
"Trust"), an open-end management investment company organized as a Massachusetts business
trust in April 1987.

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

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

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

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

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

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

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

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

The Board of Trustees has an Audit Committee which is comprised solely of Independent
Trustees. The members of the Audit Committee are Paul Y. Clinton (Chairman), Thomas W.
Courtney, Robert B. Galli, Lacy B. Herrmann and Brian Wruble. The Audit Committee met 5
times during the Fund's fiscal year ended October 31, 2004. The Audit Committee provides
the Board with recommendations regarding the selection of the Fund's independent auditor.
The Audit Committee also reviews the scope and results of audits and the audit fees
charged, reviews reports from the Fund's independent auditor concerning the Fund's internal
accounting. procedures and controls and reviews reports of the Manager's internal auditor,
among other duties as set forth in the Committee's charter.

The Audit Committee furnishes the Board with recommendations regarding the selection
of the Fund's independent auditor. The Audit Committee also reviews the scope and results
of audits and the audit fees charged, reviews reports from the Fund's independent auditors
concerning the Fund's internal accounting procedures and controls, and reviews reports of
the Manager's internal auditor among other duties as set forth in the Committee's charter.

The Audit Committee's functions include selecting and nominating, to the full Board,
nominees for election as Directors and selecting and nominating Independent Trustees for
election. The Audit Committee may, but need not, consider the advice and recommendation of
the Manager and its affiliates in selecting nominees. The full Board elects new Trustees
except for those instances when a shareholder vote is required.

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

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

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

In addition to being a trustee or director of the Board III Funds, Mr. Galli is also
a director or trustee of 24 other portfolios in the OppenheimerFunds complex. Present or
former officers, directors, trustees and employees (and their immediate family members) of
the Fund, the Manager and its affiliates, and retirement plans established by them for
their employees are permitted to purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge. The sales charge on Class A
shares is waived for that group because of the economies of sales efforts realized by the
Distributor.

Messrs. Ferreira, Gillespie, Murphy, Vottiero, Wixted, Petersen, Miao, Gillespie,
Vandehey and Zack and Mses. Bloomberg and Ives, who are officers of the Fund, respectively
hold the same offices of one or more of the other Board III Funds as with the Fund. As of
March 20, 2005, the Trustees and Officers of the Fund, as a group, owned of record or
beneficially less than 1% of each class of shares of the Fund. The foregoing statement does
not reflect ownership of shares of the Fund held of record by an employee benefit plan for
employees of the Manager, other than the shares beneficially owned under the plan by the
officers of the Fund listed above. In addition, each Independent Trustee (and their
immediate family members), do not own securities of either the Manager or Distributor of
the Board III Funds or of any entity directly or indirectly controlling, controlled by or
under common control with the Manager or Distributor.

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

-------------------------------------------------------------------------------------
Independent Trustees
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Beneficially
Owned in
Years; Range of Any of the
Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer
with Fund, Trustee; BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex Owned in Overseen
Age Currently Overseen by Trustee the Fund by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
As of December 31,
2004
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Thomas W. Principal of Courtney Associates, Inc. $0 $10,001-$50,000
Courtney, (1982-Present) (venture capital firm);
Chairman of the former General Partner of Trivest Venture
Board of Trustees, Fund (private venture capital fund);
Trustee since 1987 President of Investment Counseling
Age: 71 Federated Investors, Inc. (1973-1982);
Trustee of the following open-end
investment companies: Cash Assets Trust,
PIMCO Advisors VIT, Tax Free Trust of
Arizona and four funds for the Hawaiian
Tax Free Trust. Oversees 10 portfolios in
the OppenheimerFunds complex.

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

Paul Y. Clinton, Principal of Clinton Management $0 Over
Trustee, since Associates (1996-present) (a financial $100,000
1987 and venture capital consulting firm);
Age: 74 Trustee of PIMCO Advisors VIT (open-end
investment company); former director or
trustee of the following open-end
investment companies: OCC Cash Reserves,
Inc. (1989-December 2002), Capital Cash
Management Trust (1979-December 2004),
Prime Cash Fund and Narragansett Insured
Tax-Free Income Fund (1996-December
2004). Oversees 10 portfolios in the
OppenheimerFunds complex.

Trustee since 1998 Oppenheimer funds. Oversees 34 portfolios $100,000
Age: 71 in the OppenheimerFunds complex.

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

Lacy B. Herrmann, Chairman of the Board of Aquila $0 $10,001-$50,000
Trustee since 1987 Management Corporation, the sponsoring
Age: 75 organization and parent of the manager,
administrator, adviser and/or sub-adviser
and Chairman or Chairman Emeritus of the
Board of Trustees and President of 11
funds in the Aquila(sm) fund complex;
Chairman of Aquila Investment Management
(since 2004) and Chief Executive Officer
(1986-2004) (sub-adviser and
administrator of funds in the Aquila(sm)
fund complex; Director of Aquila
Distributors, Inc., (since 1981) and
formerly President and Secretary
(distributor of the above funds); Trustee
PIMCO Advisors VIT; Trustee Emeritus of
Brown University and the Hopkins School.
Oversees 10 portfolios in the
OppenheimerFunds complex.

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

Brian Wruble, General Partner of Odyssey Partners, L.P. $10,001-$50Over
Trustee since 2001 (since September 1995) (hedge funds in $100,000
Age: 61 distribution since January 1997);
Director of Special Value Opportunities
Fund, LLC (since September 2004);
Investment Advisory Board of Zurich
Financial Services (since October 2004);
Board of Governing Trustees of The
Jackson Laboratory (since August 1990)
(non profit); Trustee of Institute for
Advanced Study (since May 1992)
(educational institute); Special Limited
Partner (January 1999-September 2004) and
Managing Principal (through December
1998) of Odyssey Investment Partners, LLC
(private equity investment); Trustee of
Research Foundation of AIMR (2000-2002)
(investment research, non-profit);
Governor, Jerome Levy Economics Institute
of Bard College (August 1990-September
2001) (economics research); Director of
Ray & Berendtson, Inc. (May 2000-April
2002) (executive search firm). Oversees
10 portfolios in the OppenheimerFunds
complex.

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

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

-------------------------------------------------------------------------------------
Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund,
Length of Service,
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Emmanuel Ferreira, Vice President of the Manager since January 2003. An
Vice President and officer of 5 portfolios in the OppenheimerFunds complex.
Portfolio Manager Formerly, Portfolio Manager at Lashire Investments (July
since 2005 1999-December 2002).
Age: 38
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and director (since June
President since 2001 2001) and President (since September 2000) of the Manager;
Age: 55 President and a director or trustee of other Oppenheimer
funds; President and a director (since July 2001) of
Oppenheimer Acquisition Corp. (the Manager's parent holding
company) and of Oppenheimer Partnership Holdings, Inc. (a
holding company subsidiary of the Manager); a director
(since November 2001) of OppenheimerFunds Distributor, Inc.
(a subsidiary of the Manager); Chairman and a director
(since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager); President and a director
(since July 2001) of OppenheimerFunds Legacy Program (a
charitable trust program established by the Manager); a
director of the following investment advisory subsidiaries
of the Manager: OFI Institutional Asset Management, Inc.,
Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc.
(since November 2001), HarbourView Asset Management
Corporation and OFI Private Investments, Inc. (since July
2001); President (since November 1, 2001) and a director
(since July 2001) of Oppenheimer Real Asset Management,
Inc.; Executive Vice President (since February 1997) of
Massachusetts Mutual Life Insurance Company (the Manager's
parent company); a director (since June 1995) of DLB
Acquisition Corporation (a holding company that owns the
shares of Babson Capital Management LLC); a member of the
Investment Company Institute's Board of Governors (elected
to serve from October 3, 2003 through September 30, 2006).
Formerly, Chief Operating Officer (September 2000-June
2001) of the Manager; President and trustee (November
1999-November 2001) of MML Series Investment Fund and
MassMutual Institutional Funds (open-end investment
companies); a director (September 1999-August 2000) of C.M.
Life Insurance Company; President, Chief Executive Officer
and director (September 1999-August 2000) of MML Bay State
Life Insurance Company. Oversees 62 portfolios as
Trustee/Director and 21 additional portfolios as Officer in
the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer (since
Vice President and March 2004) of the Manager; Vice President (since June
Chief Compliance 1983) of OppenheimerFunds Distributor, Inc., Centennial
Officer since 2004 Asset Management Corporation and Shareholder Services, Inc.
Age: 54 Formerly (until February 2004) Vice President and Director
of Internal Audit of the Manager. An officer of 83
portfolios in the Oppenheimer funds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of
Treasurer since 1999 the Manager; Treasurer of HarbourView Asset Management
Age: 45 Corporation, Shareholder Financial Services, Inc.,
Shareholder Services, Inc., Oppenheimer Real Asset
Management Corporation, and Oppenheimer Partnership
Holdings, Inc. (since March 1999), of OFI Private
Investments, Inc. (since March 2000), of OppenheimerFunds
International Ltd. and OppenheimerFunds plc (since May
2000), of OFI Institutional Asset Management, Inc. (since
November 2000), and of OppenheimerFunds Legacy Program (a
Colorado non-profit corporation) (since June 2003);
Treasurer and Chief Financial Officer (since May 2000) of
OFI Trust Company (a trust company subsidiary of the
Manager); Assistant Treasurer (since March 1999) of
Oppenheimer Acquisition Corp. Formerly Assistant Treasurer
of Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program
(April 2000-June 2003). An officer of 83 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager since August 2002;
Assistant Treasurer formerly Manager/Financial Product Accounting (November
since 2004 1998-July 2002) of the Manager. An officer of 83 portfolios
Age: 34 in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager since March
Assistant Treasurer 2002. Formerly Vice President/Corporate Accounting of the
since 2002 Manager (July 1999-March 2002). An officer of 83 portfolios
Age: 41 in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since 2001 Counsel (since February 2002) of the Manager; General
Age: 56 Counsel and a director (since November 2001) of the
Distributor; General Counsel (since November 2001) of
Centennial Asset Management Corporation; Senior Vice
President and General Counsel (since November 2001) of
HarbourView Asset Management Corporation; Secretary and
General Counsel (since November 2001) of Oppenheimer
Acquisition Corp.; Assistant Secretary and a director
(since October 1997) of OppenheimerFunds International Ltd.
and OppenheimerFunds plc; Vice President and a director
(since November 2001) of Oppenheimer Partnership Holdings,
Inc.; a director (since November 2001) of Oppenheimer Real
Asset Management, Inc.; Senior Vice President, General
Counsel and a director (since November 2001) of Shareholder
Financial Services, Inc., Shareholder Services, Inc., OFI
Private Investments, Inc. and OFI Trust Company; Vice
President (since November 2001) of OppenheimerFunds Legacy
Program; Senior Vice President and General Counsel (since
November 2001) of OFI Institutional Asset Management, Inc.;
a director (since June 2003) of OppenheimerFunds (Asia)
Limited. Formerly Senior Vice President (May 1985-December
2003), Acting General Counsel (November 2001-February 2002)
and Associate General Counsel (May 1981-October 2001) of
the Manager; Assistant Secretary of Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001); and
OppenheimerFunds International Ltd. (October 1997-November
2001). An officer of 83 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary Assistant Secretary (since October 2003) of the Manager;
since 2001 Vice President (since 1999) and Assistant Secretary (since
Age: 39 October 2003) of the Distributor; Assistant Secretary
(since October 2003) of Centennial Asset Management
Corporation; Vice President and Assistant Secretary (since
1999) of Shareholder Services, Inc.; Assistant Secretary
(since December 2001) of OppenheimerFunds Legacy Program
and of Shareholder Financial Services, Inc.. Formerly an
Assistant Counsel (August 1994-October 2003). An officer of
83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager since
Assistant Secretary May 2004; formerly First Vice President and Associate
since 2004 General Counsel of UBS Financial Services Inc. (formerly,
Age: 37 PaineWebber Incorporated) (May 1999 - April 2004). An
officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the
Assistant Secretary Manager since September 2004. Formerly Mr. Gillespie held
since 2004 the following positions at Merrill Lynch Investment
Age: 41 Management: First Vice President (2001-September 2004);
Director (from 2000) and Vice President (1998-2000). An
officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Wayne Miao, Assistant Vice President and Assistant Counsel of the
Assistant Secretary Manager since June 2004. Formerly an Associate with Sidley
since 2004 Austin Brown & Wood LLP (September 1999 - May 2004). An
Age: 32 officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------

|X| Remuneration of Trustees. The officers of the Fund who are affiliated with the
Manager receive no salary or fee from the Fund. The Trustees of the Fund received the
compensation shown below from the Fund with respect to the Fund's fiscal year ended October
31, 2004. The compensation from all ten of the Board III Funds (including the Fund)
represents compensation received for serving as a director or trustee and member of a
committee (if applicable) of the boards of those funds during the calendar year ended
December 31, 2004.

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

Thomas W. Courtney $11,778 $24,705 $78,862 $172,0713

Chairman and Audit
Committee Member
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Paul Y. Clinton $11,299 $28,468 $76,994 $166,3894

Audit Committee
Chairman
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Robert G. Galli
Audit Committee $10,520 $14,294 $80,9235 $237,3126
Member
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Lacy B. Herrmann

Audit Committee $10,820 $21,986 $74,648 $161,0717
Member

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Brian Wruble
Audit Committee $10,820 $6,979 $22,238 $111,000
Member
-------------------------------------------------------------------------------
1. Aggregate Compensation From Fund includes fees and deferred compensation, if any, for
a Trustee.
2. Estimated Annual Retirement Benefits to be Paid Upon Retirement is based on a
straight life payment plan election with the assumption that a Trustee will retire at
the age of 75 and is eligible (after 7 years of service) to receive retirement plan
benefits as described below under "Retirement Plan for Trustees."

3. Includes $51,071 ($26,750 compensation and $24,321 accrued retirement benefits) from
one open-end investment company, PIMCO Advisors VIT ("PIMCO"), with respect to Mr.
Courtney's service as a trustee of that fund. The Fund's former Sub-Adviser acts as the
investment adviser to PIMCO.
4. Includes $50,389 ($26,500 compensation and $23,889 accrued retirement benefits) from
PIMCO, with respect to Mr. Clinton's service as a trustee of that fund.
5. Includes $43,933 estimated to be paid to Mr. Galli for serving as a trustee or
director of 25 other Oppenheimer funds (at December 31, 2004) that are not Board III
Funds.
6. Includes $129,312 paid to Mr. Galli for serving as trustee or director of 25 other
Oppenheimer funds (at December 31, 2004) that are not Board III Funds.
7. Includes $50,071 ($25,750 compensation and $24,321 accrued retirement benefits) from
PIMCO, with respect to Mr. Herrmann's service as a trustee of that fund.

* For purposes of this section only, "Fund Complex" includes the Oppenheimer funds and
PIMCO (formerly OCC Accumulation Trust) in accordance with the instructions for Form N-1A.
The Manager does not consider PIMCO to be part of the OppenheimerFunds "Fund Complex" as
that term may be otherwise interpreted.

|X| Retirement Plan for 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 Board I Funds for at least seven years in
order to be eligible for retirement plan benefits and must serve for at least 15 years to
be eligible for the maximum benefit. Each Trustee's retirement benefits will depend on the
amount of the Trustee's future compensation and length of service.

|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 is 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 SEC, 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 February 2, 2005, the only persons who owned of record or
were known by the Fund to own beneficially 5% or more of any class of the Fund's
outstanding shares were:

Merrill Lynch Pierce Fenner & Smith for the sole benefit of its customers, Attn: Fund
Admin. #97HX7, 4800 Deer Lake Drive E. FL 3, Jacksonville, FL 32246-6484, 381,524.852
Class C shares (representing 6.16% of the Class C shares then outstanding);

RPSS TR Peco Foods, Inc. 401(K) Plan, Attn: M Foucher & S Hudson, P.O. Box 1760,
Tuscaloosa, AL 35403-1760, which owned 64,969.402 Class N shares (representing 7.22%
of the Class N shares then outstanding);

IBT & Co. CUST OppenheimerFunds Cap Accum Plan, Attn: MML037, 200 Clarendon Street,
FL 16, Boston, MA 02116-5021, which owned 119,206.755 Class Y shares (representing
12.66% of the Class Y shares then outstanding);

Mass Mutual Life Insurance Co. Separate Investment Acct, Attn: N225, 1295 State
Street, Springfield, MA 01111-0001, which owned 813,800.696 Class Y shares
(representing 86.47% 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, a global, diversified
insurance and financial services organization.

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

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

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

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

The Fund is required to file Form N-PX, with its complete proxy voting record for the
12 months ended June 30th, no later than August 31st of each year. The Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525-7048 and (ii) on the SEC's website at www.sec.gov.
-----------

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 the
Fund's 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 Departments provide the
portfolio manager with counsel and support in managing the Fund's portfolio.

The investment advisory agreement permits the Manager to enter into sub-advisory
agreements with other registered investment advisers to obtain specialized services for the
Fund, as long as the Fund is not obligated to pay any additional fees for those services.
Prior to December 31, 2004, the Manager retained OpCap Advisors (the "Former Sub-Advisor")
pursuant to a separate Sub-Advisory Agreement, under which the Sub-Advisor bought and sold
portfolio securities for the Fund. The Sub-Advisory Agreement expired on December 31, 2004.

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

The Fund pays expenses not expressly assumed by the Manager under the advisory
agreement. Expenses for the Trust's three series are allocated to the series in proportion
to their net assets, unless allocations of expenses can be made directly to a series. The
advisory agreement lists examples of expenses paid by the Fund. The major categories relate
to calculation of the Fund's net asset values per share, interest, taxes, brokerage
commissions, fees to certain 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. The
management fees paid by the Fund to the Manager during its last three fiscal years were:

---------------------------------------------------------------
Fiscal Year ended 10/31: Management Fees Paid to
OppenheimerFunds, Inc. 1
---------------------------------------------------------------
---------------------------------------------------------------
2002 $22,626,612
---------------------------------------------------------------
---------------------------------------------------------------
2003 $17,971,564
---------------------------------------------------------------
---------------------------------------------------------------
2004 $17,071,617
---------------------------------------------------------------
1.The Manager, not the Fund, paid the Sub-Advisor an annual sub-advisory
fee. For fiscal years 2002, 2003 and 2004, this sub-advisory fee was
$6,711,712, $6,316,831 and $5,758,487, respectively.

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

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

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

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

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

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

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

After careful deliberation, the Board, including the Independent Directors, concluded
that it was in the best interest of shareholders to continue the investment advisory
agreements for another year. In arriving at a decision, the Board did not single out any
one factor or group of factors as being more important than other factors, but considered
all factors together. The Board judged the terms and conditions of the investment advisory
agreements, including the investment advisory fee, in light of all of the surrounding
circumstances. After deliberating the Board approved the following new fee schedule
effective January 1, 2005: the Fund will pay the Manager an advisory fee at an annual rate
that declines as the Fund's assets grow: 0.85% of the first $1 billion of average annual
net assets of the Fund, 0.80% of the next $500 million, 0.75% of the next $500 million,
0.70% of the next $500 million, 0.65% of the next $500 million, 0.60% of the next $500
million, 0.55% of the next $500 million and 0.50% of average annual net assets in excess of
$4 billion.

The Former Sub-Advisor. From the Fund's inception on April 30, 1980 until November 22,
1995, the Sub-Advisor (which was then named Quest for Value Advisors) served as the Fund's
investment advisor. On November 22, 1995, the Manager became the Fund's investment advisor
and retained OpCap Advisor to continue providing day-to-day portfolio management for the
Fund from that date, until December 31, 2004.

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

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

Rule 12b-1 under the Investment Company Act prohibits any fund from compensating a broker
or dealer for promoting or selling the fund's shares by (1) directing to that broker or
dealer any of the fund's portfolio transactions, or (2) directing any other remuneration to
that broker or dealer, such as commissions, mark-ups, mark downs or other fees from the
fund's portfolio transactions, that were effected by another broker or dealer (these latter
arrangements are considered to be a type of "step-out" transaction). In other words, a fund
and its investment advisor cannot use the fund's brokerage for the purpose of rewarding
broker-dealers for selling the fund's shares. However, the Rule permits funds to effect
brokerage transactions through firms that also sell fund shares, provided that certain
procedures are adopted to prevent a quid pro quo with respect to portfolio brokerage
allocations. As permitted by the Rule, the Manager has adopted procedures (and the Fund's
Board of Trustees has approved those procedures) that permit the Fund to direct portfolio
securities transactions to brokers or dealers that also promote or sell shares of the Fund,
subject to the "best execution" considerations discussed above. Those procedures are
designed to prevent: (1) the Manager's personnel who effect the Fund's portfolio
transactions from taking into account a broker's or dealer's promotion or sales of the Fund
shares when allocating the Fund's portfolio transactions, and (2) the Fund, the Manager and
the Distributor from entering into agreements or understandings under which the Manager
directs or is expected to direct the Fund's brokerage directly, or through a "step-out"
arrangement, to any broker or dealer in consideration of that broker's or dealer's
promotion or sale of the Fund's shares or the shares of any of the other Oppenheimer funds.

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

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

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

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

Most purchases of debt obligations are principal transactions at net prices. Instead
of using a broker for those transactions, the Fund normally deals directly with the selling
or purchasing principal or market maker unless the 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 research services provided by brokers broaden the scope and supplement 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 Manager and the Board about the
commissions paid to brokers furnishing such services, together with the Manager's
representation that the amount of such commissions was reasonably related to the value or
benefit of such services.

---------------------------------------------------------------------
Fiscal Year Ended Total Brokerage Commissions Paid by the
10/31: Fund1
---------------------------------------------------------------------
---------------------------------------------------------------------
2002 $3,238,510
---------------------------------------------------------------------
---------------------------------------------------------------------
2003 $4,048,815
---------------------------------------------------------------------
---------------------------------------------------------------------
2004 $2,830,144
---------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on a net
trade basis.

Distribution and Service Plans

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

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

-------------------------------------------
Fiscal Aggregate Class A
Front-End
Year Front-End Sales Sales Charges
Ended Charges on Retained by
10/31: Class A Shares Distributor1
-------------------------------------------
-------------------------------------------
2002 $2,242,946 $604,564
-------------------------------------------
-------------------------------------------
2003 $1,359,505 $383,133
-------------------------------------------
-------------------------------------------
2004 $1,336,120 $410,667
-------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the
Distributor.

-----------------------------------------------------------------------------
Fiscal Concessions on Concessions on Concessions on Concessions on
Year Class A Shares Class B Shares Class C Shares Class N Shares
Ended Advanced by Advanced by Advanced by Advanced by
10/31: Distributor1 Distributor1 Distributor1 Distributor1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2002 $521,551 $2,313,084 $320,261 $136,828
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2003 $293,848 $1,292,892 $163,255 $65,552
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2004 $184,600 $1,072,528 $141,161 $72,001
-----------------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A
shares and for sales of Class B and Class C shares from its own resources at the time
of sale.
2. The inception date of Class N shares was March 1, 2001.

------------------------------------------------------------------------------
Fiscal Class A Class B Class C Class N
Contingent Contingent Contingent
Year Deferred Sales Deferred Sales Contingent Deferred Sales
Ended Charges Charges Deferred Sales Charges
10/31: Retained by Retained by Charges Retained Retained by
Distributor Distributor by Distributor Distributor
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2002 $18,383 $1,972,164 $26,211 $12,689
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2003 $19,454 $1,407,485 $23,232 $37,651
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2004 $21,040 $641,979 $11,221 $9,198
------------------------------------------------------------------------------

Distribution and Service Plans. The Fund has adopted Distribution and Service Plans for
Class A, Class B, Class C and Class N shares under Rule 12b-1 of the Investment Company
Act. Under those plans the Fund pays the Distributor for all or a portion of its costs
incurred in connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of Trustees, including
a majority of the Independent Trustees1, cast in person at a meeting called for the purpose
of voting on that plan.

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

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

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

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

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

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

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

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

Under the Class A distribution plan, the plan provides for the Fund to pay an
asset-based sales charge to the Distributor at an annual rate of 0.25% of average annual
net assets of Class A shares of the Fund (the Board has set that rate at zero).

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

For the fiscal year ended October 31, 2004 payments under the Class A distribution
and service plan totaled $3,706,206, of which $212,178 was paid to an affiliate of the
Distributor's parent company. In addition, $94,264 was retained for the asset-based sales
charge, as allowed under the plan prior to January 1, 2003. Any unreimbursed expenses the
Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. The Distributor may not use payments received under the Class A plan to
pay any of its interest expenses, carrying charges, or other financial costs, or allocation
of overhead.

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

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

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

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

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

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

-------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/04
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Unreimbursed
Expenses as
Aggregate % of Net
Payments Retained by Unreimbursed Assets of
Under Plan1 Distributor Expenses Under Plan Class
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Plan $3,431,214 $2,649,679 1 $0 0.00%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan $2,030,004 $177,722 2 $6,432,924 3.38%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class N Plan $118,228 $75,036 3 $493,309 1.87%
-------------------------------------------------------------------------------
1. Includes $60,758 paid to an affiliate of the Distributor's parent company.
2. Includes $68,332 paid to an affiliate of the Distributor's parent company.
3. Includes $4,594 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

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

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

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

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

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

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

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

ERV l/n - 1 Average Annual Total
Return
P

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

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

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

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

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

ERV - P = Total Return
-----------
P

o Total Returns at Net Asset Value. From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without deducting sales
charges) for Class A, Class B, Class C or Class N shares. There is no sales charge on Class
Y shares. Each is based on the difference in net asset value per share at the beginning and
the end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into consideration
the reinvestment of dividends and capital gains distributions.

---------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 10/31/04
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns (10
years or
Shares life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of (or life of
class) class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A1 142.13% 156.90% 2.08% 8.30% -0.02% 1.18% 9.25% 9.89%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B2 149.04% 149.04% 2.46% 7.46% 0.17% 0.49% 9.55% 9.55%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C3 142.22% 142.22% 6.48% 7.48% 0.52% 0.52% 9.25% 9.25%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N -1.80%4 -1.80%4 6.89% 7.89% -0.49%4 -0.49%4 N/A N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class Y 59.63%5 59.63%5 8.42% 8.42% 1.47% 1.47% 6.12%5 6.12%5
---------------------------------------------------------------------------------
1. Inception of Class A: 1/3/89
2. Inception of Class B: 9/1/93
3. Inception of Class C: 9/1/93
4. Inception of Class N: 3/01/01
5. Inception of Class Y: 12/16/96

-----------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales Charge)
For the Periods Ended 10/31/04
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1-Year 5-Year 10-Year
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on Distributions 2.04% -1.23% 8.02%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on 1.39% -0.49% 7.60%
Distributions and
Redemption of Fund Shares
-----------------------------------------------------------------------------
1. Inception of Class A: 1/3/89

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

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

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

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

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

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

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

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

ABOUT YOUR ACCOUNT

How to Buy Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The availability of different classes of shares permits an investor to choose the
method of purchasing shares that is more appropriate for the investor. That may depend on
the amount of the purchase, the length of time the investor expects to hold shares, and
other relevant circumstances. Class A shares normally are sold subject to an initial sales
charge. While Class B, Class C and Class N shares have no initial sales charge, the purpose
of the deferred sales charge and asset-based sales charge on Class B, Class C and Class N
shares is the same as that of the initial sales charge on Class A shares - to compensate
the Distributor and brokers, dealers and financial institutions that sell shares of the
Fund. A salesperson who is entitled to receive compensation from his or her firm for
selling Fund shares may receive different levels of compensation for selling one class of
shares rather than another.

The Distributor will not accept purchase order of $100,000 or more for Class B shares
or a purchase order of $1 million or more to purchase Class C shares on behalf of a single
investor (not including dealer "street name" or omnibus accounts).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Fund cannot guarantee receipt of a payment on the date requested. The Fund
reserves the right to amend, suspend or discontinue offering these plans at any time
without prior notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while participating
in an Automatic Withdrawal Plan. Class B, Class C and Class N shareholders should not
establish automatic withdrawal plans, because of the potential imposition of the contingent
deferred sales charge on such withdrawals (except where the Class B, Class C or Class N
contingent deferred sales charge is waived as described in Appendix C to this Statement of
Additional Information).

By requesting an Automatic Withdrawal or Exchange Plan, the shareholder agrees to the
terms and conditions that apply to such plans, as stated below. These provisions may be
amended from time to time by the Fund and/or the Distributor. When adopted, any amendments
will automatically apply to existing Plans.

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

The following funds only offer Class A shares:
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Money Market Fund,
Inc.
Centennial New York Tax Exempt Trust

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

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

o Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y shares.
o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any
other fund.
o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other Oppenheimer funds
or through OppenheimerFunds-sponsored 401(k) plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for
Class A shares of other Oppenheimer funds. They may not be acquired by exchange of
shares of any class of any other Oppenheimer funds except Class A shares of
Oppenheimer Money Market Fund or Oppenheimer Cash Reserves acquired by exchange of
Class M shares.
o Class X shares of Limited Term New York Municipal Fund may be exchanged only for
Class B shares of other Oppenheimer funds and no exchanges may be made to Class X
shares.
o Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of
any money market fund offered by the Distributor. Shares of any money market fund
purchased without a sales charge may be exchanged for shares of Oppenheimer funds
offered with a sales charge upon payment of the sales charge. They may also be used
to purchase shares of Oppenheimer funds subject to an early withdrawal charge or
contingent deferred sales charge.
o Shares of the Fund acquired by reinvestment of dividends or distributions from any of
the other Oppenheimer funds or from any unit investment trust for which reinvestment
arrangements have been made with the Distributor may be exchanged at net asset value
for shares of any of the Oppenheimer funds.
o Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged at net
asset value for shares of any of the Oppenheimer funds. However, shareholders are not
permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
Principal Protected Main Street Fund until after the expiration of the warranty
period (8/5/2010).
o Shares of Oppenheimer Principal Protected Main Street Fund II may be exchanged at net
asset value for shares of any of the Oppenheimer funds. However, shareholders are not
permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
Principal Protected Main Street Fund II until after the expiration of the warranty
period (2/4/2011).
o Shares of Oppenheimer Principal Protected Main Street Fund III may be exchanged at
net asset value for shares of any of the Oppenheimer funds. However, shareholders are
not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
Principal Protected Main Street Fund III until after the expiration of the warranty
period (12/6/2011).

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

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

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

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

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

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

o With respect to Class B shares except for the funds listed in the next item
immediately below, the Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within six years of the initial purchase
of the exchanged Class B shares.

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

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

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

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

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

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

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

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

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

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

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Information About the Fund

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

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

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

Independent Registered Public Accounting Firm. KPMG LLP serves as the Independent
Registered Public Accounting Firm for the Fund. KPMG LLP audits the Fund's financial
statements and performs other related audit services. KPMG LLP also acts as the independent
registered public accounting firm for certain other funds advised by the Manager and its
affiliates. Audit and non-audit services provided by KPMG LLP to the Fund must be
pre-approved by the Audit Committee.

--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:
 We have audited the accompanying statement of assets and liabilities of
 Oppenheimer Quest Opportunity Value Fund, (one of the portfolios constituting
 the Oppenheimer Quest For Value Funds) including the statement of investments,
 as of October 31, 2004, and the related statement of operations for the year
 then ended, the statements of changes in net assets for each of the two years
 in the period then ended, and the financial highlights for each of the five
 years in the period then ended. These financial statements and financial
 highlights are the responsibility of the Fund's management. Our responsibility
 is to express an opinion on these financial statements and financial highlights
 based on our audits.
    We conducted our audits in accordance with the standards of the Public
 Company Accounting Oversight Board (United States). Those standards require
 that we plan and perform the audit to obtain reasonable assurance about whether
 the financial statements and financial highlights are free of material
 misstatement. An audit includes examining, on a test basis, evidence supporting
 the amounts and disclosures in the financial statements. Our procedures
 included confirmation of securities owned as of October 31, 2004, by
 correspondence with the custodian. An audit also includes assessing the
 accounting principles used and significant estimates made by management, as
 well as evaluating the overall financial statement presentation. We believe
 that our audits provide a reasonable basis for our opinion.
    In our opinion, the financial statements and financial highlights referred
 to above present fairly, in all material respects, the financial position of
 Oppenheimer Quest Opportunity Value Fund as of October 31, 2004, the results of
 its operations for the year then ended, the changes in its net assets for each
 of the two years in the period then ended, and the financial highlights for
 each of the five years in the period then ended, in conformity with U.S.
 generally accepted accounting principles.


 KPMG LLP

 Denver, Colorado
 December 16, 2004




--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS  OCTOBER 31, 2004
--------------------------------------------------------------------------------

                                                                         VALUE
                                                 SHARES             SEE NOTE 1
--------------------------------------------------------------------------------
 COMMON STOCKS--88.4%
--------------------------------------------------------------------------------
 CONSUMER DISCRETIONARY--11.9%
--------------------------------------------------------------------------------
 AUTOMOBILES--0.4%
 Honda Motor Co.
 Ltd., Sponsored
 ADR                                           295,000            $  7,165,550
--------------------------------------------------------------------------------
 HOTELS, RESTAURANTS & LEISURE--4.0%
 Carnival Corp.                                664,400              33,592,064
--------------------------------------------------------------------------------
 Marriott
 International, Inc.,
 Cl. A                                         840,900              45,820,641
                                                                  --------------
                                                                    79,412,705

--------------------------------------------------------------------------------
 LEISURE EQUIPMENT & PRODUCTS--0.7%
 Mattel, Inc.                                  778,000              13,622,780
--------------------------------------------------------------------------------
 MEDIA--3.1%
 EchoStar
 Communications
 Corp., Cl. A 1                                346,000              10,940,520
--------------------------------------------------------------------------------
 Liberty Media
 Corp., Cl. A 1                              2,011,000              17,938,120
--------------------------------------------------------------------------------
 Omnicom Group,
 Inc.                                           80,600               6,359,340
--------------------------------------------------------------------------------
 Time Warner, Inc. 1                           897,000              14,926,080
--------------------------------------------------------------------------------
 Viacom, Inc., Cl. B                           340,000              12,406,600
                                                                  --------------
                                                                    62,570,660

--------------------------------------------------------------------------------
 MULTILINE RETAIL--1.6%
 Dollar General
 Corp.                                       1,693,300              32,596,025
--------------------------------------------------------------------------------
 SPECIALTY RETAIL--2.1%
 Home Depot, Inc.                              357,000              14,665,560
--------------------------------------------------------------------------------
 Office Depot, Inc. 1                        1,653,900              26,776,641
                                                                  --------------
                                                                    41,442,201

--------------------------------------------------------------------------------
 CONSUMER STAPLES--5.5%
--------------------------------------------------------------------------------
 FOOD & STAPLES RETAILING--4.0%
 Sysco Corp.                                   202,000               6,518,540
--------------------------------------------------------------------------------
 Wal-Mart
 Stores, Inc.                                1,367,000              73,708,640
                                                                  --------------
                                                                    80,227,180

                                                                         VALUE
                                                 SHARES             SEE NOTE 1
--------------------------------------------------------------------------------
 FOOD PRODUCTS--1.5%
 Dean Foods Co. 1                              996,700            $ 29,751,495
--------------------------------------------------------------------------------
 ENERGY--9.8%
--------------------------------------------------------------------------------
 ENERGY EQUIPMENT & SERVICES--2.3%
 Nabors Industries
 Ltd. 1                                        942,000              46,271,040
--------------------------------------------------------------------------------
 OIL & GAS--7.5%
 BP plc, ADR                                   870,500              50,706,625
--------------------------------------------------------------------------------
 ConocoPhillips                                641,100              54,051,141
--------------------------------------------------------------------------------
 Exxon Mobil Corp.                             886,000              43,608,920
                                                                  --------------
                                                                   148,366,686

--------------------------------------------------------------------------------
 FINANCIALS--18.3%
--------------------------------------------------------------------------------
 DIVERSIFIED FINANCIAL SERVICES--5.1%
 Citigroup, Inc.                               942,133              41,802,441
--------------------------------------------------------------------------------
 Merrill Lynch
 & Co., Inc.                                   388,000              20,928,720
--------------------------------------------------------------------------------
 Morgan Stanley                                249,000              12,721,410
--------------------------------------------------------------------------------
 Schwab (Charles)
 Corp.                                       2,903,000              26,562,450
                                                                  --------------
                                                                   102,015,021

--------------------------------------------------------------------------------
 INSURANCE--5.7%
 AFLAC, Inc.                                 1,433,000              51,416,040
--------------------------------------------------------------------------------
 UnumProvident
 Corp.                                         726,000               9,917,160
--------------------------------------------------------------------------------
 XL Capital Ltd.,
 Cl. A                                         703,000              50,967,500
                                                                  --------------
                                                                   112,300,700

--------------------------------------------------------------------------------
 THRIFTS & MORTGAGE FINANCE--7.5%
 Fannie Mae                                  1,070,000              75,060,500
--------------------------------------------------------------------------------
 Freddie Mac                                 1,112,200              74,072,520
                                                                  --------------
                                                                   149,133,020

--------------------------------------------------------------------------------
 HEALTH CARE--12.2%
--------------------------------------------------------------------------------
 BIOTECHNOLOGY--2.8%
 Amgen, Inc. 1                                 180,000              10,224,000
--------------------------------------------------------------------------------
 Wyeth                                       1,138,200              45,129,630
                                                                  --------------
                                                                    55,353,630



                 20 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND



                                                                         VALUE
                                                 SHARES             SEE NOTE 1
--------------------------------------------------------------------------------
 HEALTH CARE PROVIDERS & SERVICES--2.6%
 Anthem, Inc. 1                                642,000            $ 51,616,800
--------------------------------------------------------------------------------
 PHARMACEUTICALS--6.8%
 Pfizer, Inc.                                2,360,000              68,322,000
--------------------------------------------------------------------------------
 Sanofi-Aventis
 SA, ADR                                     1,803,000              65,809,500
                                                                  --------------
                                                                   134,131,500

--------------------------------------------------------------------------------
 INDUSTRIALS--8.0%
--------------------------------------------------------------------------------
 COMMERCIAL SERVICES & SUPPLIES--1.3%
 ChoicePoint, Inc. 1                           628,100              26,147,803
--------------------------------------------------------------------------------
 INDUSTRIAL CONGLOMERATES--6.7%
 General Electric Co.                        2,706,900              92,359,428
--------------------------------------------------------------------------------
 Tyco International
 Ltd.                                        1,274,000              39,685,100
                                                                  --------------
                                                                   132,044,528

--------------------------------------------------------------------------------
 INFORMATION TECHNOLOGY--12.9%
--------------------------------------------------------------------------------
 COMMUNICATIONS EQUIPMENT--4.4%
 Cisco Systems, Inc. 1                         789,000              15,156,690
--------------------------------------------------------------------------------
 JDS Uniphase
 Corp. 1                                     6,777,600              21,484,992
--------------------------------------------------------------------------------
 Nokia Corp.,
 Sponsored ADR                               3,300,000              50,886,000
                                                                  --------------
                                                                    87,527,682

--------------------------------------------------------------------------------
 COMPUTERS & PERIPHERALS--2.0%
 EMC Corp. 1                                 1,837,000              23,642,190
--------------------------------------------------------------------------------
 International
 Business Machines
 Corp.                                         188,000              16,873,000
                                                                  --------------
                                                                    40,515,190

--------------------------------------------------------------------------------
 ELECTRONIC EQUIPMENT & INSTRUMENTS--0.4%
 Agilent
 Technologies, Inc. 1                          324,000               8,119,440


                                                                         VALUE
                                                 SHARES             SEE NOTE 1
--------------------------------------------------------------------------------
 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.8%
 Agere Systems,
 Inc., Cl. A 1                               1,455,900            $  1,761,639
--------------------------------------------------------------------------------
 Applied
 Materials, Inc. 1                           1,464,000              23,570,400
--------------------------------------------------------------------------------
 Intel Corp.                                   869,000              19,343,940
--------------------------------------------------------------------------------
 Texas Instruments,
 Inc.                                        1,215,000              29,706,750
                                                                  --------------
                                                                    74,382,729

--------------------------------------------------------------------------------
 SOFTWARE--2.3%
 Cadence Design
 Systems, Inc. 1                             1,282,300              15,951,812
--------------------------------------------------------------------------------
 Dassault Systemes
 SA, ADR                                       578,866              29,319,563
                                                                  --------------
                                                                    45,271,375

--------------------------------------------------------------------------------
 MATERIALS--9.8%
--------------------------------------------------------------------------------
 METALS & MINING--6.7%
 Alcan, Inc.                                   955,000              44,235,600
--------------------------------------------------------------------------------
 Alcoa, Inc.                                   651,000              21,157,500
--------------------------------------------------------------------------------
 Inco Ltd. 1                                 1,373,200              48,611,280
--------------------------------------------------------------------------------
 Nucor Corp.                                   438,000              18,496,740
                                                                  --------------
                                                                   132,501,120

--------------------------------------------------------------------------------
 PAPER & FOREST PRODUCTS--3.1%
 International
 Paper Co.                                   1,230,000              47,367,300
--------------------------------------------------------------------------------
 MeadWestvaco
 Corp.                                         491,000              15,481,230
                                                                  --------------
                                                                    62,848,530
                                                                  --------------
 Total Common Stocks
 (Cost $1,590,170,241)                                           1,755,335,390


                 21 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS  CONTINUED
--------------------------------------------------------------------------------

                                              PRINCIPAL                  VALUE
                                               AMOUNT               SEE NOTE 1
--------------------------------------------------------------------------------
 U.S. GOVERNMENT OBLIGATIONS--3.7%

 U.S. Treasury Nts.,
 5.75%, 11/15/05
 (Cost $72,390,137)                        $70,000,000            $ 72,523,850

--------------------------------------------------------------------------------
 SHORT-TERM NOTES--6.3%

 American Express
 Credit Corp.,
 1.81%, 11/29/04                            25,000,000              24,964,806
--------------------------------------------------------------------------------
 Federal Home Loan Bank:
 1.69%, 11/1/04                             25,049,000              25,049,000
 1.72%, 11/17/04                            50,000,000              49,961,778
 1.75%, 11/12/04                            25,000,000              24,986,937
                                                                  --------------
 Total Short-Term Notes
 (Cost $124,962,521)                                               124,962,521

--------------------------------------------------------------------------------
 Total Investments,
 at Value (excluding
 investments
 purchased with
 cash collateral from
 securities loaned)
 (Cost $1,787,522,899)                                           1,952,821,761

--------------------------------------------------------------------------------
 INVESTMENTS PURCHASED WITH CASH COLLATERAL
 FROM SECURITIES LOANED--1.5%
--------------------------------------------------------------------------------
 MASTER FLOATING NOTE--0.2%
 Merrill Lynch
 Mortgage Capital 2                          3,500,000               3,500,000
--------------------------------------------------------------------------------
 MEDIUM-TERM FLOATING NOTE--0.1%
 American Express
 Credit Corp. 2                              1,833,484               1,833,484


                                              PRINCIPAL                  VALUE
                                               AMOUNT               SEE NOTE 1
--------------------------------------------------------------------------------
 TIME DEPOSIT--0.1%
 Bank Nederlandse
 Gemeenten BNG 2                           $ 3,000,000          $    3,000,000
--------------------------------------------------------------------------------
 REPURCHASE AGREEMENTS--1.1%
 Greenwich Capital 2                        11,273,653              11,273,653
--------------------------------------------------------------------------------
 UBS Securities LLC 2                       10,813,000              10,813,000
                                                                  --------------
                                                                    22,086,653
                                                                  --------------
 Total Investments Purchased
 with Cash Collateral from
 Securities Loaned
 (Cost $30,420,137)                                                 30,420,137

--------------------------------------------------------------------------------
 TOTAL INVESTMENTS,
 AT VALUE
 (COST $1,817,943,036)                           99.9%           1,983,241,898
--------------------------------------------------------------------------------
 OTHER ASSETS
 NET OF LIABILITIES                               0.1                1,664,500
                                               ---------------------------------
 NET ASSETS                                     100.0%          $1,984,906,398
                                               =================================


FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 5 of Notes to Financial
Statements.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                 22 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


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

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

 Investments, at value (including securities loaned of $80,709,365)
 (cost $1,817,943,036)--see accompanying statement of investments                           $ 1,983,241,898
-------------------------------------------------------------------------------------------------------------
 Cash                                                                                             1,111,701
-------------------------------------------------------------------------------------------------------------
 Collateral for securities loaned                                                                51,723,190
-------------------------------------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold                                                                                33,748,146
 Interest and dividends                                                                           4,009,988
 Shares of beneficial interest sold                                                                 364,763
 Other                                                                                               53,216
                                                                                            -----------------
 Total assets                                                                                 2,074,252,902

-------------------------------------------------------------------------------------------------------------
 LIABILITIES

 Return of collateral for securities loaned                                                      82,143,327
-------------------------------------------------------------------------------------------------------------
 Payables and other liabilities:
 Shares of beneficial interest redeemed                                                           5,690,212
 Distribution and service plan fees                                                                 409,956
 Transfer and shareholder servicing agent fees                                                      397,156
 Trustees' compensation                                                                             388,731
 Shareholder communications                                                                         205,484
 Management and administrative fees                                                                     170
 Other                                                                                              111,468
                                                                                            -----------------
 Total liabilities                                                                               89,346,504

-------------------------------------------------------------------------------------------------------------
 NET ASSETS                                                                                 $ 1,984,906,398
                                                                                            =================

-------------------------------------------------------------------------------------------------------------
 COMPOSITION OF NET ASSETS

 Par value of shares of beneficial interest                                                 $       616,594
-------------------------------------------------------------------------------------------------------------
 Additional paid-in capital                                                                   1,682,451,897
-------------------------------------------------------------------------------------------------------------
 Accumulated net investment income                                                                1,244,760
-------------------------------------------------------------------------------------------------------------
 Accumulated net realized gain on investments                                                   135,294,285
-------------------------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments                                                     165,298,862
                                                                                            -----------------
 NET ASSETS                                                                                 $ 1,984,906,398
                                                                                            =================


                 23 | OPPENHEIMER QUEST OPPORTUNITY VALUE 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 $1,459,052,719 and
 45,022,154 shares of beneficial interest outstanding)                                                 $32.41
 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price)       $34.39
--------------------------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred sales charge)
 and offering price per share (based on net assets of $278,215,116 and 8,817,935 shares
 of beneficial interest outstanding)                                                                   $31.55
--------------------------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred sales charge)
 and offering price per share (based on net assets of $190,425,569 and 6,048,373 shares
 of beneficial interest outstanding)                                                                   $31.48
--------------------------------------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent deferred sales charge)
 and offering price per share (based on net assets of $26,381,907 and 822,988 shares
 of beneficial interest outstanding)                                                                   $32.06
--------------------------------------------------------------------------------------------------------------
 Class Y Shares:
 Net asset value, redemption price and offering price per share (based on net assets
 of $30,831,087 and 947,983 shares of beneficial interest outstanding)                                 $32.52


 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                 24 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS  FOR THE YEAR ENDED OCTOBER 31, 2004
--------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------
 INVESTMENT INCOME

 Dividends (net of foreign withholding taxes of $437,088)                                      $   25,995,766
---------------------------------------------------------------------------------------------------------------
 Interest                                                                                           6,172,602
---------------------------------------------------------------------------------------------------------------
 Portfolio lending fees                                                                               349,152
                                                                                               ----------------
 Total investment income                                                                           32,517,520

---------------------------------------------------------------------------------------------------------------
 EXPENSES

 Management fees                                                                                   17,071,617
---------------------------------------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                                            3,706,206
 Class B                                                                                            3,431,214
 Class C                                                                                            2,030,004
 Class N                                                                                              118,228
---------------------------------------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                                            3,412,981
 Class B                                                                                              748,523
 Class C                                                                                              434,435
 Class N                                                                                               94,438
 Class Y                                                                                              103,423
---------------------------------------------------------------------------------------------------------------
 Shareholder communications:
 Class A                                                                                              212,461
 Class B                                                                                              182,820
 Class C                                                                                               30,782
 Class N                                                                                                1,552
---------------------------------------------------------------------------------------------------------------
 Trustees' compensation                                                                                96,432
---------------------------------------------------------------------------------------------------------------
 Custodian fees and expenses                                                                           31,240
---------------------------------------------------------------------------------------------------------------
 Other                                                                                                238,053
                                                                                               ----------------
 Total expenses                                                                                    31,944,409
 Less reduction to custodian expenses                                                                  (6,430)
 Less payments and waivers of expenses                                                                (22,394)
                                                                                               ----------------
 Net expenses                                                                                      31,915,585

---------------------------------------------------------------------------------------------------------------
 NET INVESTMENT INCOME                                                                                601,935

---------------------------------------------------------------------------------------------------------------
 REALIZED AND UNREALIZED GAIN (LOSS)

 Net realized gain on:
 Investments                                                                                      265,973,218
 Net increase from payment by affiliate                                                             1,620,795
                                                                                               ----------------
 Net realized gain                                                                                267,594,013
---------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation on investments                                            (103,338,932)

---------------------------------------------------------------------------------------------------------------
 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                          $  164,857,016
                                                                                               ================

 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                 25 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


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


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

 Net investment income                                                       $       601,935     $    5,714,355
-----------------------------------------------------------------------------------------------------------------
 Net realized gain                                                               267,594,013         83,270,706
-----------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation                                          (103,338,932)       186,989,138
                                                                             ------------------------------------
 Net increase in net assets resulting from operations                            164,857,016        275,974,199

-----------------------------------------------------------------------------------------------------------------
 DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS

 Dividends from net investment income:
 Class A                                                                          (3,608,269)       (11,712,436)
 Class B                                                                                  --                 --
 Class C                                                                                  --           (389,823)
 Class N                                                                              (2,466)          (132,979)
 Class Y                                                                            (113,219)          (317,784)

-----------------------------------------------------------------------------------------------------------------
 BENEFICIAL INTEREST TRANSACTIONS

 Net increase (decrease) in net assets resulting from
 beneficial interest transactions:
 Class A                                                                         (84,052,807)        75,115,637
 Class B                                                                        (174,228,779)      (328,186,775)
 Class C                                                                         (29,787,194)       (23,354,332)
 Class N                                                                           5,217,886          2,256,746
 Class Y                                                                          (1,652,234)         1,839,588

-----------------------------------------------------------------------------------------------------------------
 NET ASSETS

 Total decrease                                                                 (123,370,066)        (8,907,959)
-----------------------------------------------------------------------------------------------------------------
 Beginning of period                                                           2,108,276,464      2,117,184,423
                                                                             ------------------------------------
 End of period (including accumulated net investment income
 of $1,244,760 and $3,284,257, respectively)                                 $ 1,984,906,398     $2,108,276,464
                                                                             ====================================

 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  26 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

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

 Net asset value, beginning of period                           $ 30.00        $ 26.41        $ 31.30        $ 36.04      $ 39.96
------------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .07 1          .14            .24            .33          .59
 Net realized and unrealized gain (loss)                           2.41           3.71          (4.74)         (1.19)         .34
                                                                --------------------------------------------------------------------
 Total from investment operations                                  2.48           3.85          (4.50)          (.86)         .93
------------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.07)          (.26)          (.39)          (.58)        (.20)
 Distributions from net realized gain                                --             --             --          (3.30)       (4.65)
                                                                --------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.07)          (.26)          (.39)         (3.88)       (4.85)
------------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                 $ 32.41        $ 30.00        $ 26.41        $ 31.30      $ 36.04
                                                                ====================================================================

------------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                                8.30%         14.70%        (14.60)%        (2.79)%       2.82%

------------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                    $1,459,053     $1,429,157     $1,181,014     $1,285,953   $1,325,552
------------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                           $1,497,594     $1,292,117     $1,300,422     $1,348,895   $1,486,116
------------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                             0.23%          0.53%          0.82%          1.01%        1.42%
 Total expenses                                                    1.32% 4,5      1.44% 4,5      1.52% 4,5      1.51% 4      1.53% 4
------------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             64%            63%            73%            42%          63%

1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                  27 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS  CONTINUED
--------------------------------------------------------------------------------


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

 Net asset value, beginning of period                           $ 29.36        $ 25.79        $ 30.56        $ 35.25      $ 39.19
------------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                                      (.17) 1        (.11)           .03            .15          .32
 Net realized and unrealized gain (loss)                           2.36           3.68          (4.63)         (1.20)         .39
                                                                --------------------------------------------------------------------
 Total from investment operations                                  2.19           3.57          (4.60)         (1.05)         .71
------------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                --             --           (.17)          (.34)          --
 Distributions from net realized gain                                --             --             --          (3.30)       (4.65)
                                                                --------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                     --             --           (.17)         (3.64)       (4.65)
------------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                 $ 31.55        $ 29.36        $ 25.79        $ 30.56      $ 35.25
                                                                ====================================================================

------------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                                7.46%         13.84%        (15.16)%        (3.40)%       2.23%

------------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                      $278,215       $424,121       $693,380      $1,157,671  $1,393,095
------------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                             $342,847       $527,653       $981,593      $1,326,222  $1,585,561
------------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income (loss)                                     (0.54)%        (0.19)%         0.17%           0.42%       0.82%
 Total expenses                                                    2.11% 4,5      2.20% 4,5      2.17% 4,5       2.11% 4     2.13% 4
------------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             64%            63%            73%             42%         63%

1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                  28 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND



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

 Net asset value, beginning of period                           $ 29.29        $ 25.77       $ 30.55        $ 35.24       $ 39.17
------------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                                      (.16) 1        (.06)          .05            .14           .35
 Net realized and unrealized gain (loss)                           2.35           3.63         (4.65)         (1.18)          .37
                                                                --------------------------------------------------------------------
 Total from investment operations                                  2.19           3.57         (4.60)         (1.04)          .72
------------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                --           (.05)         (.18)          (.35)           --
 Distributions from net realized gain                                --             --            --          (3.30)        (4.65)
                                                                --------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                     --           (.05)         (.18)         (3.65)        (4.65)
------------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                 $ 31.48        $ 29.29       $ 25.77        $ 30.55       $ 35.24
                                                                ====================================================================

------------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                                7.48%         13.88%       (15.16)%        (3.37)%        2.26%

------------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                      $190,426       $205,336      $203,490       $257,556      $287,103
------------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                             $203,073       $198,226      $245,055       $280,327      $336,213
------------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income (loss)                                     (0.51)%        (0.19)%        0.18%          0.41%         0.86%
 Total expenses                                                    2.06% 4,5      2.17% 4,5     2.16% 4,5      2.11% 4       2.08% 4
------------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             64%            63%           73%            42%           63%

1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  29 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS  CONTINUED
--------------------------------------------------------------------------------


CLASS N                 YEAR ENDED OCTOBER 31,                     2004           2003          2002           2001 1
-----------------------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA

 Net asset value, beginning of period                           $ 29.72        $ 26.21       $ 31.26        $ 33.48
-----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                                      (.05) 2         .09           .49            .03
 Net realized and unrealized gain (loss)                           2.39           3.65         (5.02)         (2.25)
                                                                -------------------------------------------------------
 Total from investment operations                                  2.34           3.74         (4.53)         (2.22)
-----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                -- 3         (.23)         (.52)            --
 Distributions from net realized gain                                --             --            --             --
                                                                -------------------------------------------------------
 Total dividends and/or distributions to shareholders                --           (.23)         (.52)            --
-----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                 $ 32.06        $ 29.72       $ 26.21        $ 31.26
                                                                =======================================================

-----------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 4                                7.89%         14.39%       (14.78)%        (6.63)%

-----------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                       $26,382        $19,538       $14,843         $2,292
-----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $23,702        $17,677       $10,295         $  646
-----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 5
 Net investment income (loss)                                     (0.15)%         0.23%         0.55%          0.47%
 Total expenses                                                    1.73%          2.14%         1.76%          1.63%
 Expenses after payments and waivers and
 reduction to custodian expenses                                   1.69%          1.73%          N/A 6,7        N/A 6
-----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             64%            63%           73%            42%

1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distribu- tions reinvested in additional shares
on the reinvestment date, and redemption at the net asset value calculated on
the last business day of the fiscal period. Sales charges are not reflected in
the total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
5. Annualized for periods of less than one full year.
6. Reduction to custodian expenses less than 0.01%.
7. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                  30 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


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

 Net asset value, beginning of period                           $ 30.11        $ 26.53       $ 31.40        $ 36.21      $ 40.17
------------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .12 1          .20           .56            .45          .71
 Net realized and unrealized gain (loss)                           2.41           3.72         (4.99)         (1.21)         .39
                                                                --------------------------------------------------------------------
 Total from investment operations                                  2.53           3.92         (4.43)          (.76)        1.10
------------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.12)          (.34)         (.44)          (.75)        (.41)
 Distributions from net realized gain                                --             --            --          (3.30)       (4.65)
                                                                --------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.12)          (.34)         (.44)         (4.05)       (5.06)
------------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                 $ 32.52        $ 30.11       $ 26.53        $ 31.40      $ 36.21
                                                                ====================================================================

------------------------------------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE 2                                8.42%         14.97%       (14.34)%        (2.48)%       3.30%

------------------------------------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                       $30,831        $30,124       $24,458        $46,942      $39,945
------------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $30,649        $27,078       $28,726        $45,797      $43,926
------------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                             0.38%          0.74%         1.17%          1.32%        1.87%
 Total expenses                                                    1.16%          1.33%         1.34%          1.17%        1.07%
 Expenses after payments and waivers and
 reduction to custodian expenses                                    N/A 4         1.23%         1.23%           N/A 4        N/A 4
------------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             64%            63%           73%            42%          63%

1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                  31 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND

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

--------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES
 Oppenheimer Quest Opportunity Value Fund (the Fund), a series of Oppenheimer
 Quest For Value Funds, is an open-end management investment company registered
 under the Investment Company Act of 1940, as amended. The Fund's investment
 objective is to seek growth of capital. The Fund's investment advisor is
 OppenheimerFunds, Inc. (the Manager). The Manager has entered into a
 sub-advisory agreement with OpCap Advisors.
    The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class
 A shares are sold at their offering price, which is normally net asset value
 plus a front-end sales charge. Class B, Class C and Class N shares are sold
 without a front-end sales charge but may be subject to a contingent deferred
 sales charge (CDSC). Class N shares are sold only through retirement plans.
 Retirement plans that offer Class N shares may impose charges on those
 accounts. Class Y shares are sold to certain institutional investors without
 either a front-end sales charge or a CDSC, however, the institutional investor
 may impose charges on those accounts. All classes of shares have identical
 rights and voting privileges with respect to the Fund in general and exclusive
 voting rights on matters that affect that class alone. Earnings, net assets and
 net asset value per share may differ due to each class having its own expenses,
 such as transfer and shareholder servicing agent fees and shareholder
 communications, directly attributable to that class. Class A, B, C and N have
 separate distribution and/or service plans. No such plan has been adopted for
 Class Y shares. Class B shares will automatically convert to Class A shares six
 years after the date of purchase.
    The following is a summary of significant accounting policies consistently
 followed by the Fund.
--------------------------------------------------------------------------------
 SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
 of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
 Eastern time, on each day the Exchange is open for business. Securities listed
 or traded on National Stock Exchanges or other domestic or foreign exchanges
 are valued based on the last sale price of the security traded on that exchange
 prior to the time when the Fund's assets are valued. Securities traded on
 NASDAQ are valued based on the closing price provided by NASDAQ prior to the
 time when the Fund's assets are valued. In the absence of a sale, the security
 is valued at the last sale price on the prior trading day, if it is within the
 spread of the closing bid and asked prices, and if not, at the closing bid
 price. Corporate, government and municipal debt instruments having a remaining
 maturity in excess of 60 days and all mortgage-backed securities will be valued
 at the mean between the "bid" and "asked" prices. Securities may be valued
 primarily using dealer-supplied valuations or a portfolio pricing service
 authorized by the Board of Trustees. Securities (including restricted
 securities) for which market quotations are not readily available are valued at
 their fair value. Foreign and domestic securities whose values have been
 materially affected by what the Manager identifies as a significant event
 occurring before the Fund's assets are valued but after the close of their
 respective exchanges will be fair valued. Fair


                 32 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND

 value is determined in good faith using consistently applied procedures under
 the supervision of the Board of Trustees. Short-term "money market type" debt
 securities with remaining maturities of sixty days or less are valued at
 amortized cost (which approximates market value).
--------------------------------------------------------------------------------
 FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
 U.S. dollars. Prices of securities denominated in foreign currencies are
 translated into U.S. dollars as of the close of The New York Stock Exchange
 (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is
 open for business. Amounts related to the purchase and sale of foreign
 securities and investment income are translated at the rates of exchange
 prevailing on the respective dates of such transactions. Foreign exchange rates
 may be valued primarily using dealer supplied valuations or a portfolio pricing
 service authorized by the Board of Trustees.
    Reported net realized foreign exchange gains or losses arise from sales of
 portfolio securities, sales and maturities of short-term securities, sales of
 foreign currencies, currency gains or losses realized between the trade and
 settlement dates on securities transactions, and the difference between the
 amounts of dividends, interest, and foreign withholding taxes recorded on the
 Fund's books and the U.S. dollar equivalent of the amounts actually received or
 paid. Net unrealized foreign exchange gains and losses arise from changes in
 the values of assets and liabilities, including investments in securities at
 fiscal period end, resulting from changes in exchange rates.
    The effect of changes in foreign currency exchange rates on investments is
 separately identified from the fluctuations arising from changes in market
 values of securities held and reported with all other foreign currency gains
 and losses in the Fund's Statement of Operations.
--------------------------------------------------------------------------------
 ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
 those attributable to a specific class), gains and losses are allocated on a
 daily basis to each class of shares based upon the relative proportion of net
 assets represented by such class. Operating expenses directly attributable to a
 specific class are charged against the operations of that class.
--------------------------------------------------------------------------------
 FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
 Revenue Code applicable to regulated investment companies and to distribute
 substantially all of its investment company taxable income, including any net
 realized gain on investments not offset by capital loss carryforwards, if any,
 to shareholders, therefore, no federal income or excise tax provision is
 required.

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


                 33 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS  CONTINUED
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES Continued


                                                                         NET UNREALIZED
                                                                           APPRECIATION
                                                                       BASED ON COST OF
                                                                         SECURITIES AND
              UNDISTRIBUTED    UNDISTRIBUTED         ACCUMULATED      OTHER INVESTMENTS
              NET INVESTMENT       LONG-TERM                LOSS     FOR FEDERAL INCOME
              INCOME                    GAIN    CARRYFORWARD 1,2           TAX PURPOSES
              -------------------------------------------------------------------------
              $1,629,195        $135,294,288                 $--           $165,298,862
 1. During the fiscal year ended October 31, 2004, the Fund utilized
 $110,007,031 of capital loss carryforward to offset capital gains realized in
 that fiscal year.
 2. During the fiscal year ended October 31, 2003, the Fund utilized $72,470,684
 of capital loss carryforward to offset capital gains realized in that fiscal
 year.

 Net investment income (loss) and net realized gain (loss) may differ for
 financial statement and tax purposes. The character of dividends and
 distributions made during the fiscal year from net investment income or net
 realized gains may differ from their ultimate characterization for federal
 income tax purposes. Also, due to timing of dividends and distributions, the
 fiscal year in which amounts are distributed may differ from the fiscal year in
 which the income or net realized gain was recorded by the Fund. Accordingly,
 the following amounts have been reclassified for October 31, 2004. Net assets
 of the Fund were unaffected by the reclassifications.


                                          INCREASE TO             REDUCTION TO
                                          ACCUMULATED          ACCUMULATED NET
                 INCREASE TO           NET INVESTMENT            REALIZED GAIN
                 PAID-IN CAPITAL               INCOME         ON INVESTMENTS 3
                 -------------------------------------------------------------
                 $20,222,688               $1,082,522              $21,305,210

 3. $20,222,688, including $19,684,415 of long-term capital gain, was
 distributed in connection with Fund share redemptions.

 The tax character of distributions paid during the years ended October 31, 2004
 and October 31, 2003 was as follows:

                                                    YEAR ENDED        YEAR ENDED
                                              OCTOBER 31, 2004  OCTOBER 31, 2003
                 ---------------------------------------------------------------
                 Distributions paid from:
                 Ordinary income                    $3,723,954       $12,553,022

 The aggregate cost of securities and other investments and the composition of
 unrealized appreciation and depreciation of securities and other investments
 for federal income tax purposes as of October 31, 2004 are noted below. The
 primary difference between book and tax appreciation or depreciation of
 securities and other investments, if applicable, is attributable to the tax
 deferral of losses or tax realization of financial statement unrealized gain or
 loss.

                 34 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


                 Federal tax cost of securities     $1,817,943,036
                                                    ==============
                 Gross unrealized appreciation      $  214,937,642
                 Gross unrealized depreciation         (49,638,780)
                                                    --------------
                 Net unrealized appreciation        $  165,298,862
                                                    ==============
--------------------------------------------------------------------------------
 TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for
 the Fund's independent trustees. Benefits are based on years of service and
 fees paid to each trustee during the years of service. During the year ended
 October 31, 2004, the Fund's projected benefit obligations were increased by
 $38,787 and payments of $8,954 were made to retired trustees, resulting in an
 accumulated liability of $371,627 as of October 31, 2004.
    The Board of Trustees has adopted a deferred compensation plan for
 independent trustees that enables trustees to elect to defer receipt of all or
 a portion of the annual compensation they are entitled to receive from the
 Fund. For purposes of determining the amount owed to the Trustee under the
 plan, deferred amounts are treated as though equal dollar amounts had been
 invested in shares of the Fund or in other Oppenheimer funds selected by the
 Trustee. The Fund purchases shares of the funds selected for deferral by the
 Trustee in amounts equal to his or her deemed investment, resulting in a Fund
 asset equal to the deferred compensation liability. Such assets are included as
 a component of "Other" within the asset section of the Statement of Assets and
 Liabilities. Deferral of trustees' fees under the plan will not affect the net
 assets of the Fund, and will not materially affect the Fund's assets,
 liabilities or net investment income per share. Amounts will be deferred until
 distributed in accordance to the Plan.
--------------------------------------------------------------------------------
 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
 shareholders, which are determined in accordance with income tax regulations,
 are recorded on the ex-dividend date. Income and capital gain distributions, if
 any, are declared and paid annually.
--------------------------------------------------------------------------------
 INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
 ex-dividend notification in the case of certain foreign dividends where the
 ex-dividend date may have passed. Non-cash dividends included in dividend
 income, if any, are recorded at the fair market value of the securities
 received. Interest income, which includes accretion of discount and
 amortization of premium, is accrued as earned.
--------------------------------------------------------------------------------
 CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
 include interest expense incurred by the Fund on any cash overdrafts of its
 custodian account during the period. The Fund pays interest to its custodian on
 such cash overdrafts at a rate equal to the Federal Funds Rate plus 0.50%. The
 Reduction to Custodian Expenses line item, if applicable, represents earnings
 on cash balances maintained by the Fund during the period. Such interest
 expense and other custodian fees may be paid with these earnings.
--------------------------------------------------------------------------------
 SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
 Realized gains and losses on securities sold are determined on the basis of
 identified cost.

                 35 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS  CONTINUED
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES Continued
 OTHER. The preparation of financial statements in conformity with U.S.
 generally accepted accounting principles requires management to make estimates
 and assumptions that affect the reported amounts of assets and liabilities and
 disclosure of contingent assets and liabilities at the date of the financial
 statements and the reported amounts of income and expenses during the reporting
 period. Actual results could differ from those estimates.

--------------------------------------------------------------------------------
 2. SHARES OF BENEFICIAL INTEREST
 The Fund has authorized an unlimited number of $0.01 par value shares of
 beneficial interest of each class. Transactions in shares of beneficial
 interest were as follows:


                                  YEAR ENDED OCTOBER 31, 2004           YEAR ENDED OCTOBER 31, 2003
                                    SHARES             AMOUNT             SHARES             AMOUNT
-----------------------------------------------------------------------------------------------------
 CLASS A
 Sold                            8,115,941    $   257,114,536         15,512,162    $   418,441,325
 Dividends and/or
 distributions reinvested          110,183          3,344,067            414,020         10,892,875
 Redeemed                      (10,835,364)      (344,511,410)       (13,009,920)      (354,218,563)
                               ----------------------------------------------------------------------
 Net increase (decrease)        (2,609,240)   $   (84,052,807)         2,916,262    $    75,115,637
                               ======================================================================

-----------------------------------------------------------------------------------------------------
 CLASS B
 Sold                            1,110,689    $    34,361,333          1,759,775    $    46,740,716
 Dividends and/or
 distributions reinvested               --                 --                 --                 --
 Redeemed                       (6,736,531)      (208,590,112)       (14,198,043)      (374,927,491)
                               ----------------------------------------------------------------------
 Net decrease                   (5,625,842)   $  (174,228,779)       (12,438,268)   $  (328,186,775)
                               ======================================================================

-----------------------------------------------------------------------------------------------------
 CLASS C
 Sold                              584,805    $    18,064,684            839,530    $    22,356,887
 Dividends and/or
 distributions reinvested               --                 --             13,425            347,059
 Redeemed                       (1,546,263)       (47,851,878)        (1,738,392)       (46,058,278)
                               ----------------------------------------------------------------------
 Net decrease                     (961,458)   $   (29,787,194)          (885,437)   $   (23,354,332)
                               ======================================================================

-----------------------------------------------------------------------------------------------------
 CLASS N
 Sold                              332,734    $    10,461,951            313,856    $     8,489,890
 Dividends and/or
 distributions reinvested               81              2,455              5,090            132,970
 Redeemed                         (167,204)        (5,246,520)          (227,811)        (6,366,114)
                               -----------------------------------------------------------------------
 Net increase                      165,611    $     5,217,886             91,135    $     2,256,746
                               =======================================================================

------------------------------------------------------------------------------------------------------
 CLASS Y
 Sold                              247,467    $     7,884,122            360,532    $     9,593,522
 Dividends and/or
 distributions reinvested            3,721            113,218             12,055            317,784
 Redeemed                         (303,824)        (9,649,574)          (293,840)        (8,071,718)
                               ------------------------------------------------------------------------
 Net increase (decrease)           (52,636)   $    (1,652,234)            78,747    $     1,839,588
                               ========================================================================


                 36 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


--------------------------------------------------------------------------------
 3. PURCHASES AND SALES OF SECURITIES
 The aggregate cost of purchases and proceeds from sales of securities, other
 than U.S. government obligations and short-term obligations, for the year ended
 October 31, 2004, were $1,289,314,372 and $1,257,623,299, respectively. There
 were sales of $337,180,094 of U.S. government and government agency obligations
 for the year ended October 31, 2004.

--------------------------------------------------------------------------------
 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
 MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
 the investment advisory agreement with the Fund. Effective January 1, 2004, the
 agreement provides for a fee at an annual rate of 0.85% of the first $1 billion
 of average annual net assets of the Fund, 0.80% of the next $500 million, 0.75%
 of the next $500 million, 0.70% of the next $500 million, 0.65% of the next
 $500 million, 0.60% of the next $500 million, 0.55% of the next $500 million
 and 0.50% of average annual net assets in excess of $4 billion. From June 15,
 2003 through December 31, 2003, the annual advisory fee rate was: 0.91% of the
 first $400 million of average annual net assets of the Fund, 0.86% of the next
 $400 million, 0.85% of the next $200 million, 0.81% of the next $2 billion,
 0.70% of the next $1 billion, 0.65% of the next $1 billion and 0.60% of average
 annual net assets in excess of $5 billion.
--------------------------------------------------------------------------------
 ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
 preparing and filing the Fund's tax returns.
--------------------------------------------------------------------------------
 SUB-ADVISOR FEES. The Manager retains OpCap Advisors (the Sub-Advisor) to
 provide the day-to-day portfolio management of the Fund. The Manager pays the
 Sub-Advisor a monthly fee based on the fee schedule set forth in the Fund's
 prospectus. For the year ended October 31, 2004, the Manager paid $5,758,487 to
 the Sub-Advisor for its services to the Fund.
--------------------------------------------------------------------------------
 TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the
 Manager, acts as the transfer and shareholder servicing agent for the Fund. The
 Fund pays OFS a per account fee. For the year ended October 31, 2004, the Fund
 paid $4,870,162 to OFS for services to the Fund.
    Additionally, Class Y shares are subject to minimum fees of $10,000 for
 assets of $10 million or more. The Class Y shares are subject to the minimum
 fees in the event that the per account fee does not equal or exceed the
 applicable minimum fees. OFS may voluntarily waive the minimum fees.
--------------------------------------------------------------------------------
 DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
 Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
 acts as the Fund's principal underwriter in the continuous public offering of
 the Fund's classes of shares.
--------------------------------------------------------------------------------
 SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class
 A shares. Under the Plan, the Fund pays a service fee to the Distributor of up
 to 0.25% of the average annual net assets of Class A shares. The Distributor
 currently uses all of those fees to

                 37 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS  CONTINUED
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
 pay dealers, brokers, banks and other financial institutions quarterly for
 providing personal services and maintenance of accounts of their customers that
 hold Class A shares. Under the Plan, the Fund may also pay an asset-based sales
 charge to the Distributor. Beginning January 1, 2003, the Board of Trustees set
 the annual asset-based sales charge rate at zero. Fees incurred by the Fund
 under the Plan are detailed in the Statement of Operations.
--------------------------------------------------------------------------------
 DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
 Fund has adopted Distribution and Service Plans for Class B, Class C and Class
 N shares to compensate the Distributor for its services in connection with the
 distribution of those shares and servicing accounts. Under the plans, the Fund
 pays the Distributor an annual asset-based sales charge of 0.75% per year on
 Class B and Class C shares and 0.25% per year on Class N shares. The
 Distributor also receives a service fee of up to 0.25% per year under each
 plan. If either the Class B, Class C or Class N plan is terminated by the Fund
 or by the shareholders of a class, the Board of Trustees and its independent
 trustees must determine whether the Distributor shall be entitled to payment
 from the Fund of all or a portion of the service fee and/or asset-based sales
 charge in respect to shares sold prior to the effective date of such
 termination. The Distributor's aggregate uncompensated expenses under the plan
 at October 31, 2004 for Class C and Class N shares were $6,432,924 and
 $493,309, respectively. Fees incurred by the Fund under the plans are detailed
 in the Statement of Operations.
--------------------------------------------------------------------------------
 SALES CHARGES. Front-end sales charges and contingent deferred sales charges
 (CDSC) do not represent expenses of the Fund. They are deducted from the
 proceeds of sales of Fund shares prior to investment or from redemption
 proceeds prior to remittance, as applicable. The sales charges retained by the
 Distributor from the sale of shares and the CDSC retained by the Distributor on
 the redemption of shares is shown in the table below for the period indicated.


                                            CLASS A           CLASS B          CLASS C         CLASS N
                           CLASS A       CONTINGENT        CONTINGENT       CONTINGENT      CONTINGENT
                         FRONT-END         DEFERRED          DEFERRED         DEFERRED        DEFERRED
                     SALES CHARGES    SALES CHARGES     SALES CHARGES    SALES CHARGES   SALES CHARGES
                       RETAINED BY      RETAINED BY       RETAINED BY      RETAINED BY     RETAINED BY
 YEAR ENDED            DISTRIBUTOR      DISTRIBUTOR       DISTRIBUTOR      DISTRIBUTOR     DISTRIBUTOR
--------------------------------------------------------------------------------------------------------
 October 31, 2004         $410,667          $21,040          $641,979          $11,221          $9,198
--------------------------------------------------------------------------------------------------------
 PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
 commissions for sales that is permitted under its investment advisory
 agreement, the Fund's Manager terminated that practice in July 2003.
 Subsequently, the Manager paid the Fund $1,620,795, an amount equivalent to
 certain of such commissions incurred in prior years.
    OFS has voluntarily agreed to limit transfer and shareholder servicing agent
 fees for all classes to 0.35% of average annual net assets per class. During
 the year ended October 31, 2004, OFS waived $5,767, $4,532, $1,081 and $11,014
 for Class A, Class B, Class C, and Class N shares, respectively. This
 undertaking may be amended or withdrawn at any time.

                 38 | OPPENHEIMER QUEST OPPORTUNITY VALUE FUND


--------------------------------------------------------------------------------
 5. SECURITIES LENDING
 The Fund lends portfolio securities from time to time in order to earn
 additional income. In return, the Fund receives collateral in the form of US
 Treasury obligations or cash, against the loaned securities and maintains
 collateral in an amount not less than 100% of the market value of the loaned
 securities during the period of the loan. The market value of the loaned
 securities is determined at the close of business of the funds and any
 additional required collateral is delivered to the Fund on the next business
 day. If the borrower defaults on its obligation to return the securities loaned
 because of insolvency or other reasons, the Fund could experience delays and
 cost in recovering the securities loaned or in gaining access to the
 collateral. Cash collateral is invested in cash equivalents. The Fund retains a
 portion of the interest earned from the collateral. The Fund also continues to
 receive interest or dividends paid on the securities loaned. As of October 31,
 2004, the Fund had on loan securities valued at $80,709,365. Cash of
 $82,143,327 was received as collateral for the loans, of which $30,420,137 has
 been invested in approved instruments.

--------------------------------------------------------------------------------
 6. LITIGATION
 Six complaints have been filed as putative derivative and class actions against
 the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as
 well as 51 of the Oppenheimer funds (collectively, the "Funds") including this
 Fund, and nine Directors/ Trustees of certain of the Funds other than this Fund
 (collectively, the "Directors/Trustees"). The complaints allege that the
 Manager charged excessive fees for distribution and other costs, improperly
 used assets of the Funds in the form of directed brokerage commissions and
 12b-1 fees to pay brokers to promote sales of the Funds, and failed to properly
 disclose the use of Fund assets to make those payments in violation of the
 Investment Company Act of 1940 and the Investment Advisers Act of 1940. The
 complaints further allege that by permitting and/or participating in those
 actions, the Directors/Trustees breached their fiduciary duties to Fund
 shareholders under the Investment Company Act of 1940 and at common law. By
 order dated October 27, 2004, these six actions, and future related actions,
 were consolidated by the U.S. District Court for the Southern District of New
 York into a single consolidated proceeding in contemplation of the filing of a
 superseding consolidated and amended complaint.
    OppenheimerFunds believes that it is premature to render any opinion as to
 the likelihood of an outcome unfavorable to them, the Funds or the
 Directors/Trustees and that no estimate can yet be made with any degree of
 certainty as to the amount or range of any potential loss. However,
 OppenheimerFunds, the Funds and the Directors/Trustees believe that the
 allegations contained in the complaints are without merit and intend to defend
 these lawsuits vigorously.

--------------------------------------------------------------------------------
 7. SUBSEQUENT EVENT
The subadvisory agreement between the Manager and OpCap Advisors will terminate
on December 31, 2004. Effective January 1, 2005, the Manager will assume
day-to-day investment management of the Fund.

A-7
A-1
Appendix A

RATINGS DEFINITIONS
-------------------

Below are summaries of the rating definitions used by the nationally-recognized rating
agencies listed below. Those ratings represent the opinion of the agency as to the credit
quality of issues that they rate. The summaries below are based upon publicly available
information provided by the rating organizations.

Moody's Investors Service, Inc. ("Moody's")

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

Aaa: Bonds and preferred stock rated "Aaa" are judged to be the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure. While the various protective
elements are likely to change, the changes that can be expected are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds and preferred stock rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not be as large
as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risk appear somewhat larger
than that of "Aaa" securities.

A: Bonds and preferred stock rated "A" possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.

Baa: Bonds and preferred stock rated "Baa" are considered medium-grade obligations; that
is, they are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and have speculative characteristics as well.

Ba: Bonds and preferred stock rated "Ba" are judged to have speculative elements. Their
future cannot be considered well-assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this class.

B: Bonds and preferred stock rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.

Caa: Bonds and preferred stock rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds and preferred stock rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds and preferred stock rated "C" are the lowest class of rated bonds and can be
regarded as having extremely poor prospects of ever attaining any real investment standing.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from
"Aa" through "Caa." The modifier "1" indicates that the obligation ranks in the higher end
of its generic rating category; the modifier "2" indicates a mid-range ranking; and the
modifier "3" indicates a ranking in the lower end of that generic rating category. Advanced
refunded issues that are secured by certain assets are identified with a # symbol.

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

Prime-1: Issuer has a superior ability for repayment of senior short-term debt obligations.

Prime-2: Issuer has a strong ability for repayment of senior short-term debt obligations.
Earnings trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

Prime-3: Issuer has an acceptable ability for repayment of senior short-term obligations.
The effect of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Not Prime: Issuer does not fall within any Prime rating category.

Standard & Poor's Ratings Services ("Standard & Poor's"), a division of The McGraw-Hill
Companies, Inc.

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

AAA: An obligation rated "AAA" have the highest rating assigned by Standard & Poor's. The
obligor's capacity to meet its financial commitment on the obligation is extremely strong.

AA: An obligation rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the obligation is very
strong.

A: An obligation rated "A" are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated categories.
However, the obligor's capacity to meet its financial commitment on the obligation is still
strong.

BBB: An obligation rated "BBB" exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, and C
An obligation rated `BB', `B', `CCC', `CC', and `C' are regarded as having significant
speculative characteristics. `BB' indicates the least degree of speculation and `C' the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major exposures to
adverse conditions.

BB: An obligation rated "BB" are less vulnerable to nonpayment than other speculative
issues. However, they face major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation.

B: An obligation rated "B" are more vulnerable to nonpayment than obligations rated "BB",
but the obligor currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment on the obligation.

CCC: An obligation rated "CCC" are currently vulnerable to nonpayment, and are dependent
upon favorable business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its financial
commitment on the obligation.

CC: An obligation rated "CC" are currently highly vulnerable to nonpayment.

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

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

The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.

c: The `c' subscript is used to provide additional information to investors that the bank
may terminate its obligation to purchase tendered bonds if the long-term credit rating of
the issuer is below an investment-grade level and/or the issuer's bonds are deemed
taxable.

p: The letter `p' indicates that the rating is provisional. A provisional rating assumes
the successful completion of the project financed by the debt being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon the
successful, timely completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the likelihood of or
the risk of default upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.

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

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

N.R. Not rated.

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

Bond Investment Quality Standards

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

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

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

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial commitment on the
obligation is satisfactory.
A-3: A short-term obligation rated "A-3" exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.

B: A short-term obligation rated "B" is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial commitment on
the obligation; however, it faces major ongoing uncertainties which could lead to the
obligor's inadequate capacity to meet its financial commitment on the obligation.

C: A short-term obligation rated "C" is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.

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

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

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

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

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

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

INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings.

Investment Grade:

AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of credit risk.
They are assigned only in the case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of credit risk.
They indicate a very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.

A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic conditions than
is the case for higher ratings.

BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low expectation
of credit risk. The capacity for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in economic conditions are more likely
to impair this capacity. This is the lowest investment-grade category.

Speculative Grade:

BB: Speculative. "BB" ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time. However,
business or financial alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.

B: Highly Speculative. "B" ratings indicate that significant credit risk is present, but a
limited margin of safety remains. Financial commitments are currently being met. However,
capacity for continued payment is contingent upon a sustained, favorable business and
economic environment.

CCC, CC C: High Default Risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon sustained, favorable business or economic
developments. A "CC" rating indicates that default of some kind appears probable. "C"
ratings signal imminent default.

DDD, DD, and D: Default. The ratings of obligations in this category are based on their
prospects for achieving partial or full recovery in a reorganization or liquidation of the
obligor. While expected recovery values are highly speculative and cannot be estimated with
any precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and accrued
interest. "DD" indicates potential recoveries in the range of 50%-90%, and "D" the lowest
recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their obligations.
Entities rated "DDD" have the highest prospect for resumption of performance or continued
operation with or without a formal reorganization process. Entities rated "DD" and "D" are
generally undergoing a formal reorganization or liquidation process; those rated "DD" are
likely to satisfy a higher portion of their outstanding obligations, while entities rated
"D" have a poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status
within the major rating categories. Plus and minus signs are not added to the "AAA"
category or to categories below "CCC," nor to short-term ratings other than "F1" (see
below).

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

F1: Highest credit quality. Strongest capacity for timely payment of financial commitments.
May have an added "+" to denote any exceptionally strong credit feature.

F2: Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of higher ratings.

F3: Fair credit quality. Capacity for timely payment of financial commitments is adequate.
However, near-term adverse changes could result in a reduction to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

C: High default risk. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic environment.

D: Default. Denotes actual or imminent payment default.

B-1
Appendix B

Industry Classifications

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

C-11
Appendix C

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A. Waivers for Redemptions in Certain Cases.

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

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

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

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

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but Prior to
November 24, 1995. In the following cases, the contingent deferred sales charge will be
waived for redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund into the fund
or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into
which such Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
o redemptions following the death or disability of the shareholder(s) (as evidenced by
a determination of total disability by the U.S. Social Security Administration);
o withdrawals under an automatic withdrawal plan (but only for Class B or Class C
shares) where the annual withdrawals do not exceed 10% of the initial value of
the account value; adjusted annually, and
o liquidation of a shareholder's account if the aggregate net asset value of shares
held in the account is less than the required minimum account value.
A shareholder's account will be credited with the amount of any contingent deferred
sales charge paid on the redemption of any Class A, Class B or Class C shares of the
Oppenheimer fund described in this section if the proceeds are invested in the same Class
of shares in that fund or another Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who
Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
-----------------------------------------------------------------------------------------

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

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

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

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

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

|X|

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

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

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

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

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

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

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

Oppenheimer Quest Opportunity Value FundSM

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

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

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

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL OPP(225.5677)

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

Independent Registered Public Accounting Firm
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202

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

1234
PX0236.0205.rev0405

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

------------------------------------------------------------------------------
Oppenheimer Small Cap Value Fund
------------------------------------------------------------------------------
(A series of Oppenheimer Quest for Value Funds)

6803 S. Tucson Way, Centennial, CO 80112
1.800.CALL OPP (225.5677)

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

15, 2005, further revised on April 1, 2005


      This Statement of Additional Information is not a Prospectus.  This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 28, 2005.  It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217, or by calling the Transfer Agent at the toll-free number shown above,
or by downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

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

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

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

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






ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

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

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

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

|X|   Investments in Equity Securities. The Fund emphasizes investments in
equity securities of small-cap companies. Equity securities include common
stocks, preferred stocks, rights and warrants, and securities convertible
into common stock. The Fund's investments primarily include stocks of
companies having a market capitalization under $3.0 billion, but the Fund can
purchase securities of issuers having a larger market capitalization.

      Current income is not a criterion used to select equity securities, as
the Fund does not seek income as part of its goal. However, certain debt
securities can be selected for the Fund's portfolio for liquidity needs or
for defensive purposes (including debt securities that the Manager believes
might offer some opportunities for capital appreciation when stocks are
disfavored).

      Securities of newer small-cap companies might offer greater
opportunities for capital appreciation than securities of large, more
established companies. However, these securities also involve greater risks
than securities of larger companies. 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 than that of funds
focusing on larger-capitalization issuers.

o     Value Investing. In using a value approach, the portfolio managers seek
stock and other equity securities that appear to be temporarily undervalued,
by various measures, such as price/earnings ratios. This approach is subject
to change and might not necessarily be used in all cases. Value investing
seeks stocks having prices that are low in relation to their real worth or
future prospects, in the hope that the Fund will realize appreciation in the
value of its holdings when other investors realize the intrinsic value of the
stock.

      Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures that can be used to
identify these securities include, among others:
o     Price/Earnings ratio, which is the stock's price divided by its
         earnings per share. A stock having a price/earnings ratio lower than
         its historical range, or the market as a whole or that of similar
         companies may offer attractive investment opportunities.
o     Price/book value ratio, which is the stock price divided by the book
         value of the company per share, which measures the company's stock
         price in relation to its asset value.
o     Dividend Yield is measured by dividing the annual dividend by the stock
         price per share.
o     Valuation of Assets, which compares the stock price to the value of the
         company's underlying assets, including their projected value in the
         marketplace and liquidation value.

o     Preferred Stocks. Preferred stocks are equity securities but have
certain attributes of debt securities. Preferred stock, unlike common stock,
has a stated dividend rate payable from the corporation's earnings. Preferred
stock dividends may be cumulative or non-cumulative, participating, or
auction rate. "Cumulative" dividend provisions require all or a portion of
prior unpaid dividends to be paid before the issuer can pay dividends on
common shares.

      If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as provisions for
their call or redemption prior to maturity which can have a negative effect
on their prices when interest prior to maturity rates decline. Preferred
stock may be "participating" stock, which means that it may be entitled to a
dividend exceeding the stated dividend in certain cases.

      Preferred stocks are equity securities because they do not constitute a
liability of the issuer and therefore do not offer the same degree of
protection of capital as debt securities and may not offer the same degree of
assurance of continued income as debt securities. The rights of preferred
stock on distribution of a corporation's assets in the event of its
liquidation are generally subordinate to the rights associated with a
corporation's debt securities. Preferred stock generally has a preference
over common stock on the distribution of a corporation's assets in the event
of its liquidation.

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

      The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease
when interest rates rise. If the conversion value exceeds the investment
value, the security will behave more like an equity security: it will likely
sell at a premium over its conversion value, and its price will tend to
fluctuate directly with the price of the underlying security. Convertible
securities are subject to credit risks and interest rate risk as discussed
below under "Investments in Debt Securities."

      While some convertible securities are a form of debt security in many
cases, their conversion feature (allowing conversion into equity securities)
causes them to be regarded by the Manager more as "equity equivalents."  In
those cases, the credit rating assigned to the security has less impact on
the Manager's investment decision 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.

|X|   Investments in Debt Securities. While the Fund does not invest for the
purpose of seeking current income, at times the portfolio managers may select
certain debt securities (besides convertible debt securities described above)
for investment by the Fund for liquidity or defensive purposes. For example,
when the stock market is volatile, or when the portfolio managers believe
that growth opportunities in stocks are not attractive, debt securities might
offer defensive opportunities and also some opportunities for capital
appreciation. These investments could include corporate bonds and notes of
foreign or U.S. companies, as well as U.S. and foreign government securities.
It is not expected that this will be a significant portfolio strategy of the
Fund under normal market conditions.

o     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. The Fund
 can invest up to 5% of its total assets in higher-yielding lower-grade debt
 securities (that is, securities below investment grade).

o     Interest Rate Risk. Interest rate risk refers to the fluctuations in
 value of debt securities resulting from the inverse relationship between
 price and yield.  For example, an increase in general interest rates will
 tend to reduce the market value of already-issued fixed-income investments,
 and a decline in general interest rates will tend to increase their value.
 In addition, debt securities with longer maturities, which tend to have
 higher yields, are subject to potentially greater fluctuations in value from
 changes in interest rates than obligations with shorter maturities.

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

o     Special Risks of Lower-Grade Securities. The Fund can invest up to 5%
of its total assets in lower-grade securities. Lower-grade securities
(commonly known as "junk bonds") are rated less than "BBB" by Standard &
Poor's Rating Services ("Standard & Poor's") or less than "Baa" by Moody's
Investors Service, Inc. ("Moody's"), or have a comparable rating from another
rating organization. If unrated, a security is considered to be below
investment grade if the Manager deems it to be of comparable quality to
securities rated less than investment grade. The Fund does not intend to
invest in securities that are in default.

      High-yield, lower-grade securities, whether rated or unrated, often
have speculative characteristics and special risks that make them riskier
investments than investment grade securities. They may be subject to greater
market fluctuations and risk of loss of income and principal than lower
yielding, investment-grade securities. There may be less of a market for them
and therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be insufficient
to make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency.

      These risks mean that the Fund may not achieve the expected income from
lower-grade securities, and that the Fund's net asset value per share may be
affected by declines in value of these securities. However, the Fund's
limitations on investments in these types of securities may reduce some of
the risk, as will the Fund's policy of diversifying its investments.

|X|   U.S. Government Securities.  These are securities issued or guaranteed
by the U.S. Treasury or other U.S. government agencies or federally-chartered
corporate entities referred to as "instrumentalities." The obligations of
U.S. government agencies or instrumentalities in which the Fund may invest
may or may not be guaranteed or supported by the "full faith and credit" of
the United States. "Full faith and credit" means generally that the taxing
power of the U.S. government is pledged to the payment of interest and
repayment of principal on a security. If a security is not backed by the full
faith and credit of the United States, the owner of the security must look
principally to the agency issuing the obligation for repayment. The owner
might not be able to assert a claim against the United States if the issuing
agency or instrumentality does not meet its commitment. The Fund will invest
in securities of U.S. government agencies and instrumentalities only if the
Manager is satisfied that the credit risk with respect to such agency or
instrumentality is minimal. While U.S. government securities have little
credit risk, prior to their maturity they are subject to price fluctuations
from changes in interest rates.

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

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

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

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

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

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

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

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

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

|X|   Foreign Securities. The Fund can purchase equity and debt securities
issued by foreign companies or foreign governments or their agencies.
"Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States and debt
securities of foreign governments and their agencies and instrumentalities.
Those securities may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.

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

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

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

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

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

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

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

o     Special Risks of Emerging Markets. Emerging and developing markets
 abroad may also offer special opportunities for growth investing but have
 greater risks than more developed foreign markets, such as those in Europe,
 Canada, Australia, New Zealand and Japan. There may be even less liquidity
 in their securities markets, and settlements of purchases and sales of
 securities may be subject to additional delays. They are subject to greater
 risks of limitations on the repatriation of income and profits because of
 currency restrictions imposed by local governments. Those countries may also
 be subject to the risk of greater political and economic instability, which
 can greatly affect the volatility of prices of securities in those
 countries. The Manager will consider these factors when evaluating
 securities in these markets. The Fund currently limits these investments to
 not more than 5% of its total assets.

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

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

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

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

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

|X|   Investing in Special Situations. Periodically, the Fund might use
aggressive investment techniques. These might include seeking to benefit from
what the portfolio manager perceives to be "special situations," such as
mergers, reorganizations, restructurings or other unusual events expected to
affect a particular issuer. However, there is a risk in investing in special
situations that the change or event might not occur, which could have a
negative impact on the price of the issuer's securities. The Fund's
investment might not produce the expected gains or could incur a loss for the
portfolio.

|X|   "When-Issued" and "Delayed-Delivery" Transactions.  The Fund can invest
in securities on a "when-issued" basis and can purchase or sell securities on
a "delayed-delivery" or "forward commitment" basis.  When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery.

      When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date.  The
securities are subject to change in value from market fluctuations during the
period until settlement. The value at delivery may be less than the purchase
price. For example, changes in interest rates in a direction other than that
expected by the Manager before settlement will affect the value of such
securities and may cause a loss to the Fund. During the period between
purchase and settlement, no payment is made by the Fund to the issuer and no
interest accrues to the Fund from the investment.  No income begins to accrue
to the Fund on a when-issued security until the Fund receives the security at
settlement of the trade.

      The Fund can engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of
entering into the obligation. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to complete the
transaction. Its failure to do so may cause the Fund to lose the opportunity
to obtain the security at a price and yield the Manager considers to be
advantageous.

      When the Fund engages in when-issued and delayed-delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies for its portfolio or for delivery
pursuant to options contracts it has entered into, and not for the purpose of
investment leverage. Although the Fund will enter into delayed-delivery or
when-issued purchase transactions to acquire securities, it may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or to dispose of
its right to delivery or receive against a forward commitment, it may incur a
gain or loss.

      At the time the Fund makes the commitment to purchase or sell a
security on a when-issued or delayed-delivery basis, it records the
transaction on its books and reflects the value of the security purchased in
determining the Fund's net asset value.  In a sale transaction, it records
the proceeds to be received. The Fund will identify on its books liquid
assets at least equal in value to the value of the Fund's purchase
commitments until the Fund pays for the investment. The Fund will not enter
into when-issued commitments if more than 15% of the Fund's net assets would
be committed under these transactions.

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

|X|   Rights and Warrants. The Fund can invest up to 5% of its total assets
in warrants and rights. 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|   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.

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

      The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the
purchase. Repurchase agreements having a maturity beyond seven days are
subject to the Fund's limits on holding illiquid investments. 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 monitor the vendor's
creditworthiness to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.

      Pursuant to an exemptive order issued by the Securities and Exchange
Commission ("SEC"), the Fund, along with other affiliated entities managed by
the Manager, may transfer uninvested cash balances into one or more joint
repurchase accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities that are
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each joint repurchase arrangement requires that
the market value of the collateral be sufficient to cover payments of
interest and principal; however, in the event of default by the other party
to the agreement, retention or sale of the collateral may be subject to legal
proceedings.

o     Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements on debt obligations it owns. Under a reverse repurchase agreement,
the Fund sells an underlying debt obligation and simultaneously agrees to
repurchase the same security at an agreed-upon price at an agreed-upon date.
The Fund will identify on its books liquid assets in an amount sufficient to
cover its obligations under reverse repurchase agreements, including
interest, until payment is made to the seller.

      These transactions involve the risk that the market value of the
securities sold by the Fund under a reverse repurchase agreement could
decline below the price at which the Fund is obligated to repurchase them.
These agreements are considered borrowings by the Fund and will be subject to
the asset coverage requirement under the Fund's policy on borrowing discussed
below.

|X|   Illiquid and Restricted Securities.  To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered.  The
expenses of registering restricted securities may be negotiated by the Fund
with the issuer at the time the Fund buys the securities. When the Fund must
arrange registration because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell
the security and the time the security is registered so that the Fund could
sell it. The Fund would bear the risks of any downward price fluctuation
during that period.

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

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

|X|   Participation Interests. The Fund can invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan
made by the issuing financial institution in the proportion that the
buyer's participation interest bears to the total principal amount of the
loan. No more than 5% of the Fund's net assets can be invested in
participation interests of the same borrower. The issuing financial
institution may have no obligation to the Fund other than to pay the Fund
the proportionate amount of the principal and interest payments it
receives.

      Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan. There is a risk that a
borrower may have difficulty making payments. If a borrower fails to pay
scheduled interest or principal payments, the Fund could experience a
reduction in its income. The value of that participation interest might
also decline, which could affect the net asset value of the Fund's shares.
If the issuing financial institution fails to perform its obligations
under the participation agreement, the Fund might incur costs and delays
in realizing payment and suffer a loss of principal and/or interest.

|X|   Loans of Portfolio Securities.  The Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of
Trustees. It might do so to try to provide income or to raise cash or
income for liquidity purposes. These loans are limited to not more than
10% of the value 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. The Fund presently does not intend to engage in
loans of securities.

      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 must both be satisfactory to the Fund.

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

|X|   Borrowing. As a fundamental policy, the Fund cannot borrow money except
as a temporary measure for extraordinary or emergency purposes. Loans may
not exceed 33 1/3% of the value of the Fund's total assets. Additionally,
as part of that fundamental policy, the Fund will not purchase securities
at times when loans exceed 5% of its total assets.

      The Fund may borrow only from banks. 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. Additionally, the Fund's net asset value per share might fluctuate
more than that of funds that do not borrow.

|X|   Hedging. Although the Fund can use hedging instruments, it is not
obligated to use them in seeking its objective. It does not currently
contemplate using them to any significant degree.  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
that have appreciated, or to facilitate selling securities for investment
reasons, the Fund could:
o     sell futures contracts,
o     buy puts on such futures or on securities, or
o     write covered calls on securities or futures.

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

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

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

      A broadly-based stock index is used as the basis for trading stock
index futures. These indices may in some cases be based on stocks of issuers
in a particular industry or group of industries. A stock index assigns
relative values to the common stocks included in the index and its value
fluctuates in response to the changes in value of the underlying stocks. A
stock index cannot be purchased or sold directly. These contracts obligate
the seller to deliver, and the purchaser to take, cash to settle the futures
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.

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

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

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

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

o     Put and Call Options. The Fund can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including options
on broadly-based indices, securities, foreign currencies and stock index
futures. The Trustees have adopted a non-fundamental policy that the Fund may
write covered call options or write covered put options with respect to not
more than 25% of the value of its net assets. Similarly, the Fund may
purchase call or put options only if, after the purchase, the value of all
call and put options held by the Fund will not exceed 50% of the Fund's total
assets.

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

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

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

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

      The Fund's custodian, 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.

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

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

      The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at
the time the call is written, the Fund must cover the call by 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.

o     Writing Put Options. The Fund can sell put options on stock indices,
foreign currencies or stock index futures. A put option on securities gives
the purchaser the right to sell, and the writer the obligation to buy, the
underlying investment of the exercise price during the option period. If the
Fund writes a put, the put must be covered by liquid assets identified on the
Fund's books in an amount at least equal to the exercise price of the
underlying securities.  The Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those 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 settle the transaction in cash with the buyer of
the put at the exercise price, even if the value of the underlying investment
falls below the exercise price.  If a put the Fund has written expires
unexercised, the Fund realizes a gain in the amount of the premium less the
transaction costs incurred.  If the put is exercised, the Fund must fulfill
its obligation to settle in cash at the exercise price. That price will
usually exceed the market value of the investment at that time.  In that
case, the fund might 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.

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

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

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

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


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

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

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

      When the Fund purchases a put on a stock index, the put protects the
Fund to the extent that the index moves in a similar pattern to the
securities the Fund holds.  The Fund can resell the put. The resale price of
the put will vary inversely with the price of the underlying investment.  If
the market price of the underlying investment is above the exercise price,
and as a result the put is not exercised, the put will become worthless on
the expiration date.  In the event of a decline in price of the underlying
investment, the Fund could exercise or sell the put at a profit to attempt to
offset some or all of its loss on its portfolio securities. The Fund may buy
a call or put only if, after the purchase, the value of all call and put
options held by the Fund will not exceed 5% of the Fund's total assets.

|X|   Buying and Selling Options on Foreign Currency. 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 identified
on its books) upon conversion or exchange of other foreign currency held in
its portfolio.

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

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

      The Fund's option activities could affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund 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.

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

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

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

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

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

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

      The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is
entered into and the date it is sold.  In some cases, the 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 transaction costs.
The use of forward contracts in this manner might reduce the Fund's
performance if there are unanticipated changes in currency prices to a
greater degree than if the Fund had not entered into such contracts.

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

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

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

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

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

      Under 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.

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

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

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

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

Investment in Other Investment Companies. The Fund can invest up to 10% of
its total assets in shares of other investment companies. It can invest up to
5% of its total assets in any one investment company (but cannot own more
than 3% of the outstanding voting stock of that company). These limits do not
apply to shares acquired in a merger, consolidation, reorganization or
acquisition of another investment company.

      For example, the Fund can invest in Exchange-Traded Funds, which are
typically open-end funds or unit investment trusts, listed on a stock
exchange.  The Fund might do so as a way of gaining exposure to the segments
of the equity or fixed-income markets represented by the Exchange-Traded
Fund's portfolio, at times when the Fund may not be able to buy those
portfolio securities directly.

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

|X|   Temporary Defensive and Interim Investments.  When market, economic or
political 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 and the types of money market
instruments described above. The Fund can also purchase these securities for
liquidity purposes to meet cash needs due to the redemption of Fund shares,
or to hold while waiting to reinvest cash received from the sale of other
portfolio securities. The Fund can buy:
o     obligations issued or guaranteed by the U. S. government or its
         instrumentalities or agencies,
o     commercial paper (short-term, unsecured, promissory notes of domestic
         or foreign companies) rated in the top two rating categories of a
         nationally-recognized rating organization,
o     short-term debt obligations of corporate issuers, rated investment
         grade (rated at least Baa by Moody's or at least BBB by Standard &
         Poor's, or a comparable rating by another rating organization), or
         unrated securities judged by the Manager to have a comparable
         quality to rated securities in those categories,
o     certificates of deposit and bankers' acceptances of domestic and
         foreign banks  having total assets in excess of $1 billion, and
o     repurchase agreements.

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

Other Investment Restrictions

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

      The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of
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 principal investment policies are
described in the Prospectus.

|X|   Does the Fund Have Additional Fundamental Policies?  The following
investment restrictions are fundamental policies of the Fund.

o     The Fund cannot invest more than 5% of the value of its total assets in
the securities of any one issuer. This restriction applies to 75% of its
total assets.

o     The Fund cannot purchase more than 10% of the voting securities of any
one issuer. All outstanding debt securities and all preferred stock of an
issuer are considered as one class. This restriction does not apply to
securities issued by the U.S. government or any of its agencies or
instrumentalities.

o     The Fund cannot concentrate its investments. That means it cannot
invest 25% or more of its total assets in any industry. If deemed appropriate
for attaining its investment objective, the Fund may invest less than but up
to 25% of its total assets in any one industry classification used by the
Fund for investment purposes. For this purpose, a foreign government is
considered an industry.

o     The Fund cannot borrow money in excess of 33 1/3% of the value of the
Fund's total assets. The Fund may borrow only from banks and only as a
temporary measure for extraordinary or emergency purposes. The Fund will make
no additional investments while borrowings exceed 5% of the Fund's total
assets. The Fund can borrow only if it maintains a 300% ratio of assets to
borrowings at all times in the manner set forth in the Investment Company Act
of 1940.

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

o     The Fund cannot invest in real estate or real estate limited
partnerships (direct participation programs). However, the Fund may purchase
securities of issuers that engage in real estate operations and securities
which are secured by real estate or interests in real estate.

o     The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities
Act of 1933 when reselling any securities held in its own portfolio.

o     The Fund cannot invest in securities of any issuer if, to the knowledge
of the Trust, officers, directors or trustees of the Trust, or the Manager
who owns more than 1/2 of 1% of the outstanding securities of such issuer
together own more than 5% of the outstanding securities of such issuer.

o     The Fund cannot pledge its assets or assign or otherwise encumber its
assets in excess of 10% of its net assets. It can pledge, assign or encumber
its assets only to secure borrowings effected within the limitations set
forth in the Prospectus.

o     The Fund cannot invest for the purpose of exercising control or
management of another company.

o     The Fund cannot issue senior securities (as defined in the Investment
Company Act of 1940). However, the Fund can enter into any repurchase
agreement, borrow money in accordance with restrictions described above and
lend its portfolio securities.

o     The Fund cannot make loans to any person or individual. However,
portfolio securities may be loaned by the Fund within the limits set forth in
the Prospectus.

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

o     The Fund cannot make short sales or purchase securities on margin.
However, the Fund can make short-term borrowings when necessary for the
clearance of purchases of portfolio securities. Collateral arrangements in
connection with futures and options transactions are not deemed to be margin
transactions under this restriction.

o     The Fund cannot invest in interests in oil, gas or other mineral
exploration or development programs or leases.

o     The Fund cannot invest in the securities of other registered investment
companies or registered unit investment trusts in reliance on sub-paragraph
(F) or (G) of section 12(d)(1) of the Investment Company Act.

o     With respect to the Fund's non-fundamental policy to invest, under
normal circumstances, at least 80% of its net assets (plus the amount of any
borrowings used for investment purposes) in equity securities of "small-cap"
domestic and foreign issuers, the Fund will provide shareholders at least 60
days' prior notice of any change in such policy as required by the Investment
Company Act.

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

      For purposes of the Fund's policy not to concentrate its assets as
described in the Prospectus, the Fund has adopted, as a matter of
non-fundamental policy, the corporate industry classifications set forth in
Appendix B to this Statement of Additional Information.  The percentage
restrictions described above and in the Prospectus apply only at the time of
investment and require no action by the Fund as a result of subsequent
changes in relative values.

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

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

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

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

      Except under special limited circumstances discussed below, month-end
lists of a Fund's complete portfolio holdings may be disclosed no sooner than
30-days after the relevant month-end, subject to the procedures below. If
they have not been disclosed publicly, they may be disclosed pursuant to
special requests for legitimate business reasons, provided that:

o     The third-party recipient must first submit a request for release of
            Fund portfolio holdings, explaining the business reason for the
            request;
o     Senior officers (a Senior Vice President or above) in the Manager's
            Portfolio and Legal departments must approve the completed
            request for release of Fund portfolio holdings; and
o     The third-party recipient must sign the Manager's portfolio holdings
            non-disclosure agreement before receiving the data, agreeing to
            keep confidential information that is not publicly available
            regarding a Fund's holdings and agreeing not to trade directly or
            indirectly based on the information.

      Complete Fund portfolio holdings positions may be released to the
following categories of entities or individuals on an ongoing basis, provided
that such entity or individual either (1) has signed an agreement to keep
such information confidential and not trade on the basis of such information
or (2) is subject to fiduciary obligations, as a member of the Fund's Board,
or as an employee, officer and/or director of the Manager, Distributor, or
Transfer Agent, or their respective legal counsel, not to disclose such
information except in conformity with these policies and procedures and not
to trade for his/her personal account on the basis of such information:

o     Employees of the Fund's Manager, Distributor and Transfer Agent who
            need to have access to such information (as determined by senior
            officers of such entity),
o     The Fund's certified public accountants and auditors,
o     Members of the Fund's Board and the Board's legal counsel,
o     The Fund's custodian bank,
o     A proxy voting service designated by the Fund and its Board,
o     Rating/ranking organizations (such as Lipper and Morningstar),
o     Portfolio pricing services retained by the Manager to provide portfolio
            security prices, and
o     Dealers, to obtain bids (price quotations, because securities are not
            priced by the Fund's regular pricing services).

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

      Portfolio holdings information (which may include information on
individual securities positions or multiple securities) may be provided to
the entities listed below (1) by portfolio traders employed by the Manager in
connection with portfolio trading, and (2) by the members of the Manager's
Security Valuation Group and Accounting Departments in connection with
portfolio pricing or other portfolio evaluation purposes:

o     Brokers and dealers in connection with portfolio transactions
            (purchases and sales)
o     Brokers and dealers to obtain bids or bid and asked prices (if
            securities held by a Fund are not priced by the fund's regular
            pricing services)
o     Dealers to obtain price quotations where the fund is not identified as
            the owner

      Portfolio holdings information (which may include information on a
Fund's entire portfolio or individual securities therein) may be provided by
senior officers of the Manager or attorneys on the legal staff of the
Manager, Distributor, or Transfer Agent, in the following circumstances:

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

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

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

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

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

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



How the Fund is Managed

Organization and History.  The Fund is an open-end, diversified management
investment company. The Fund is one of three series of Oppenheimer Quest For
Value Funds, an open-end management investment company organized as a
Massachusetts business trust in April 1987 (and which is referred to as the
"Trust").

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

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

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

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

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

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

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

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

      The Board of Trustees has an Audit Committee which is comprised solely
of Independent Trustees.  The members of the Audit Committee are Paul Y.
Clinton (Chairman), Thomas W. Courtney, Robert G. Galli, Lacy B. Herrmann and
Brian Wruble.  The Audit Committee met 5 times during the Fund's fiscal year
ended October 31, 2004. The Audit Committee provides the Board with
recommendations regarding the selection of the Fund's independent auditor.
The Audit Committee also reviews the scope and results of audits and the
audit fees charged, reviews reports from the Fund's independent auditor
concerning the Fund's internal accounting procedures and controls and reviews
reports of the Manager's internal auditor, among other duties as set forth in
the Committee's charter.

      The Audit Committee furnishes the Board with recommendations regarding
the selection of the Fund's independent auditor.  The Audit Committee also
reviews the scope and results of audits and the audit fees charged, reviews
reports from the Fund's independent auditors concerning the Fund's internal
accounting procedures and controls, and reviews reports of the Manager's
internal auditor among other duties as set forth in the Committee's charter.

      The Audit Committee's functions include selecting and nominating, to
the full Board, nominees for election as Directors and selecting and
nominating Independent Trustees for election.  The Audit Committee may, but
need not, consider the advice and recommendation of the Manager and its
affiliates in selecting nominees.  The full Board elects new Trustees except
for those instances when a shareholder vote is required.

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

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

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


      In addition to being a trustee or director of the Board III Funds, Mr.
Galli is also a director or trustee of 24 other portfolios in the
OppenheimerFunds complex. Present or former officers, directors, trustees and
employees (and their immediate family members) of the Fund, the Manager and
its affiliates, and retirement plans established by them for their employees
are permitted to purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge. The sales charge
on Class A shares is waived for that group because of the economies of sales
efforts realized by the Distributor.

      Messrs. Damian, Leavy, Murphy, Vottiero, Wixted, Petersen, Miao,
Gillespie, Vandehey and Zack and Mses. Bloomberg, and Ives, who are officers
of the Fund, respectively hold the same offices of one or more of the other
Board III Funds as with the Fund.  As of March 20, 2005, the Trustees and
Officers of the Fund, as a group, owned of record or beneficially less than
1% of each class of shares of the Fund. The foregoing statement does not
reflect ownership of shares of the Fund held of record by an employee benefit
plan for employees of the Manager, other than the shares beneficially owned
under the plan by the officers of the Fund listed above. In addition, each
Independent Trustee (and their immediate family members) do not own
securities of either the Manager or Distributor of the Board III Funds or of
any entity directly or indirectly controlling, controlled by or under common
control with the Manager or Distributor.


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

                                Independent Trustees
Name,              Principal Occupation(s) During Past 5      Dollar     Aggregate
Position(s) Held   Years;                                     Range of   Dollar
with Fund,         Other Trusteeships/Directorships Held by   Shares     Range Of
Length of Service, Trustee;                                   BeneficiallShares
Age                Number of Portfolios in Fund Complex       Owned in   Beneficially
                   Currently Overseen by Trustee              the Fund   Owned in
                                                                         Any of the
                                                                         Oppenheimer
                                                                         Funds
                                                                         Overseen by
                                                                         Trustee
                                                              As of December 31, 2004

Thomas W.          Principal of Courtney Associates, Inc.     $0          $10,001-$50,000
Courtney,          (1982-Present) (venture capital firm);
Chairman of the    former General Partner of Trivest Venture
Board of Trustees, Fund (private venture capital fund);
Trustee since 1987 President of Investment Counseling
Age: 71            Federated Investors, Inc. (1973-1982);
                   Trustee of the following open-end
                   investment companies: Cash Assets Trust,
                   PIMCO Advisors VIT, Tax Free Trust of
                   Arizona and four funds for the Hawaiian
                   Tax Free Trust. Oversees 10 portfolios in
                   the OppenheimerFunds complex.
Paul Y. Clinton,   Principal of Clinton Management            $50,000-$100Over
Trustee since 1987 Associates (1996-present) (a financial                 $100,000
Age: 73            and venture capital consulting firm);
                   Trustee of PIMCO Advisors VIT (open-end
                   investment company); former director or
                   trustee of the following open-end
                   investment companies: OCC Cash Reserves,
                   Inc. (1989-December 2002), Capital Cash
                   Management Trust (1979-December 2004),
                   Prime Cash Fund and Narragansett Insured
                   Tax-Free Income Fund (1996-December
                   2004). Oversees 10 portfolios in the
                   OppenheimerFunds complex.
Robert G. Galli,   A   trustee   or    director    of   other Over        Over
Trustee since 1998 Oppenheimer funds.  Oversees 34 portfolios $100,000    $100,000
Age: 71            in the OppenheimerFunds complex.
Lacy B. Herrmann,  Chairman of the Board of Aquila            $0          $10,001-$50,000
Trustee since 1987 Management Corporation, the sponsoring
Age: 75            organization and parent of the manager,
                   administrator, adviser and/or sub-adviser
                   and Chairman or Chairman Emeritus of the
                   Board of Trustees and President of 11
                   funds in the Aquila(sm) fund complex;
                   Chairman of Aquila Investment Management
                   (since 2004) and Chief Executive Officer
                   (1986-2004) (sub-adviser and
                   administrator of funds in the Aquila(sm)
                   fund complex; Director of Aquila
                   Distributors, Inc., (since 1981) and
                   formerly President and Secretary
                   (distributor of the above funds); Trustee
                   PIMCO Advisors VIT; Trustee Emeritus of
                   Brown University and the Hopkins School.
                   Oversees 10 portfolios in the
                   OppenheimerFunds complex.
Brian Wruble,      General Partner of Odyssey Partners, L.P.  $50,001-$100Over
Trustee since 2001 (since September 1995) (hedge funds in                 $100,000
Age: 61            distribution since January 1997);
                   Director of Special Value Opportunities
                   Fund, LLC (since September 2004);
                   Investment Advisory Board of Zurich
                   Financial Services (since October 2004);
                   Board of Governing Trustees of The
                   Jackson Laboratory (since August 1990)
                   (non profit); Trustee of Institute for
                   Advanced Study (since May 1992)
                   (educational institute); Special Limited
                   Partner (January 1999-September 2004) and
                   Managing Principal (through December
                   1998) of Odyssey Investment Partners, LLC
                   (private equity investment); Trustee of
                   Research Foundation of AIMR  (2000-2002)
                   (investment research, non-profit);
                   Governor, Jerome Levy Economics Institute
                   of Bard College (August 1990-September
                   2001) (economics research); Director of
                   Ray & Berendtson, Inc. (May 2000-April
                   2002) (executive search firm). Oversees
                   10 portfolios in the OppenheimerFunds
                   complex.


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

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

John Damian, Vice       Vice President (since September 2001) of the Manager; an
President and           officer of 1 portfolio in the OppenheimerFunds complex;
Portfolio Manager       formerly Senior Analyst/Director for Citigroup Asset
since October 2001      Management (November 1999 - September 2001).

Age: 35
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Christopher Leavy,      Senior Vice President (since September 2000) of the
Vice President and      Manager; an officer of 7 portfolios in the OppenheimerFunds
Portfolio Manager       complex; prior to joining the Manager in September 2000, he
since March 2001        was a portfolio manager of Morgan Stanley Dean Witter
Age: 32                 Investment Management (1997 - September 2000).
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy,         Chairman,  Chief Executive  Officer and director (since June
President since 2001    2001) and President  (since  September 2000) of the Manager;
Age: 55                 President  and a director  or  trustee of other  Oppenheimer
                        funds;  President  and  a  director  (since  July  2001)  of
                        Oppenheimer  Acquisition Corp. (the Manager's parent holding
                        company) and of Oppenheimer  Partnership  Holdings,  Inc. (a
                        holding  company  subsidiary  of the  Manager);  a  director
                        (since November 2001) of OppenheimerFunds  Distributor, Inc.
                        (a  subsidiary  of the  Manager);  Chairman  and a  director
                        (since  July  2001) of  Shareholder  Services,  Inc.  and of
                        Shareholder   Financial   Services,   Inc.  (transfer  agent
                        subsidiaries  of  the  Manager);  President  and a  director
                        (since  July  2001) of  OppenheimerFunds  Legacy  Program (a
                        charitable  trust program  established  by the  Manager);  a
                        director of the following  investment advisory  subsidiaries
                        of the Manager:  OFI Institutional  Asset Management,  Inc.,
                        Centennial Asset Management Corporation,  Trinity Investment
                        Management Corporation and Tremont Capital Management,  Inc.
                        (since  November   2001),   HarbourView   Asset   Management
                        Corporation  and OFI Private  Investments,  Inc. (since July
                        2001);  President  (since  November  1, 2001) and a director
                        (since  July 2001) of  Oppenheimer  Real  Asset  Management,
                        Inc.;  Executive  Vice  President  (since  February 1997) of
                        Massachusetts  Mutual Life Insurance  Company (the Manager's
                        parent  company);  a  director  (since  June  1995)  of  DLB
                        Acquisition  Corporation  (a holding  company  that owns the
                        shares of Babson  Capital  Management  LLC); a member of the
                        Investment  Company  Institute's Board of Governors (elected
                        to serve from October 3, 2003 through  September  30, 2006).
                        Formerly,   Chief  Operating  Officer  (September  2000-June
                        2001)  of  the  Manager;  President  and  trustee  (November
                        1999-November  2001)  of  MML  Series  Investment  Fund  and
                        MassMutual    Institutional   Funds   (open-end   investment
                        companies);  a director (September 1999-August 2000) of C.M.
                        Life Insurance Company;  President,  Chief Executive Officer
                        and director  (September  1999-August 2000) of MML Bay State
                        Life   Insurance   Company.   Oversees  62   portfolios   as
                        Trustee/Director and 21 additional  portfolios as Officer in
                        the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Mark S. Vandehey,       Senior Vice  President and Chief  Compliance  Officer (since
Vice President and      March  2004) of the  Manager;  Vice  President  (since  June
Chief Compliance        1983)  of  OppenheimerFunds  Distributor,  Inc.,  Centennial
Officer since 2004      Asset Management Corporation and Shareholder Services,  Inc.
Age:  54                Formerly  (until  February 2004) Vice President and Director
                        of  Internal  Audit  of  the  Manager.   An  officer  of  83
                        portfolios in the Oppenheimer funds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted,        Senior Vice  President and  Treasurer  (since March 1999) of
Treasurer since 1999    the  Manager;  Treasurer  of  HarbourView  Asset  Management
Age: 45                 Corporation,    Shareholder   Financial   Services,    Inc.,
                        Shareholder   Services,   Inc.,   Oppenheimer   Real   Asset
                        Management   Corporation,    and   Oppenheimer   Partnership
                        Holdings,   Inc.   (since  March   1999),   of  OFI  Private
                        Investments,  Inc. (since March 2000),  of  OppenheimerFunds
                        International  Ltd.  and  OppenheimerFunds  plc  (since  May
                        2000), of OFI Institutional  Asset  Management,  Inc. (since
                        November 2000),  and of  OppenheimerFunds  Legacy Program (a
                        Colorado   non-profit   corporation)   (since   June  2003);
                        Treasurer and Chief  Financial  Officer  (since May 2000) of
                        OFI  Trust  Company  (a  trust  company  subsidiary  of  the
                        Manager);   Assistant   Treasurer   (since  March  1999)  of
                        Oppenheimer  Acquisition Corp.  Formerly Assistant Treasurer
                        of   Centennial   Asset   Management    Corporation   (March
                        1999-October  2003)  and  OppenheimerFunds   Legacy  Program
                        (April  2000-June  2003). An officer of 83 portfolios in the
                        OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Petersen,         Assistant  Vice  President of the Manager since August 2002;
Assistant Treasurer     formerly   Manager/Financial  Product  Accounting  (November
since 2004              1998-July 2002) of the Manager.  An officer of 83 portfolios
Age: 34                 in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero         Vice President/Fund Accounting of the Manager since March
Age: 41                 2002. Formerly Vice President/Corporate Accounting of the
                        Manager (July 1999-March 2002). An officer of 83 portfolios
                        in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack,         Executive  Vice  President  (since January 2004) and General
Secretary since 2001    Counsel  (since  February  2002)  of  the  Manager;  General
Age: 56                 Counsel  and  a  director   (since  November  2001)  of  the
                        Distributor;   General  Counsel  (since  November  2001)  of
                        Centennial   Asset  Management   Corporation;   Senior  Vice
                        President  and  General  Counsel  (since  November  2001) of
                        HarbourView  Asset  Management  Corporation;  Secretary  and
                        General   Counsel  (since   November  2001)  of  Oppenheimer
                        Acquisition  Corp.;   Assistant  Secretary  and  a  director
                        (since October 1997) of OppenheimerFunds  International Ltd.
                        and  OppenheimerFunds  plc;  Vice  President  and a director
                        (since November 2001) of Oppenheimer  Partnership  Holdings,
                        Inc.; a director (since  November 2001) of Oppenheimer  Real
                        Asset  Management,  Inc.;  Senior  Vice  President,  General
                        Counsel and a director  (since November 2001) of Shareholder
                        Financial Services,  Inc.,  Shareholder Services,  Inc., OFI
                        Private  Investments,  Inc.  and  OFI  Trust  Company;  Vice
                        President (since November 2001) of  OppenheimerFunds  Legacy
                        Program;  Senior Vice  President and General  Counsel (since
                        November 2001) of OFI Institutional Asset Management,  Inc.;
                        a  director  (since  June 2003) of  OppenheimerFunds  (Asia)
                        Limited.  Formerly Senior Vice President (May  1985-December
                        2003), Acting General Counsel (November  2001-February 2002)
                        and Associate  General  Counsel (May  1981-October  2001) of
                        the Manager;  Assistant  Secretary of Shareholder  Services,
                        Inc.  (May  1985-November   2001),   Shareholder   Financial
                        Services,    Inc.   (November   1989-November   2001);   and
                        OppenheimerFunds  International Ltd. (October  1997-November
                        2001).  An officer of 83 portfolios in the  OppenheimerFunds
                        complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice  President  (since  June 1998) and Senior  Counsel  and
Assistant Secretary     Assistant  Secretary  (since  October  2003) of the Manager;
since 2001              Vice President  (since 1999) and Assistant  Secretary (since
Age: 39                 October  2003)  of  the  Distributor;   Assistant  Secretary
                        (since   October  2003)  of  Centennial   Asset   Management
                        Corporation;  Vice President and Assistant  Secretary (since
                        1999) of Shareholder  Services,  Inc.;  Assistant  Secretary
                        (since  December  2001) of  OppenheimerFunds  Legacy Program
                        and of Shareholder  Financial  Services,  Inc..  Formerly an
                        Assistant Counsel (August  1994-October 2003). An officer of
                        83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lisa I. Bloomberg,      Vice President and Associate Counsel of the Manager since
Assistant Secretary     May 2004; formerly First Vice President and Associate
since 2004              General Counsel of UBS Financial Services Inc. (formerly,
Age:  37                PaineWebber Incorporated) (May 1999 - April 2004). An
                        officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Wayne Miao,             Senior Vice President and Deputy General Counsel of the
Assistant Secretary     Manager since September 2004. Formerly Mr. Gillespie held
since 2004              the following positions at Merrill Lynch Investment
Age:  31                Management: First Vice President (2001-September 2004);
                        Director (from 2000) and Vice President (1998-2000). An
                        officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Wayne Miao,             Assistant Vice President and Assistant Counsel of the
Assistant Secretary     Manager since June 2004. Formerly an Associate with Sidley
since 2004              Austin Brown & Wood LLP (September 1999 - May 2004). An
Age:  32                officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------


      |X|   Remuneration of Trustees. The officers of the Fund who are
affiliated with the Manager receive no salary or fee from the Fund. The
Trustees of the Fund received the compensation shown below from the Fund with
respect to the Fund's fiscal year ended October 31, 2004. The compensation
from all ten of the Board III funds (including the Fund) represents
compensation received for serving as a director or trustee and member of a
committee (if applicable) of the boards of those funds during the calendar
year ended December 31, 2004.










--------------------------------------------------------------------------------
Trustee Name and        Aggregate    Retirement   Estimated         Total
                                                                Compensation
                                                    Annual        From All
                                      Benefits    Retirement     Oppenheimer
                                     Accrued as  Benefits to   Funds For Which

Other Fund                            Part of      be Paid       Individual
Position(s)           Compensation      Fund         Upon         Serves As
(as applicable)        From Fund1     Expenses   Retirement2  Trustee/Director*

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

Thomas W. Courtney       $7,007       $11,865      $78,862        $172,0713

Chairman and Audit
Committee Member
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Paul Y. Clinton          $6,843       $13,671      $76,994        $166,3894

Audit Committee
Chairman
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Robert G. Galli
Audit Committee          $6,378        $6,865      $80,9235
Member                                                            $237,3126
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Lacy B. Herrmann

Audit Committee          $6,678       $10,559      $74,648
Member                                                            $161,0717

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Brian Wruble
Audit Committee          $6,678        $3,352      $22,238
Member                                                            $111,000
--------------------------------------------------------------------------------
1.    Aggregate   Compensation   From   Fund   includes   fees  and   deferred
   compensation, if any, for a Trustee.
2.    Estimated  Annual  Retirement  Benefits  to be Paid Upon  Retirement  is
   based on a straight life payment plan election with the  assumption  that a
   Trustee  will  retire  at the age of 75 and is  eligible  (after 7 years of
   service)  to receive  retirement  plan  benefits as  described  below under
   "Retirement Plan for Trustees."

3.    Includes  $51,071 ($26,750  compensation and $24,321 accrued  retirement
   benefits)  from  one  open-end  investment  company,   PIMCO  Advisors  VIT
   ("PIMCO"),  with  respect  to Mr.  Courtney's  service as a trustee of that
   fund.  The Fund's  former  Sub-Adviser  acts as the  investment  adviser to
   PIMCO.
4.    Includes  $50,389 ($26,500  compensation and $23,889 accrued  retirement
   benefits) from PIMCO,  with respect to Mr.  Clinton's  service as a trustee
   of that fund.
Includes  $43,933  estimated  to be paid to Mr. Galli for serving as a trustee
   or director of 25 other  Oppenheimer  funds (at December 31, 2004) that are
   not Board III Funds.
6.    Includes  $129,312  paid to Mr. Galli for serving as trustee or director
   of 25 other  Oppenheimer  funds (at  December  31, 2004) that are not Board
   III Funds.
7.    Includes  $50,071 ($25,750  compensation and $24,321 accrued  retirement
   benefits) from PIMCO, with respect to Mr.  Herrmann's  service as a trustee
   of that fund.

* For purposes of this section only, "Fund Complex" includes the Oppenheimer
funds and PIMCO (formerly OCC Accumulation Trust) in accordance with the
instructions for Form N-1A.  The Manager does not consider PIMCO to be part
of the OppenheimerFunds "Fund Complex" as that term may be otherwise
interpreted.


|X|   Retirement Plan for 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 Board I Funds for at least seven years in order to be eligible for
retirement plan benefits and must serve for at least 15 years to be eligible
for the maximum benefit. Each Trustee's retirement benefits will depend on
the amount of the Trustee's future compensation and length of service.

|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 is 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 SEC, 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 February 2, 2005, the only persons who owned
of record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were:

      Charles Schwab & Co. Inc. Special Custody Acct for the Exclusive
      Benefit of Customers, Attn: Mutual Funds, 101 Montgomery Street, San
      Francisco, CA 94104-4122, which owned 2,388,803.141 Class A shares
      (representing 10.45% of the Class A shares then outstanding);

      Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of Customers,
      Attn: Mutual Funds, 101 Montgomery Street, San Francisco, CA
      94104-4122, which owned 605,352.985 Class C shares (representing 10.82%
      of the Class C shares then outstanding).

      Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of its
      Customers, Attn: Fund Admin. 4800 Deer Lake Drive E Fl. 3,
      Jacksonville, FL 32246-6484; which owned 165,613.805 Class N shares
      (representing 9.68% of the Class N shares then outstanding).

The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company, a
global, diversified insurance and financial services organization.

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

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

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

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

      The Fund is required to file Form N-PX, with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each
year. The Fund's Form N-PX filing is available (i) without charge, upon
request, by calling the Fund toll-free at  1.800.525-7048 and (ii) on the
SEC's website at www.sec.gov.
                 -----------

      |X|   The Investment Advisory Agreement.  The Manager provides
investment advisory and management services to the Fund under an investment
advisory agreement between the Manager and the Fund. The Manager selects
securities for the Fund's portfolio and handles its day-to-day business. The
portfolio managers of the Fund are employed by the Manager and are the
persons who are 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 managers with counsel and support in managing the
Fund's portfolio.

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

      The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. Expenses for the Trust's three series are allocated to
the series in proportion to their net assets, unless allocations of expenses
can be made directly to a series. The advisory agreement lists examples of
expenses paid by the Fund. The major categories relate to calculation of the
Fund's net asset values per share, interest, taxes, brokerage commissions,
fees to certain 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. The management fees paid by
the Fund to the Manager during its last three fiscal years were:

---------------------------------------------------------------
Fiscal Year ended 10/31:        Management Fees Paid to
                                OppenheimerFunds, Inc.
---------------------------------------------------------------
---------------------------------------------------------------
          2002                        $3,656,726
---------------------------------------------------------------
---------------------------------------------------------------
          2003                         $3,717,654
---------------------------------------------------------------
---------------------------------------------------------------
          2004                         $5,805,595
---------------------------------------------------------------

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

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

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

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

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

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

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

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

Brokerage Policies of the Fund

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

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

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

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

Brokerage Practices Followed by the Manager. The Manager allocates brokerage
for the Fund subject to the provisions of the investment advisory agreement
and the procedures and rules described above. Generally, the Manager's
portfolio traders allocate brokerage based upon recommendations from the
Manager's portfolio managers. In certain instances, portfolio manager 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 commissions on
fixed-price offerings to obtain research, in the same manner as is permitted
for agency transactions.

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









   ---------------------------------------------------------------------
   Fiscal Year Ended 10/31   Total Brokerage Commissions Paid by the
                                              Fund1
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2002                            $2,850,138
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2003                           $3,893,0122
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2004                            $4,288,825
   ---------------------------------------------------------------------
1.    Amounts do not include spreads or commissions on principal  transactions
   on a net trade basis.
2.    In the fiscal year ended 10/31/03,  the amount of transactions  directed
      to brokers for research  services was  $71,988,314 and the amount
      of the  commissions  paid to  broker-dealers  for those  services
      was $214,794.

Distribution and Service Plans

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

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

-------------------------------------------
Fiscal    Aggregate        Class A
                           Front-End
Year      Front-End Sales  Sales Charges
Ended     Charges on       Retained by
10/31:    Class A Shares   Distributor1
-------------------------------------------
-------------------------------------------
  2002       $1,277,747       $364,089
-------------------------------------------
-------------------------------------------
  2003        $862,941        $249,984
-------------------------------------------
-------------------------------------------
  2004       $2,237,599       $609,190
-------------------------------------------
1.    Includes amounts  retained by a broker-dealer  that is an affiliate or a
    parent of the Distributor.

-----------------------------------------------------------------------------
Fiscal    Concessions on   Concessions on  Concessions on   Concessions on
Year      Class A Shares   Class B Shares  Class C Shares   Class N Shares
Ended     Advanced by      Advanced by     Advanced by      Advanced by
10/31:    Distributor1     Distributor1    Distributor1     Distributor1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2002        $136,926       $1,601,790        $237,568         $43,172
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2003        $81,212         $826,834         $147,073         $41,153
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2004        $195,869       $1,229,769        $349,158         $120,457
-----------------------------------------------------------------------------
1.    The  Distributor  advances  concession  payments  to dealers for certain
   sales  of  Class A shares  and for  sales  of Class B and  Class C shares
   from its own resources at the time of sale.
.

------------------------------------------------------------------------------
Fiscal    Class A          Class B         Class C           Class N
          Contingent       Contingent                        Contingent
Year      Deferred Sales   Deferred Sales  Contingent        Deferred Sales
Ended     Charges          Charges         Deferred Sales    Charges
10/31:    Retained by      Retained by     Charges Retained  Retained by
          Distributor      Distributor     by Distributor    Distributor
------------------------------------------------------------------------------
------------------------------------------------------------------------------
  2002        $12,049         $369,914          $19,284           $4,079
------------------------------------------------------------------------------
------------------------------------------------------------------------------
  2003         $6,212         $375,487          $11,524          $14,320
------------------------------------------------------------------------------
------------------------------------------------------------------------------
  2004         $2,832         $304,373          $16,341          $10,762
------------------------------------------------------------------------------

Distribution and Service Plans. The Fund has adopted a Service Plan for Class
A shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent Trustees1, cast in person
at a meeting called for the purpose of voting on that plan.

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

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

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


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

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

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

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

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

      Under the Class A distribution plan, the plan provides for the Fund to
pay an asset-based sales charge to the Distributor at an annual rate of 0.25%
of average annual net assets of Class A shares of the Fund (the Board has set
that rate at zero).

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

      For the fiscal year ended October 31, 2004 payments under the Class A
plan totaled $1,072,829, of which $61,900 was paid to an affiliate of the
Distributor's parent company. In addition, $22,011 was retained for the
asset-based sales charge, as allowed under the plan prior to January 1, 2003.
Any unreimbursed expenses the Distributor incurs with respect to Class A
shares in any fiscal year cannot be recovered in subsequent years. The
Distributor may not use payments received under the Class A plan to pay any
of its interest expenses, carrying charges, or other financial costs, or
allocation of overhead.

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

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

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

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

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

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

 -------------------------------------------------------------------------------
  Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/04
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class:            Total      Amount Retained   Distributor's    Distributor's
                                                  Aggregate      Unreimbursed
                                                 Unreimbursed    Expenses as %
                  Payments                      Expenses Under   of Net Assets
                 Under Plan    by Distributor        Plan          of Class
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class B Plan    $1,901,18      $1,487,7291       $2,005,361         1.01%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class C Plan     $963,669       $266,5402        $1,355,190         1.11%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class N Plan     $109,390        $71,9033         $344,483          0.95%
 -------------------------------------------------------------------------------
1.    Includes  $61,900  paid  to an  affiliate  of the  Distributor's  parent
   company.
2.    Includes  $26,454  paid  to an  affiliate  of the  Distributor's  parent
   company.
3.    Includes  $2,523  paid  to an  affiliate  of  the  Distributor's  parent
    company.

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

Performance of the Fund

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

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

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

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

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

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

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

ERV   l/n - 1  Average Annual Total
               Return
  P

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

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

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

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

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


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




---------------------------------------------------------------------------------
            The Fund's Total Returns for the Periods Ended 10/31/04
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of  Cumulative Total              Average Annual Total Returns
             Returns (10
              years or
Shares     life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                 1-Year            5-Year           10-Year
                                                (or life of       (or life of
                                                   class)           class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After    Without  After    Without  After    Without After    Without
          Sales    Sales    Sales    Sales    Sales    Sales   Sales    Sales
           Charge   Charge   Charge   Charge   Charge  Charge   Charge   Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A1   170.41%  186.90%   13.95%   20.90%   13.38%  14.74%   10.46%   11.12%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B2   178.16%  178.16%   14.91%   19.91%   13.74%  13.98%   10.77%   10.77%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C3   170.64%  170.64%   18.95%   19.95%   13.99%  13.99%   10.47%   10.47%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N    60.16%4  60.16%4   19.29%   20.29%  13.71%4 13.71%4      N/A      N/A
---------------------------------------------------------------------------------
1. Inception of Class A:      01/03/89
2. Inception of Class B:      9/1/93
3. Inception of Class C:      9/1/93
4. Inception of Class N:      3/01/01

-----------------------------------------------------------------------------
    Average Annual Total Returns for Class A Shares (After Sales Charge)
                       For the Periods Ended 10/31/04
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
                                 1-Year          5-Year          10-Year
                                              (or life of      (or life of
                                                 class)          class)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on Distributions     12.83%          12.77%           9.02%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on                   9.62%           11.37%           8.32%
Distributions and
Redemption of Fund Shares
-----------------------------------------------------------------------------
1.    Inception of Class A: 01/03/89

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

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

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

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

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

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

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

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

ABOUT YOUR ACCOUNT

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

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

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

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

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

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

And the following money market funds:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant circumstances. Class
A shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and
Class N shares is the same as that of the initial sales charge on Class A
shares - to compensate the Distributor and brokers, dealers and financial
institutions that sell shares of the Fund. A salesperson who is entitled to
receive compensation from his or her firm for selling Fund shares may receive
different levels of compensation for selling one class of shares rather than
another.

      The Distributor will not accept purchase order of $100,000 or more for
Class B shares or a purchase order of $1 million or more to purchase Class C
shares on behalf of a single investor (not including dealer "street name" or
omnibus accounts).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

      The Fund cannot guarantee receipt of a payment on the date requested.
The Fund reserves the right to amend, suspend or discontinue offering these
plans at any time without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make regular additional
Class A share purchases while participating in an Automatic Withdrawal Plan.
Class B, Class C and Class N shareholders should not establish automatic
withdrawal plans, because of the potential imposition of the contingent
deferred sales charge on such withdrawals (except where the Class B, Class C
or Class N contingent deferred sales charge is waived as described in
Appendix C to this Statement of Additional Information).

      By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to
existing Plans.

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

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

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


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

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

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

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

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

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

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

o     With respect to Class B shares except for the funds listed in the next
item immediately below, the Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within
six years of the initial purchase of the exchanged Class B shares.

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

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

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

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

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

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

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

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

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

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

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Information About the Fund

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

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

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

Independent Auditors. KPMG LLP serves as the Independent Registered Public
Accounting Firm for the Fund. KPMG LLP audits the Fund's financial statements
and performs other related audit services. KPMG LLP  also acts as the
independent registered public accounting firm for certain other funds advised
by the Manager and its affiliates. Audit and non-audit services provided by
KPMG LLP to the Fund must be pre-approved by the Audit Committee.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Small Cap Value Fund, (one of the portfolios constituting the
Oppenheimer Quest For Value Funds) including the statement of investments, as of
October 31, 2004, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

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


KPMG LLP

Denver, Colorado
December 16, 2004





STATEMENT OF INVESTMENTS  October 31, 2004
--------------------------------------------------------------------------------

                                                                           VALUE
                                                          SHARES      SEE NOTE 1
--------------------------------------------------------------------------------
COMMON STOCKS--96.2%
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--13.5%
--------------------------------------------------------------------------------
DISTRIBUTORS--1.0%
Source Information
Management Co.
(The) 1                                                  900,000   $   9,072,000
--------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--6.6%
AFC Enterprises, Inc. 1                                  876,000      18,991,680
--------------------------------------------------------------------------------
Dave & Buster's, Inc. 1                                  391,200       6,943,800
--------------------------------------------------------------------------------
Intrawest Corp.                                          299,600       5,827,220
--------------------------------------------------------------------------------
Lodgian, Inc. 1                                          900,000       9,270,000
--------------------------------------------------------------------------------
Scientific Games
Corp., Cl. A 1                                           875,000      18,532,500
                                                                   -------------
                                                                      59,565,200

--------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.8%
Celebrate
Express, Inc. 1                                           50,000         849,500
--------------------------------------------------------------------------------
ValueVision Media,
Inc., Cl. A 1                                            600,000       6,264,000
                                                                   -------------
                                                                       7,113,500

--------------------------------------------------------------------------------
MEDIA--2.7%
Carmike Cinemas,
Inc.                                                      25,000         895,000
--------------------------------------------------------------------------------
DreamWorks
Animation SKG, Inc. 1                                     23,800         929,390
--------------------------------------------------------------------------------
UnitedGlobalCom,
Inc., Cl. A 1                                          3,000,000      22,440,000
                                                                   -------------
                                                                      24,264,390

--------------------------------------------------------------------------------
MULTILINE RETAIL--0.7%
Dollar Tree
Stores, Inc. 1                                           200,000       5,780,000
--------------------------------------------------------------------------------
SPECIALTY RETAIL--1.5%
Advance Auto
Parts, Inc. 1                                            150,000       5,868,000
--------------------------------------------------------------------------------
Build-A-Bear-
Workshop, Inc. 1                                          37,100         905,611
--------------------------------------------------------------------------------
Pacific Sunwear of
California, Inc. 1                                       300,000       7,032,000
                                                                   -------------
                                                                      13,805,611

--------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.2%
Oxford Industries,
Inc.                                                      50,000       1,854,500
--------------------------------------------------------------------------------
CONSUMER STAPLES--3.5%
--------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.1%
Pantry, Inc. (The) 1                                     611,400      14,056,086
--------------------------------------------------------------------------------
Performance Food
Group Co. 1                                              200,000       4,652,000
                                                                   -------------
                                                                      18,708,086

--------------------------------------------------------------------------------
FOOD PRODUCTS--1.4%
Gold Kist
Holdings, Inc. 1                                         600,000       6,600,000
--------------------------------------------------------------------------------
J.M. Smucker Co.
(The)                                                    150,000       6,675,000
                                                                   -------------
                                                                      13,275,000

--------------------------------------------------------------------------------
ENERGY--4.4%
--------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.4%
Pride International,
Inc. 1                                                   700,000      12,936,000
--------------------------------------------------------------------------------
OIL & GAS--3.0%
Energy Partners Ltd. 1                                   800,000      14,048,000
--------------------------------------------------------------------------------
Frontier Oil Corp.                                       300,000       7,374,000
--------------------------------------------------------------------------------
KCS Energy, Inc. 1                                       400,000       5,444,000
                                                                   -------------
                                                                      26,866,000

--------------------------------------------------------------------------------
FINANCIALS--21.9%
--------------------------------------------------------------------------------
CAPITAL MARKETS--0.5%
National Financial
Partners Corp.                                           145,900       4,484,966
--------------------------------------------------------------------------------
COMMERCIAL BANKS--3.7%
BankAtlantic
Bancorp, Inc.                                            485,000       8,482,650
--------------------------------------------------------------------------------
Cullen/Frost
Bankers, Inc.                                            180,000       8,820,000
--------------------------------------------------------------------------------
Independence
Community
Bank Corp.                                               127,622       4,802,416
--------------------------------------------------------------------------------
Sterling Financial
Corp., Western US                                        300,000      11,271,000
                                                                   -------------
                                                                      33,376,066


                      19 | OPPENHEIMER SMALL CAP VALUE FUND

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

                                                                           VALUE
                                                          SHARES      SEE NOTE 1
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--5.7%
Affiliated Managers
Group, Inc. 1                                            265,600   $  14,831,104
--------------------------------------------------------------------------------
Apollo Investment
Corp.                                                    700,000       9,520,000
--------------------------------------------------------------------------------
Assured Guaranty
Ltd.                                                     547,000       8,981,740
--------------------------------------------------------------------------------
Gabelli Asset
Management, Inc.                                         200,000       9,220,000
--------------------------------------------------------------------------------
Knight Trading
Group, Inc. 1                                            833,500       8,660,065
                                                                   -------------
                                                                      51,212,909

--------------------------------------------------------------------------------
INSURANCE--3.0%
Platinum
Underwriters
Holdings Ltd.                                            500,000      14,625,000
--------------------------------------------------------------------------------
Protective Life Corp.                                    312,700      12,289,110
                                                                   -------------
                                                                      26,914,110

--------------------------------------------------------------------------------
REAL ESTATE--5.6%
BioMed Realty
Trust, Inc.                                              250,000       4,545,000
--------------------------------------------------------------------------------
Kite Realty
Group Trust                                              140,000       1,848,000
--------------------------------------------------------------------------------
New Century
Financial Corp.                                          225,000      12,408,750
--------------------------------------------------------------------------------
Newcastle
Investment Corp.                                         375,000      11,478,750
--------------------------------------------------------------------------------
NorthStar Realty
Finance Corp. 1,2                                      1,689,000      14,829,420
--------------------------------------------------------------------------------
U-Store-It Trust 1                                       325,000       5,430,750
                                                                   -------------
                                                                      50,540,670

--------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--3.4%
Bank Mutual Corp.                                        700,000       8,596,000
--------------------------------------------------------------------------------
Franklin Bank Corp. 1                                    550,000       9,075,000
--------------------------------------------------------------------------------
NewAlliance
Bancshares, Inc.                                         925,000      12,839,000
                                                                   -------------
                                                                      30,510,000

--------------------------------------------------------------------------------
HEALTH CARE--4.8%
--------------------------------------------------------------------------------
BIOTECHNOLOGY--0.6%
MedImmune, Inc. 1                                        175,000       4,973,500

--------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.5%
Bio-Rad Laboratories,
Inc., Cl. A 1                                             80,000       4,161,600
--------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--2.8%
Capital Senior
Living Corp. 1                                           800,000       4,240,000
--------------------------------------------------------------------------------
Manor Care, Inc.                                         375,000      12,277,500
--------------------------------------------------------------------------------
PacifiCare Health
Systems, Inc. 1                                          250,000       8,905,000
                                                                   -------------
                                                                      25,422,500

--------------------------------------------------------------------------------
PHARMACEUTICALS--0.9%
Watson
Pharmaceuticals,
Inc. 1                                                   300,000       8,409,000
--------------------------------------------------------------------------------
INDUSTRIALS--16.5%
--------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.4%
BE Aerospace, Inc. 1                                     183,900       1,577,862
--------------------------------------------------------------------------------
Orbital Sciences
Corp. 1                                                1,066,200      11,035,170
                                                                   -------------
                                                                      12,613,032

--------------------------------------------------------------------------------
BUILDING PRODUCTS--1.1%
Jacuzzi Brands, Inc. 1                                 1,100,000       9,515,000
--------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Huron Consulting
Group, Inc. 1                                             80,200       1,563,900
--------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--2.5%
Perini Corp. 1                                           375,000       5,925,000
--------------------------------------------------------------------------------
Quanta Services,
Inc. 1                                                 1,200,000       8,064,000
--------------------------------------------------------------------------------
URS Corp. 1                                              325,000       8,970,000
                                                                   -------------
                                                                      22,959,000

--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--1.6%
AMETEK, Inc.                                             425,000      13,991,000
--------------------------------------------------------------------------------
MACHINERY--6.3%
Actuant Corp., Cl. A 1                                   110,000       4,363,700
--------------------------------------------------------------------------------
Albany International
Corp., Cl. A                                             225,000       6,754,500
--------------------------------------------------------------------------------
Chicago Bridge
& Iron Co. NV                                            300,000       9,285,000
--------------------------------------------------------------------------------
Harsco Corp.                                             185,000       8,963,250
--------------------------------------------------------------------------------
Idex Corp.                                               223,200       8,236,080


                      20 | OPPENHEIMER SMALL CAP VALUE FUND

                                                                           VALUE
                                                          SHARES      SEE NOTE 1
--------------------------------------------------------------------------------
MACHINERY Continued
Kennametal, Inc.                                         200,000   $   9,306,000
--------------------------------------------------------------------------------
Oshkosh Truck Corp.                                      175,000      10,307,500
                                                                   -------------
                                                                      57,216,030

--------------------------------------------------------------------------------
ROAD & RAIL--2.0%
Old Dominion
Freight Line, Inc. 1                                     300,000       8,407,500
--------------------------------------------------------------------------------
Pacer International,
Inc. 1                                                   550,000       9,762,500
                                                                   -------------
                                                                      18,170,000

--------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--1.4%
Hughes Supply, Inc.                                      450,000      12,784,500
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--13.9%
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.3%
Carrier Access Corp. 1                                   700,000       6,188,000
--------------------------------------------------------------------------------
Packeteer, Inc. 1                                        450,000       5,553,000
                                                                   -------------
                                                                      11,741,000

--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--2.1%
Amphenol Corp.,
Cl. A 1                                                  270,000       9,269,100
--------------------------------------------------------------------------------
Lipman Electronic
Engineering Ltd.                                         250,000       5,955,000
--------------------------------------------------------------------------------
Richardson
Electronics Ltd.                                         390,000       3,237,000
                                                                   -------------
                                                                      18,461,100

--------------------------------------------------------------------------------
IT SERVICES--3.9%
Ceridian Corp. 1                                         375,000       6,468,750
--------------------------------------------------------------------------------
CSG Systems
International, Inc. 1                                    800,000      13,448,000
--------------------------------------------------------------------------------
Ness Technologies,
Inc. 1                                                   501,000       6,623,220
--------------------------------------------------------------------------------
Titan Corp. (The) 1                                      600,000       8,904,000
                                                                   -------------
                                                                      35,443,970

--------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.0%
National
Semiconductor
Corp. 1                                                  550,000       9,185,000

--------------------------------------------------------------------------------
SOFTWARE--5.6%
Activision, Inc. 1                                       850,000      12,308,000
--------------------------------------------------------------------------------
Compuware Corp. 1                                        800,000       4,632,000
--------------------------------------------------------------------------------
Novell, Inc. 1                                           600,000       4,314,000
--------------------------------------------------------------------------------
Take-Two Interactive
Software, Inc. 1                                         878,600      28,958,656
                                                                   -------------
                                                                      50,212,656

--------------------------------------------------------------------------------
MATERIALS--8.0%
--------------------------------------------------------------------------------
CHEMICALS--2.7%
Airgas, Inc.                                             400,000       9,840,000
--------------------------------------------------------------------------------
FMC Corp. 1                                              150,000       6,577,500
--------------------------------------------------------------------------------
Millennium
Chemicals, Inc. 1                                        300,000       6,444,000
--------------------------------------------------------------------------------
Westlake Chemical
Corp. 1                                                   50,000       1,153,500
                                                                   -------------
                                                                      24,015,000

--------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.7%
Smurfit-Stone
Container Corp. 1                                        375,000       6,510,000
--------------------------------------------------------------------------------
METALS & MINING--3.3%
Century
Aluminum Co. 1                                           492,000      11,384,880
--------------------------------------------------------------------------------
International Steel
Group, Inc. 1                                             59,600       2,201,028
--------------------------------------------------------------------------------
Oregon Steel
Mills, Inc. 1                                          1,120,300      16,266,756
                                                                   -------------
                                                                      29,852,664

--------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.3%
Bowater, Inc.                                            325,000      11,973,000
--------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.8%
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--2.5%
IDT Corp., Cl. B 1                                     1,300,000      17,966,000
--------------------------------------------------------------------------------
PTEK Holdings, Inc. 1                                    500,000       4,980,000
                                                                   -------------
                                                                      22,946,000

--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.3%
SBA Communications
Corp. 1                                                  300,000       2,511,000


                      21 | OPPENHEIMER SMALL CAP VALUE FUND

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

                                                                           VALUE
                                                          SHARES      SEE NOTE 1
--------------------------------------------------------------------------------
UTILITIES--6.9%
--------------------------------------------------------------------------------
ELECTRIC UTILITIES--4.0%
AES Corp. (The) 1                                        800,000   $   8,720,000
--------------------------------------------------------------------------------
CMS Energy Corp. 1                                     1,000,000       9,360,000
--------------------------------------------------------------------------------
NRG Energy, Inc. 1                                       320,000       8,876,800
--------------------------------------------------------------------------------
Reliant Energy, Inc. 1                                   850,000       8,738,000
                                                                   -------------
                                                                      35,694,800

--------------------------------------------------------------------------------
GAS UTILITIES--1.0%
Southern Union Co. 1                                     420,000       9,227,400
--------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.9%
Equitable
Resources, Inc.                                          160,000       8,848,000
--------------------------------------------------------------------------------
Questar Corp.                                            175,200       8,409,600
                                                                   -------------
                                                                      17,257,600
                                                                   -------------

Total Common Stocks
(Cost $763,240,111)                                                  867,089,260

                                                      PRINCIPAL           VALUE
                                                         AMOUNT      SEE NOTE 1
--------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--4.0%
--------------------------------------------------------------------------------
Undivided interest of 63.18% in joint
repurchase agreement (Principal Amount/
Value $57,987,000, with a maturity value
of $57,995,553) with Zions Bank/Capital
Markets Group, 1.77%, dated 10/29/04,
to be repurchased at $36,641,404 on
11/1/04, collateralized by U.S. Treasury
Nts., 2.375%, 8/15/06, with a
value of $59,191,443
(Cost $36,636,000)                                 $ 36,636,000   $  36,636,000
--------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $799,876,111)                                       100.2%    903,725,260
--------------------------------------------------------------------------------
LIABILITIES
IN EXCESS OF
OTHER ASSETS                                               (0.2)     (2,103,924)
                                                   -----------------------------
NET ASSETS                                                100.0%  $ 901,621,336
                                                   =============================

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Non-income producing security.

2. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended October 31, 2004.
The aggregate fair value of securities of affiliated companies held by the Fund
as of October 31, 2004 amounts to $14,829,420. Transactions during the period in
which the issuer was an affiliate are as follows:

                                       SHARES                                     SHARES
                                  OCTOBER 31,        GROSS         GROSS     OCTOBER 31,     UNREALIZED    DIVIDEND
                                         2003    ADDITIONS    REDUCTIONS            2004   DEPRECIATION      INCOME
-------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
NorthStar Realty Finance Corp.             --    1,689,000            --       1,689,000      $ 371,580        $ --

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      22 | OPPENHEIMER SMALL CAP VALUE FUND

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

-------------------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $784,675,111)                                         $ 888,895,840
Affiliated companies (cost $15,201,000)                                               14,829,420
                                                                                   --------------
                                                                                     903,725,260
-------------------------------------------------------------------------------------------------
Cash                                                                                     269,077
-------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold                                                                       6,609,722
Shares of beneficial interest sold                                                     3,437,614
Interest and dividends                                                                   121,309
Other                                                                                     51,365
                                                                                   --------------
Total assets                                                                         914,214,347

-------------------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased                                                                 10,998,972
Shares of beneficial interest redeemed                                                   994,590
Transfer and shareholder servicing agent fees                                            209,643
Distribution and service plan fees                                                       184,122
Shareholder communications                                                               115,594
Trustees' compensation                                                                    49,984
Other                                                                                     40,106
                                                                                   --------------
Total liabilities                                                                     12,593,011

-------------------------------------------------------------------------------------------------
NET ASSETS                                                                         $ 901,621,336
                                                                                   ==============

-------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
-------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                         $     307,809
-------------------------------------------------------------------------------------------------
Additional paid-in capital                                                           695,192,607
-------------------------------------------------------------------------------------------------
Accumulated net investment loss                                                          (48,262)
-------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions       102,320,033
-------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                           103,849,149
                                                                                   --------------
NET ASSETS                                                                         $ 901,621,336
                                                                                   ==============


                      23 | OPPENHEIMER SMALL CAP VALUE 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 $543,999,330
and 18,083,646 shares of beneficial interest outstanding)                               $   30.08
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price)                                                                         $   31.92
-------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $198,971,123
and 7,103,289 shares of beneficial interest outstanding)                                $   28.01
-------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $122,329,169
and 4,373,831 shares of beneficial interest outstanding)                                $   27.97
-------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $36,321,714
and 1,220,089 shares of beneficial interest outstanding)                                $   29.77

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      24 | OPPENHEIMER SMALL CAP VALUE FUND

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

--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $24,509)           $   5,216,533
--------------------------------------------------------------------------------
Interest                                                                312,149
                                                                  -------------
Total investment income                                               5,528,682

--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Management fees                                                       5,805,595
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                               1,072,829
Class B                                                               1,901,118
Class C                                                                 963,669
Class N                                                                 109,390
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                               1,187,370
Class B                                                                 612,972
Class C                                                                 308,881
Class N                                                                  85,156
--------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                 100,696
Class B                                                                  90,652
Class C                                                                  31,278
Class N                                                                   2,579
--------------------------------------------------------------------------------
Trustees' compensation                                                   46,313
--------------------------------------------------------------------------------
Custodian fees and expenses                                              21,207
--------------------------------------------------------------------------------
Other                                                                   147,436
                                                                  --------------
Total expenses                                                       12,487,141
Less reduction to custodian expenses                                     (7,478)
Less payments and waivers of expenses                                    (8,455)
                                                                  --------------
Net expenses                                                         12,471,208

--------------------------------------------------------------------------------
NET INVESTMENT LOSS                                                  (6,942,526)

--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
--------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments                                                         124,451,145
Foreign currency transactions                                           (43,653)
Net increase from payment by affiliate                                   21,870
                                                                  --------------
Net realized gain                                                   124,429,362
--------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                 14,520,760

--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS              $ 132,007,596
                                                                  ==============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      25 | OPPENHEIMER SMALL CAP VALUE FUND

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

YEAR ENDED OCTOBER 31,                                                  2004             2003
----------------------------------------------------------------------------------------------
OPERATIONS
----------------------------------------------------------------------------------------------
Net investment loss                                           $   (6,942,526)  $   (1,946,080)
----------------------------------------------------------------------------------------------
Net realized gain                                                124,429,362       56,185,756
----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)              14,520,760       90,036,665
                                                              --------------------------------
Net increase in net assets resulting from operations             132,007,596      144,276,341

----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A                                                          (16,996,526)              --
Class B                                                           (9,005,226)              --
Class C                                                           (3,905,268)              --
Class N                                                             (673,503)              --

----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A                                                          152,733,067       27,564,749
Class B                                                            2,246,042       (1,650,967)
Class C                                                           38,042,967        7,875,626
Class N                                                           22,066,171        4,208,196

----------------------------------------------------------------------------------------------
NET ASSETS
----------------------------------------------------------------------------------------------
Total increase                                                   316,515,320      182,273,945
----------------------------------------------------------------------------------------------
Beginning of period                                              585,106,016      402,832,071
                                                              --------------------------------
End of period (including accumulated net investment loss of
$48,262 and $32,137, respectively)                            $  901,621,336   $  585,106,016
                                                              ==============   ===============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      26 | OPPENHEIMER SMALL CAP VALUE FUND

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

CLASS A    YEAR ENDED OCTOBER 31,                          2004            2003            2002            2001             2000
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                $     26.11     $     19.18     $     19.53     $     21.26      $     16.82
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                                        (.17) 1         (.04)           (.19)           (.23)            (.16)
Net realized and unrealized gain (loss)                    5.42            6.97            (.09)           (.47)            4.60
                                                    ------------------------------------------------------------------------------
Total from investment operations                           5.25            6.93            (.28)           (.70)            4.44
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                      (1.28)             --            (.07)          (1.03)              -- 2
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                      $     30.08     $     26.11     $     19.18     $     19.53      $     21.26
                                                    ==============================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                        20.90%          36.13%          (1.45)%         (3.02)%          26.40%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)            $   543,999     $   330,215     $   222,029     $   172,395      $   157,759
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $   436,617     $   245,319     $   231,657     $   163,007      $   147,952
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss                                       (0.61)%         (0.12)%         (0.69)%         (1.06)%          (0.95)%
Total expenses                                             1.35%           1.59%           1.68%           1.86%            1.90%
Expenses after payments and waivers and
reduction to custodian expenses                             N/A 5          1.56%           1.66%            N/A 5,6          N/A 5
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                     163%            163%            151%            162%             166%

1. Per share amounts calculated based on the average shares outstanding during
the period.

2. Less than $0.005 per share.

3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

4. Annualized for periods of less than one full year.

5. Reduction to custodian expenses less than 0.01%.

6. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      27 | OPPENHEIMER SMALL CAP VALUE FUND

FINANCIAL HIGHLIGHTS  Continued
--------------------------------------------------------------------------------

CLASS B   YEAR ENDED OCTOBER 31,                           2004            2003            2002            2001             2000
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                $     24.59     $     18.20     $     18.65     $     20.47      $     16.28
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                                       (.37) 1          (.17)           (.18)           (.23)            (.33)
Net realized and unrealized gain (loss)                    5.07            6.56            (.20)           (.56)            4.52
                                                    ------------------------------------------------------------------------------
Total from investment operations                           4.70            6.39            (.38)           (.79)            4.19
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                      (1.28)             --            (.07)          (1.03)              -- 2
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                      $     28.01     $     24.59     $     18.20     $     18.65      $     20.47
                                                    ==============================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                        19.91%          35.11%          (2.06)%         (3.60)%          25.74%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)            $   198,971     $   171,896     $   129,885     $    95,418      $    83,859
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $   190,251     $   137,734     $   134,304     $    88,235      $    79,526
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss                                       (1.43)%         (0.85)%         (1.34)%         (1.65)%          (1.48)%
Total expenses                                             2.18%           2.42%           2.34%           2.45%            2.44%
Expenses after payments and waivers and
reduction to custodian expenses                             N/A 5          2.29%           2.32%            N/A 5,6          N/A 5
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                     163%            163%            151%            162%             166%

1. Per share amounts calculated based on the average shares outstanding during
the period.

2. Less than $0.005 per share.

3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

4. Annualized for periods of less than one full year.

5. Reduction to custodian expenses less than 0.01%.

6. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      28 | OPPENHEIMER SMALL CAP VALUE FUND

CLASS C     YEAR ENDED OCTOBER 31,                         2004            2003            2002            2001             2000
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                $     24.55     $     18.17     $     18.62     $     20.44      $     16.25
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                                        (.37) 1         (.13)           (.10)           (.19)            (.33)
Net realized and unrealized gain (loss)                    5.07            6.51            (.28)           (.60)            4.52
                                                    ------------------------------------------------------------------------------
Total from investment operations                           4.70            6.38            (.38)           (.79)            4.19
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                      (1.28)             --            (.07)          (1.03)              -- 2
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                      $     27.97     $     24.55     $     18.17     $     18.62      $     20.44
                                                    ==============================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                        19.95%          35.11%          (2.06)%         (3.61)%          25.79%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)            $   122,329     $    71,779     $    46,360     $    26,604      $    22,173
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $    96,555     $    53,649     $    45,455     $    24,134      $    20,521
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss                                       (1.42)%         (0.85)%         (1.33)%         (1.64)%          (1.49)%
Total expenses                                             2.16%           2.40%           2.33%           2.45%            2.44%
Expenses after payments and waivers and
reduction to custodian expenses                             N/A 5          2.30%           2.31%            N/A 5,6          N/A 5
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                     163%            163%            151%            162%             166%

1. Per share amounts calculated based on the average shares outstanding during
the period.

2. Less than $0.005 per share.

3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

4. Annualized for periods of less than one full year.

5. Reduction to custodian expenses less than 0.01%.

6. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      29 | OPPENHEIMER SMALL CAP VALUE FUND

FINANCIAL HIGHLIGHTS  Continued
--------------------------------------------------------------------------------

CLASS N     YEAR ENDED OCTOBER 31,                      2004           2003           2002         2001 1
-------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $    25.98     $    19.13     $    19.51     $    19.58
-------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                                     (.26) 2        (.11)          (.27)          (.04)
Net realized and unrealized gain (loss)                 5.33           6.96           (.04)          (.03)
                                                  -----------------------------------------------------------
Total from investment operations                        5.07           6.85           (.31)          (.07)
-------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                   (1.28)            --           (.07)            --
-------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $    29.77     $    25.98     $    19.13     $    19.51
                                                  ===========================================================

-------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                     20.29%         35.81%         (1.61)%        (0.36)%
-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $   36,322     $   11,216     $    4,558     $      409
-------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $   21,951     $    6,722     $    2,882     $      106
-------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss                                    (0.93)%        (0.36)%        (0.78)%        (1.14)%
Total expenses                                          1.70%          2.01%          1.82%          2.01%
Expenses after payments and waivers and
reduction to custodian expenses                         1.66%          1.80%          1.80%           N/A 5,6
-------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  163%           163%           151%           162%

1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.

2. Per share amounts calculated based on the average shares outstanding during
the period.

3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

4. Annualized for periods of less than one full year.

5. Reduction to custodian expenses less than 0.01%.

6. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      30 | OPPENHEIMER SMALL CAP VALUE FUND

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

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES

Oppenheimer Small Cap Value Fund (the Fund), a series of Oppenheimer Quest For
Value Funds, is an open-end management investment company registered under the
Investment Company Act of 1940, as amended. 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 and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ due to each class
having its own expenses, such as transfer and shareholder servicing agent fees
and shareholder communications, directly attributable to that class. Class A, B,
C and N have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The Fund assesses a 2% fee on the proceeds of fund shares that are redeemed
(either by selling or exchanging to another Oppenheimer fund) within 30 days of
their purchase. The fee, which is retained by the Fund, is accounted for as an
addition to paid-in capital.

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

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


                      31 | OPPENHEIMER SMALL CAP VALUE FUND

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

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

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

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

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

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

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

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

--------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments


                      32 | OPPENHEIMER SMALL CAP VALUE FUND

not offset by capital loss carry forwards, if any, to shareholders, therefore,
no federal income or excise tax provision is required.

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

                                                              NET UNREALIZED
                                                                APPRECIATION
                                                            BASED ON COST OF
                                                              SECURITIES AND
    UNDISTRIBUTED    UNDISTRIBUTED          ACCUMULATED    OTHER INVESTMENTS
    NET INVESTMENT       LONG-TERM                 LOSS   FOR FEDERAL INCOME
    INCOME                    GAIN     CARRYFORWARD 1,2         TAX PURPOSES
    ------------------------------------------------------------------------
    $ 66,322,978      $ 36,175,708                 $ --        $ 103,670,496

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

2. During the fiscal year ended October 31, 2003, the Fund utilized $18,203,203
of capital loss carryforward to offset capital gains realized in that fiscal
year.

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for October 31, 2004. Net assets of the
Fund were unaffected by the reclassifications.

                                                         REDUCTION TO
                                     REDUCTION TO     ACCUMULATED NET
               INCREASE TO        ACCUMULATED NET       REALIZED GAIN
               PAID-IN CAPITAL    INVESTMENT LOSS    ON INVESTMENTS 3
               ------------------------------------------------------
               $ 14,197,981           $ 6,926,401        $ 21,124,382

3. $14,197,981, including $5,011,011 of long-term capital gain, was distributed
in connection with Fund share redemptions.

The tax character of distributions paid during the years ended October 31, 2004
and October 31, 2003 was as follows:

                                                 YEAR ENDED          YEAR ENDED
                                           OCTOBER 31, 2004    OCTOBER 31, 2003
               ----------------------------------------------------------------
               Distributions paid from:
               Ordinary income             $      8,874,298            $     --
               Long-term capital gain            21,706,225                  --
                                           ------------------------------------
               Total                       $     30,580,523            $     --
                                           ====================================

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


                      33 | OPPENHEIMER SMALL CAP VALUE FUND

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

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

book and tax appreciation or depreciation of securities and other investments,
if applicable, is attributable to the tax deferral of losses or tax realization
of financial statement unrealized gain or loss.

               Federal tax cost of securities          $  800,054,764
                                                       ===============

               Gross unrealized appreciation           $  118,737,789
               Gross unrealized depreciation              (15,067,293)
                                                       ---------------
               Net unrealized appreciation             $  103,670,496
                                                       ===============

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended October
31, 2004, the Fund's projected benefit obligations were increased by $11,181 and
payments of $745 were made to retired trustees, resulting in an accumulated
liability of $42,574 as of October 31, 2004.

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

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

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

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


                      34 | OPPENHEIMER SMALL CAP VALUE FUND

Fund during the period. Such interest expense and other custodian fees may be
paid with these earnings.

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

--------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

--------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST

The Fund has authorized an unlimited number of $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:

                             YEAR ENDED OCTOBER 31, 2004      YEAR ENDED OCTOBER 31, 2003
                                SHARES            AMOUNT          SHARES           AMOUNT
------------------------------------------------------------------------------------------
CLASS A
Sold                         8,776,725    $  247,299,487       5,916,521    $ 125,928,724
Dividends and/or
distributions reinvested       633,321        16,346,018              --               --
Redeemed                    (3,975,589)     (110,912,438) 1   (4,844,173)     (98,363,975)
                            --------------------------------------------------------------
Net increase                 5,434,457    $  152,733,067       1,072,348    $  27,564,749
                            ==============================================================

------------------------------------------------------------------------------------------
CLASS B
Sold                         2,234,686    $   58,583,041       2,100,067    $  42,422,540
Dividends and/or
distributions reinvested       344,832         8,348,406              --               --
Redeemed                    (2,467,247)      (64,682,405) 1   (2,247,539)     (44,073,507)
                            --------------------------------------------------------------
Net increase (decrease)        112,271    $    2,246,042        (147,472)   $  (1,650,967)
                            ==============================================================

------------------------------------------------------------------------------------------
CLASS C
Sold                         2,120,967    $   55,844,893       1,493,876    $  29,360,313
Dividends and/or
distributions reinvested       146,833         3,549,968              --               --
Redeemed                      (817,988)      (21,351,894) 1   (1,121,795)     (21,484,687)
                            --------------------------------------------------------------
Net increase                 1,449,812    $   38,042,967         372,081    $   7,875,626
                            ==============================================================

------------------------------------------------------------------------------------------
CLASS N
Sold                           942,361    $   26,412,337         288,753    $   6,214,235
Dividends and/or
distributions reinvested        24,717           634,506              --               --
Redeemed                      (178,716)       (4,980,672) 1      (95,267)      (2,006,039)
                            --------------------------------------------------------------
Net increase                   788,362    $   22,066,171         193,486    $   4,208,196
                            ==============================================================

1. Net of redemption fees of $7,733, $3,369, $1,710 and $389 for Class A, Class
B, Class C and Class N, respectively.


                      35 | OPPENHEIMER SMALL CAP VALUE FUND

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

--------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended October 31, 2004, were
$1,333,539,394 and $1,185,208,883, respectively.

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

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. Effective January 1, 2004, the
agreement provides for a fee at an annual rate of 0.80% of the first $400
million of average annual net assets of the Fund, 0.75% of the next $400 million
and 0.60% of average annual net assets in excess of $800 million. Prior to
January 1, 2004 the annual advisory fee was: 0.85% of the first $400 million of
average annual net assets of the Fund, 0.75% of the next $400 million and 0.60%
of average annual net assets in excess of $800 million.

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

--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2004, the Fund paid
$2,118,544 to OFS for services to the Fund.

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

--------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. Under the Plan, the Fund pays a service fee to the Distributor of up to
0.25% of the average annual net assets of Class A shares. The Distributor
currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions quarterly for providing personal services and maintenance
of accounts of their customers that hold Class A shares. Under the Plan, the
Fund may also pay an asset-based sales charge to the Distributor. Beginning
January 1, 2003, the Board of Trustees set the annual asset-based sales charge
rate at zero. Fees incurred by the Fund under the Plan are detailed in the
Statement of Operations.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of up to 0.25% per year under each plan. If either
the Class B, Class C or Class N plan is terminated by the Fund or by the
shareholders of a class, the Board of Trustees and its independent trustees must


                      36 | OPPENHEIMER SMALL CAP VALUE FUND

determine whether the Distributor shall be entitled to payment from the Fund of
all or a portion of the service fee and/or asset-based sales charge in respect
to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at October 31,
2004 for Class B, Class C and Class N shares were $2,005,361, $1,355,190 and
$344,483, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.

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

                                         CLASS A         CLASS B         CLASS C         CLASS N
                         CLASS A      CONTINGENT      CONTINGENT      CONTINGENT      CONTINGENT
                       FRONT-END        DEFERRED        DEFERRED        DEFERRED        DEFERRED
                   SALES CHARGES   SALES CHARGES   SALES CHARGES   SALES CHARGES   SALES CHARGES
                     RETAINED BY     RETAINED BY     RETAINED BY     RETAINED BY     RETAINED BY
YEAR ENDED           DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR
------------------------------------------------------------------------------------------------
October 31, 2004       $ 609,190         $ 2,832       $ 304,373        $ 16,341        $ 10,762

--------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $21,870, an amount equivalent to certain of such
commissions incurred in prior years.

      OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class.
During the year ended October 31, 2004, OFS waived $8,455 for Class N shares.
This undertaking may be amended or withdrawn at any time.

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

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

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


                      37 | OPPENHEIMER SMALL CAP VALUE FUND

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

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

      The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.

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

--------------------------------------------------------------------------------
6. LITIGATION

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

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

                                     A-7
                                     A-1
                                  Appendix A

                             RATINGS DEFINITIONS
                             -------------------

Below are summaries of the rating definitions used by the
nationally-recognized rating agencies listed below. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate.
The summaries below are based upon publicly available information provided by
the rating organizations.

Moody's Investors Service, Inc. ("Moody's")

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

Aaa: Bonds and preferred stock rated "Aaa" are judged to be the best quality.
They carry the smallest degree of investment risk.  Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure.  While the various protective elements are likely to change, the
changes that can be expected are most unlikely to impair the fundamentally
strong position of such issues.

Aa: Bonds and preferred stock rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what are
generally known as high-grade bonds.  They are rated lower than the best
bonds because margins of protection may not be as large as with "Aaa"
securities or fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risk appear
somewhat larger than that of "Aaa" securities.

A: Bonds and preferred stock rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment some
time in the future.

Baa: Bonds and preferred stock rated "Baa" are considered medium-grade
obligations; that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and have speculative characteristics as well.

Ba: Bonds and preferred stock rated "Ba" are judged to have speculative
elements. Their future cannot be considered well-assured.  Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Bonds and preferred stock rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.

Caa: Bonds and preferred stock rated "Caa" are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds and preferred stock rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C:  Bonds and preferred stock rated "C" are the lowest class of rated bonds
and can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a
ranking in the lower end of that generic rating category. Advanced refunded
issues that are secured by certain assets are identified with a # symbol.

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

Prime-1: Issuer has a superior ability for repayment of senior short-term
debt obligations.

Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained.

Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions
may be more pronounced. Variability in earnings and profitability may result
in changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.

Not Prime: Issuer does not fall within any Prime rating category.

Standard & Poor's Ratings Services ("Standard & Poor's"), a division of The
McGraw-Hill Companies, Inc.

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

AAA: An obligation  rated "AAA" have the highest rating assigned by Standard &
Poor's.  The  obligor's  capacity  to meet  its  financial  commitment  on the
obligation is extremely strong.

AA: An obligation  rated "AA" differ from the highest rated  obligations  only
in small degree.  The obligor's  capacity to meet its financial  commitment on
the obligation is very strong.

A: An  obligation  rated "A" are  somewhat  more  susceptible  to the  adverse
effects of changes in circumstances  and economic  conditions than obligations
in  higher-rated  categories.  However,  the  obligor's  capacity  to meet its
financial commitment on the obligation is still strong.

BBB:  An  obligation  rated  "BBB"  exhibit  adequate  protection  parameters.
However,  adverse  economic  conditions  or  changing  circumstances  are more
likely to lead to a weakened  capacity  of the  obligor to meet its  financial
commitment on the obligation.

BB, B, CCC, CC, and C
An obligation rated `BB', `B', `CCC', `CC', and `C' are regarded as having
significant speculative characteristics. `BB' indicates the least degree of
speculation and `C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

BB: An obligation  rated "BB" are less  vulnerable  to  nonpayment  than other
speculative  issues.   However,  they  face  major  ongoing  uncertainties  or
exposure to adverse business,  financial,  or economic  conditions which could
lead to the obligor's  inadequate capacity to meet its financial commitment on
the obligation.

B: An obligation  rated "B" are more vulnerable to nonpayment than obligations
rated "BB",  but the obligor  currently has the capacity to meet its financial
commitment  on  the  obligation.  Adverse  business,  financial,  or  economic
conditions  will likely impair the obligor's  capacity or  willingness to meet
its financial commitment on the obligation.

CCC: An obligation  rated "CCC" are currently  vulnerable to  nonpayment,  and
are dependent upon favorable business,  financial, and economic conditions for
the obligor to meet its financial  commitment on the obligation.  In the event
of adverse business,  financial,  or economic  conditions,  the obligor is not
likely  to  have  the  capacity  to  meet  its  financial  commitment  on  the
obligation.

CC: An obligation rated "CC" are currently highly vulnerable to nonpayment.

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

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

The ratings from "AA" to "CCC" may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within the major rating
categories.

c: The `c' subscript is used to provide additional information to investors
that the bank may terminate its obligation to purchase tendered bonds if the
long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.

p: The letter `p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.

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

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

N.R. Not rated.

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

Bond Investment Quality Standards

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

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

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

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.

B: A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet
its financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet
its financial commitment on the obligation.

C: A short-term obligation rated "C" is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation.

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

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

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

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

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

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

INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings.

Investment Grade:

AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.

A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.

Speculative Grade:

BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.


B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.

CCC, CC C: High Default Risk.  Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.

DDD, DD, and D: Default. The ratings of obligations in this category are
based on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected recovery values
are highly speculative and cannot be estimated with any precision, the
following serve as general guidelines. "DDD" obligations have the highest
potential for recovery, around 90%-100% of outstanding amounts and accrued
interest. "DD" indicates potential recoveries in the range of 50%-90%, and
"D" the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy
a higher portion of their outstanding obligations, while entities rated "D"
have a poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories.  Plus and minus signs are
not added to the "AAA" category or to categories below "CCC," nor to
short-term ratings other than "F1" (see below).

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

F1: Highest credit quality. Strongest capacity for timely payment of
financial commitments. May have an added "+" to denote any exceptionally
strong credit feature.

F2: Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of higher ratings.

F3: Fair credit quality. Capacity for timely payment of financial commitments
is adequate. However, near-term adverse changes could result in a reduction
to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.

C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.

D: Default. Denotes actual or imminent payment default.









                                     B-1
                                  Appendix B

                           Industry Classifications

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






                                     C-11
                                  Appendix C

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

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

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

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

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

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






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

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

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






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

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

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

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

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

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

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

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

A. Waivers for Redemptions in Certain Cases.

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

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

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






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

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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







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

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

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

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

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

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

|X|   Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent
deferred sales charge will be waived for redemptions of Class A, Class B or
Class C shares of an Oppenheimer fund. The shares must have been acquired by
the merger of a Former Quest for Value Fund into the fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on
or after March 6, 1995, but prior to November 24, 1995:
o     redemptions following the death or disability of the shareholder(s) (as
            evidenced by a determination of total disability by the U.S.
            Social Security Administration);
o     withdrawals under an automatic withdrawal plan (but only for Class B or
            Class C shares) where the annual withdrawals do not exceed 10% of
            the initial value of the account value; adjusted annually, and
o     liquidation of a shareholder's account if the aggregate net asset value
            of shares held in the account is less than the required minimum
            account value.
      A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class
B or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V.         Special Sales Charge Arrangements for Shareholders of Certain
          Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
                            Investment Accounts, Inc.
---------------------------------------------------------------------------

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

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

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

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

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

|X|





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

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

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

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

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

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

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








Oppenheimer Small Cap Value Fund

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

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

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

Transfer Agent
      OppenheimerFunds Services
      P.O. Box 5270
      Denver, Colorado 80217
      1.800.CALL OPP(225.5677)

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

Independent Registered Public Accounting Firm
      KPMG LLP
      707 Seventeenth Street
      Denver, Colorado 80202

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


1234


PX0251.0205.rev 0405


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


------------------------------------------------------------------------------
Oppenheimer Quest Balanced FundSM
------------------------------------------------------------------------------
(A series of Oppenheimer Quest for Value Funds)

6803 S. Tucson Way, Centennial, CO 80112
1.800.CALL OPP (225.5677)


Statement of Additional  Information dated February 28, 2005, revised April 1,
2005


      This Statement of Additional Information is not a Prospectus.  This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 28, 2005.  It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217, or by calling the Transfer Agent at the toll-free number shown above,
or by downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

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

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

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

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






ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

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

The Fund's Investment Policies. The composition of the Fund's portfolio and
the techniques and strategies that the Fund's Sub-Advisor may use in
selecting portfolio securities will vary over time. The Fund is not required
to use all of the investment techniques and strategies described below 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.

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

|X|   Investments in Equity Securities. The Fund does not limit its
investments in equity securities to issuers having a market capitalization of
a specified size or range, and therefore the Fund can invest in securities of
small-, mid- and large-capitalization issuers. At times, the Fund may
increase the relative emphasis of its equity investments in securities of one
or more capitalization ranges, based upon the Sub-Advisor's judgment of where
the best market opportunities are to seek the Fund's objective. At times, the
market may favor or disfavor securities of issuers of a particular
capitalization range, and securities of small-capitalization issuers may be
subject to greater price volatility in general than securities of larger
companies. Therefore, if the Fund has substantial investments in
smaller-capitalization companies at times of market volatility, the Fund's
share price could fluctuate more than that of funds focusing on
larger-capitalization issuers.

o     Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio manager currently uses a value investing style. In
using a value approach, the portfolio manager seeks stock and other equity
securities that appear to be temporarily undervalued, by various measures,
such as price/earnings ratios. This approach is subject to change and may not
necessarily be used in all cases. Value investing seeks stocks having prices
that are low in relation to their real worth or future prospects, in the hope
that the Fund will realize appreciation in the value of its holdings when
other investors realize the intrinsic value of the stock.






      Using value investing requires research as to the issuer's underlying
financial condition and prospects. While there are a variety of measures that
can be used to identify these securities, the portfolio manager looks
primarily at the issuer's price/earnings ratio, which is the stock's price
divided by its earnings per share. A stock having a price/earnings ratio
lower than its historical range, or the market as a whole or that of similar
companies, may offer attractive investment opportunities.

o     Preferred Stocks. Preferred stocks are equity securities but have
certain attributes of debt securities. Preferred stock, unlike common stock,
has a stated dividend rate payable from the corporation's earnings. Preferred
stock dividends may be cumulative or non-cumulative, participating, or
auction rate. "Cumulative" dividend provisions require all or a portion of
prior unpaid dividends to be paid before the issuer can pay dividends on
common shares.

      If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as provisions for
their call or redemption prior to maturity which can have a negative effect
on their prices when interest prior to maturity rates decline. Preferred
stock may be "participating" stock, which means that it may be entitled to a
dividend exceeding the stated dividend in certain cases.

      Preferred stocks are equity securities because they do not constitute a
liability of the issuer and therefore do not offer the same degree of
protection of capital as debt securities and may not offer the same degree of
assurance of continued income as debt securities. The rights of preferred
stock on distribution of a corporation's assets in the event of its
liquidation are generally subordinate to the rights associated with a
corporation's debt securities. Preferred stock generally has a preference
over common stock on the distribution of a corporation's assets in the event
of its liquidation.

o     Rights and Warrants. The Fund can invest up to 5% of its total assets
in warrants and rights. 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.

o     Convertible Securities.  Convertible securities are debt securities
that are convertible into an issuer's common stock. Convertible securities
rank senior to common stock in a corporation's capital structure and
therefore are subject to less risk than common stock in case of the issuer's
bankruptcy or liquidation.
      The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease
when interest rates rise. If the conversion value exceeds the investment
value, the security will behave more like an equity security: it will likely
sell at a premium over its conversion value, and its price will tend to
fluctuate directly with the price of the underlying security. Convertible
securities are subject to credit risks and interest rate risk as discussed
below under "Investments in Debt Securities."
      While some convertible securities are a form of debt security in many
cases, their conversion feature (allowing conversion into equity securities)
causes them to be regarded by the Manager more as "equity equivalents."  In
those cases, the credit rating assigned to the security has less impact on
the Manager's investment decision 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.

|X|   Investments in Debt Securities. The Fund invests in a variety of
domestic and foreign debt securities, including corporate bonds, debentures
and other debt securities, and foreign and U.S. government securities
including mortgage-related securities, to seek investment income as part of
its investment objectives.  It might invest in them also to seek capital
growth or for liquidity or defensive purposes.  Although the Fund will invest
at least 25% of its total assets in fixed-income senior securities, the Fund
emphasizes investments in equity securities.  Foreign debt securities are
subject to the risks of foreign investing described below.  In general,
domestic and foreign debt securities are also subject to credit risk and
interest rate risk.

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

o     Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of debt securities resulting from the inverse relationship between
price and yield.  For example, an increase in general interest rates will
tend to reduce the market value of already-issued fixed-income investments,
and a decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.

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

o     Special Risks of Lower-Grade Securities. The Fund can invest up to 25%
of its total assets in lower-grade debt securities.  Because lower-grade
securities tend to offer higher yields than investment-grade securities, the
Fund may invest in lower-grade securities if the Sub-Advisor is trying to
achieve greater income. In some cases, the appreciation possibilities of
lower-grade securities may be a reason they are selected for the Fund's
portfolio.

      "Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than
"BBB" by Standard & Poor's or Fitch, or similar ratings by other nationally
recognized rating organizations. If they are unrated, and are determined by
the Sub-Advisor to be of comparable quality to debt securities rated below
investment grade, they are included in determining the maximum amount of  the
Fund's assets that can be invested in lower-grade securities under the 25%
limitation.  The Fund can invest in securities rated as low as "Caa" by
Moody's or "CCC" by Standard and Poor's, although it does not intend to
invest in securities in those ratings categories.

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

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

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

o     Mortgage-Related Securities.  Mortgage-related securities are a form of
 derivative investment collateralized by pools of commercial or residential
 mortgages. Pools of mortgage loans are assembled as securities for sale to
 investors by government agencies or entities or by private issuers. These
 securities include collateralized mortgage obligations ("CMOs"), mortgage
 pass-through securities, stripped mortgage pass-through securities,
 interests in real estate mortgage investment conduits ("REMICs") and other
 real estate-related securities.

      Mortgage-related securities that are issued or guaranteed by agencies
or instrumentalities of the U.S. government have relatively little credit
risk (depending on the nature of the issuer) but are subject to interest rate
risks and prepayment risks, as described in the Prospectus.

      As with other debt securities, the prices of mortgage-related
securities tend to move inversely to changes in interest rates. The Fund can
buy mortgage-related securities that have interest rates that move inversely
to changes in general interest rates, based on a multiple of a specific
index. Although the value of a mortgage-related security may decline when
interest rates rise, the converse is not always the case.

      In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened
by unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities
may be less effective as a means of "locking in" attractive long-term
interest rates, and they may have less potential for appreciation during
periods of declining interest rates, than conventional bonds with comparable
stated maturities.

      Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all
or part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes
or prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment
than were anticipated, the Fund may fail to recoup its initial investment on
the security.

      If interest rates rise rapidly, prepayments may occur at a slower rate
than expected and the expected maturity of long-term or medium-term
securities could lengthen as a result. Generally, that would cause their
value and the prices of the Fund's share to fluctuate more widely in response
to changes in interest rates.

      As with other debt securities, the values of mortgage-related
securities may be affected by changes in the market's perception of the
creditworthiness of the entity issuing the securities or guaranteeing them.
Their values may also be affected by changes in government regulations and
tax policies.

o     Collateralized Mortgage Obligations. CMOs are multi-class bonds that
 are backed by pools of mortgage loans or mortgage pass-through certificates.
 They may be collateralized by:
(1)   pass-through certificates issued or guaranteed by Ginnie Mae, Fannie
               Mae, or Freddie Mac,
(2)   unsecuritized mortgage loans insured by the Federal Housing
               Administration or guaranteed by the Department of Veterans'
               Affairs,
(3)   unsecuritized conventional mortgages,
(4)   other mortgage-related securities, or
(5)   any combination of these.
      Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal
and interest on the underlying mortgages may be allocated among the several
classes of a series of a CMO in different ways. One or more tranches may have
coupon rates that reset periodically at a specified increase over an index.
These are floating rate CMOs, and typically have a cap on the coupon rate.
Inverse floating rate CMOs have a coupon rate that moves in the reverse
direction to an applicable index. The coupon rate on these CMOs will increase
as general interest rates decrease. These are usually much more volatile than
fixed rate CMOs or floating rate CMOs.

|X|   U.S. Government Securities.  These are securities issued or guaranteed
by the U.S. Treasury or other U.S. government agencies or federally-chartered
entities referred to as "instrumentalities." The obligations of U.S.
government agencies or instrumentalities in which the Fund can invest may or
may not be guaranteed or supported by the "full faith and credit" of the
United States.  "Full faith and credit" means generally that the taxing power
of the U.S. government is pledged to the payment of interest and repayment of
principal on a security. If a security is not backed by the full faith and
credit of the United States, the owner of the security must look principally
to the agency issuing the obligation for repayment. The owner might not be
able to assert a claim against the United States if the issuing agency or
instrumentality does not meet its commitment.  The Fund will invest in
securities of U.S. government agencies and instrumentalities only if the
Sub-Advisor is satisfied that the credit risk with respect to the agency or
instrumentality is minimal.

o     U.S. Treasury Obligations. These include Treasury bills (which have
 maturities of one year or less when issued), Treasury notes (which have
 maturities of from one to ten years when issued), and Treasury bonds (which
 have maturities of more than ten years when issued). Treasury securities are
 backed by the full faith and credit of the United States as to timely
 payments of interest and repayments of principal. They also can include U.
 S. Treasury securities that have been "stripped" by a Federal Reserve Bank,
 zero-coupon U.S. Treasury securities described below, and Treasury
 Inflation-Protection Securities ("TIPS").

o     Treasury Inflation-Protection Securities. The Fund can buy these U.S.
 Treasury securities, called "TIPS," that are designed to provide an
 investment vehicle that is not vulnerable to inflation. The interest rate
 paid by TIPS is fixed. The principal value rises or falls semi-annually
 based on changes in the published Consumer Price Index. If inflation occurs,
 the principal and interest payments on TIPS are adjusted to protect
 investors from inflationary loss. If deflation occurs, the principal and
 interest payments will be adjusted downward, although the principal will not
 fall below its face amount at maturity.

o     Obligations Issued or Guaranteed by U.S. Government Agencies or
 Instrumentalities. These include direct obligations and mortgage-related
 securities that have different levels of credit support from the government.
 Some are supported by the full faith and credit of the U.S. government, such
 as Government National Mortgage Association pass-through mortgage
 certificates (called "Ginnie Maes"). Some are supported by the right of the
 issuer to borrow from the U.S. Treasury under certain circumstances, such as
 Federal National Mortgage Association bonds ("Fannie Maes"). Others are
 supported only by the credit of the entity that issued them, such as Federal
 Home Loan Mortgage Corporation obligations ("Freddie Macs").

o     U.S. Government Mortgage-Related Securities. The Fund can invest in a
 variety of mortgage-related securities that are issued by U.S. government
 agencies or instrumentalities, some of which are described below.

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

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

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

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

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

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

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

      Because these notes are direct lending arrangements between the lender
and borrower, it is not expected that there will be a trading market for
them. There is no secondary market for these notes, although they are
redeemable (and thus are immediately repayable by the borrower) at principal
amount, plus accrued interest, at any time.  Accordingly, the Fund's right to
redeem such notes is dependent upon the ability of the borrower to pay
principal and interest on demand.
      The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an
ongoing basis, the Sub-Advisor will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
made demand simultaneously.  Investments in master demand notes are subject
to the limitation on investments by the Fund in illiquid securities,
described in the Prospectus. The Fund does not intend that its investments in
variable amount master demand notes will exceed 5% of its total assets.

|X|   Portfolio Turnover.  "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year.  For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100% annually. The Fund's portfolio turnover
rate will fluctuate from year to year, and may be in excess of 100%
annually.  Increased portfolio turnover creates higher brokerage and
transaction costs for the Fund.  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|   Foreign Securities. The Fund can purchase equity and debt securities
issued by foreign companies or foreign governments or their agencies.
"Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States and debt
securities of foreign governments and their agencies and instrumentalities.
Those securities may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.

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

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

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

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

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

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

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

o     Special Risks of Emerging Markets. Emerging and developing markets
 abroad may also offer special opportunities for growth investing but have
 greater risks than more developed foreign markets, such as those in Europe,
 Canada, Australia, New Zealand and Japan. There may be even less liquidity
 in their securities markets, and settlements of purchases and sales of
 securities may be subject to additional delays. They are subject to greater
 risks of limitations on the repatriation of income and profits because of
 currency restrictions imposed by local governments. Those countries may also
 be subject to the risk of greater political and economic instability, which
 can greatly affect the volatility of prices of securities in those
 countries. The Sub-Advisor will consider these factors when evaluating
 securities in these markets, because the selection of those securities must
 be consistent with the Fund's goal of growth of capital and investment
 income.

|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.

|X|   "When-Issued" and "Delayed-Delivery" Transactions.  The Fund can invest
in securities on a "when-issued" basis and can purchase or sell securities on
a "delayed-delivery" or "forward commitment" basis.  When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery.

      When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date.  The
securities are subject to change in value from market fluctuations during the
period until settlement. The value at delivery may be less than the purchase
price. For example, changes in interest rates in a direction other than that
expected by the Sub-Advisor before settlement will affect the value of such
securities and may cause a loss to the Fund. During the period between
purchase and settlement, no payment is made by the Fund to the issuer and no
interest accrues to the Fund from the investment.  No income begins to accrue
to the Fund on a when-issued security until the Fund receives the security at
settlement of the trade. There is a risk of loss to the Fund if the value of
the security changes prior to the settlement date, and there is the risk that
the other party may not perform

      The Fund can engage in when-issued transactions to secure what the
Sub-Advisor considers to be an advantageous price and yield at the time of
entering into the obligation. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to complete the
transaction. Its failure to do so may cause the Fund to lose the opportunity
to obtain the security at a price and yield the Sub-Advisor considers to be
advantageous.

      When the Fund engages in when-issued and delayed-delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies for its portfolio or for delivery
pursuant to options contracts it has entered into, and not for the purpose of
investment leverage. Although the Fund will enter into delayed-delivery or
when-issued purchase transactions to acquire securities, it may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or to dispose of
its right to delivery or receive against a forward commitment, it may incur a
gain or loss.

      At the time the Fund makes the commitment to purchase or sell a
security on a when-issued or delayed-delivery basis, it records the
transaction on its books and reflects the value of the security purchased in
determining the Fund's net asset value.  In a sale transaction, it records
the proceeds to be received. The Fund will identify on its books liquid
assets at least equal in value to the value of the Fund's purchase
commitments until the Fund pays for the investment. The Fund will not enter
into when-issued commitments if more than 15% of the Fund's net assets would
be committed under these transactions.

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

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

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

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

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

      Pursuant to an exemptive order issued by the Securities and Exchange
Commission ("SEC"), the Fund, along with other affiliated entities managed by
the Manager, may transfer uninvested cash balances into one or more joint
repurchase accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities that are
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each joint repurchase arrangement requires that
the market value of the collateral be sufficient to cover payments of
interest and principal; however, in the event of default by the other party
to the agreement, retention or sale of the collateral may be subject to legal
proceedings.

o     Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements on debt obligations it owns. Under a reverse repurchase agreement,
the Fund sells an underlying debt obligation and simultaneously agrees to
repurchase the same security at an agreed-upon price at an agreed-upon date.
The Fund will identify on its books liquid assets in an amount sufficient to
cover its obligations under reverse repurchase agreements, including
interest, until payment is made to the seller.

      These transactions involve the risk that the market value of the
securities sold by the Fund under a reverse repurchase agreement could
decline below the price at which the Fund is obligated to repurchase them.
These agreements are considered borrowings by the Fund and will be subject to
the asset coverage requirement under the Fund's policy on borrowing discussed
below.

|X|   Illiquid and Restricted Securities.  To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered.  The
expenses of registering restricted securities may be negotiated by the Fund
with the issuer at the time the Fund buys the securities. When the Fund must
arrange registration because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell
the security and the time the security is registered so that the Fund could
sell it. The Fund would bear the risks of any downward price fluctuation
during that period.

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

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

|X|   Participation Interests. The Fund can invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan
made by the issuing financial institution in the proportion that the
buyer's participation interest bears to the total principal amount of the
loan. No more than 5% of the Fund's net assets can be invested in
participation interests of the same borrower. The issuing financial
institution may have no obligation to the Fund other than to pay the Fund
the proportionate amount of the principal and interest payments it
receives.

      Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan. There is a risk that a
borrower may have difficulty making payments. If a borrower fails to pay
scheduled interest or principal payments, the Fund could experience a
reduction in its income. The value of that participation interest might
also decline, which could affect the net asset value of the Fund's shares.
If the issuing financial institution fails to perform its obligations
under the participation agreement, the Fund might incur costs and delays
in realizing payment and suffer a loss of principal and/or interest.

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

|X|   Hedging. Although the Fund can use hedging instruments, it is not
obligated to use them in seeking its objective. It does not currently
contemplate using them to any significant degree.  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
that have appreciated, or to facilitate selling securities for investment
reasons, the Fund could:
o     sell futures contracts,
o     buy puts on such futures or on securities, or
o     write covered calls on securities or futures.  Covered calls could also
            be used to increase the Fund's income, but the Sub-Advisor
            does not expect to engage extensively in that practice.
      The Fund can use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In
that case the Fund would normally seek to purchase the securities and then
terminate that hedging position. The Fund might also use this type of
hedge to attempt to protect against the possibility that its portfolio
securities would not be fully included in a rise in value of the market.
To do so, the Fund could:
o     buy futures, or
o     buy calls on such futures or on securities.

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

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

      A broadly-based stock index is used as the basis for trading stock
index futures. These indices may in some cases be based on stocks of issuers
in a particular industry or group of industries. A stock index assigns
relative values to the common stocks included in the index and its value
fluctuates in response to the changes in value of the underlying stocks. A
stock index cannot be purchased or sold directly. These contracts obligate
the seller to deliver, and the purchaser to take, cash to settle the futures
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.

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

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

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

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

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

o     Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered.  For
options on securities, that means the Fund must own the security subject to
the call while the call is outstanding. For stock index options, that means
the call must be covered by segregating liquid assets to enable the Fund to
satisfy its obligations if the call is exercised.  The Trustees have adopted
an operating policy that the Fund may not write covered call options (or
write put options) with respect to more than 5% of the value of the Fund's
total assets.

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

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

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

      The Fund's custodian, 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.

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

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

      The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at
the time the call is written, the Fund must cover the call by 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.

o     Writing Put Options. The Fund can sell put options on stock indices,
foreign currencies or stock index futures. A put option on securities gives
the purchaser the right to sell, and the writer the obligation to buy, the
underlying investment of the exercise price during the option period. If the
Fund writes a put, the put must be covered by liquid assets identified on the
Fund's books in an amount at least equal to the exercise price of the
underlying securities.  The Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those 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 settle the transaction in cash with the buyer of
the put at the exercise price, even if the value of the underlying investment
falls below the exercise price.  If a put the Fund has written expires
unexercised, the Fund realizes a gain in the amount of the premium less the
transaction costs incurred.  If the put is exercised, the Fund must fulfill
its obligation to settle in cash at the exercise price. That price will
usually exceed the market value of the investment at that time.  In that
case, the fund might 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.

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

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

o     Purchasing Calls and Puts. The Fund can buy calls to protect against
the possibility that the Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Fund buys a call (other
than in a closing purchase transaction), it pays a premium. Buying a call on
a security or future gives the Fund the right to buy the underlying
investment from a seller of a corresponding call on the same investment
during the call period at a fixed exercise price. The Fund benefits only if
it sells the call at a profit or if, during the call period, the market price
of the underlying investment is above the sum of the call price plus the
transaction costs and the premium paid for the call and the Fund exercises
the call. If the Fund does not exercise the call or sell it (whether or not
at a profit), the call will become worthless at its expiration date. In that
case the Fund will have paid the premium but lost the right to purchase the
underlying investment.

      In the case of a purchase of a call on a stock index, if the Fund
exercises the call during the call period, a seller of a corresponding call
on the same index will pay the Fund an amount of cash to settle the call if
the closing level of the stock index upon which the call is based is greater
than the exercise price of the call.  That cash payment is equal to the
difference between the closing price of the call and the exercise price of
the call times a specified multiple (the "multiplier") which determines the
total dollar value for each point of difference.

      When the Fund buys a put, it pays a premium. It has the right during
the put period to require a seller of a corresponding put, upon the Fund's
exercise of its put, to buy the underlying security (in the case of puts on
securities or futures) or in the case of puts on stock indices, to deliver
cash to the Fund to settle the put if the closing level of the stock index
upon which the put is based is less than the exercise price of the put.  That
cash payment is determined by the multiplier, in the same manner as described
above as to calls.

      Buying a put on a security or future enables the Fund to sell the
underlying investment to a seller of a corresponding put on the same
investment during the put period at a fixed exercise price. Buying a put on
securities or futures the Fund owns enables the Fund to attempt to protect
itself during the put period against a decline in the value of the underlying
investment below the exercise price by selling the underlying investment at
the exercise price to a seller of a corresponding put. If the market price of
the underlying investment is equal to or above the exercise price and, as a
result, the put is not exercised or resold, the put will become worthless at
its expiration date. In that case the Fund will have paid the premium but
lost the right to sell the underlying investment. However, the Fund may sell
the put prior to its expiration. That sale may or may not be at a profit.

      Buying a put on an investment the Fund does not own (such as an index
or future) permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to the price of the underlying investment. If the market price of
the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date.

      When the Fund purchases a put on a stock index, the put protects the
Fund to the extent that the index moves in a similar pattern to the
securities the Fund holds.  The Fund can resell the put. The resale price of
the put will vary inversely with the price of the underlying investment.  If
the market price of the underlying investment is above the exercise price,
and as a result the put is not exercised, the put will become worthless on
the expiration date.  In the event of a decline in price of the underlying
investment, the Fund could exercise or sell the put at a profit to attempt to
offset some or all of its loss on its portfolio securities. The Fund may buy
a call or put only if, after the purchase, the value of all call and put
options held by the Fund will not exceed 5% of the Fund's total assets.

|X|   Buying and Selling Options on Foreign Currency. The Fund can buy and
sell calls and puts on foreign currencies.  They include puts and calls that
trade on a securities or commodities exchange or in the over-the-counter
markets or are quoted by major recognized dealers in such options.  The Fund
could use these calls and puts to try to protect against declines in the
dollar value of foreign securities and increases in the dollar cost of
foreign securities the Fund wants to acquire.

      If the Sub-Advisor anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased
cost of those securities may be partially offset by purchasing calls or
writing puts on that foreign currency.  If the Sub-Advisor anticipates a
decline in the dollar value of a foreign currency, the decline in the dollar
value of portfolio securities denominated in that currency might be partially
offset by writing calls or purchasing puts on that foreign currency.
However, the currency rates could fluctuate in a direction adverse to the
Fund's position. The Fund will then have incurred option premium payments and
transaction costs without a corresponding benefit.

      A call the Fund writes on a foreign currency is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute
and immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in 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 identifying on its books cash, U.S. government securities or other liquid
securities in an amount equal to the exercise price of the option.
o     Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques
that are different than what is required for normal portfolio management.  If
the Sub-Advisor uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments. The Fund's option
activities may affect its costs.

      The Fund's option activities could affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund 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.

o     Forward Contracts. Forward contracts are foreign currency exchange
contracts.  They are used to buy or sell foreign currency for future delivery
at a fixed price.  The Fund uses them to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold,
or to protect against possible losses from changes in the relative values of
the U.S. dollar and a foreign currency.  The Fund limits its exposure in
foreign currency exchange contracts in a particular foreign currency to the
amount of its assets denominated in that currency or a closely-correlated
currency.  The Fund may also use "cross-hedging" where the Fund hedges
against changes in currencies other than the currency in which a security it
holds is denominated.

      Under a forward contract, one party agrees to purchase, and another
party agrees to sell, a specific currency at a future date. That date may be
any fixed number of days from the date of the contract agreed upon by the
parties. The transaction price is set at the time the contract is entered
into.  These contracts are traded in the inter-bank market conducted directly
among currency traders (usually large commercial banks) and their customers.

      The Fund may use forward contracts to protect against uncertainty in
the level of future exchange rates.  The use of forward contracts does not
eliminate the risk of fluctuations in the prices of the underlying securities
the Fund owns or intends to acquire, but it does fix a rate of exchange in
advance. Although forward contracts may reduce the risk of loss from a
decline in the value of the hedged currency, at the same time they limit any
potential gain if the value of the hedged currency increases.

      When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent of the
dividend payments.  To do so, the Fund could enter into a forward contract
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction, in a fixed amount of U.S. dollars per unit of the
foreign currency. This is called a "transaction hedge." The transaction hedge
will protect the Fund against a loss from an adverse change in the currency
exchange rates during the period between the date on which the security is
purchased or sold or on which the payment is declared, and the date on which
the payments are made or received.

      The Fund could also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge."  When the
Fund believes that foreign currency might a substantial decline against the
U.S. dollar, it could 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
on its books liquid assets having a value equal to the aggregate amount of
the Fund's commitment under forward contracts. The Fund will not enter into
forward contracts or maintain a net exposure to such contracts if the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency or another currency that is the
subject of the hedge. However, to avoid excess transactions and transaction
costs, the Fund may maintain a net exposure to forward contracts in excess of
the value of the Fund's portfolio securities or other assets denominated in
foreign currencies if the excess amount is "covered" by liquid securities
denominated in any currency. The cover must be at least equal at all times to
the amount of that excess.

      As one alternative, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward
sale contract at a price no higher than the forward contract price.  As
another alternative, the Fund may purchase a put option permitting the Fund
to sell the amount of foreign currency subject to a forward purchase contract
at a price as high or higher than the forward contact price.

      The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is
entered into and the date it is sold.  In some cases, the Sub-Advisor might
decide to sell the security and deliver foreign currency to settle the
original purchase obligation. If the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver, the
Fund might have to purchase additional foreign currency on the "spot" (that
is, cash) market to settle the security trade. If the market value of the
security instead exceeds the amount of foreign currency the Fund is obligated
to deliver to settle the trade, the Fund might have to sell on the spot
market some of the foreign currency received upon the sale of the security.
There will be additional transaction costs on the spot market in those cases.

      The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain.  Forward contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the Fund to
sustain losses on these contracts and to pay additional transaction costs.
The use of forward contracts in this manner might reduce the Fund's
performance if there are unanticipated changes in currency prices to a
greater degree than if the Fund had not entered into such contracts.

      At or before the maturity of a forward contract requiring the Fund to
sell a currency, the Fund might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract. Under that contract the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver.  Similarly, the Fund might close out a forward contract
requiring it to purchase a specified currency by entering into a second
contract entitling it to sell the same amount of the same currency on the
maturity date of the first contract.  The Fund would realize a gain or loss
as a result of entering into such an offsetting forward contract under either
circumstance. The gain or loss will depend on the extent to which the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and offsetting contract.

      The costs to the Fund of  engaging  in  forward  contracts  varies  with
factors such as the  currencies  involved,  the length of the contract  period
and the market  conditions  then  prevailing.  Because  forward  contracts are
usually  entered into on a principal  basis,  no brokerage fees or commissions
are  involved.  Because  these  contracts  are not traded on an exchange,  the
Fund must evaluate the credit and performance risk of the  counterparty  under
each forward contract.

Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on
a daily basis.  The Fund may convert foreign currency from time to time, and
will incur costs in doing so. Foreign exchange dealers do not charge a fee
for conversion, but they do seek to realize a profit based on the difference
between the prices at which they buy and sell various currencies.  Thus, a
dealer might offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange if the Fund desires to resell that
currency to the dealer.

o     Regulatory Aspects of Hedging Instruments.  The Commodities Futures
Trading Commission (the "CFTC") recently eliminated limitations on futures
trading by certain regulated entities including registered investment
companies and consequently registered investment companies may engage in
unlimited futures transactions and options thereon provided that the Fund
claims an exclusion from regulation as a commodity pool operator. The Fund
has claimed such an exclusion from registration as a commodity pool operator
under the Commodity Exchange Act ("CEA"). The Fund may use futures and
options for hedging and non-hedging purposes to the extent consistent with
its investment objective, internal risk management guidelines adopted by the
Fund's investment advisor (as they may be amended from time to time), and as
otherwise set forth in the Fund's prospectus or this statement of additional
information.

      Transactions in options by the Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number
of options that may be written or held by a single investor or group of
investors acting in concert. Those limits apply regardless of whether the
options were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different exchanges or
through one or more brokers.  Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same Advisor as the Fund (or
an Advisor that is an affiliate of the Fund's Advisor).  The exchanges also
impose position limits on futures transactions.  An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.

      Under interpretations of staff members of the SEC regarding applicable
provisions of the Investment Company Act, when the Fund purchases a future,
it must segregate cash or readily marketable short-term debt instruments in
an amount equal to the securities purchase price of the future, less the
margin deposit applicable to it. The account must be a segregated account or
accounts held by the Fund's custodian bank.

o     Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code.  In general, gains or losses
relating to Section 1256 contracts are characterized as 60% long-term and 40%
short-term capital gains or losses under the Code.  However, foreign currency
gains or losses arising from Section 1256 contracts that are forward
contracts generally are treated as ordinary income or loss.  In addition,
Section 1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market," and unrealized gains or losses are treated as though they
were realized.  These contracts also may be marked-to-market for purposes of
determining the excise tax applicable to investment company distributions and
for other purposes under rules prescribed pursuant to the Internal Revenue
Code.  An election can be made by the Fund to exempt those transactions from
this marked-to-market treatment.

      Certain forward contracts the Fund enters into may result in
"straddles" for federal income tax purposes.  The straddle rules may affect
the character and timing of gains (or losses) recognized by the Fund on
straddle positions.  Generally, a loss sustained on the disposition of a
position making up a straddle is allowed only to the extent that the loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle.  Disallowed loss is generally allowed at the point where there is
no unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.

      Under the Internal Revenue Code, the following gains or losses are
treated as ordinary income or loss:
1.    gains or losses attributable to fluctuations in exchange rates that
         occur between the time the Fund accrues interest or other
         receivables or accrues expenses or other liabilities denominated in
         a foreign currency and the time the Fund actually collects such
         receivables or pays such liabilities, and
2.    gains or losses attributable to fluctuations in the value of a foreign
         currency between the date of acquisition of a debt security
         denominated in a foreign currency or foreign currency forward
         contracts and the date of disposition.

      Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the
amount of the Fund's investment income available for distribution to its
shareholders.

Investment in Other Investment Companies. The Fund can also invest in the
securities of other investment companies, which can include open-end funds,
closed-end funds and unit investment trusts, subject to the limits set forth
in the Investment Company Act of 1940 (the "Investment Company Act") that
apply to those types of investments.  For example, the Fund can invest in
Exchange-Traded Funds, which are typically open-end funds or unit investment
trusts, listed on a stock exchange.  The Fund might do so as a way of gaining
exposure to the segments of the equity or fixed-income markets represented by
the Exchange-Traded Fund's portfolio, at times when the Fund may not be able
to buy those portfolio securities directly.

      Investing in another investment company may involve the payment of
substantial premiums above the value of such investment company's portfolio
securities and is subject to limitations under the Investment Company Act.
The Fund does not intend to invest in other investment companies unless the
Sub-Advisor believes that the potential benefits of the investment justify
the payment of any premiums or sales charges.  As a shareholder of an
investment company, the Fund would be subject to its ratable share of that
investment company's expenses, including its advisory and administration
expenses.  The Fund does not anticipate investing a substantial amount of its
net assets in shares of other investment companies.

|X|   Temporary Defensive and Interim Investments.  When market, economic or
political conditions are unstable, or the Sub-Advisor believes it is
otherwise appropriate to reduce holdings in stocks, the Fund can invest in a
variety of debt securities for defensive purposes and the types of money
market instruments described above. The Fund can also purchase these
securities for liquidity purposes to meet cash needs due to the redemption of
Fund shares, or to hold while waiting to reinvest cash received from the sale
of other portfolio securities. The Fund can buy:
o     obligations issued or guaranteed by the U. S. government or its
         instrumentalities or agencies,
o     commercial paper (short-term, unsecured, promissory notes of domestic
         or foreign companies) rated in the top two rating categories of a
         nationally-recognized rating organization,
o     short-term debt obligations of corporate issuers, rated investment
         grade (rated at least Baa by Moody's or at least BBB by Standard &
         Poor's, or a comparable rating by another rating organization), or
         unrated securities judged by the Sub-Advisor to have a comparable
         quality to rated securities in those categories,
o     certificates of deposit and bankers' acceptances of domestic and
         foreign banks  having total assets in excess of $1 billion, and
o     repurchase agreements.

      Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly,
are not generally subject to significant fluctuations in principal value and
their value will be less subject to interest rate risk than longer-term debt
securities.

Other Investment Restrictions

|X|   What Are "Fundamental Policies"? Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities.  Under the Investment Company Act, a "majority" vote is defined
as the vote of the holders of the lesser of:
o     67% or more of the shares present or represented by proxy at a
         shareholder meeting, if the holders of more than 50% of the
         outstanding shares are present or represented by proxy, or
o     more than 50% of the outstanding shares.

      The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of
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 principal investment policies are
described in the Prospectus.

|X|   Does the Fund Have Additional Fundamental Policies?  The following
investment restrictions are fundamental policies of the Fund.

o     The Fund cannot invest in physical commodities or physical commodity
contracts. However, the Fund may buy and sell hedging instruments to the
extent specified in its Prospectus and Statement of Additional Information
from time to time. The Fund can also buy and sell options, futures, and
securities or other instruments backed by physical commodities or whose
investment return is linked to changes in the price of physical commodities.

o     The Fund cannot invest in real estate or real estate limited
partnerships (direct participation programs). However, the Fund can purchase
securities of issuers that engage in real estate operations and securities
that are secured by real estate or interests in real estate.

o     The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities
Act of 1933 when reselling any securities held in its own portfolio.

o     The Fund cannot invest in securities of any issuer if, to the knowledge
of the Trust, any officer or trustee of the Trust or any officer or director
of the Manager or Sub-Advisor owns more than 1/2 of 1% of the outstanding
securities of that issuer, and who together own more 5% of the outstanding
securities of that issuer.

o     The Fund cannot pledge its assets, or assign or otherwise encumber its
assets in an amount in excess of 10% of the value of its net assets. It can
pledge, assign or encumber its assets only to secure borrowings that comply
with the limits set forth in the Fund's Prospectus and Statement of
Additional Information.

o     The Fund cannot invest for the purpose of exercising control or
management of another company.

o     The Fund cannot issue senior securities (as defined in the Investment
Company Act of 1940). However, the Fund can enter into repurchase agreements,
borrow money in accordance with the restrictions set forth in its other
fundamental policies and lend its portfolio securities.
o     The Fund cannot make loans to any person or individual. However,
portfolio securities may be loaned by the Fund within the limits set forth in
the Prospectus and Statement of Additional Information.

o     The Fund cannot invest more than 5% of the value of its total assets in
the securities of any one issuer. This restriction applies to 75% of its
total assets.

o     The Fund cannot purchase more than 10% of the voting securities of any
one issuer (other than the U.S. government or any of its agencies or
instrumentalities).  This restriction applies to 75% of the Fund's total
assets.

o     The Fund cannot concentrate its investments in any particular industry.
However, if it is deemed appropriate to help the Fund attain its investment
objective, the Fund may invest up to but less than 25% of its total assets
(valued at the time of investment) in any one industry classification used by
the Fund for investment purposes. For this purpose, a foreign government is
considered to be an industry.

o     The Fund cannot borrow money in excess of 33-1/3% of the value of the
Fund's total assets. The Fund may borrow only from banks and only as a
temporary measure for extraordinary or emergency purposes.  The Fund will
make no additional investments while borrowings exceed 5% of the Fund's total
assets.  With respect to this fundamental policy, the Fund can borrow only if
it maintains a 300% ratio of assets to borrowings at all times in the manner
set forth in the Investment Company Act.

|X|   Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund
has a number of other investment restrictions that are not fundamental
policies, which means that they can be changed by the Board of Trustees
without shareholder approval.

o     The Fund cannot make short sales or purchase securities on margin.
However, the Fund can make short-term borrowings when necessary for the
clearance of purchases of portfolio securities. Collateral arrangements in
connection with futures and options transactions are not deemed to be margin
transactions under this restriction.

o     The Fund cannot invest in interests in oil, gas or other mineral
exploration or development programs or leases.

o     The Fund cannot invest in the securities of other registered investment
companies or registered unit investment trusts in reliance on sub-paragraph
(F) or (G) of section 12(d)(1) of the Investment Company Act.

      Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment (except in the case of
borrowing and investments in illiquid securities). The Fund need not sell
securities to meet the percentage limits if the value of the investment
increases in proportion to the size of the Fund.

      For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth
in Appendix B to this Statement of Additional Information.  This is not a
fundamental policy.

Disclosure of Portfolio Holdings.  The Fund has adopted policies and
procedures concerning the dissemination by employees, officers and/or
directors of the Manager, Sub-Advisor, Distributor, and Transfer Agent of
information about the portfolio securities holdings of the Funds.  These
policies are designed to assure that dissemination of non-public information
about portfolio securities is distributed for a legitimate business purpose,
and is done in a manner that (a) conforms to applicable laws and regulations
and (b) is designed to prevent that information from being used in a way that
could negatively affect the Fund's investment program or enable third parties
to use that information in a manner that is harmful to a Fund.

Until publicly disclosed, a Fund's portfolio holdings are proprietary,
confidential business information. While recognizing the importance of
providing Fund shareholders with information about their Fund's investments
and providing portfolio information to a variety of third parties to assist
with the management, distribution and administrative process, such need for
transparency must be balanced against the risk that third parties who gain
access to a Fund's portfolio holdings information could attempt to use that
information to trade ahead of or against the Fund, which could negatively
affect the prices the Fund is able to obtain in portfolio transactions or the
availability of the portfolio securities that portfolio managers are trading
in on a Fund's behalf.

The Manager and its subsidiaries and affiliates, employees, officers, and
directors, shall neither solicit nor accept any compensation or other
consideration (including any agreement to maintain assets in the Fund or in
other investment companies or accounts managed by the Manager or any
affiliated person of the Manager) in connection with the disclosure a Fund's
non-public portfolio holdings. The receipt of investment advisory fees or
other fees and compensation paid to the Manager and their subsidiaries
pursuant to agreements approved by the Fund's Board shall not be deemed to be
"compensation" or "consideration" for these purposes.  It is a violation of
the Code of Ethics for any covered person to release holdings in
contravention of portfolio holdings disclosure policies and procedures
adopted by the Fund.

A list of the top 10 or more portfolio securities holdings (based on invested
                  ----------
assets), listed by security or by issuer, as of the end of each month may be
disclosed to third parties (subject to the procedures below) no sooner than
15 days after month-end.  The top 10 or more holdings also shall be posted on
the OppenheimerFunds' website at www.oppenheimerfunds.com in the "Fund
Profiles" section.  Other general information about a Fund's portfolio
investments, such as portfolio composition by asset class, industry, country,
currency, credit rating or maturity, may also be posted with a 15-day lag.

Except under special limited circumstances discussed below, month-end lists
of a Fund's complete portfolio holdings may be disclosed no sooner than
30-days after the relevant month-end, subject to the procedures below. If
they have not been disclosed publicly, they may be disclosed pursuant to
special requests for legitimate business reasons, provided that:

o     The third-party recipient must first submit a request for release of
            Fund portfolio holdings, explaining the business reason for the
            request;
o     Senior officers (a Senior Vice President or above) in the Manager's
            Portfolio and Legal departments must approve the completed
            request for release of Fund portfolio holdings; and
o     The third-party recipient must sign the Manager's portfolio holdings
            non-disclosure agreement before receiving the data, agreeing to
            keep confidential information that is not publicly available
            regarding a Fund's holdings and agreeing not to trade directly or
            indirectly based on the information.

Complete Fund portfolio holdings positions may be released to the following
categories of entities or individuals on an ongoing basis, provided that such
entity or individual either (1) has signed an agreement to keep such
information confidential and not trade on the basis of such information or
(2) is subject to fiduciary obligations, as a member of the Fund's Board, or
as an employee, officer and/or director of the Manager, Sub-Advisor,
Distributor, or Transfer Agent, or their respective legal counsel, not to
disclose such information except in conformity with these policies and
procedures and not to trade for his/her personal account on the basis of such
information:

o     Employees of the Fund's Manager, Sub-Advisor, Distributor and Transfer
            Agent who need to have access to such information (as determined
            by senior officers of such entity),
o     The Fund's certified public accountants and auditors,
o     Members of the Fund's Board and the Board's legal counsel,
o     The Fund's custodian bank,
o     A proxy voting service designated by the Fund and its Board,
o     Rating/ranking organizations (such as Lipper and Morningstar),
o     Portfolio pricing services retained by the Manager to provide portfolio
            security prices, and
o     Dealers, to obtain bids (price quotations, because securities are not
            priced by the Fund's regular pricing services).

Portfolio holdings information of a Fund may be provided, under limited
circumstances, to brokers and dealers or with whom the Fund trades and/or
entities that provide investment coverage and/or analytical information
regarding the Fund's portfolio, provided that there is a legitimate
investment reason for providing the information to the broker or dealer or
other entity.  Month-end portfolio holdings information may, under this
procedure, be provided to vendors providing research information and/or
analytics to the fund, with at least a 15-day delay after the month end, but
in certain cases may be provided to a broker or analytical vendor with a 1- 2
day lag to facilitate the provision of requested investment information to
the manager to facilitate a particular trade or the portfolio manager's
investment process for the Fund.  Any third party receiving such information
must first sign the Manager's portfolio holdings non-disclosure agreement as
a pre-condition to receiving this information.

Portfolio holdings information (which may include information on individual
securities positions or multiple securities) may be provided to the entities
listed below (1) by portfolio traders employed by the Manager in connection
with portfolio trading, and (2) by the members of the Manager's Security
Valuation Group and Accounting Departments in connection with portfolio
pricing or other portfolio evaluation purposes:

o     Brokers and dealers in connection with portfolio transactions
            (purchases and sales)
o     Brokers and dealers to obtain bids or bid and asked prices (if
            securities held by a Fund are not priced by the fund's regular
            pricing services)
o     Dealers to obtain price quotations where the fund is not identified as
            the owner

Portfolio holdings information (which may include information on a Fund's
entire portfolio or individual securities therein) may be provided by senior
officers of the Manager or attorneys on the legal staff of the Manager,
Distributor, or Transfer Agent, in the following circumstances:

o     Response to legal process in litigation matters, such as responses to
            subpoenas or in class action matters where the Fund may be part
            of the plaintiff class (and seeks recovery for losses on a
            security) or a defendant,
o     Response to regulatory requests for information (the SEC, NASD, state
            securities regulators, and/or foreign securities authorities,
            including without limitation requests for information in
            inspections or for position reporting purposes),
o     To potential sub-advisors of portfolios (but only pursuant to
            confidentiality agreements),
o     To consultants for retirement plans for plan sponsors/discussions at
            due diligence meetings (if entire portfolio holdings are
            provided, however, it shall be done only pursuant to a
            confidentiality agreement),
o     Investment bankers in connection with merger discussions (but only
            pursuant to confidentiality agreements)

Portfolio managers and analysts may, subject to the Manager's policies on
communications with the press and other media, discuss portfolio information
in interviews with members of the media, or in due diligence or similar
meetings with clients or prospective purchasers of Fund shares or their
financial intermediary representatives.

The Fund's shareholders may, under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions), receive redemption
proceeds of their Fund shares paid as pro rata shares of securities held in
the Fund's portfolio.  In such circumstances, disclosure of the Fund's
portfolio holdings may be made to such shareholders.

The Chief Compliance Officer of the Fund and the Manager, Distributor, and
Transfer Agent (the "CCO") shall oversee the compliance by the Manager,
Sub-Advisor, Distributor, Transfer Agent, and their personnel with these
policies and procedures. At least annually, the CCO shall report to the Fund
Board on such compliance oversight and on the categories of entities and
individuals to which disclosure of portfolio holdings of the Funds has been
made during the preceding year pursuant to these policies. The CCO shall
report to the Fund Board any material violation of these policies and
procedures during the previous calendar quarter and shall make
recommendations to the Companies and to the Boards as to any amendments that
the CCO believes are necessary and desirable to carry out or improve these
policies and procedures.

The Manager and/or the Fund have entered into ongoing arrangements to make
available information about the Fund's portfolio holdings.  One or more of
the Oppenheimer funds may currently disclose portfolio holdings information
based on ongoing arrangements to the following parties:

            -------------------------------------------------------
            A.G. Edwards & Sons         Keijser Securities
            -------------------------------------------------------
            -------------------------------------------------------
            ABG Securities              Kempen & Co. USA Inc.
            -------------------------------------------------------
            -------------------------------------------------------
            ABN AMRO                    Kepler Equities/Julius
                                        Baer Sec
            -------------------------------------------------------
            -------------------------------------------------------
            Advest                      KeyBanc Capital Markets
            -------------------------------------------------------
            -------------------------------------------------------
            AG Edwards                  Leerink Swan
            -------------------------------------------------------
            -------------------------------------------------------
            American Technology ResearchLegg Mason
            -------------------------------------------------------
            -------------------------------------------------------
            Auerbach Grayson            Lehman
            -------------------------------------------------------
            -------------------------------------------------------
            Banc of America Securities  Lehman Brothers
            -------------------------------------------------------
            -------------------------------------------------------
            Barclays                    Lipper
            -------------------------------------------------------
            -------------------------------------------------------
            Baseline                    Loop Capital Markets
            -------------------------------------------------------
            -------------------------------------------------------
            Bear Stearns                MainFirst Bank AG
            -------------------------------------------------------
            -------------------------------------------------------
            Belle Haven                 Makinson Cowell US Ltd
            -------------------------------------------------------
            -------------------------------------------------------
            Bloomberg                   Maxcor Financial
            -------------------------------------------------------
            -------------------------------------------------------
            BNP Paribas                 Merrill
            -------------------------------------------------------
            -------------------------------------------------------
            BS Financial Services       Merrill Lynch
            -------------------------------------------------------
            -------------------------------------------------------
            Buckingham Research Group   Midwest Research
            -------------------------------------------------------
            -------------------------------------------------------
            Caris & Co.                 Mizuho Securities
            -------------------------------------------------------
            -------------------------------------------------------
            CIBC World Markets          Morgan Stanley
            -------------------------------------------------------
            -------------------------------------------------------
            Citigroup                   Morningstar
            -------------------------------------------------------
            -------------------------------------------------------
            Citigroup Global Markets    Natexis Bleichroeder
            -------------------------------------------------------
            -------------------------------------------------------
            Collins Stewart             Ned Davis Research Group
            -------------------------------------------------------
            -------------------------------------------------------
            Craig-Hallum Capital Group  Nomura Securities
            LLC
            -------------------------------------------------------
            -------------------------------------------------------
            Credit Agricole Cheuvreux   Pacific Crest
            N.A. Inc.
            -------------------------------------------------------
            -------------------------------------------------------
            Credit Suisse First Boston  Pacific Crest Securities
            -------------------------------------------------------
            -------------------------------------------------------
            Daiwa Securities            Pacific Growth Equities
            -------------------------------------------------------
            -------------------------------------------------------
            Davy                        Petrie Parkman
            -------------------------------------------------------
            -------------------------------------------------------
            Deutsche Bank               Pictet
            -------------------------------------------------------
            -------------------------------------------------------
            Deutsche Bank Securities    Piper Jaffray Inc.
            -------------------------------------------------------
            -------------------------------------------------------
            Dresdner Kleinwort          Plexus
            Wasserstein
            -------------------------------------------------------
            -------------------------------------------------------
            Emmet & Co                  Prager Sealy & Co.
            -------------------------------------------------------
            -------------------------------------------------------
            Empirical Research          Prudential Securities
            -------------------------------------------------------
            -------------------------------------------------------
            Enskilda Securities         Ramirez & Co.
            -------------------------------------------------------
            -------------------------------------------------------
            Essex Capital Markets       Raymond James
            -------------------------------------------------------
            -------------------------------------------------------
            Exane BNP Paribas           RBC Capital Markets
            -------------------------------------------------------
            -------------------------------------------------------
            Factset                     RBC Dain Rauscher
            -------------------------------------------------------
            -------------------------------------------------------
            Fidelity Capital Markets    Research Direct
            -------------------------------------------------------
            -------------------------------------------------------
            Fimat USA Inc.              Robert W. Baird
            -------------------------------------------------------
            -------------------------------------------------------
            First Albany                Roosevelt & Cross
            -------------------------------------------------------
            -------------------------------------------------------
            First Albany Corporation    Russell Mellon
            -------------------------------------------------------
            -------------------------------------------------------
            Fixed Income Securities     Ryan Beck & Co.
            -------------------------------------------------------
            -------------------------------------------------------
            Fortis Securities           Sanford C. Bernstein
            -------------------------------------------------------
            -------------------------------------------------------
            Fox-Pitt, Kelton            Scotia Capital Markets
            -------------------------------------------------------
            -------------------------------------------------------
            Friedman, Billing, Ramsey   SG Cowen & Co.
            -------------------------------------------------------
            -------------------------------------------------------
            Fulcrum Global Partners     SG Cowen Securities
            -------------------------------------------------------
            -------------------------------------------------------
            Garp Research               Soleil Securities Group
            -------------------------------------------------------
            -------------------------------------------------------
            George K Baum & Co.         Standard & Poors
            -------------------------------------------------------
            -------------------------------------------------------
            Goldman                     Stone & Youngberg
            -------------------------------------------------------
            -------------------------------------------------------
            Goldman Sachs               SWS Group
            -------------------------------------------------------
            -------------------------------------------------------
            HSBC                        Taylor Rafferty
            -------------------------------------------------------
            -------------------------------------------------------
            HSBC Securities Inc         Think Equity Partners
            -------------------------------------------------------
            -------------------------------------------------------
            ING Barings                 Thomas Weisel Partners
            -------------------------------------------------------
            -------------------------------------------------------
            ISI Group                   UBS
            -------------------------------------------------------
            -------------------------------------------------------
            Janney Montgomery           Wachovia
            -------------------------------------------------------
            -------------------------------------------------------
            Jefferies                   Wachovia Corp
            -------------------------------------------------------
            -------------------------------------------------------
            Jeffries & Co.              Wachovia Securities
            -------------------------------------------------------
            -------------------------------------------------------
            JP Morgan                   Wescott Financial
            -------------------------------------------------------
            -------------------------------------------------------
            JP Morgan Securities        William Blair
            -------------------------------------------------------
            -------------------------------------------------------
            JPP Eurosecurities          Yieldbook
            -------------------------------------------------------
            -------------------------------------------------------
            Keefe, Bruyette & Woods
            -------------------------------------------------------


How the Fund is Managed

Organization and History.  The Fund is an open-end, diversified management
investment company. The Fund is one of three series of Oppenheimer Quest For
Value Funds, an open-end management investment company organized as a
Massachusetts business trust in April 1987 (and which is referred to as the
"Trust").

|X|   Classes of Shares. The Trustees are authorized, without shareholder
approval, to create new series and classes of shares.  The Trustees may
reclassify unissued shares of the Fund into additional series or classes of
shares.  The Trustees also may divide or combine the shares of a class into a
greater or lesser number of shares without changing the proportionate
beneficial interest of a shareholder in the Fund.  Shares do not have
cumulative voting rights or preemptive or subscription rights.  Shares may be
voted in person or by proxy at shareholder meetings.

      The Fund  currently has five classes of shares:  Class A, Class B, Class
C,  Class  N  and  Class  Y.  All  classes  invest  in  the  same   investment
portfolio.  Only  retirement  plans may purchase Class N shares.  Only certain
institutional  investors may elect to purchase  Class Y shares.  Each class of
shares:
o     has its own dividends and distributions,
o     pays certain expenses which may be different for the different classes,
o     may have a different net asset value,
o     may have  separate  voting  rights on matters in which  interests of one
      class are different from interests of another class, and
o     votes as a class on matters that affect that class alone.

      Shares  are  freely  transferable,  and each share of each class has one
vote at shareholder meetings,  with fractional shares voting proportionally on
matters  submitted  to the  vote  of  shareholders.  Each  share  of the  Fund
represents  an interest in the Fund  proportionately  equal to the interest of
each other share of the same class.

Meetings of Shareholders.  As a Massachusetts business trust, the Fund is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders, but may do so from time to time on important matters or when
required to do so by the Investment Company Act or other applicable law.
Shareholders have the right, upon vote of two-thirds of the outstanding
shares of the Fund, to remove a Trustee or to take other action described in
the Fund's Declaration of Trust.

      The Trustees will call a meeting of shareholders to vote on the removal
of a Trustee upon the written request of the record holders of 10% of its
outstanding shares.  If the Trustees receive a request from at least 10
shareholders stating that they wish to communicate with other shareholders to
request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants' expense. The
shareholders making the request must have been shareholders for at least six
months and must hold shares of the Fund valued at $25,000 or more or
constituting at least 1% of the Fund's outstanding shares. The Trustees may
also take other action as permitted by the Investment Company Act.


Shareholder and Trustee Liability.  The Fund's Declaration of Trust contains
an express disclaimer of shareholder or Trustee liability for the Fund's
obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for its obligations.  The Declaration of Trust also states that upon
request, the Fund shall assume the defense of any claim made against a
shareholder for any act or obligation of the Fund and shall satisfy any
judgment on that claim.  Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances. However, the risk that a Fund shareholder will
incur financial loss from being held liable as a "partner" of the Fund is
limited to the relatively remote circumstances in which the Fund would be
unable to meet its obligations.

      The Fund's contractual arrangements state that any person doing
business with the Fund (and each shareholder of the Fund) agrees under its
Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand that may arise out of any dealings with
the Fund. Additionally, the Trustees shall have no personal liability to any
such person, to the extent permitted by law.

Board of Trustees and Oversight Committees. The Fund is governed by a Board
of Trustees, which is responsible for protecting the interests of
shareholders under Massachusetts law. The Trustees meet periodically
throughout the year to oversee the Fund's activities, review its performance,
and review the actions of the Manager.

      The Board of Trustees has an Audit Committee which is comprised solely
of Independent Trustees. The members of the Audit Committee Paul Y. Clinton
(Chairman), Thomas W. Courtney, Robert G. Galli, Lacy B. Herrmann and Brian
Wruble.  The Audit Committee met 5 times during the Fund's fiscal year ended
October 31, 2004. The Audit Committee provides the Board with recommendations
regarding the selection of the Fund's independent auditor. The Audit
Committee also reviews the scope and results of audits and the audit fees
charged, reviews reports from the Fund's independent auditor concerning the
Fund's internal accounting procedures and controls and reviews reports of the
Manager's internal auditor, among other duties as set forth in the
Committee's charter.

      The Audit Committee furnishes the Board with recommendations regarding
the selection of the Fund's independent auditor.  The Audit Committee also
reviews the scope and results of audits and the audit fees charged, reviews
reports from the Fund's independent auditors concerning the Fund's internal
accounting procedures and controls, and reviews reports of the Manager's
internal auditor among other duties as set forth in the Committee's charter.

      The Audit Committee's functions include selecting and nominating, to
the full Board, nominees for election as Directors and selecting and
nominating Independent Trustees for election.  The Audit Committee may, but
need not, consider the advice and recommendation of the Manager and its
affiliates in selecting nominees.  The full Board elects new Trustees except
for those instances when a shareholder vote is required.

      To date, the Committee has been able to identify from its own resources
an ample number of qualified candidates.  Nonetheless, shareholders may
submit names of individuals, accompanies by complete and properly supported
resumes, for the Audit Committee's consideration by mailing such information
to the Committee in care of the Fund.  The Committee may consider such
persons at such time as it meets to consider possible nominees.  The
Committee, however, reserves sole discretion to determine the candidates to
present to the Board and/or shareholders when it meets for the purpose of
considering potential nominees.

Trustees and Officers of the Fund. Each of the Trustees is an "Independent
Trustee" under the Investment Company Act. The Fund's Trustees and officers
and their positions held with the Fund and length of service in such
position(s) and their principal occupations and business affiliations during
the past five years are listed in the chart below. The information for the
Trustees also includes the dollar range of shares of the Fund as well as the
aggregate dollar range of shares beneficially owned in any of the Oppenheimer
funds overseen by the Trustees. All of the Trustees are also trustees or
directors of the following Oppenheimer funds (referred to as "Board III
Funds"):

Oppenheimer  Quest  For  Value  Funds,  a
series  fund having the  following  three
series:
  Oppenheimer Small Cap Value Fund,       Oppenheimer Quest International Value
                                          Fund, Inc.
  Oppenheimer Quest Balanced Fund and     Oppenheimer Quest Capital Value Fund,
                                          Inc.
  Oppenheimer   Quest  Opportunity  Value Oppenheimer Quest Value Fund, Inc.
  Fund
Rochester   Portfolio  Series,  a  series Bond Fund Series,  a series fund having
fund having one series:  Limited-Term New one  series:   Oppenheimer  Convertible
York Municipal Fund                       Securities Fund
Rochester Fund Municipals                 Oppenheimer MidCap Fund


      In addition to being a trustee or director of the Board III Funds, Mr.
Galli is also a director or trustee of 24 other portfolios in the
OppenheimerFunds complex. Present or former officers, directors, trustees and
employees (and their immediate family members) of the Fund, the Manager and
its affiliates, and retirement plans established by them for their employees
are permitted to purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge. The sales charge
on Class A shares is waived for that group because of the economies of sales
efforts realized by the Distributor.

      Messrs. Murphy, Vottiero, Wixted, Petersen, Miao, Gillespie, Vandehey
and Zack and Mses. Bloomberg and Ives, who are officers of the Fund,
respectively hold the same offices of one or more of the other Board III
Funds as with the Fund.  As of March 20, 2005, the Trustees and Officers of
the Fund, as a group, owned of record or beneficially less than 1% of each
class of shares of the Fund. The foregoing statement does not reflect
ownership of shares of the Fund held of record by an employee benefit plan
for employees of the Manager, other than the shares beneficially owned under
the plan by the officers of the Fund listed above. In addition, each
Independent Trustee (and their immediate family members) do not own
securities of either the Manager or Distributor or Sub-Advisor of the Board
III Funds or of any entity directly or indirectly controlling, controlled by
or under common control with the Manager, Distributor or Sub-Advisor.


      The address of each Trustee in the chart below is 6803 S. Tucson Way,
Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until
his or her resignation, retirement, death or removal.

-------------------------------------------------------------------------------------
                                Independent Trustees
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name,              Principal Occupation(s) During Past 5      Dollar     Aggregate
                                                                         Dollar
                                                                         Range Of
                                                                         Shares
                                                                         Beneficially
                                                                         Owned in
                   Years;                                     Range of   Any of the
Position(s) Held   Other Trusteeships/Directorships Held by   Shares     Oppenheimer
with Fund,         Trustee;                                   BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex       Owned in   Overseen
Age                Currently Overseen by Trustee              the Fund   by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                                As of December 31,
                                                                       2004
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Thomas W.          Principal of Courtney Associates, Inc.     $0         $10,001-$50,000
Courtney,          (1982-Present) (venture capital firm);
Chairman of the    former General Partner of Trivest Venture
Board of Trustees, Fund (private venture capital fund);
Trustee since 1987 President of Investment Counseling
Age: 71            Federated Investors, Inc. (1973-1982);
                   Trustee of the following open-end
                   investment companies: Cash Assets Trust,
                   PIMCO Advisors VIT, Tax Free Trust of
                   Arizona and four funds for the Hawaiian
                   Tax Free Trust. Oversees 10 portfolios in
                   the OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Paul Y. Clinton,   Principal of Clinton Management            $0         Over
Trustee, since     Associates (1996-present) (a financial                $100,000
1987               and venture capital consulting firm);
Age: 73            Trustee of PIMCO Advisors VIT (open-end
                   investment company); former director or
                   trustee of the following open-end
                   investment companies: OCC Cash Reserves,
                   Inc. (1989-December 2002), Capital Cash
                   Management Trust (1979-December 2004),
                   Prime Cash Fund and Narragansett Insured
                   Tax-Free Income Fund (1996-December
                   2004). Oversees 10 portfolios in the
                   OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Galli,   A   trustee   or    director    of   other $0         Over

Trustee since 1998 Oppenheimer funds.  Oversees 34 portfolios            $100,000
Age: 71            in the OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Lacy B. Herrmann,  Chairman of the Board of Aquila            $0         $10,001-$50,000
Trustee since 1987 Management Corporation, the sponsoring
Age: 75            organization and parent of the manager,
                   administrator, adviser and/or sub-adviser
                   and Chairman or Chairman Emeritus of the
                   Board of Trustees and President of 11
                   funds in the Aquila(sm) fund complex;
                   Chairman of Aquila Investment Management
                   (since 2004) and Chief Executive Officer
                   (1986-2004) (sub-adviser and
                   administrator of funds in the Aquila(sm)
                   fund complex; Director of Aquila
                   Distributors, Inc., (since 1981) and
                   formerly President and Secretary
                   (distributor of the above funds); Trustee
                   PIMCO Advisors VIT; Trustee Emeritus of
                   Brown University and the Hopkins School.
                   Oversees 10 portfolios in the
                   OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Brian Wruble,      General Partner of Odyssey Partners,  L.P. $10,001-   Over
Trustee since 2001 (since  September  1995)  (hedge  funds in $50,000    $100,00
Age: 61            distribution    since    January    1997);
                   Director  of Special  Value  Opportunities
                   Fund,   LLC   (since    September   2004);
                   Investment   Advisory   Board  of   Zurich
                   Financial  Services  (since October 2004);
                   Board  of   Governing   Trustees   of  The
                   Jackson  Laboratory  (since  August  1990)
                   (non  profit);  Trustee of  Institute  for
                   Advanced    Study    (since    May   1992)
                   (educational  institute);  Special Limited
                   Partner (January  1999-September 2004) and
                   Managing   Principal   (through   December
                   1998) of Odyssey Investment Partners,  LLC
                   (private  equity  investment);  Trustee of
                   Research  Foundation  of AIMR  (2000-2002)
                   (investment     research,     non-profit);
                   Governor,  Jerome Levy Economics Institute
                   of  Bard  College  (August  1990-September
                   2001)  (economics  research);  Director of
                   Ray &  Berendtson,  Inc.  (May  2000-April
                   2002)  (executive  search firm).  Oversees
                   10  portfolios  in  the   OppenheimerFunds
                   complex.

-------------------------------------------------------------------------------------

      The address of the Officers in the chart below is as follows: for
Messrs. Gillespie, Miao, Murphy and Zack and Ms. Bloomberg, Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008, for Messrs. Vandehey, Vottiero, Petersen and Wixted and Ms. Ives,
6803 S. Tucson Way, Centennial, CO 80112-3924.  Each Officer serves for an
indefinite term or until his or her earlier resignation, retirement, death or
removal.

-------------------------------------------------------------------------------------
                                Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name,                   Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund,
Length of Service,
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy,         Chairman,  Chief Executive  Officer and director (since June
President since 2001    2001) and President  (since  September 2000) of the Manager;
Age: 55                 President  and a director  or  trustee of other  Oppenheimer
                        funds;  President  and  a  director  (since  July  2001)  of
                        Oppenheimer  Acquisition Corp. (the Manager's parent holding
                        company) and of Oppenheimer  Partnership  Holdings,  Inc. (a
                        holding  company  subsidiary  of the  Manager);  a  director
                        (since November 2001) of OppenheimerFunds  Distributor, Inc.
                        (a  subsidiary  of the  Manager);  Chairman  and a  director
                        (since  July  2001) of  Shareholder  Services,  Inc.  and of
                        Shareholder   Financial   Services,   Inc.  (transfer  agent
                        subsidiaries  of  the  Manager);  President  and a  director
                        (since  July  2001) of  OppenheimerFunds  Legacy  Program (a
                        charitable  trust program  established  by the  Manager);  a
                        director of the following  investment advisory  subsidiaries
                        of the Manager:  OFI Institutional  Asset Management,  Inc.,
                        Centennial Asset Management Corporation,  Trinity Investment
                        Management Corporation and Tremont Capital Management,  Inc.
                        (since  November   2001),   HarbourView   Asset   Management
                        Corporation  and OFI Private  Investments,  Inc. (since July
                        2001);  President  (since  November  1, 2001) and a director
                        (since  July 2001) of  Oppenheimer  Real  Asset  Management,
                        Inc.;  Executive  Vice  President  (since  February 1997) of
                        Massachusetts  Mutual Life Insurance  Company (the Manager's
                        parent  company);  a  director  (since  June  1995)  of  DLB
                        Acquisition  Corporation  (a holding  company  that owns the
                        shares of Babson  Capital  Management  LLC); a member of the
                        Investment  Company  Institute's Board of Governors (elected
                        to serve from October 3, 2003 through  September  30, 2006).
                        Formerly,   Chief  Operating  Officer  (September  2000-June
                        2001)  of  the  Manager;  President  and  trustee  (November
                        1999-November  2001)  of  MML  Series  Investment  Fund  and
                        MassMutual    Institutional   Funds   (open-end   investment
                        companies);  a director (September 1999-August 2000) of C.M.
                        Life Insurance Company;  President,  Chief Executive Officer
                        and director  (September  1999-August 2000) of MML Bay State
                        Life   Insurance   Company.   Oversees  62   portfolios   as
                        Trustee/Director and 21 additional  portfolios as Officer in
                        the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Mark S. Vandehey,       Senior Vice  President and Chief  Compliance  Officer (since
Vice President and      March  2004) of the  Manager;  Vice  President  (since  June
Chief Compliance        1983)  of  OppenheimerFunds  Distributor,  Inc.,  Centennial
Officer since 2004      Asset Management Corporation and Shareholder Services,  Inc.
Age:  54                Formerly  (until  February 2004) Vice President and Director
                        of  Internal  Audit  of  the  Manager.   An  officer  of  83
                        portfolios in the Oppenheimer funds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted,        Senior Vice  President and  Treasurer  (since March 1999) of
Treasurer since 1999    the  Manager;  Treasurer  of  HarbourView  Asset  Management
Age: 45                 Corporation,    Shareholder   Financial   Services,    Inc.,
                        Shareholder   Services,   Inc.,   Oppenheimer   Real   Asset
                        Management   Corporation,    and   Oppenheimer   Partnership
                        Holdings,   Inc.   (since  March   1999),   of  OFI  Private
                        Investments,  Inc. (since March 2000),  of  OppenheimerFunds
                        International  Ltd.  and  OppenheimerFunds  plc  (since  May
                        2000), of OFI Institutional  Asset  Management,  Inc. (since
                        November 2000),  and of  OppenheimerFunds  Legacy Program (a
                        Colorado   non-profit   corporation)   (since   June  2003);
                        Treasurer and Chief  Financial  Officer  (since May 2000) of
                        OFI  Trust  Company  (a  trust  company  subsidiary  of  the
                        Manager);   Assistant   Treasurer   (since  March  1999)  of
                        Oppenheimer  Acquisition Corp.  Formerly Assistant Treasurer
                        of   Centennial   Asset   Management    Corporation   (March
                        1999-October  2003)  and  OppenheimerFunds   Legacy  Program
                        (April  2000-June  2003). An officer of 83 portfolios in the
                        OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Petersen,         Assistant  Vice  President of the Manager since August 2002;
Assistant Treasurer     formerly   Manager/Financial  Product  Accounting  (November
since 2004              1998-July 2002) of the Manager.  An officer of 83 portfolios
Age: 34                 in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero,        Vice President/Fund Accounting of the Manager since March
Assistant Treasurer     2002. Formerly Vice President/Corporate Accounting of the
since 2002              Manager (July 1999-March 2002). An officer of 83 portfolios
Age:  41                in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack,         Executive  Vice  President  (since January 2004) and General
Secretary since 2001    Counsel  (since  February  2002)  of  the  Manager;  General
Age: 56                 Counsel  and  a  director   (since  November  2001)  of  the
                        Distributor;   General  Counsel  (since  November  2001)  of
                        Centennial   Asset  Management   Corporation;   Senior  Vice
                        President  and  General  Counsel  (since  November  2001) of
                        HarbourView  Asset  Management  Corporation;  Secretary  and
                        General   Counsel  (since   November  2001)  of  Oppenheimer
                        Acquisition  Corp.;   Assistant  Secretary  and  a  director
                        (since October 1997) of OppenheimerFunds  International Ltd.
                        and  OppenheimerFunds  plc;  Vice  President  and a director
                        (since November 2001) of Oppenheimer  Partnership  Holdings,
                        Inc.; a director (since  November 2001) of Oppenheimer  Real
                        Asset  Management,  Inc.;  Senior  Vice  President,  General
                        Counsel and a director  (since November 2001) of Shareholder
                        Financial Services,  Inc.,  Shareholder Services,  Inc., OFI
                        Private  Investments,  Inc.  and  OFI  Trust  Company;  Vice
                        President (since November 2001) of  OppenheimerFunds  Legacy
                        Program;  Senior Vice  President and General  Counsel (since
                        November 2001) of OFI Institutional Asset Management,  Inc.;
                        a  director  (since  June 2003) of  OppenheimerFunds  (Asia)
                        Limited.  Formerly Senior Vice President (May  1985-December
                        2003), Acting General Counsel (November  2001-February 2002)
                        and Associate  General  Counsel (May  1981-October  2001) of
                        the Manager;  Assistant  Secretary of Shareholder  Services,
                        Inc.  (May  1985-November   2001),   Shareholder   Financial
                        Services,    Inc.   (November   1989-November   2001);   and
                        OppenheimerFunds  International Ltd. (October  1997-November
                        2001).  An officer of 83 portfolios in the  OppenheimerFunds
                        complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice  President  (since  June 1998) and Senior  Counsel  and
Assistant Secretary     Assistant  Secretary  (since  October  2003) of the Manager;
since 2001              Vice President  (since 1999) and Assistant  Secretary (since
Age: 39                 October  2003)  of  the  Distributor;   Assistant  Secretary
                        (since   October  2003)  of  Centennial   Asset   Management
                        Corporation;  Vice President and Assistant  Secretary (since
                        1999) of Shareholder  Services,  Inc.;  Assistant  Secretary
                        (since  December  2001) of  OppenheimerFunds  Legacy Program
                        and of Shareholder  Financial  Services,  Inc..  Formerly an
                        Assistant Counsel (August  1994-October 2003). An officer of
                        83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lisa I. Bloomberg,      Vice President and Associate Counsel of the Manager since
Assistant Secretary     May 2004; formerly First Vice President and Associate
since 2004              General Counsel of UBS Financial Services Inc. (formerly,
Age:  37                PaineWebber Incorporated) (May 1999 - April 2004). An
                        officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip S. Gillespie,   Senior Vice President and Deputy General Counsel of the
Assistant Secretary     Manager since September 2004. Formerly Mr. Gillespie held
since 2004              the following positions at Merrill Lynch Investment
Age:  41                Management: First Vice President (2001-September 2004);
                        Director (from 2000) and Vice President (1998-2000). An
                        officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Wayne Miao,             Assistant Vice President and Assistant Counsel of the
Assistant Secretary     Manager since June 2004. Formerly an Associate with Sidley
since 2004              Austin Brown & Wood LLP (September 1999 - May 2004). An
Age:  32                officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------


      |X|   Remuneration of Trustees. The officers of the Fund who are
affiliated with the Manager receive no salary or fee from the Fund. The
Trustees of the Fund received the compensation shown below from the Fund with
respect to the Fund's fiscal year ended October 31, 2004. The compensation
from all 10 of the Oppenheimer funds (including the Fund) represents
compensation received for serving as a director or trustee and member of a
committee (if applicable) of the boards of those funds during the calendar
year ended December 31, 2004.









-------------------------------------------------------------------------------
Trustee Name and        Aggregate    Retirement   Estimated        Total
                                                                Compensation
                                                               From Fund and
                                                    Annual      Fund Complex
                                      Benefits    Retirement     Including
                                     Accrued as  Benefits to      Accrued

Other Fund                            Part of      be Paid       Retirement
Position(s)           Compensation      Fund         Upon      Benefits Paid
(as applicable)        From Fund1     Expenses   Retirement2    to Trustees*

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Thomas W. Courtney       $26,761      $60,075      $78,862       $172,0713

Chairman and Audit
Committee Member
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Paul Y. Clinton          $25,780      $69,223      $76,994       $166,3894

Audit Committee
Chairman
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Robert G. Galli
Audit Committee          $23,962      $34,759      $80,9235      $237,3126
Member
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Lacy B. Herrmann

Audit Committee          $23,962      $53,463      $74,648       $161,0717
Member

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Brian Wruble
Audit Committee          $24,262      $16,970      $22,238        $111,000
Member
-------------------------------------------------------------------------------
1.    Aggregate   Compensation   From   Fund   includes   fees  and   deferred
   compensation, if any, for a Trustee.
2.    Estimated  Annual  Retirement  Benefits  to be Paid Upon  Retirement  is
   based on a straight life payment plan election with the  assumption  that a
   Trustee  will  retire  at the age of 75 and is  eligible  (after 7 years of
   service)  to receive  retirement  plan  benefits as  described  below under
   "Retirement Plan for Trustees."

3.    Includes  $51,071 ($26,750  compensation and $24,321 accrued  retirement
   benefits)  from  one  open-end  investment  company,   PIMCO  Advisors  VIT
   ("PIMCO"),  with  respect  to Mr.  Courtney's  service as a trustee of that
   fund.  The Fund's  former  Sub-Adviser  acts as the  investment  adviser to
   PIMCO.
4.    Includes  $50,389 ($26,500  compensation and $23,889 accrued  retirement
   benefits) from PIMCO,  with respect to Mr.  Clinton's  service as a trustee
   of that fund.
5.    Includes  $43,933  estimated  to be paid to Mr.  Galli for  serving as a
   trustee or director of 25 other  Oppenheimer  funds (at  December 31, 2004)
   that are not Board III Funds.
6.    Includes  $129,312  paid to Mr. Galli for serving as trustee or director
   of 25 other  Oppenheimer  funds (at  December  31, 2004) that are not Board
   III Funds.
7.    Includes  $50,071 ($25,750  compensation and $24,321 accrued  retirement
   benefits) from PIMCO, with respect to Mr.  Herrmann's  service as a trustee
   of that fund.

* For purposes of this section only, "Fund Complex" includes the Oppenheimer
funds and PIMCO (formerly OCC Accumulation Trust) in accordance with the
instructions for Form N-1A.  The Manager does not consider PIMCO to be part
of the OppenheimerFunds "Fund Complex" as that term may be otherwise
interpreted.


|X|   Retirement Plan for 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 Board I Funds for at least seven years in order to be eligible for
retirement plan benefits and must serve for at least 15 years to be eligible
for the maximum benefit. Each Trustee's retirement benefits will depend on
the amount of the Trustee's future compensation and length of service.


|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 is 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 SEC, 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 February 2, 2005, the only persons who owned
of record or were known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were:

      Charles Schwab & Co. Inc. Special Custody Acct for the Exclusive
      Benefit of Customers, Attn: Mutual Funds, 101 Montgomery Street, San
      Francisco, CA 94104-4122, which owned 14,344,444.679 Class A shares
      (representing 7.89% of the Class A shares then outstanding).

      Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of Customers,
      Attn: Fund Admn/#971H3, 4800 Deer Lake Drive E. Fl 3, Jacksonville, FL
      32246-6484, which owned 13,939,295.813 Class A shares (representing
      7.67% of the Class A shares then outstanding).

      Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of Customers,
      Attn: Fund Admn/#97CK8, 4800 Deer Lake Drive E. Fl 3, Jacksonville, FL
      32246-6484, which owned 19,813,703.379 Class B shares (representing
      13.56% of the Class B shares then outstanding).

      Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of Customers,
      Attn: Fund Admn/#97HX9, 4800 Deer Lake Drive E. Fl 3, Jacksonville, FL
      32246-6484, which owned 10,911,889.202 Class C shares (representing
      15.23% of the Class C shares then outstanding);

      Citigroup Global Mkts Inc., 00109801250, Attn: Cindy Tepesta-7th Floor,
      333 West 34th Street, New York, NY 10001-2483, which owned
      4,664,570.817 Class C shares (representing 6.51% of the Class C shares
      then outstanding);

      Mass Mutual Life Insurance Co. Separate Investment Acct, Attn: N225,
      1295 State Street, Springfield, MA 01111-0001, which owned
      8,010,831.949 Class Y shares (representing 57.47% of the Class Y shares
      then outstanding);

      Vanguard Fiduciary Trust Company, Attn: Outside Funds, Oppenheimer
      Quest Balanced Fund Y 24VM 613, P.O. Box 2600, Boston, MA 02117-9130,
      which owned 4,475,970.056 Class Y shares (representing 32.10% of the
      Class Y shares then outstanding);

      Taynik & Co., c/o Investors Bank & Trust, FPG90, P.O. Box 9130, Boston,
      MA 02117-9130, which owned 1,003,564.090 Class Y shares (representing
      7.19% 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, a
global, diversified insurance and financial services organization.


|X|   Code of Ethics. The Fund, the Manager and the Distributor have a Code
of Ethics. It is designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with or
take advantage of the Fund's portfolio transactions. Covered persons include
persons with knowledge of the investments and investment intentions of the
Fund and other funds advised by the Manager. The Code of Ethics does permit
personnel subject to the Code to invest in securities, including securities
that may be purchased or held by the Fund, subject to a number of
restrictions and controls. Compliance with the Code of Ethics is carefully
monitored and enforced by the Manager.

      The Code of Ethics is an exhibit to the Fund's registration statement
filed with the SEC and can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. You can obtain information about the hours
of operation of the Public Reference Room by calling the SEC at
1.202.942.8090. The Code of Ethics can also be viewed as part of the Fund's
registration statement on the SEC's EDGAR database at the SEC's Internet
website at www.sec.gov. Copies may be obtained, after paying a duplicating
           -----------
fee, by electronic request at the following E-mail address:
publicinfo@sec.gov., or by writing to the SEC's Public Reference Section,
-------------------
Washington, D.C. 20549-0102.

|X|   Portfolio Proxy Voting.  The Fund has adopted Portfolio Proxy Voting
Policies and Procedures under which the Fund votes proxies relating to
securities ("portfolio proxies") held by the Fund. The Fund's primary
consideration in voting portfolio proxies is the financial interests of the
Fund and its shareholders. The Fund has retained an unaffiliated third-party
as its agent to vote portfolio proxies in accordance with the Fund's
Portfolio Proxy Voting Guidelines and to maintain records of such portfolio
proxy voting. The Proxy Voting Guidelines include provisions to address
conflicts of interest that may arise between the Fund and OFI where an OFI
directly-controlled affiliate manages or administers the assets of a pension
plan of a company soliciting the proxy. The Fund's Portfolio Proxy Voting
Guidelines on routine and non-routine proxy proposals are summarized below.

o     The Fund votes with the recommendation of the issuer's management on
            routine matters, including election of directors nominated by
            management and ratification of auditors, unless circumstances
            indicate otherwise.
o     In general, the Fund opposes anti-takeover proposals and supports
            elimination of anti-takeover proposals, absent unusual
            circumstances.
o     The Fund supports shareholder proposals to reduce a super-majority vote
            requirement, and opposes management proposals to add a
            super-majority vote requirement.
o     The Fund opposes proposals to classify the board of directors.
o     The Fund supports proposals to eliminate cumulative voting.
o     The Fund opposes re-pricing of stock options.
o     The Fund generally considers executive compensation questions such as
            stock option plans and bonus plans to be ordinary business
            activity. The Fund analyzes stock option plans, paying particular
            attention to their dilutive effect. While the Fund generally
            supports management proposals, the Fund opposes plans it
            considers to be excessive.

      The Fund is required to file Form N-PX, with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each
year. The Fund's Form N-PX filing is available (i) without charge, upon
request, by calling the Fund toll-free at  1.800.525-7048 and (ii) on the
SEC's website at www.sec.gov.
                 -----------

|X|   The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and Fund's parent Trust.  The Manager handles
the Fund's day-to-day business, and the agreement permits the Manager to
enter into sub-advisory agreements with other registered investment advisers
to obtain specialized services for the Fund, as long as the Fund is not
obligated to pay any additional fees for those services.  If the Manager has
retained the Sub-Advisor pursuant to a separate Sub-Advisory Agreement,
described below, under which the Sub-Advisor buys and sells portfolio
securities for the Fund. The portfolio manager of the Fund is employed by the
Sub-Advisor and is the person who is principally responsible for the
day-to-day management of the Fund's portfolio, as described below.

      The investment advisory agreement between the Fund and the Manager
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment. It also requires the Manager to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective administration for the Fund. Those
responsibilities include the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified reports,
and composition of proxy materials and registration statements for continuous
public sale of shares of the Fund.

      The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. Expenses for the Trust's three series are allocated to
the series in proportion to their net assets, unless allocations of expenses
can be made directly to a series. The investment advisory agreement lists
examples of expenses paid by the Fund. The major categories relate to
calculation of the Fund's net asset values per share, interest, taxes,
brokerage commissions, fees to certain 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.
The management fees paid by the Fund to the Manager during its last three
fiscal years were:

---------------------------------------------------------------
Fiscal Year ended 10/31:        Management Fees Paid to
                                OppenheimerFunds, Inc.1
---------------------------------------------------------------
---------------------------------------------------------------
          2002                        $43,436,918
---------------------------------------------------------------
---------------------------------------------------------------
          2003                        $40,756,593
---------------------------------------------------------------
---------------------------------------------------------------
          2004                        $50,570,841
---------------------------------------------------------------
         1.The Manager, not the Fund, pays the Sub-Advisor an annual
           sub-advisory fee. For fiscal year 2002, 2003 and 2004, this
           sub-advisory fee was $13,154,575 $11,559,829 and
           $15,004,710, respectively.

      The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment
advisory agreement, the Manager is not liable for any loss resulting from a
good faith error or omission on its part with respect to any of its duties
under the agreement.

      The agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the names "Oppenheimer" and
"Quest for Value" in connection with other investment companies for which it
may act as investment adviser or general distributor. If the Manager shall no
longer act as investment adviser to the Fund, the Manager may withdraw the
right of the Fund to use the names "Oppenheimer" or "Quest for Value" as part
of its name.

         |X|      Annual Approval of Investment Advisory and Sub-Advisory
Agreement. Each year, the Board of Trustees, including a majority of the
Independent Trustees, is required to approve the renewal of the investment
advisory agreement and sub-advisory agreement. The Investment Company Act
requires that the Board request and evaluate the Manager and Sub-Advisor and
provide such information as may be reasonably necessary to evaluate the terms
of the investment advisory and sub-advisory agreements.  The Board employs an
independent consultant to prepare a report that provides such information as
the Board requests for this purpose.

      The Board also receives information about the 12b-1 distribution fees
the Fund pays.  These distribution fees are reviewed and approved at a
different time of the year.

      The Board reviewed the foregoing information in arriving at its
decision to renew the investment advisory and sub-advisory agreements.  Among
other factors, the Board considered:
o     The nature, cost, and quality of the services provided to the Fund and
         its shareholders;
o     The profitability of the Fund to the Manager and Sub-Advisor;
o     The investment performance of the Fund in comparison to regular market
         indices;
o     Economies of scale that may be available to the Fund from the Manager
         and Sub-Advisor;
o     Fees paid by other mutual funds for similar services;
o     The value and quality of any other benefits or services received by the
         Fund from its relationship with the Manager and Sub-Advisor, and
o     The direct and indirect benefits the Manager and Sub-Advisor received
         from its relationship with the Fund.  These included services
         provided by the Distributor and the Transfer Agent, and brokerage
         and soft dollar arrangements permissible under Section 28(e) of the
         Securities Exchange Act.

      The Board considered that the Manager and Sub-Advisor must be able to
pay and retain high quality personnel at competitive rates to provide
services to the Fund.  The Board also considered that maintaining the
financial viability of the Manager and Sub-Advisor is important so that the
Manager and Sub-Advisor will be able to continue to provide quality services
to the Fund and its shareholders in adverse times.  The Board also considered
the investment performance of other mutual funds advised by the Manager and
Sub-Advisor. The Board is aware that there are alternatives to the use of the
Manager and Sub-Advisor.

      These matters were also considered by the Independent Trustees, meeting
separately from the full Board with experienced Counsel to the Fund who
assisted the Board in its deliberations.  The Fund's Counsel is independent
of the Manager and Sub-Advisor within the meaning and intent of the SEC Rules
regarding the independence of counsel.

      After careful deliberation the Board concluded that it was in the best
interest of shareholders to continue the investment advisory and sub-advisory
agreements for another year. In arriving at a decision, the Board did not
single out any one factor or group of factors as being more important than
other factors, but considered all factors together.  The Board judged the
terms and conditions of the investment advisory agreements, including the
investment advisory fees, in light of all of the surrounding circumstances.
After deliberating the Board approved the following fee schedule: effective
January 1, 2004, the Fund pays the Manager an advisory fee at an annual rate
that declines on additional assets as the Fund grows: 0.85% of the first $1
billion of average annual net assets of the Fund, 0.81% of the next $2
billion, 0.76% of the next $1 billion, 0.71% of the next $1 billion, 0.65% of
the next $1 billion, 0.60% of the next $1 billion, 0.55% of the next $1
billion and 0.50% of average annual net assets in excess of $8 billion.

The Sub-Advisor.  As of January 1, 2005, the Fund's Sub-Advisor is
Oppenheimer Capital LLC, a registered investment advisor. The Sub-Advisor is
a Delaware limited liability company with one member, Allianz Dresdner Asset
Management U.S. Equities LLC. Allianz Dresdner Asset Management U.S. Equities
LLC is a wholly-owned subsidiary of Allianz Dresdner Asset Management of
America L.P. ("ADAM LP"). ADAM LP is a Delaware limited partnership whose
sole general partner is Allianz-PacLife Partners LLC.  Allianz-PacLife
Partners LLC is a Delaware limited liability company with three members, ADAM
U.S. Holding LLC, a Delaware limited liability company, Pacific Asset
Management LLC, a Delaware limited liability company and Pacific Life
Insurance Company, a California stock life insurance company.  The sole
member of ADAM U.S. Holding LLC is Allianz Dresdner Asset Management of
America LLC. Allianz Dresdner Asset Management of America LLC has two
members, Allianz of America, Inc., a Delaware corporation which owns 99.9%
non-managing interest and Allianz Dresdner Asset Management of America
Holding Inc., a Delaware corporation which owns a 0.01% managing interest.
Allianz Dresdner Asset Management of America Holding Inc. is a wholly-owned
subsidiary of ADAM GmbH, which is wholly owned by Allianz Aktiengesellschaft
("Allianz AG"). Allianz of America, Inc. is wholly-owned by Allianz AG.
Pacific Asset Management LLC is a wholly-owned subsidiary of Pacific Life
Insurance Company, a wholly-owned subsidiary of Pacific Mutual Holding
Company. Allianz AG indirectly holds a controlling interest in Allianz
Dresdner Asset Management of America LP. Allianz AG is a European-based,
multinational insurance and financial services holding company. Pacific Life
Insurance Company owns an indirect minority equity interest in ADAM LP and is
a California-based insurance company.

      The Sub-Advisor has operated as an investment advisor to investment
companies and other investors since its organization in 1969. As of September
30, 2004, the Sub-Advisor advised accounts having assets in excess of $24
billion. The Sub-Advisor is located at 1345 Avenue of the Americas, 49th
Floor, New York, New York 10105-4800.

            Prior to January 1, 2005, the Fund's Sub-Advisor was OpCap
Advisors ("OpCap"), a wholly-owned subsidiary of the Sub-Advisor. From the
Fund's inception on April 30, 1980 until November 22, 1995, OpCap (which was
then named Quest for Value Advisors) served as the Fund's investment advisor.
On November 22, 1995, the Manager retained OpCap to provide day-to-day
portfolio management for the Fund.

|X|   The Sub-Advisor's Code of Ethics. Each employee of the Sub-Advisor is
subject to a Code of Ethics which has been adopted by the Sub-Advisor to
comply with the provisions of Rule 17j-1 under the Investment Company Act.
The Codes of Ethics are designed to detect and prevent improper personal
trading. The Codes of Ethics permit personnel subject to the Codes to invest
in securities, including securities that may be purchased, sold or held by
the Fund, subject to a number of restrictions and controls including
prohibitions against purchases of securities in an Initial Public Offering
and a preclearance requirement with respect to certain personal securities
transactions.

|X|   The Sub-Advisory Agreement. Under the Sub-Advisory Agreement between
the Manager and the Sub-Advisor, the Sub-Advisor shall regularly provide
investment advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund.  Under the
Sub-Advisory Agreement, the Sub-Advisor agrees not to change the portfolio
manager of the Fund without the written approval of the Manager. The
Sub-Advisor also agrees to provide assistance in the distribution and
marketing of the Fund.

      Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of
the Fund. The fee paid to the Sub-Advisor under the Sub-Advisory agreement is
paid by the Manager, not by the Fund. The fee is equal to 40% of the
investment advisory fee collected by the Manager from the Fund based on the
total net assets of the Fund as of November 22, 1995 (the "Base Amount") plus
30% of the investment advisory fee collected by the Manager based on the
total net assets of the Fund that exceed the Base Amount.

      The Sub-Advisory Agreement states that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, the Sub-Advisor shall not be liable to the Manager for any act
or omission in the course of or connected with rendering services under the
Sub-Advisory Agreement or for any losses that may be sustained in the
purchase, holding or sale of any security.

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement and the
Sub-Advisory Agreement. One of the duties of the Sub-Advisor under the
Sub-Advisory Agreement is to arrange the portfolio transactions for the Fund.
The Fund's investment advisory agreement with the Manager and the
Sub-Advisory Agreement contain provisions relating to the employment of
broker-dealers to effect the Fund's portfolio transactions. The Manager and
the Sub-Advisor are authorized to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company Act.
They may employ broker-dealers that the Manager thinks, in its best judgment
based on all relevant factors, will implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" of the Fund's portfolio
transactions. "Best execution" means prompt and reliable execution at the
most favorable price obtainable.

      Under the investment advisory and sub-advisory agreements, in choosing
brokers to execute portfolio transactions for the Fund, the Manager and
Sub-Adviser may select brokers (other than affiliates) that provide brokerage
and/or research services to the Fund and/or the other accounts over which the
Manager or its affiliates have investment discretion.  The concessions paid
to those brokers may be higher than another qualified broker would charge, if
the Manager or Sub-Adviser makes a good faith determination that the
concession is fair and reasonable in relation to the services provided.

      Rule 12b-1 under the Investment Company Act prohibits any fund from
compensating a broker or dealer for promoting or selling the fund's shares by
(1) directing to that broker or dealer any of the fund's portfolio
transactions, or (2) directing any other remuneration to that broker or
dealer, such as commissions, mark-ups, mark downs or other fees from the
fund's portfolio transactions, that were effected by another broker or dealer
(these latter arrangements are considered to be a type of "step-out"
transaction). In other words, a fund and its investment advisor cannot use
the fund's brokerage for the purpose of rewarding broker-dealers for selling
the fund's shares.

      However, the Rule permits funds to effect brokerage transactions
through firms that also sell fund shares, provided that certain procedures
are adopted to prevent a quid pro quo with respect to portfolio brokerage
allocations. As permitted by the Rule, the Manager has adopted procedures
(and the Fund's Board of Trustees has approved those procedures) that permit
the Fund to direct portfolio securities transactions to brokers or dealers
that also promote or sell shares of the Fund, subject to the "best execution"
considerations discussed above. Those procedures are designed to prevent: (1)
the Manager's personnel who effect the Fund's portfolio transactions from
taking into account a broker's or dealer's promotion or sales of the Fund
shares when allocating the Fund's portfolio transactions, and (2) the Fund,
the Manager and the Distributor from entering into agreements or
understandings under which the Manager directs or is expected to direct the
Fund's brokerage directly, or through a "step-out" arrangement, to any broker
or dealer in consideration of that broker's or dealer's promotion or sale of
the Fund's shares or the shares of any of the other Oppenheimer funds.

      The Sub-Advisory Agreement permits the Sub-Advisor to enter into
"soft-dollar" arrangements through the agency of third parties to obtain
services for the Fund. Pursuant to these arrangements, the Sub-Advisor will
undertake to place brokerage business with broker-dealers who pay third
parties that provide services. Any such "soft-dollar" arrangements will be
made in accordance with policies adopted by the Board of the Trust and in
compliance with applicable law.

Brokerage Practices. Brokerage for the Fund is allocated subject to the
provisions of the investment advisory agreement and the Sub-Advisory
Agreement and the procedures and rules described above. Generally, the
Sub-Advisor's portfolio traders allocate brokerage based upon recommendations
from the Fund's portfolio manager. In certain instances, portfolio managers
may directly place trades and allocate brokerage. In either case, the
Sub-Advisor's executive officers supervise the allocation of brokerage.

      Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid
primarily for transactions in listed securities or for certain fixed-income
agency transactions in the secondary market. Otherwise brokerage commissions
are paid only if it appears likely that a better price or execution can be
obtained by doing so.

      The Sub-Advisor serves as investment manager to a number of clients,
including other investment companies, and may in the future act as investment
manager or advisor to others. It is the practice of the Sub-Advisor to
allocate purchase or sale transactions among the Fund and other clients whose
assets it manages in a manner it deems equitable. In making those
allocations, the Sub-Advisor considers several main factors, including the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment,
the size of investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of the Fund and each other
client's accounts.

      When orders to purchase or sell the same security on identical terms
are placed by more than one of the funds and/or other advisory accounts
managed by the Sub-Advisor or its affiliates, the transactions are generally
executed as received, although a fund or advisory account that does not
direct trades to a specific broker (these are called "free trades") usually
will have its order executed first. Orders placed by accounts that direct
trades to a specific broker will generally be executed after the free trades.
All orders placed on behalf of the Fund are considered free trades. However,
having an order placed first in the market does not necessarily guarantee the
most favorable price. Purchases are combined where possible for the purpose
of negotiating brokerage commissions. In some cases that practice might have
a detrimental effect on the price or volume of the security in a particular
transaction for the Fund.

      Most purchases of debt obligations are principal transactions at net
prices. Instead of using a broker for those transactions, the Fund normally
deals directly with the selling or purchasing principal or market maker
unless the Sub-Advisor determines that a better price or execution can be
obtained by using the services of a broker. Purchases of portfolio securities
from underwriters include a commission or concession paid by the issuer to
the underwriter. Purchases from dealers include a spread between the bid and
asked prices. The Fund seeks to obtain prompt execution of these orders at
the most favorable net price.

      The investment advisory agreement and the Sub-Advisory Agreement permit
the Manager and the Sub-Advisor to allocate brokerage for research services.
The research services provided by a particular broker may be useful only to
one or more of the advisory accounts of the Sub-Advisor and its affiliates.
The investment research received for the commissions of those other accounts
may be useful both to the Fund and one or more of the Sub-Advisor's other
accounts. Investment research may be supplied to the Sub-Advisor by a third
party at the instance of a broker through which trades are placed.

      Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Sub-Advisor in a non-research capacity (such as
bookkeeping or other administrative functions), then only the percentage or
component that provides assistance to the Sub-Advisor in the investment
decision-making process may be paid in commission dollars.

      The research services provided by brokers broaden the scope and
supplement the research activities of the Sub-Advisor. That research provides
additional views and comparisons for consideration, and helps the Sub-Advisor
to obtain market information for the valuation of securities that are either
held in the Fund's portfolio or are being considered for purchase. The
Sub-Advisor provides information to the Manager and the Board about the
commissions paid to brokers furnishing such services, together with the
Sub-Advisor's representation that the amount of such commissions was
reasonably related to the value or benefit of such services.









   ---------------------------------------------------------------------
   Fiscal Year Ended 10/31   Total Brokerage Commissions Paid by the
                                              Fund1
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2002                           $14,892,886
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2003                           $11,814,870
   ---------------------------------------------------------------------
   ---------------------------------------------------------------------
            2004                           $11,883,706
   ---------------------------------------------------------------------
1.    Amounts do not include spreads or commissions on principal  transactions
   on a net trade basis.


Distribution and Service Plans

The Distributor.  Under its General Distributor's Agreement with the Trust,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's classes of shares. The Distributor bears the
expenses normally attributable to sales, including advertising and the cost
of printing and mailing prospectuses, other than those furnished to existing
shareholders. The Distributor is not obligated to sell a specific number of
shares.

      The sales charges and concessions paid to, or retained by, the
Distributor from the sale of shares and the contingent deferred sales charges
retained by the Distributor on the redemption of shares during the Fund's
three most recent fiscal years are shown in the tables below.

-------------------------------------------
Fiscal    Aggregate        Class A
                           Front-End
Year      Front-End Sales  Sales Charges
Ended     Charges on       Retained by
10/31:    Class A Shares   Distributor1
-------------------------------------------
-------------------------------------------
  2002      $14,121,824      $3,513,191
-------------------------------------------
-------------------------------------------
  2003       $6,082,038      $1,693,081
-------------------------------------------
-------------------------------------------
  2004      $12,316,772      $3,479,343
-------------------------------------------
1.    Includes amounts  retained by a broker-dealer  that is an affiliate or a
    parent of the Distributor.

-----------------------------------------------------------------------------
Fiscal    Concessions on   Concessions on  Concessions on   Concessions on
Year      Class A Shares   Class B Shares  Class C Shares   Class N Shares
Ended     Advanced by      Advanced by     Advanced by      Advanced by
10/31:    Distributor1     Distributor1    Distributor1     Distributor1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2002       $1,237,651      $32,336,348      $4,801,712        $983,606
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2003        $611,237       $8,142,875       $1,397,803        $475,836
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2004        $792,990       $10,578,513      $2,508,475        $858,034
-----------------------------------------------------------------------------
1.    The  Distributor  advances  concession  payments  to dealers for certain
   sales  of  Class A shares  and for  sales  of Class B and  Class C shares
   from its own resources at the time of sale.

------------------------------------------------------------------------------
Fiscal    Class A          Class B         Class C           Class N
          Contingent       Contingent                        Contingent
Year      Deferred Sales   Deferred Sales  Contingent        Deferred Sales
Ended     Charges          Charges         Deferred Sales    Charges
10/31     Retained by      Retained by     Charges Retained  Retained by
          Distributor      Distributor     by Distributor    Distributor
------------------------------------------------------------------------------
------------------------------------------------------------------------------
  2002        $83,677        $7,504,572        $559,091          $236,911
------------------------------------------------------------------------------
------------------------------------------------------------------------------
  2003        $38,817        $6,310,225        $216,014          $354,859
------------------------------------------------------------------------------
------------------------------------------------------------------------------
  2004        $55,427        $4,944,985        $146,159          $276,218
------------------------------------------------------------------------------

Distribution and Service Plans. The Fund has adopted a Service Plan for Class
A shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent Trustees1, cast in person
at a meeting called for the purpose of voting on that plan.

      Under the Plans, the Manager and the Distributor may make payments to
affiliates.  In their sole discretion, they may also from time to time make
substantial payments from their own resources, which include the profits the
Manager derives from the advisory fees it receives from the Fund, to
compensate brokers, dealers, financial institutions and other intermediaries
for providing distribution assistance and/or administrative services or that
otherwise promote sales of the Fund's shares.  These payments, some of which
may be referred to as "revenue sharing," may relate to the Fund's inclusion
on a financial intermediary's preferred list of funds offered to its clients.

      Financial intermediaries, brokers and dealers may receive other
payments from the Distributor or the Manager from their own resources in
connection with the promotion and/or sale of shares of the Fund, including
payments to defray expenses incurred in connection with educational seminars
and meetings.  The Manager or Distributor may share expenses incurred by
financial intermediaries in conducting training and educational meetings
about aspects of the Fund for employees of the intermediaries or for hosting
client seminars or meetings at which the Fund is discussed.  In their sole
discretion, the Manager and/or the Distributor may increase or decrease the
amount of payments they make from their own resources for these purposes.

      Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class.

      The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount
of payments to be made under a plan must be approved by shareholders of the
class affected by the amendment. Because Class B shares of the Fund
automatically convert into Class A shares 72 months after purchase, the Fund
must obtain the approval of both Class A and Class B shareholders for a
proposed material amendment to the Class A the plan that would materially
increase payments under the plan. That approval must be by a majority of the
shares of each class, voting separately by class.

      While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.

      Each plan states that while it is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested persons" of
the Fund is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in the selection and nomination
process as long as the final decision as to selection or nomination is
approved by a majority of the Independent Trustees.

      Under the plans for a class, no payment will be made to any recipient
in any quarter in which the aggregate net asset value of all Fund shares of
that class held by the recipient for itself and its customers does not exceed
a minimum amount, if any, that may be set from time to time by a majority of
the Independent Trustees. The Board of Trustees has set no minimum amount of
assets to qualify for payments under the plans.

|X|   Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions for personal services and account
maintenance services they provide for their customers who hold Class A
shares. The services include, among others, answering customer inquiries
about the Fund, assisting in establishing and maintaining accounts in the
Fund, making the Fund's investment plans available and providing other
services at the request of the Fund or the Distributor. The Class A service
plan permits compensation to the Distributor at a rate of up to 0.25% of
average annual net assets of Class A shares. The Distributor does not receive
or retain the service fee on Class A shares in accounts for which the
Distributor has been listed as the broker-dealer of record. The Board
Trustees has set that rate. While the plan permits the Board to authorize
payments to the Distributor to reimburse itself for services under the plan,
the Board has not yet done so, except in the case of the special arrangement
described below, regarding grandfathered retirement accounts. The Distributor
makes payments to plan recipients quarterly at an annual rate not to exceed
0.25% of the average annual net assets consisting of Class A shares held in
the accounts of the recipients or their customers.

      Under the Class A distribution plan, the plan provides for the Fund to
pay an asset-based sales charge to the Distributor at an annual rate of 0.25%
of average annual net assets of Class A shares of the Fund. Effective January
1, 2003, the Board set that rate to zero. Prior to that date, the Fund paid
the Distributor an annual asset-based sales charge equal to 0.10% of average
annual net assets representing Class A shares. The Distributor paid the
entire asset-based sales charge to brokers, dealers and financial
institutions.

      With respect to purchases of Class A shares subject to a contingent
deferred sales charge by certain retirement plans that purchased such shares
prior to March 1, 2001 ("grandfathered retirement accounts"), the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after the shares are purchased. During the first year the shares
are sold, the Distributor retains the service fee to reimburse itself for the
costs of distributing the shares. After the first year shares are
outstanding, the Distributor makes service fee payments to recipients
quarterly on those shares. The advance payment is based on the net asset
value of shares sold. Shares purchased by exchange do not qualify for the
advance service fee payment. If Class A shares purchased by grandfathered
retirement accounts are redeemed during the first year after their purchase,
the recipient of the service fees on those shares will be obligated to repay
the Distributor a pro rata portion of the advance payment of the service fee
made on those shares.

      For the fiscal year ended October 31, 2004 payments under the Class A
distribution and service plan totaled $6,845,930, of which $354,388 was paid
to an affiliate of the Distributor's parent company. In addition, $172,007
was retained for the asset-based sales charge, as allowed under the plan
prior to January 1, 2003. Any unreimbursed expenses the Distributor incurs
with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. The Distributor may not use payments received under the
Class A plan to pay any of its interest expenses, carrying charges, or other
financial costs, or allocation of overhead.

|X|   Class B, Class C and Class N Distribution and Service Plan Fees. Under
each plan, distribution and service fees are computed on the average of the
net asset value of shares in the respective class, determined as of the close
of each regular business day during the period. Each plan provides for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund
under the plan during the period for which the fee is paid. The types of
services that recipients provide are similar to the services provided under
the Class A service plan, described above.

      Each plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a
quarterly basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after Class B, Class C and Class N shares are purchased. After the
first year Class B, Class C or Class N shares are outstanding, after their
purchase, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee
payment. If Class B, Class C or Class N shares are redeemed during the first
year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance
payment of the service fee made on those shares. Class B, Class C or Class N
shares may not be purchased by an investor directly from the Distributor
without the investor designating another broker-dealer of record.  If the
investor no longer has another broker-dealer of record for an existing
account, the Distributor is automatically designated as the broker-dealer of
record, but solely for the purpose of acting as the investor's agent to
purchase the shares.  In those cases, the Distributor retains the asset-based
sales charge paid on Class B, Class C and Class N shares, but does not retain
any service fees as to the assets represented by that account.

      The asset-based sales charge and service fees increase Class B and
Class C expenses by 1.00% and the asset-based sales charge and service fees
increase Class N expenses by 0.50% of the net assets per year of the
respective classes.

      The Distributor retains the asset-based sales charge on Class B and
Class N shares. The Distributor retains the asset-based sales charge on Class
C shares during the first year the shares are outstanding. It pays the
asset-based sales charge as an ongoing concession to the recipient on Class C
shares outstanding for a year or more. If a dealer has a special agreement
with the Distributor, the Distributor will pay the Class B, Class C or Class
N service fee and the asset-based sales charge to the dealer quarterly in
lieu of paying the sales concession and service fee in advance at the time of
purchase.

      The asset-based sales charge on Class B, Class C and Class N shares
allow investors to buy shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The Fund pays
the asset-based sales charge to the Distributor for its services rendered in
distributing Class B, Class C and Class N shares. The payments are made to
the Distributor in recognition that the Distributor:
o     pays sales concessions to authorized brokers and dealers at the time of
         sale and pays service fees as described above,
o     may finance payment of sales concessions and/or the advance of the
         service fee payment to recipients under the plans, or may provide
         such financing from its own resources or from the resources of an
         affiliate,
o     employs personnel to support distribution of Class B, Class C and Class
         N shares,
o     bears the costs of sales literature, advertising and prospectuses
         (other than those furnished to current shareholders) and state "blue
         sky" registration fees and certain other distribution expenses,
o     may not be able to adequately compensate dealers that sell Class B,
         Class C and Class N shares without receiving payment under the plans
         and therefore may not be able to offer such Classes for sale absent
         the plans,
o     receives payments under the plans consistent with the service fees and
         asset-based sales charges paid by other non-proprietary funds that
         charge 12b-1 fees,
o     may use the payments under the plan to include the Fund in various
         third-party distribution programs that may increase sales of Fund
         shares,
o     may experience increased difficulty selling the Fund's shares if
         payments under the plan are discontinued because most competitor
         funds have plans that pay dealers for rendering distribution
         services as much or more than the amounts currently being paid by
         the Fund, and
o     may not be able to continue providing, at the same or at a lesser cost,
         the same quality distribution sales efforts and services, or to
         obtain such services from brokers and dealers, if the plan payments
         were to be discontinued.

      The Distributor's actual expenses in selling Class B, Class C and Class
N shares may be more than the payments it receives from the contingent
deferred sales charges collected on redeemed shares and from the Fund under
the plans. If either the Class B, Class C or Class N plan is terminated by
the Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for distributing shares
before the plan was terminated.

 -------------------------------------------------------------------------------
  Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/04
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class:            Total      Amount Retained   Distributor's    Distributor's
                                                  Aggregate      Unreimbursed
                                                 Unreimbursed    Expenses as %
                  Payments                      Expenses Under   of Net Assets
                 Under Plan    by Distributor        Plan          of Class
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class B Plan   $24,952,922     $19,251,9801     $60,959,378         2.39%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class C Plan   $11,290,179     $2,280,3592      $20,556,604         1.70%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class N Plan     $898,689       $570,7523        $3,804,005         1.83%
 -------------------------------------------------------------------------------
1.    Includes  $354,388  paid to an  affiliate  of the  Distributor's  parent
   company.
2.    Includes  $193,832  paid to an  affiliate  of the  Distributor's  parent
   company.
3.    Includes  $16,600  paid  to an  affiliate  of the  Distributor's  parent
    company.

      All payments under the Class B, Class C and Class N plans are subject
to the limitations imposed by the Conduct Rules of the National Association
of Securities Dealers, Inc. on payments of asset-based sales charges and
service fees.


Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how
total returns are calculated is set forth below. The charts below show the
Fund's performance as of the Fund's most recent fiscal year end. You can
obtain current performance information by calling the Fund's Transfer Agent
at 1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

      The Fund's illustrations of its performance data in advertisements must
comply with rules of the SEC. Those rules describe the types of performance
data that may be used and how it is to be calculated. In general, any
advertisement by the Fund of its performance data must include the average
annual total returns for the advertised class of shares of the Fund.

      Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other
investments:
o     Total returns measure the performance of a hypothetical account in the
         Fund over various periods and do not show the performance of each
         shareholder's account. Your account's performance will vary from the
         model performance data if your dividends are received in cash, or
         you buy or sell shares during the period, or you bought your shares
         at a different time and price than the shares used in the model.
o     The Fund's performance returns do not reflect the effect of taxes on
         dividends and capital gains distributions.
o     An investment in the Fund is not insured by the FDIC or any other
         government agency.
o     The principal value of the Fund's shares, and total returns are not
         guaranteed and normally will fluctuate on a daily basis.
o     When an investor's shares are redeemed, they may be worth more or less
         than their original cost.
o     Total returns for any given past period represent historical
         performance information and are not, and should not be considered, a
         prediction of future returns.

      The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The total
returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of those
investments, the types of investments the Fund holds, and its operating
expenses that are allocated to the particular class

      |X|   Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. Because of differences in expenses for each class of shares, the
total returns for each class are separately measured. The cumulative total
return measures the change in value over the entire period (for example, ten
years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. The Fund uses standardized calculations for its
total returns as prescribed by the SEC. The methodology is discussed below.

         In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted
from the initial investment ("P" in the formula below) (unless the return is
shown without sales charge, as described below). For Class B shares, payment
of the applicable contingent deferred sales charge is applied, depending on
the period for which the return is shown: 5.0% in the first year, 4.0% in the
second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0%
in the sixth year and none thereafter. For Class C shares, the 1.0%
contingent deferred sales charge is deducted for returns for the one-year
period. For Class N shares, the 1.0% contingent deferred sales charge is
deducted for returns for the one-year period, and total returns for the
periods prior to 03/01/01 (the inception date for Class N shares) are based
on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1
fees. There is no sales charge on Class Y shares.

o     Average Annual Total Return. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in
value of a hypothetical initial investment of $1,000 ("P" in the formula
below) held for a number of years ("n" in the formula) to achieve an Ending
Redeemable Value ("ERV" in the formula) of that investment, according to the
following formula:

ERV   l/n - 1  Average Annual Total
               Return
  P

o     Average Annual Total Return (After Taxes on Distributions). The
"average annual total return (after taxes on distributions)" of Class A
shares is an average annual compounded rate of return for each year in a
specified number of years, adjusted to show the effect of federal taxes
(calculated using the highest individual marginal federal income tax rates in
effect on any reinvestment date) on any distributions made by the Fund during
the specified period. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking into account the
effect of taxes on Fund distributions, but not on the redemption of Fund
shares, according to the following formula:

           - 1 = Average Annual Total Return (After Taxes on
ATVD   l/n     Distributions)
---
  P

o     Average Annual Total Return (After Taxes on Distributions and
Redemptions). The "average annual total return (after taxes on distributions
and redemptions)" of Class A shares is an average annual compounded rate of
return for each year in a specified number of years, adjusted to show the
effect of federal taxes (calculated using the highest individual marginal
federal income tax rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period and the effect of
capital gains taxes or capital loss tax benefits (each calculated using the
highest federal individual capital gains tax rate in effect on the redemption
date) resulting from the redemption of the shares at the end of the period.
It is the rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an ending value ("ATVDR" in the
formula) of that investment, after taking into account the effect of taxes on
fund distributions and on the redemption of Fund shares, according to the
following formula:

ATVDR       - 1  = Average Annual Total Return (After Taxes on Distributions
---
l/n              and Redemptions)
  P

o     Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:

 ERV - P   = Total Return
-----------
    P
o     Total Returns at Net Asset Value. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class N
shares. There is no sales charge on Class Y shares. Each is based on the
difference in net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.

---------------------------------------------------------------------------------
            The Fund's Total Returns for the Periods Ended 10/31/04
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of  Cumulative Total              Average Annual Total Returns
             Returns (10
              years or
Shares     life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                 1-Year            5-Year           10-Year
                                                (or life of       (or life of
                                                   class)           class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After    Without  After    Without  After    Without After    Without
          Sales    Sales    Sales    Sales    Sales    Sales   Sales    Sales
           Charge   Charge   Charge   Charge   Charge  Charge   Charge   Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A1   216.05%  235.34%    3.48%    9.79%    2.77%   3.99%   12.20%   12.86%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B2   223.67%  223.67%    3.97%    8.97%    2.93%   3.29%   12.46%   12.46%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C3   214.32%  214.32%    8.10%    9.10%    3.33%   3.33%   12.13%   12.13%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N     8.14%4   8.14%4    8.47%    9.47%   2.16%4  2.16%4      N/A      N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class Y    25.55%5   25.55%   10.17%   10.17%   5.19%5  5.19%5      N/A      N/A
---------------------------------------------------------------------------------
1. Inception of Class A:      11/01/91
2. Inception of Class B:      9/1/93
3. Inception of Class C:      9/1/93
4. Inception of Class N:      3/01/01
5. Inception of Class Y:      05/01/00

-----------------------------------------------------------------------------
    Average Annual Total Returns for Class A Shares (After Sales Charge)
                       For the Periods Ended 10/31/04
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
                                 1-Year          5-Year          10-Year
                                              (or life of      (or life of
                                                 class)          class)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on Distributions     3.44%           1.73%            9.67%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on                   2.30%           1.74%            9.13%
Distributions and
Redemption of Fund Shares
-----------------------------------------------------------------------------
1.    Inception of Class A: 11/01/91

Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer
Agent at the addresses or telephone numbers shown on the cover of this
Statement of Additional Information. The Fund may also compare its
performance to that of other investments, including other mutual funds, or
use rankings of its performance by independent ranking entities. Examples of
these performance comparisons are set forth below.

|X|   Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper, Inc. ("Lipper"). Lipper
is a widely-recognized independent mutual fund monitoring service. Lipper
monitors the performance of regulated investment companies, including the
Fund, and ranks their performance for various periods in categories based on
investment styles. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gain distributions and income
dividends but do not take sales charges or taxes into consideration. Lipper
also publishes "peer-group" indices of the performance of all mutual funds in
a category that it monitors and averages of the performance of the funds in
particular categories.

|X|   Morningstar Ratings. From time to time the Fund may publish the star
rating of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar rates mutual funds in
their specialized market sector. The Fund is include rated among moderate
allocation funds.

      Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. For each fund with at least a three-year history,
Morningstar calculates a Morningstar Rating(TM)based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in a fund's monthly
performance (including the effects of sales charges, loads, and redemption
fees), placing more emphasis on downward variations and rewarding consistent
performance.  The top 10% of funds in each category receive 5 stars, the next
22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2
stars, and the bottom 10% receive 1 star. (Each share class is counted as a
fraction of one fund within this scale and rated separately, which may cause
slight variations in the distribution percentages.) The Overall Morningstar
Rating for a fund is derived from a weighted average of the performance
figures associated with its three-, five-and ten-year (if applicable)
Morningstar Rating metrics.

      |X|   Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements
and sales literature performance information about the Fund cited in
newspapers and other periodicals such as The New York Times, The Wall Street
Journal, Barron's, or similar publications. That information may include
performance quotations from other sources, including Lipper and Morningstar.
The performance of the Fund's classes of shares may be compared in
publications to the performance
of various market indices or other investments, and averages, performance
rankings or other benchmarks prepared by recognized mutual fund statistical
services.

      Investors may also wish to compare the returns on the Fund's share
classes to the return on fixed-income investments available from banks and
thrift institutions. Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or insured by
the FDIC or any other agency and will fluctuate daily, while bank depository
obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is
backed by the full faith and credit of the U.S. government.

      From time to time, the Fund may publish rankings or ratings of the
Manager or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder and
investor services by third parties may include comparisons of their services
to those provided by other mutual fund families selected by the rating or
ranking services. They may be based upon the opinions of the rating or
ranking service itself, using its research or judgment, or based upon surveys
of investors, brokers, shareholders or others.

      From time to time the Fund may include in its advertisements and sales
literature the total return performance of a hypothetical investment account
that includes shares of the Fund and other Oppenheimer funds. The combined
account may be part of an illustration of an asset allocation model or
similar presentation. The account performance may combine total return
performance of the Fund and the total return performance of other Oppenheimer
funds included in the account. Additionally, from time to time, the Fund's
advertisements and sales literature may include, for illustrative or
comparative purposes, statistical data or other information about general or
specific market and economic conditions. That may include, for example,
o     information about the performance of certain securities or commodities
         markets or segments of those markets,
o     information about the performance of the economies of particular
         countries or regions,
o     the earnings of companies included in segments of particular
         industries, sectors, securities markets, countries or regions,
o     the availability of different types of securities or offerings of
         securities,
o     information relating to the gross national or gross domestic product of
         the United States or other countries or regions,
o     comparisons of various market sectors or indices to demonstrate
         performance, risk, or other characteristics of the Fund.


ABOUT YOUR ACCOUNT

How to Buy Shares

Additional information is presented below about the methods that can be used
to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances
in which sales charges may be reduced or waived for certain classes of
investors.

AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $50 and shareholders must invest at least $500 before an
                     ---
Asset Builder Plan (described below) can be established on a new account.
Accounts established prior to November 1, 2002 will remain at $25 for
additional purchases. Shares will be purchased on the regular business day
the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange (the "Exchange"). The Exchange normally
closes at 4:00 P.M., but may close earlier on certain days. If Federal Funds
are received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the Fund
three days after the transfers are initiated. If the proceeds of the ACH
transfer are not received on a timely basis, the Distributor reserves the
right to cancel the purchase order. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from delays in ACH
transmissions.

Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and
Letters of Intent because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers making such sales.
No sales charge is imposed in certain other circumstances described in
Appendix C to this Statement of Additional Information because the
Distributor or dealer or broker incurs little or no selling expenses.

A fiduciary can count all shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the same
employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You
must request it when you buy shares.

The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for which
the Distributor acts as the distributor and currently include the following:

Oppenheimer AMT-Free Municipals           Oppenheimer Limited Term Municipal Fund
Oppenheimer AMT-Free New York Municipals  Oppenheimer Main Street Fund
Oppenheimer Balanced Fund                 Oppenheimer Main Street Opportunity Fund
Oppenheimer Bond Fund                     Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund     Oppenheimer MidCap Fund
Oppenheimer Capital Appreciation Fund     Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Income Fund           Oppenheimer Pennsylvania Municipal Fund
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Champion Income Fund          Street Fund
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Convertible Securities Fund   Street Fund II
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Developing Markets Fund       Street Fund III
Oppenheimer Disciplined Allocation Fund   Oppenheimer Quest Balanced Fund
                                          Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Discovery Fund                Inc.
                                          Oppenheimer  Quest  International  Value
Oppenheimer Emerging Growth Fund          Fund, Inc.
Oppenheimer Emerging Technologies Fund    Oppenheimer Quest Opportunity Value Fund
Oppenheimer Enterprise Fund               Oppenheimer Quest Value Fund, Inc.
Oppenheimer Equity Fund, Inc.             Oppenheimer Real Asset Fund
Oppenheimer Global Fund                   Oppenheimer Real Estate Fund
                                          Oppenheimer      Rochester      National
Oppenheimer Global Opportunities Fund     Municipals
Oppenheimer Gold & Special Minerals Fund  Oppenheimer Select Value Fund
Oppenheimer Growth Fund                   Oppenheimer Senior Floating Rate Fund
Oppenheimer High Yield Fund               Oppenheimer Small Cap Value Fund
Oppenheimer International Bond Fund       Oppenheimer Strategic Income Fund
Oppenheimer International Growth Fund     Oppenheimer Total Return Bond Fund
Oppenheimer  International  Small Company
Fund                                      Oppenheimer U.S. Government Trust
Oppenheimer International Value Fund      Oppenheimer Value Fund
Oppenheimer   Limited   Term   California
Municipal Fund                            Limited-Term New York Municipal Fund
Oppenheimer Limited-Term Government Fund  Rochester Fund Municipals

And the following money market funds:

Oppenheimer Cash Reserves                 Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc.       Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust    Centennial Tax Exempt Trust
Centennial Government Trust

      There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds.
Under certain circumstances described in this Statement of Additional
Information, redemption proceeds of certain money market fund shares may be
subject to a contingent deferred sales charge.

   Letters of Intent.  Under a Letter of Intent ("Letter"), you can reduce
   the sales charge rate that applies to your purchases of Class A shares if
   you purchase Class A, Class B or (effective March 18, 2005) Class C shares
   of the Fund or other Oppenheimer funds during a 13-month period. The total
   amount of your purchases of Class A, Class B and (effective March 18,
   2005) Class C shares will determine the sales charge rate that applies to
   your Class A share purchases during that period. You can choose to include
   purchases made up to 90 days before the date of the Letter. Class A shares
   of Oppenheimer Money Market Fund, Inc. and Oppenheimer Cash Reserves fund
   on which you did not pay a sales charge and any Class N shares you
   purchase, or may have purchased, will not be counted towards satisfying
   the purchases specified in a Letter.

         A Letter is an investor's statement in writing to the Distributor of
   his or her intention to purchase a specified value of Class A, Class B and
   (effective March 18, 2005) Class C shares of the Fund and other
   Oppenheimer funds during a 13-month period (the "Letter period"). At the
   investor's request, this may include purchases made up to 90 days prior to
   the date of the Letter. The Letter states the investor's intention to make
   the aggregate amount of purchases of shares which, when added to the
   investor's holdings of shares of those funds, will equal or exceed the
   amount specified in the Letter. Purchases made by reinvestment of
   dividends or capital gains distributions and purchases made at net asset
   value (i.e. without a sales charge) do not count toward satisfying the
   amount of the Letter.

      Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that would apply to a single
lump-sum purchase of shares in the amount intended to be purchased under the
Letter.

      In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter
period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms
of Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the application used
for a Letter. If those terms are amended, as they may be from time to time by
the Fund, the investor agrees to be bound by the amended terms and that those
amendments will apply automatically to existing Letters.

      If the total eligible purchases made during the Letter period do not
equal or exceed the intended purchase amount, the concessions previously paid
to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to
actual total purchases. If total eligible purchases during the Letter period
exceed the intended purchase amount and exceed the amount needed to qualify
for the next sales charge rate reduction set forth in the Prospectus, the
sales charges paid will be adjusted to the lower rate. That adjustment will
be made only if and when the dealer returns to the Distributor the excess of
the amount of concessions allowed or paid to the dealer over the amount of
concessions that apply to the actual amount of purchases. The excess
concessions returned to the Distributor will be used to purchase additional
shares for the investor's account at the net asset value per share in effect
on the date of such purchase, promptly after the Distributor's receipt
thereof.

      The  Transfer  Agent  will not hold  shares in escrow for  purchases  of
shares of the Fund and other Oppenheimer funds by  OppenheimerFunds  prototype
401(k) plans under a Letter.  If the intended  purchase  amount under a Letter
entered into by an OppenheimerFunds  prototype 401(k) plan is not purchased by
the plan by the end of the  Letter  period,  there  will be no  adjustment  of
concessions paid to the  broker-dealer or financial  institution of record for
accounts held in the name of that plan.

      In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter when placing any purchase
orders for the investor during the Letter period. All of such purchases must
be made through the Distributor.

      |X|   Terms of Escrow That Apply to Letters of Intent.

      1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by
the Transfer Agent. For example, if the intended purchase amount is $50,000,
the escrow shall be shares valued in the amount of $2,500 (computed at the
offering price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the investor's
account.

      2. If the total minimum investment specified under the Letter is
completed within the 13-month Letter period, the escrowed shares will be
promptly released to the investor.

      3. If, at the end of the 13-month Letter period the total purchases
pursuant to the Letter are less than the intended purchase amount specified
in the Letter, the investor must remit to the Distributor an amount equal to
the difference between the dollar amount of sales charges actually paid and
the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request
from the Distributor or the dealer, the Distributor will, within sixty days
of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.

      4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption
any or all escrowed shares.

5.    The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(a)   Class A shares sold with a front-end sales charge or subject to a Class
            A contingent deferred sales charge,
(b)   Class B shares of other Oppenheimer funds acquired subject to a
            contingent deferred sales charge, and
(c)   Class A or Class B shares acquired by exchange of either (1) Class A
            shares of one of the other Oppenheimer funds that were acquired
            subject to a Class A initial or contingent deferred sales charge
            or (2) Class B shares of one of the other Oppenheimer funds that
            were acquired subject to a contingent deferred sales charge.

      6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow
will be transferred to that other fund.

Asset Builder Plans. As explained in the Prospectus, you must initially
establish your account with $500. Subsequently, you can establish an Asset
Builder Plan to automatically purchase additional shares directly from a bank
account for as little as $50. For those accounts established prior to
November 1, 2002 and which have previously established Asset Builder Plans,
additional purchases will remain at $25. Shares purchased by Asset Builder
Plan payments from bank accounts are subject to the redemption restrictions
for recent purchases described in the Prospectus. Asset Builder Plans are
available only if your bank is an ACH member. Asset Builder Plans may not be
used to buy shares for OppenheimerFunds employer-sponsored qualified
retirement accounts. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use their fund account to make monthly automatic
purchases of shares of up to four other Oppenheimer funds.

      If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit
will be made two business days prior to the investment dates you selected on
your application. Neither the Distributor, the Transfer Agent nor the Fund
shall be responsible for any delays in purchasing shares that result from
delays in ACH transmissions.

      Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by
writing to the Transfer Agent. The Transfer Agent requires a reasonable
period (approximately 10 days) after receipt of your instructions to
implement them. The Fund reserves the right to amend, suspend or discontinue
offering Asset Builder plans at any time without prior notice.

Retirement Plans.  Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charges or at reduced sales charge rates, as
described in an Appendix to this Statement of Additional Information.
Certain special sales charge arrangements described in that Appendix apply to
retirement plans whose records are maintained on a daily valuation basis by
Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent
record keeper that has a contract or special arrangement with Merrill Lynch.
If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has less than $1 million in assets invested in
applicable investments (other than assets invested in money market funds),
then the retirement plan may purchase only Class C shares of the Oppenheimer
funds.  If on the date the plan sponsor signed the Merrill Lynch record
keeping service agreement the plan has $1 million or more in assets but less
than $5 million in assets invested in applicable investments (other than
assets invested in money market funds), then the retirement plan may purchase
only Class N shares of the Oppenheimer funds.  If on the date the plan
sponsor signed the Merrill Lynch record keeping service agreement the plan
has $5 million or more in assets invested in applicable investments (other
than assets invested in money market funds), then the retirement plan may
purchase only Class A shares of the Oppenheimer funds.

      OppenheimerFunds has entered into arrangements with certain record
keepers whereby the Transfer Agent compensates the record keeper for its
record keeping and account servicing functions that it performs on behalf of
the participant level accounts of a retirement plan. While such compensation
may act to reduce the record keeping fees charged by the retirement plan's
record keeper, that compensation arrangement may be terminated at any time,
potentially affecting the record keeping fees charged by the retirement
plan's record keeper.

Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset values of the Fund's
shares on the cancellation date is less than on the purchase date. That loss
is equal to the amount of the decline in the net asset value per share
multiplied by the number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the Fund for
the loss, the Distributor will do so. The Fund may reimburse the Distributor
for that amount by redeeming shares from any account registered in that
investor's name, or the Fund or the Distributor may seek other redress.

Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has
different shareholder privileges and features. The net income attributable to
Class B, Class C or Class N shares and the dividends payable on Class B,
Class C or Class N shares will be reduced by incremental expenses borne
solely by that class. Those expenses include the asset-based sales charges to
which Class B, Class C and Class N shares are subject.

      The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant circumstances. Class
A shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and
Class N shares is the same as that of the initial sales charge on Class A
shares - to compensate the Distributor and brokers, dealers and financial
institutions that sell shares of the Fund. A salesperson who is entitled to
receive compensation from his or her firm for selling Fund shares may receive
different levels of compensation for selling one class of shares rather than
another.

      The Distributor will not accept purchase order of $100,000 or more for
Class B shares or a purchase order of $1 million or more to purchase Class C
shares on behalf of a single investor (not including dealer "street name" or
omnibus accounts).

|X|   Class A Shares Subject to a Contingent Deferred Sales Charge. For
purchases of Class A shares at net asset value whether or not subject to a
contingent deferred sales charge as described in the Prospectus, no sales
concessions will be paid to the broker-dealer of record, as described in the
Prospectus, on sales of Class A shares purchased with the redemption proceeds
of shares of another mutual fund offered as an investment option in a
retirement plan in which Oppenheimer funds are also offered as investment
options under a special arrangement with the Distributor, if the purchase
occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan. Additionally, that concession will not be
paid on purchases of Class A shares by a retirement plan made with the
redemption proceeds of Class N shares of one or more Oppenheimer funds held
by the plan for more than 18 months.

      |X|   Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of
Class B shares to Class A shares 72 months after purchase is not treated as a
taxable event for the shareholder. If those laws or the IRS interpretation of
those laws should change, the automatic conversion feature may be suspended.
In that event, no further conversions of Class B shares would occur while
that suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the
two classes, without the imposition of a sales charge or fee, such exchange
could constitute a taxable event for the shareholder, and absent such
exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.

      |X|   Availability of Class N Shares. In addition to the description of
the types of retirement plans which may purchase Class N shares contained in
the prospectus, Class N shares also are offered to the following:
o     to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),
o     to all rollover contributions made to Individual 401(k) plans,
            Profit-Sharing Plans and Money Purchase Pension Plans,
o     to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and
            Ascender retirement plans,
o     to all trustee-to-trustee IRA transfers,
o     to all 90-24 type 403(b) transfers,
o     to Group Retirement Plans (as defined in Appendix C to this Statement
            of Additional Information) which have entered into a special
            agreement with the Distributor for that purpose,
o     to Retirement Plans qualified under Sections 401(a) or 401(k) of the
            Internal Revenue Code, the recordkeeper or the plan sponsor for
            which has entered into a special agreement with the Distributor,
o     to Retirement Plans of a plan sponsor where the aggregate assets of all
            such plans invested in the Oppenheimer funds is $500,000 or more,
o     to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
            purchase with the redemption proceeds of Class A shares of one or
            more Oppenheimer funds, and
o     to certain customers of broker-dealers and financial advisors that are
            identified in a special agreement between the broker-dealer or
            financial advisor and the Distributor for that purpose.

      The sales concession and the advance of the service fee, as described
in the Prospectus, will not be paid to dealers of record on sales of Class N
shares on:
         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),
         purchases of Class N shares in amounts of $500,000 or more by a
            retirement plan that pays for the purchase with the redemption
            proceeds of  Class C shares of one or more Oppenheimer funds held
            by the plan for more than one year (other than rollovers from an
            OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to
            any IRA invested in the Oppenheimer funds), and
         on purchases of Class N shares by an OppenheimerFunds-sponsored
            Pinnacle or Ascender 401(k) plan made with the redemption
            proceeds of Class A shares of one or more Oppenheimer funds.

      No sales concessions will be paid to the broker-dealer of record, as
described in the Prospectus, on sales of Class N shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.

      |X|   Allocation of Expenses. The Fund pays expenses related to its
daily operations, such as custodian fees, Trustees' fees, transfer agency
fees, legal fees and auditing costs. Those expenses are paid out of the
Fund's assets and are  not paid directly by shareholders. However, those
expenses reduce the net asset values of shares, and therefore are indirectly
borne by shareholders through their investment.

      The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are
allocated pro rata to the shares of all classes. The allocation is based on
the percentage of the Fund's total assets that is represented by the assets
of each class, and then equally to each outstanding share within a given
class. Such general expenses include management fees, legal, bookkeeping and
audit fees, printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, fees to unaffiliated Trustees, custodian expenses, share
issuance costs, organization and start-up costs, interest, taxes and
brokerage commissions, and non-recurring expenses, such as litigation costs.

      Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of
such expenses include distribution and  service plan (12b-1) fees, transfer
and shareholder servicing agent fees and expenses, and shareholder meeting
expenses (to the extent that such expenses pertain only to a specific class).

Fund Account Fees. As stated in the Prospectus, a $12 annual "Minimum Balance
Fee" is assessed on each Fund account with a share balance valued under $500.
The Minimum Balance Fee is automatically deducted from each such Fund account
on or about the second to last business day of September.

      Listed below are certain cases in which the Fund has elected, in its
discretion, not to assess the Fund Account Fees.  These exceptions are
subject to change:
o     A fund account whose shares were acquired after September 30th of the
            prior year;
o     A fund account that has a balance below $500 due to the automatic
            conversion of shares from Class B to Class A shares. However,
            once all Class B shares held in the account have been converted
            to Class A shares the new account balance may become subject to
            the Minimum Balance Fee;
o     Accounts of shareholders who elect to access their account documents
            electronically via eDoc Direct;
o     A fund account that has only certificated shares and, has a balance
            below $500 and is being escheated;
o     Accounts of shareholders that are held by broker-dealers under the NSCC
            Fund/SERV system;
o     Accounts held under the Oppenheimer Legacy Program and/or holding
            certain Oppenheimer Variable Account Funds;
o     Omnibus accounts holding shares pursuant to the Pinnacle, Ascender,
            Custom Plus, Recordkeeper Pro and Pension Alliance Retirement
            Plan programs; and
o     A fund account that falls below the $500 minimum solely due to market
            fluctuations within the 12-month period preceding the date the
            fee is deducted.

      To access account documents electronically via eDocs Direct, please
visit the Service Center on our website at www.oppenheimerfunds.com or call
                                           ------------------------
1.888.470.0862 for instructions.

      The Fund reserves the authority to modify Fund Account Fees in its
discretion.

Determination of Net Asset Values Per Share. The net asset values per share
of each class of shares of the Fund are determined as of the close of
business of the Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M., Eastern time, but may
close earlier on some other days (for example, in case of weather emergencies
or on days falling before a U.S. holiday). All references to time in this
Statement of Additional Information mean "Eastern time." The Exchange's most
recent annual announcement (which is subject to change) states that it will
close on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days.

      Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. Because the Fund's
net asset values will not be calculated on those days, the Fund's net asset
values per share may be significantly affected on such days when shareholders
may not purchase or redeem shares. Additionally, trading on European and
Asian stock exchanges and over-the-counter markets normally is completed
before the close of The Exchange.

      Changes in the values of securities traded on foreign exchanges or
markets as a result of events that occur after the prices of those securities
are determined, but before the close of the Exchange, will not be reflected
in the Fund's calculation of its net asset values that day unless the Manager
determines that the event is likely to effect a material change in the value
of the security. The Manager, or an internal valuation committee established
by the Manager, as applicable, may establish a valuation, under procedures
established by the Board and subject to the approval, ratification and
confirmation by the Board at its next ensuing meeting.

      |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:
o     Equity securities traded on a U.S. securities exchange or on Nasdaq(R)
are valued as follows:
(1)   if last sale information is regularly reported, they are valued at the
               last reported sale price on the principal exchange on which
               they are traded or on Nasdaq(R), as applicable, on that day, or
(2)   if last sale information is not available on a valuation date, they are
               valued at the last reported sale price preceding the valuation
               date if it is within the spread of the closing "bid" and
               "asked" prices on the valuation date or, if not,  at the
               closing "bid" price on the valuation date.
o     Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1)   at the last sale price available to the pricing service approved by the
               Board of Trustees, or
(2)   at the last sale price obtained by the Manager from the report of the
               principal exchange on which the security is traded at its last
               trading session on or immediately before the valuation date, or
(3)   at the mean between the "bid" and "asked" prices obtained from the
               principal exchange on which the security is traded or, on the
               basis of reasonable inquiry, from two market makers in the
               security.
o     Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
o     The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1)   debt instruments that have a maturity of more than 397 days when
               issued,
(2)   debt instruments that had a maturity of 397 days or less when issued
               and have a remaining maturity of more than 60 days, and
(3)   non-money market debt instruments that had a maturity of 397 days or
               less when issued and which have a remaining maturity of 60
               days or less.
o     The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1)   money market debt securities held by a non-money market fund that had a
               maturity of less than 397 days when issued that have a
               remaining maturity of 60 days or less, and
(2)   debt instruments held by a money market fund that have a remaining
               maturity of 397 days or less.
o     Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).

In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information
is not generally available, the Manager may use pricing services approved by
the Board of Trustees. The pricing service may use "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield and
maturity. Other special factors may be involved (such as the tax-exempt
status of the interest paid by municipal securities). The Manager will
monitor the accuracy of the pricing services. That monitoring may include
comparing prices used for portfolio valuation to actual sales prices of
selected securities.

      The closing prices in the 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(R), as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last
sale price on the preceding trading day if it is within the spread of the
closing "bid" and "asked" prices on the principal exchange or on Nasdaq(R)on
the valuation date. If not, the value shall be the closing bid price on the
principal exchange or on Nasdaq(R)on the valuation date. If the put, call or
future is not traded on an exchange or on Nasdaq(R), it shall be valued by the
mean between "bid" and "asked" prices obtained by the Manager from two active
market makers. In certain cases that may be at the "bid" price if no "asked"
price is available.

      When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the
option. In determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by the Fund expires, the Fund has a gain
in the amount of the premium. If the Fund enters into a closing purchase
transaction, it will have a gain or loss, depending on whether the premium
received was more or less than the cost of the closing transaction. If the
Fund exercises a put it holds, the amount the Fund receives on its sale of
the underlying investment is reduced by the amount of premium paid by the
Fund.

How to Sell Shares

The information below supplements the terms and conditions for redeeming
shares set forth in the Prospectus.

Sending Redemption Proceeds by Federal Funds Wire.  The Federal Funds wire of
redemption proceeds may be delayed if the Fund's custodian bank is not open
for business on a day when the Fund would normally authorize the wire to be
made, which is usually the Fund's next regular business day following the
redemption. In those circumstances, the wire will not be transmitted until
the next bank business day on which the Fund is open for business. No
dividends will be paid on the proceeds of redeemed shares awaiting transfer
by Federal Funds wire.

Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o     Class A shares purchased subject to an initial sales charge or Class A
         shares on which a contingent deferred sales charge was paid, or
o     Class B shares that were subject to the Class B contingent deferred
         sales charge when redeemed.

      The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. This privilege does not
apply to Class C, Class N or Class Y shares. The Fund may amend, suspend or
cease offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.

      Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all of
the loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the
sales charge, the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the redemption. However,
in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds.

Payments "In Kind". The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, under certain
circumstances, the Board of Trustees of the Fund may determine that it would
be detrimental to the best interests of the remaining shareholders of the
Fund to make payment of a redemption order wholly or partly in cash. In that
case, the Fund may pay the redemption proceeds in whole or in part by a
distribution "in kind" of liquid securities from the portfolio of the Fund,
in lieu of cash.

      The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. The Fund will value securities used to pay
redemptions in kind using the same method the Fund uses to value its
portfolio securities described above under "Determination of Net Asset Values
Per Share." That valuation will be made as of the time the redemption price
is determined.

Involuntary Redemptions. The Fund's Board of Trustees has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $500 or such lesser amount as
the Board may fix. The Board will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of such shares has
fallen below the stated minimum solely as a result of market fluctuations. If
the Board exercises this right, it may also fix the requirements for any
notice to be given to the shareholders in question (not less than 30 days).
The Board may alternatively set requirements for the shareholder to increase
the investment, or set other terms and conditions so that the shares would
not be involuntarily redeemed.

Transfers of Shares. A transfer of shares to a different registration is not
an event that triggers the payment of sales charges. Therefore, shares are
not subject to the payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or entity. It does not
matter whether the transfer occurs by absolute assignment, gift or bequest,
as long as it does not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales charge are
transferred, the transferred shares will remain subject to the contingent
deferred sales charge. It will be calculated as if the transferee shareholder
had acquired the transferred shares in the same manner and at the same time
as the transferring shareholder.

      If less than all shares held in an account are transferred, and some
but not all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class B,
Class C and Class N contingent deferred sales charge will be followed in
determining the order in which shares are transferred.

Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial
plans, 401(k) plans or pension or profit-sharing plans should be addressed to
"Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its
address listed in "How To Sell Shares" in the Prospectus or on the back cover
of this Statement of Additional Information. The request must:
(1)   state the reason for the distribution;
(2)   state the owner's awareness of tax penalties if the distribution is
         premature; and
(3)   conform to the requirements of the plan and the Fund's other redemption
         requirements.

      Participants (other than self-employed plan sponsors) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign
the request.

      Distributions from pension and profit sharing plans are subject to
special requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed and submitted to the
Transfer Agent before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the Internal
Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be
submitted to the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided the Transfer
Agent with a certified tax identification number, the Internal Revenue Code
requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, and
the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.

Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized
dealers or brokers on behalf of their customers. Shareholders should contact
their broker or dealer to arrange this type of redemption. The repurchase
price per share will be the net asset value next computed after the
Distributor receives an order placed by the dealer or broker. However, if the
Distributor receives a repurchase order from a dealer or broker after the
close of the Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from
its customers prior to the time the Exchange closes. Normally, the Exchange
closes at 4:00 P.M., but may do so earlier on some days. Additionally, the
order must have been transmitted to and received by the Distributor prior to
its close of business that day (normally 5:00 P.M.).

      Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after the shares
have been redeemed upon the Distributor's receipt of the required redemption
documents in proper form. The signature(s) of the registered owners on the
redemption documents must be guaranteed as described in the Prospectus.

Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to $1,500
per month may be requested by telephone if payments are to be made by check
payable to all shareholders of record. Payments must also be sent to the
address of record for the account and the address must not have been changed
within the prior 30 days. Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis.

      Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account designated
on the account application or by signature-guaranteed instructions sent to
the Transfer Agent. Shares are normally redeemed pursuant to an Automatic
Withdrawal Plan three business days before the payment transmittal date you
select in the account application. If a contingent deferred sales charge
applies to the redemption, the amount of the check or payment will be reduced
accordingly.

      The Fund cannot guarantee receipt of a payment on the date requested.
The Fund reserves the right to amend, suspend or discontinue offering these
plans at any time without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make regular additional
Class A share purchases while participating in an Automatic Withdrawal Plan.
Class B, Class C and Class N shareholders should not establish automatic
withdrawal plans, because of the potential imposition of the contingent
deferred sales charge on such withdrawals (except where the Class B, Class C
or Class N contingent deferred sales charge is waived as described in
Appendix C to this Statement of Additional Information).

      By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to
existing Plans.

|X|   Automatic Exchange Plans. Shareholders can authorize the Transfer Agent
to exchange a pre-determined amount of shares of the Fund for shares (of the
same class) of other Oppenheimer funds automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum
amount that may be exchanged to each other fund account is $50. Instructions
should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of Additional
Information.

Automatic  Withdrawal Plans. Fund shares will be redeemed as necessary to meet
withdrawal  payments.  Shares acquired without a sales charge will be redeemed
first.   Shares   acquired  with   reinvested   dividends  and  capital  gains
distributions will be redeemed next,  followed by shares acquired with a sales
charge,  to the extent necessary to make withdrawal  payments.  Depending upon
the amount withdrawn, the investor's principal may be depleted.  Payments made
under  these  plans  should  not be  considered  as a yield or  income on your
investment.

      The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the plan
authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for
any action taken or not taken by the Transfer Agent in good faith to
administer the plan. Share certificates will not be issued for shares of the
Fund purchased for and held under the plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the plan application so that the shares
represented by the certificate may be held under the plan.

      For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the
account may be paid in cash or reinvested.

      Shares will be redeemed to make withdrawal payments at the net asset
value per share determined on the redemption date. Checks or AccountLink
payments representing the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment, according to the choice specified in writing by the Planholder.
Receipt of payment on the date selected cannot be guaranteed.

      The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such
notification for the requested change to be put in effect. The Planholder
may, at any time, instruct the Transfer Agent by written notice to redeem
all, or any part of, the shares held under the plan. That notice must be in
proper form in accordance with the requirements of the then-current
Prospectus of the Fund. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect and
will mail a check for the proceeds to the Planholder.

      The Planholder may terminate a plan at any time by writing to the
Transfer Agent. The Fund may also give directions to the Transfer Agent to
terminate a plan. The Transfer Agent will also terminate a plan upon its
receipt of evidence satisfactory to it that the Planholder has died or is
legally incapacitated. Upon termination of a plan by the Transfer Agent or
the Fund, shares that have not been redeemed will be held in uncertificated
form in the name of the Planholder. The account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his or her executor or
guardian, or another authorized person.

      If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to
act as agent in administering the plan.

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares
of the same class of other Oppenheimer funds. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A"
shares for this purpose. You can obtain a current list showing which funds
offer which classes of shares by calling the Distributor.

o     All of the Oppenheimer funds currently offer Class A, B, C, N and Y
      shares with the following exceptions:

   The following funds only offer Class A shares:
   Centennial California Tax Exempt Trust    Centennial New York Tax Exempt
                                             Trust
   Centennial Government Trust               Centennial Tax Exempt Trust
   Centennial Money Market Trust


   The following funds do not offer Class N shares:
   Limited Term New York Municipal Fund      Oppenheimer New Jersey Municipal Fund
   Oppenheimer AMT-Free Municipals           Oppenheimer Principal Protected Main
                                             Street Fund II
   Oppenheimer AMT-Free New York             Oppenheimer Pennsylvania Municipal
   Municipals                                Fund
   Oppenheimer California Municipal Fund     Oppenheimer Rochester National
                                             Municipals
   Oppenheimer International Value Fund      Oppenheimer Senior Floating Rate Fund
   Oppenheimer Limited Term California       Rochester Fund Municipals
   Municipal Fund
   Oppenheimer Limited Term Municipal
   Fund
   Oppenheimer Money Market Fund, Inc.

   The following funds do not offer Class Y shares:
   Limited Term New York Municipal Fund      Oppenheimer International Small Company
                                             Fund
   Oppenheimer AMT-Free Municipals          Oppenheimer Limited Term Municipal Fund
   Oppenheimer AMT-Free New York Municipals Oppenheimer New Jersey Municipal Fund
   Oppenheimer Balanced Fund                Oppenheimer Pennsylvania Municipal Fund
   Oppenheimer California Municipal Fund    Oppenheimer Principal Protected Main
                                            Street Fund
   Oppenheimer Capital Income Fund          Oppenheimer Principal Protected Main
                                            Street Fund II
   Oppenheimer Cash Reserves                Oppenheimer Principal Protected Main
                                            Street Fund III
   Oppenheimer Champion Income Fund         Oppenheimer Quest Capital Value Fund,
                                            Inc.
   Oppenheimer Convertible Securities Fund  Oppenheimer Quest International Value
                                            Fund, Inc.
   Oppenheimer Disciplined Allocation Fund  Oppenheimer Rochester National Municipals
   Oppenheimer Developing Markets Fund      Oppenheimer Senior Floating Rate Fund
   Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund
   Oppenheimer International Growth Fund    Oppenheimer Total Return Bond Fund


o     Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y
      shares.
o     Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
      shares of any other fund.
o     Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
      generally available only by exchange from the same class of shares of
      other Oppenheimer funds or through OppenheimerFunds-sponsored 401(k)
      plans.
o     Class M shares of Oppenheimer Convertible Securities Fund may be
      exchanged only for Class A shares of other Oppenheimer funds. They may
      not be acquired by exchange of shares of any class of any other
      Oppenheimer funds except Class A shares of Oppenheimer Money Market
      Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
      shares.
o     Class A shares of Oppenheimer funds may be exchanged at net asset value
      for shares of any money market fund offered by the Distributor. Shares
      of any money market fund purchased without a sales charge may be
      exchanged for shares of Oppenheimer funds offered with a sales charge
      upon payment of the sales charge. They may also be used to purchase
      shares of Oppenheimer funds subject to an early withdrawal charge or
      contingent deferred sales charge.
o     Shares of the Fund acquired by reinvestment of dividends or
      distributions from any of the other Oppenheimer funds or from any unit
      investment trust for which reinvestment arrangements have been made
      with the Distributor may be exchanged at net asset value for shares of
      any of the Oppenheimer funds.
o     Shares of Oppenheimer Principal Protected Main Street Fund may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund until after the expiration of the warranty period
      (8/5/2010).
o     Shares of Oppenheimer Principal Protected Main Street Fund II may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund II until after the expiration of the warranty period
      (2/4/2011).
o     Shares of Oppenheimer Principal Protected Main Street Fund III may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund III until after the expiration of the warranty period
      (12/6/2011).

      The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days' notice prior to
materially amending or terminating the exchange privilege. That 60 day notice
is not required in extraordinary circumstances.

      |X|   How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any
class purchased subject to a contingent deferred sales charge, with the
following exceptions:

o     When Class A shares of any Oppenheimer fund (other than Rochester
National Municipals and Rochester Fund Municipals) acquired by exchange of
Class A shares of any Oppenheimer fund purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months measured from
the beginning of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on
the redeemed shares.

o     When Class A shares of Rochester National Municipals and Rochester Fund
Municipals acquired by exchange of Class A shares of any Oppenheimer fund
purchased subject to a Class A contingent deferred sales charge are redeemed
within 24 months of the beginning of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred
sales charge is imposed on the redeemed shares.

o     If any Class A shares of another Oppenheimer fund that are exchanged
for Class A shares of Oppenheimer Senior Floating Rate Fund are subject to
the Class A contingent deferred sales charge of the other Oppenheimer fund at
the time of exchange, the holding period for that Class A contingent deferred
sales charge will carry over to the Class A shares of Oppenheimer Senior
Floating Rate Fund acquired in the exchange. The Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in that exchange will be
subject to the Class A Early Withdrawal Charge of Oppenheimer Senior Floating
Rate Fund if they are repurchased before the expiration of the holding period.

o     When Class A shares of Oppenheimer Cash Reserves and Oppenheimer Money
Market Fund, Inc. acquired by exchange of Class A shares of any Oppenheimer
fund purchased subject to a Class A contingent deferred sales charge are
redeemed within the Class A holding period of the fund from which the shares
were exchanged, the Class A contingent deferred sales charge of the fund from
which the shares were exchanged is imposed on the redeemed shares.

o     With respect to Class B shares except for the funds listed in the next
item immediately below, the Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within
six years of the initial purchase of the exchanged Class B shares.

o     With respect to Class B shares of Limited-Term Government Fund, Limited
Term Municipal Fund, Limited Term New York Municipal Fund, Oppenheimer Senior
Floating Rate Fund and Cash Reserves that were initially purchased as shares
of Oppenheimer Capital Preservation Fund, the Class B contingent deferred
sales charge is imposed on Class B shares acquired by exchange if they are
redeemed within 5 years of the initial purchase of the exchanged Class B
shares.

o     With respect to Class C shares, the Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.

o     With respect to Class N shares, a 1% contingent deferred sales charge
will be imposed if the retirement plan (not including IRAs and 403(b) plans)
is terminated or Class N shares of all Oppenheimer funds are terminated as an
investment option of the plan and Class N shares are redeemed within 18
months after the plan's first purchase of Class N shares of any Oppenheimer
fund or with respect to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within 18 months of the plan's first purchase of Class N
shares of any Oppenheimer fund.

o     When Class B, Class C or Class N shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the Prospectus
for the imposition of the Class B, Class C or Class N contingent deferred
sales charge will be followed in determining the order in which the shares
are exchanged. Before exchanging shares, shareholders should take into
account how the exchange may affect any contingent deferred sales charge that
might be imposed in the subsequent redemption of remaining shares.

      Shareholders owning shares of more than one class must specify which
class of shares they wish to exchange.

      |X|   Limits on Multiple Exchange Orders. The Fund reserves the right
to reject telephone or written exchange requests submitted in bulk by anyone
on behalf of more than one account.

      |X|   Telephone Exchange Requests. When exchanging shares by telephone,
a shareholder must have an existing account in the fund to which the exchange
is to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.

Processing  Exchange  Requests.  Shares to be  exchanged  are  redeemed on the
regular  business  day the  Transfer  Agent  receives an  exchange  request in
proper  form  (the  "Redemption  Date").  Normally,  shares  of the fund to be
acquired are  purchased on the  Redemption  Date,  but such  purchases  may be
delayed  by either  fund up to five  business  days if it  determines  that it
would be  disadvantaged by an immediate  transfer of the redemption  proceeds.
The Fund  reserves  the  right,  in its  discretion,  to refuse  any  exchange
request  that may  disadvantage  it. For  example,  if the receipt of multiple
exchange  requests  from a dealer might require the  disposition  of portfolio
securities at a time or at a price that might be  disadvantageous to the Fund,
the Fund may refuse the request.

      When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange
features such as Automatic Exchange Plans and Automatic Withdrawal Plans
cannot be switched to an account in Oppenheimer Senior Floating Rate Fund.

      In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a
share certificate that is not tendered with the request. In those cases, only
the shares available for exchange without restriction will be exchanged.

      The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that
the fund selected is appropriate for his or her investment and should be
aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of one
fund and a purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of redemption proceeds
in such cases. The Fund, the Distributor, and the Transfer Agent are unable
to provide investment, tax or legal advice to a shareholder in connection
with an exchange request or any other investment transaction.

Dividends, Capital Gains and Taxes

Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of
any capital gains. The dividends and distributions paid by a class of shares
will vary from time to time depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by the Fund or borne separately
by a class. Dividends are calculated in the same manner, at the same time,
and on the same day for each class of shares. However, dividends on Class B,
Class C and Class N shares are expected to be lower than dividends on Class A
and Class Y shares. That is because of the effect of the asset-based sales
charge on Class B, Class C and Class N shares. Those dividends will also
differ in amount as a consequence of any difference in the net asset values
of the different classes of shares.

      Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund,
Inc. Reinvestment will be made as promptly as possible after the return of
such checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders
or their representatives for compliance with those laws in good faith.

Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares.
The federal tax treatment of the Fund's dividends and capital gains
distributions is briefly highlighted in the Prospectus. The following is only
a summary of certain additional tax considerations generally affecting the
Fund and its shareholders.

      The tax discussion in the Prospectus and this Statement of Additional
Information is based on tax law in effect on the date of the Prospectus and
this Statement of Additional Information. Those laws and regulations may be
changed by legislative, judicial, or administrative action, sometimes with
retroactive effect. State and local tax treatment of ordinary income
dividends and capital gain dividends from regulated investment companies may
differ from the treatment under the Internal Revenue Code described below.
Potential purchasers of shares of the Fund are urged to consult their tax
advisers with specific reference to their own tax circumstances as well as
the consequences of federal, state and local tax rules affecting an
investment in the Fund.

Qualification as a Regulated Investment Company. The Fund has elected to be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a regulated investment company, the Fund
is not subject to federal income tax on the portion of its net investment
income (that is, taxable interest, dividends, and other taxable ordinary
income, net of expenses) and capital gain net income (that is, the excess of
net long-term capital gains over net short-term capital losses) that it
distributes to shareholders. That qualification enables the Fund to "pass
through" its income and realized capital gains to shareholders without having
to pay tax on them. This avoids a "double tax" on that income and capital
gains, since shareholders normally will be taxed on the dividends and capital
gains they receive from the Fund (unless their Fund shares are held in a
retirement account or the shareholder is otherwise exempt from tax).

      The Internal Revenue Code contains a number of complex tests relating
to qualification that the Fund might not meet in a particular year. If it did
not qualify as a regulated investment company, the Fund would be treated for
tax purposes as an ordinary corporation and would receive no tax deduction
for payments made to shareholders.

      To qualify as a regulated investment company, the Fund must distribute
at least 90% of its investment company taxable income (in brief, net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year. The Fund must also satisfy
certain other requirements of the Internal Revenue Code, some of which are
described below. Distributions by the Fund made during the taxable year or,
under specified circumstances, within 12 months after the close of the
taxable year, will be considered distributions of income and gains for the
taxable year and will therefore count toward satisfaction of the
above-mentioned requirement.

      To qualify as a regulated investment company, the Fund must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies (to the extent such currency gains
are directly related to the regulated investment company's principal business
of investing in stock or securities) and certain other income.

      In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under that test, at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items (including receivables), U.S. government
securities, securities of other regulated investment companies, and
securities of other issuers. As to each of those issuers, the Fund must not
have invested more than 5% of the value of the Fund's total assets in
securities of each such issuer and the Fund must not hold more than 10% of
the outstanding voting securities of each such issuer. No more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
For purposes of this test, obligations issued or guaranteed by certain
agencies or instrumentalities of the U.S. government are treated as U.S.
government securities.

Excise Tax on Regulated Investment Companies. Under the Internal Revenue
Code, by December 31 each year, the Fund must distribute 98% of its taxable
investment income earned from January 1 through December 31 of that year and
98% of its capital gains realized in the period from November 1 of the prior
year through October 31 of the current year. If it does not, the Fund must
pay an excise tax on the amounts not distributed. It is presently anticipated
that the Fund will meet those requirements. To meet this requirement, in
certain circumstances the Fund might be required to liquidate portfolio
investments to make sufficient distributions to avoid excise tax liability.
However, the Board of Trustees and the Manager might determine in a
particular year that it would be in the best interests of shareholders for
the Fund not to make such distributions at the required levels and to pay the
excise tax on the undistributed amounts. That would reduce the amount of
income or capital gains available for distribution to shareholders.

Taxation of Fund Distributions. The Fund anticipates distributing
substantially all of its investment company taxable income for each taxable
year. Those distributions will be taxable to shareholders as ordinary income
and treated as dividends for federal income tax purposes.

      Special provisions of the Internal Revenue Code govern the eligibility
of the Fund's dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not eligible for the
deduction. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option
premiums, interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for the
deduction.

      The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute
any such amounts. If net long term capital gains are distributed and
designated as a capital gain distribution, it will be taxable to shareholders
as a long-term capital gain and will be properly identified in reports sent
to shareholders in January of each year. Such treatment will apply no matter
how long the shareholder has held his or her shares or whether that gain was
recognized by the Fund before the shareholder acquired his or her shares.

      If the Fund elects to retain its net capital gain, the Fund will be
subject to tax on it at the 35% corporate tax rate. If the Fund elects to
retain its net capital gain, the Fund will provide to shareholders of record
on the last day of its taxable year information regarding their pro rata
share of the gain and tax paid. As a result, each shareholder will be
required to report his or her pro rata share of such gain on their tax return
as long-term capital gain, will receive a refundable tax credit for his/her
pro rata share of tax paid by the Fund on the gain, and will increase the tax
basis for his/her shares by an amount equal to the deemed distribution less
the tax credit.

      Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such
income.

      Distributions by the Fund that do not constitute ordinary income
dividends or capital gain distributions will be treated as a return of
capital to the extent of the shareholder's tax basis in their shares. Any
excess will be treated as gain from the sale of those shares, as discussed
below. Shareholders will be advised annually as to the U.S. federal income
tax consequences of distributions made (or deemed made) during the year. If
prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of
the effect of the Fund's investment policies, they will be identified as such
in notices sent to shareholders.

      Distributions by the Fund will be treated in the manner described above
regardless of whether the distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date.

      The Fund will be required in certain cases to withhold 28% of ordinary
income dividends, capital gains distributions and the proceeds of the
redemption of shares, paid to any shareholder (1) who has failed to provide a
correct taxpayer identification number or to properly certify that number
-------
when required, (2) who is subject to backup withholding for failure to report
the receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that the shareholder is not subject to backup withholding
or is an "exempt recipient" (such as a corporation). Any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and all income and any tax
withheld is identified in reports mailed to shareholders in January of each
year with a copy sent to the IRS.

Tax Effects of Redemptions of Shares. If a shareholder redeems all or a
portion of his/her shares, the shareholder will recognize a gain or loss on
the redeemed shares in an amount equal to the difference between the proceeds
of the redeemed shares and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss recognized in that manner may be
disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the redemption.

      In general, any gain or loss arising from the redemption of shares of
the Fund will be considered capital gain or loss, if the shares were held as
a capital asset. It will be long-term capital gain or loss if the shares were
held for more than one year. However, any capital loss arising from the
redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on those shares. Special holding period rules under the Internal
Revenue Code apply in this case to determine the holding period of shares and
there are limits on the deductibility of capital losses in any year.

Foreign Shareholders. Under U.S. tax law, taxation of a shareholder who is a
foreign person (to include, but not limited to, a nonresident alien
individual, a foreign trust, a foreign estate, a foreign corporation, or a
foreign partnership) primarily depends on whether the foreign person's income
from the Fund is effectively connected with the conduct of a U.S. trade or
business. Typically, ordinary income dividends paid from a mutual fund are
not considered "effectively connected" income.

      Ordinary income dividends that are paid by the Fund (and are deemed not
"effectively connected income") to foreign persons will be subject to a U.S.
tax withheld by the Fund at a rate of 30%, provided the Fund obtains a
properly completed and signed Certificate of Foreign Status. The tax rate may
be reduced if the foreign person's country of residence has a tax treaty with
the U.S. allowing for a reduced tax rate on ordinary income dividends paid by
the Fund. Any tax withheld by the Fund is remitted by the Fund to the U.S.
Treasury and all income and any tax withheld is identified in reports mailed
to shareholders in March of each year with a copy sent to the IRS.

      If the ordinary income dividends from the Fund are effectively
                                                     ---
connected with the conduct of a U.S. trade or business, then the foreign
person may claim an exemption from the U.S. tax described above provided the
Fund obtains a properly completed and signed Certificate of Foreign Status.
If the foreign person fails to provide a certification of his/her foreign
status, the Fund will be required to withhold U.S. tax at a rate of 28% on
ordinary income dividends, capital gains distributions and the proceeds of
the redemption of shares, paid to any foreign person. All income and any tax
withheld (in this situation) by the Fund is remitted by the Fund to the U.S.
Treasury and is identified in reports mailed to shareholders in January of
each year with a copy sent to the IRS.

      The tax consequences to foreign persons entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisors or the U.S.
Internal Revenue Service with respect to the particular tax consequences to
them of an investment in the Fund, including the applicability of the U.S.
withholding taxes described above.

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the
same class of any of the other Oppenheimer funds listed above. Reinvestment
will be made without sales charge at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
To elect this option, the shareholder must notify the Transfer Agent in
writing and must have an existing account in the fund selected for
reinvestment. Otherwise the shareholder first must obtain a prospectus for
that fund and an application from the Distributor to establish an account.
Dividends and/or distributions from shares of certain other Oppenheimer funds
(other than Oppenheimer Cash Reserves) may be invested in shares of this Fund
on the same basis.


Additional Information About the Fund

The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as
the Fund's Distributor. The Distributor also distributes shares of the other
Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of
the Manager.

The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is
a division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It serves as the Transfer Agent for
an annual per account fee. It also acts as shareholder servicing agent for
the other Oppenheimer funds. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free numbers shown on
the back cover.


The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund.  It is the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with
the Manager and its affiliates.  The Fund's cash balances with the custodian
in excess of $100,000 are not protected by federal deposit insurance.  Those
uninsured balances at times may be substantial.

Independent Registered Public Accounting Firm. KPMG LLP serves as the
independent registered public accounting firm for the Fund. KPMG LLP audits
the Fund's financial statements and performs other related audit services.
KPMG LLP also acts as the independent registered public accounting firm for
certain other funds advised by the Manager and its affiliates. Audit and
non-audit services provided by KPMG LLP to the Fund must be pre-approved by
the Audit Committee.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Quest Balanced Fund formerly Oppenheimer Quest Balanced Value Fund
(one of the portfolios constituting the Oppenheimer Quest For Value Funds),
including the statement of investments, as of October 31, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

      We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 2004, by correspondence with
the custodian 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 Quest Balanced Fund as of October 31, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.


KPMG LLP

Denver, Colorado
December 16, 2004





STATEMENT OF INVESTMENTS  October 31, 2004
--------------------------------------------------------------------------------

                                                                           VALUE
                                                          SHARES      SEE NOTE 1
--------------------------------------------------------------------------------
COMMON STOCKS--72.5%
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--11.9%
--------------------------------------------------------------------------------
HOTELS, RESTAURANTS &amp; LEISURE--3.8%
Royal Caribbean Cruises Ltd.                           5,845,400   $ 272,395,640
--------------------------------------------------------------------------------
MEDIA--3.7%
DirecTV Group, Inc. (The) 1                           16,000,000     268,320,000
--------------------------------------------------------------------------------
MULTILINE RETAIL--1.3%
Dollar General Corp.                                   5,200,000     100,100,000
--------------------------------------------------------------------------------
SPECIALTY RETAIL--3.1%
Abercrombie &amp; Fitch Co., Cl. A                         1,344,600      52,681,428
--------------------------------------------------------------------------------
Office Depot, Inc. 1                                  10,098,500     163,494,715
--------------------------------------------------------------------------------
Tiffany &amp; Co.                                            294,800       8,646,484
                                                                   -------------
                                                                     224,822,627

--------------------------------------------------------------------------------
CONSUMER STAPLES--4.5%
--------------------------------------------------------------------------------
FOOD &amp; STAPLES RETAILING--4.5%
Wal-Mart Stores, Inc.                                  6,000,000     323,520,000
--------------------------------------------------------------------------------
ENERGY--9.1%
--------------------------------------------------------------------------------
ENERGY EQUIPMENT &amp; SERVICES--0.3%
Nabors Industries Ltd. 1                                 500,000      24,560,000
--------------------------------------------------------------------------------
OIL &amp; GAS--8.8%
BP plc, ADR                                            3,000,000     174,750,000
--------------------------------------------------------------------------------
ChevronTexaco Corp.                                    2,000,000     106,120,000
--------------------------------------------------------------------------------
ConocoPhillips                                         4,250,000     358,317,500
                                                                   -------------
                                                                     639,187,500

--------------------------------------------------------------------------------
FINANCIALS--12.2%
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--2.2%
American Express Co.                                   3,000,000     159,210,000
--------------------------------------------------------------------------------
INSURANCE--10.0%
AMBAC Financial Group, Inc.                            2,000,000     156,120,000
--------------------------------------------------------------------------------
American International Group, Inc.                     3,000,000     182,130,000
--------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The)          4,500,000     263,160,000
--------------------------------------------------------------------------------
UnumProvident Corp.                                    9,000,000     122,940,000
                                                                   -------------
                                                                     724,350,000

--------------------------------------------------------------------------------
HEALTH CARE--10.7%
--------------------------------------------------------------------------------
BIOTECHNOLOGY--2.8%
Amgen, Inc. 1                                          2,000,000     113,600,000
--------------------------------------------------------------------------------
Wyeth                                                  2,206,400      87,483,760
                                                                   -------------
                                                                     201,083,760


                      19 | OPPENHEIMER QUEST BALANCED FUND

STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------
                                                                           VALUE
                                                          SHARES      SEE NOTE 1
--------------------------------------------------------------------------------
HEALTH CARE PROVIDERS &amp; SERVICES--1.4%
Anthem, Inc. 1                                         1,300,000   $ 104,520,000
--------------------------------------------------------------------------------
PHARMACEUTICALS--6.5%
Pfizer, Inc.                                           5,000,000     144,750,000
--------------------------------------------------------------------------------
Sanofi-Aventis SA, ADR                                 9,000,000     328,500,000
                                                                   -------------
                                                                     473,250,000

--------------------------------------------------------------------------------
INDUSTRIALS--2.4%
--------------------------------------------------------------------------------
COMMERCIAL SERVICES &amp; SUPPLIES--1.3%
ChoicePoint, Inc. 1                                    2,200,000      91,586,000
--------------------------------------------------------------------------------
MACHINERY--1.1%
SPX Corp.                                              2,157,700      82,747,795
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--13.3%
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.5%
Cisco Systems, Inc. 1                                  9,624,400     184,884,724
--------------------------------------------------------------------------------
JDS Uniphase Corp. 1                                  22,000,000      69,740,000
                                                                   -------------
                                                                     254,624,724

--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT &amp; INSTRUMENTS--2.1%
Flextronics International Ltd. 1                      12,400,000     149,420,000
--------------------------------------------------------------------------------
SEMICONDUCTORS &amp; SEMICONDUCTOR EQUIPMENT--6.9%
Freescale Semiconductor, Inc., Cl. A 1                 4,500,000      69,930,000
--------------------------------------------------------------------------------
Intel Corp.                                            8,500,000     189,210,000
--------------------------------------------------------------------------------
Texas Instruments, Inc.                               10,000,000     244,500,000
                                                                   -------------
                                                                     503,640,000

--------------------------------------------------------------------------------
SOFTWARE--0.8%
Cadence Design Systems, Inc. 1                         4,394,400      54,666,336
--------------------------------------------------------------------------------
MATERIALS--8.4%
--------------------------------------------------------------------------------
METALS &amp; MINING--5.9%
Alcan, Inc.                                            4,700,000     217,704,000
--------------------------------------------------------------------------------
Inco Ltd. 1                                            5,900,000     208,860,000
                                                                   -------------
                                                                     426,564,000

--------------------------------------------------------------------------------
PAPER &amp; FOREST PRODUCTS--2.5%
International Paper Co.                                4,800,000     184,848,000
                                                                   -------------
Total Common Stocks (Cost $4,906,569,793)                          5,263,416,382

                                                           UNITS
--------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
--------------------------------------------------------------------------------
Conseco, Inc. Wts., Exp. 9/10/08 1 (Cost $1,000,000)     200,000         472,000


                      20 | OPPENHEIMER QUEST BALANCED FUND

                                                       PRINCIPAL           VALUE
                                                          AMOUNT      SEE NOTE 1
--------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.9%
--------------------------------------------------------------------------------
U.S. Treasury Nts.:
1.625%, 3/31/05                                     $221,200,000   $ 220,871,739
2.625%, 3/15/09                                       65,155,000      63,724,652
                                                                   -------------
Total U.S. Government Obligations
 (Cost $280,949,359)                                                 284,596,391

--------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--22.4%
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--2.9%
--------------------------------------------------------------------------------
AUTOMOBILES--1.4%
DaimlerChrysler North America Holding Corp.:
3.40% Nts., Series D, 12/15/04                        19,480,000      19,493,227
7.40% Unsec. Nts., 1/20/05                            14,600,000      14,755,329
--------------------------------------------------------------------------------
Ford Motor Co., 7.45% Bonds, 7/16/31                   7,610,000       7,432,337
--------------------------------------------------------------------------------
Ford Motor Credit Co., 6.125% Unsec. Nts., 1/9/06     20,060,000      20,732,792
--------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.75% Nts., 1/15/06  38,505,000      39,861,570
                                                                   -------------
                                                                     102,275,255

--------------------------------------------------------------------------------
MEDIA--1.5%
News America Holdings, Inc., 9.25% Sr. Debs., 2/1/13   8,500,000      11,016,697
--------------------------------------------------------------------------------
Time Warner, Inc., 5.625% Sr. Unsec. Nts., 5/1/05     29,270,000      29,715,606
--------------------------------------------------------------------------------
Viacom, Inc., 6.40% Sr. Nts., 1/30/06                 38,950,000      40,730,171
--------------------------------------------------------------------------------
Walt Disney Co. (The), 7.30% Nts., 2/8/05             24,340,000      24,660,655
                                                                   -------------
                                                                     106,123,129

--------------------------------------------------------------------------------
CONSUMER STAPLES--3.9%
--------------------------------------------------------------------------------
BEVERAGES--0.6%
Coca-Cola Enterprises, Inc., 5.25% Unsec. Unsub.
 Nts., 5/15/07                                        41,139,000      43,297,399
--------------------------------------------------------------------------------
FOOD &amp; STAPLES RETAILING--0.9%
CVS Corp., 3.875% Unsec. Nts., 11/1/07                24,360,000      24,786,032
--------------------------------------------------------------------------------
Safeway, Inc., 6.15% Sr. Unsec. Nts., 3/1/06          40,125,000      41,805,555
                                                                   -------------
                                                                      66,591,587

--------------------------------------------------------------------------------
FOOD PRODUCTS--1.9%
General Mills, Inc., 2.625% Unsec. Unsub.
 Nts., 10/24/06                                       43,810,000      43,398,142
--------------------------------------------------------------------------------
Kellogg Co., 2.875% Nts., 6/1/08                      33,760,000      33,117,277
--------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625% Nts., 11/1/06               36,610,000      37,698,598
--------------------------------------------------------------------------------
Tyson Foods, Inc., 7.25% Sr. Unsec. Nts., 10/1/06     24,350,000      26,145,545
                                                                   -------------
                                                                     140,359,562

--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.5%
Proctor &amp; Gamble Co. (The), 3.50% Nts., 12/15/08      33,490,000      33,685,180


                      21 | OPPENHEIMER QUEST BALANCED FUND

STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                       PRINCIPAL           VALUE
                                                          AMOUNT      SEE NOTE 1
--------------------------------------------------------------------------------
ENERGY--1.2%
--------------------------------------------------------------------------------
OIL &amp; GAS--1.2%
ChevronTexaco Capital Co., 3.50% Nts., 9/17/07      $ 43,790,000   $  44,357,037
--------------------------------------------------------------------------------
ConocoPhillips, 3.625% Sr. Unsec. Nts., 10/15/07      40,890,000      41,329,731
                                                                   -------------
                                                                      85,686,768

--------------------------------------------------------------------------------
FINANCIALS--6.8%
--------------------------------------------------------------------------------
CAPITAL MARKETS--0.5%
Credit Suisse First Boston, Inc. (USA), 5.75%
 Nts., 4/15/07                                        32,620,000      34,638,982
--------------------------------------------------------------------------------
COMMERCIAL BANKS--2.0%
Household Finance Corp., 7% Nts., 5/15/12             20,000,000      23,140,420
--------------------------------------------------------------------------------
KeyCorp, 2.75% Sr. Nts., Series G, 2/27/07            43,615,000      43,262,329
--------------------------------------------------------------------------------
US Bank NA, 2.85% Nts., 11/15/06                      40,300,000      40,295,325
--------------------------------------------------------------------------------
Wachovia Corp., 4.95% Nts., 11/1/06                   40,680,000      42,303,010
                                                                   -------------
                                                                     149,001,084

--------------------------------------------------------------------------------
CONSUMER FINANCE--0.3%
American Express Credit Corp., 3% Nts., 5/16/08       19,460,000      19,196,434
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--3.4%
American Express Co., 5.50% Nts., 9/12/06             41,100,000      43,062,607
--------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The), 6.25% Sr. Unsec.
 Nts., 7/15/05                                        24,860,000      25,513,122
--------------------------------------------------------------------------------
CIT Group, Inc., 7.75% Sr. Unsec. Unsub.
 Nts., 4/2/12                                         15,000,000      17,881,845
--------------------------------------------------------------------------------
Citigroup, Inc.:
5% Nts., 3/6/07                                       26,426,000      27,587,978
6% Nts., 2/21/12                                      15,000,000      16,667,625
--------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), 5.70%
 Sr. Unsec. Nts., 9/1/12                              25,000,000      26,670,525
--------------------------------------------------------------------------------
JPMorgan Chase &amp; Co., 5.25% Nts., 5/30/07             46,725,000      49,033,589
--------------------------------------------------------------------------------
Merrill Lynch &amp; Co., Inc., 6.15% Nts.,
 Series B, 1/26/06                                    38,390,000      40,016,815
                                                                   -------------
                                                                     246,434,106

--------------------------------------------------------------------------------
INSURANCE--0.6%
International Lease Finance Corp., 4% Nts.,
 Series O, 1/17/06                                    41,660,000      42,272,027
--------------------------------------------------------------------------------
HEALTH CARE--1.0%
--------------------------------------------------------------------------------
HEALTH CARE PROVIDERS &amp; SERVICES--0.4%
Tenet Healthcare Corp., 5% Sr. Nts., 7/1/07           32,275,000      32,275,000
--------------------------------------------------------------------------------
PHARMACEUTICALS--0.6%
Bristol-Myers Squibb Co., 4.75% Nts., 10/1/06         38,950,000      40,260,668
--------------------------------------------------------------------------------
INDUSTRIALS--3.2%
--------------------------------------------------------------------------------
AEROSPACE &amp; DEFENSE--1.2%
Boeing Capital Corp., 6.50% Nts., 2/15/12             10,000,000      11,270,740
--------------------------------------------------------------------------------
General Dynamics Corp., 2.125% Nts., 5/15/06          40,930,000      40,578,207
--------------------------------------------------------------------------------
Northrop Grumman Corp., 4.079% Nts., 11/16/06         34,100,000      34,721,166
                                                                   -------------
                                                                      86,570,113


                      22 | OPPENHEIMER QUEST BALANCED FUND

                                                       PRINCIPAL           VALUE
                                                          AMOUNT      SEE NOTE 1
--------------------------------------------------------------------------------
AIR FREIGHT &amp; LOGISTICS--0.6%
FedEx Corp., 2.65% Unsec. Nts., 4/1/07              $ 43,830,000   $  43,315,260
--------------------------------------------------------------------------------
COMMERCIAL SERVICES &amp; SUPPLIES--0.4%
Cendant Corp., 6.875% Sr. Unsec. Nts., 8/15/06        15,100,000      16,095,135
--------------------------------------------------------------------------------
Waste Management, Inc., 6.50% Sr.
 Unsub. Nts., 11/15/08                                 8,740,000       9,647,256
                                                                   -------------
                                                                      25,742,391

--------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.6%
General Electric Capital Corp.:
5.35% Nts., Series A, 3/30/06                         24,340,000      25,243,744
6% Nts., 6/15/12                                      19,700,000      21,663,046
                                                                   -------------
                                                                      46,906,790

--------------------------------------------------------------------------------
MACHINERY--0.4%
John Deere Capital Corp., 3.125% Sr. Nts.,
 Series D, 12/15/05                                   29,200,000      29,314,084
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--0.5%
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.5%
Motorola, Inc., 4.608% Nts., 11/16/07                 38,960,000      40,145,748
--------------------------------------------------------------------------------
MATERIALS--0.8%
--------------------------------------------------------------------------------
METALS &amp; MINING--0.6%
Alcoa, Inc., 4.25% Sr. Unsec. Nts., 8/15/07           44,705,000      45,996,662
--------------------------------------------------------------------------------
PAPER &amp; FOREST PRODUCTS--0.2%
Weyerhaeuser Co., 5.50% Unsec. Unsub. Nts., 3/15/05   11,091,000      11,207,866
--------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.5%
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.2%
SBC Communications, Inc., 5.75% Sr. Nts., 5/2/06      39,450,000      41,186,786
--------------------------------------------------------------------------------
Verizon Global Funding Corp.:
6.75% Sr. Unsec. Unsub. Nts., 12/1/05                 24,350,000      25,438,007
7.375% Sr. Nts., 9/1/12                               15,000,000      17,845,860
                                                                   -------------
                                                                      84,470,653

--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.3%
AT&amp;T Wireless Services, Inc., 7.35%
 Sr. Unsec. Nts., 3/1/06                              24,740,000      26,212,822
--------------------------------------------------------------------------------
UTILITIES--0.6%
--------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.2%
Dominion Resources, Inc., 7.625% Sr. Unsec.
 Unsub. Nts., Series B, 7/15/05                       14,440,000      14,942,859
--------------------------------------------------------------------------------
MULTI-UTILITIES &amp; UNREGULATED POWER--0.4%
Duke Capital LLC, 4.302% Sr. Unsec. Nts., 5/18/06     28,130,000      28,624,216
                                                                   -------------
Total Non-Convertible Corporate Bonds and Notes
 (Cost $1,606,757,969)                                             1,625,546,645


                      23 | OPPENHEIMER QUEST BALANCED FUND

STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                      PRINCIPAL           VALUE
                                                         AMOUNT      SEE NOTE 1
--------------------------------------------------------------------------------
SHORT-TERM NOTES--1.2%
--------------------------------------------------------------------------------
American Express Credit Corp., 1.70%, 11/2/04      $ 13,000,000  $   12,999,381
--------------------------------------------------------------------------------
Canadian Imperial Holdings, Inc., 1.89%, 12/1/04     25,000,000      24,960,624
--------------------------------------------------------------------------------
Federal Home Loan Bank, 1.69%, 11/1/04               48,003,000      48,003,000
                                                                 ---------------
Total Short-Term Notes (Cost $85,963,005)                            85,963,005

--------------------------------------------------------------------------------
Total Investments, at Value (excluding investments
 purchased with cash collateral from securities
 loaned) (Cost $6,881,240,126)                                    7,259,994,423

--------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--5.1%
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.3%
Trust Money Market Securities 2                      10,000,000      10,000,000
White Hawk CDO Funding Corp. 2                       12,000,000      12,000,000
                                                                 ---------------
                                                                     22,000,000
--------------------------------------------------------------------------------
FUNDING AGREEMENT/GIC--0.0%
Protective Life Insurance Co. 2                       2,000,000       2,000,000
--------------------------------------------------------------------------------
MEDIUM-TERM NOTES--0.9%
Deutsche Bank AG (GE) 2                              25,000,000      25,000,000
International Lease Finance Corp. 2                  40,127,968      40,127,968
                                                                 ---------------
                                                                     65,127,968
--------------------------------------------------------------------------------
TIME DEPOSITS--0.5%
Bank Nederlandse Gemeenten BNG 2                     25,000,000      25,000,000
Caja de Madrid 2                                     14,000,000      14,000,000
                                                                 ---------------
                                                                     39,000,000
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--3.4%
Greenwich Capital 2                                   8,291,990       8,291,990
UBS Securities LLC 2                                 30,764,400      30,764,400
UBS Securities LLC 2                                203,860,000     203,860,000
                                                                 ---------------
                                                                    242,916,390
Total Investments Purchased with Cash Collateral
from Securities Loaned (Cost $371,044,358)                          371,044,358

--------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $7,252,284,484)        105.1%   7,631,038,781
--------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS                     (5.1)   (373,255,491)
                                                   -----------------------------

NET ASSETS                                               100.0%  $7,257,783,290
                                                   =============================
FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Non-income producing security.

2. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 5 of Notes to Financial
Statements.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      24 | OPPENHEIMER QUEST BALANCED FUND

STATEMENT OF ASSETS AND LIABILITIES  October 31, 2004
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $391,744,555)
(cost $7,252,284,484)--see accompanying statement of investments                       $  7,631,038,781
--------------------------------------------------------------------------------------------------------
Cash                                                                                          1,354,443
--------------------------------------------------------------------------------------------------------
Collateral for securities loaned                                                             27,744,753
--------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold                                                                             49,309,329
Interest and dividends                                                                       25,505,722
Shares of beneficial interest sold                                                            7,927,456
Other                                                                                           151,094
                                                                                       -----------------
Total assets                                                                              7,743,031,578

--------------------------------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned                                                  398,789,111
--------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased                                                                        70,294,980
Shares of beneficial interest redeemed                                                       12,334,325
Distribution and service plan fees                                                            1,471,082
Transfer and shareholder servicing agent fees                                                 1,262,383
Trustees' compensation                                                                          530,289
Shareholder communications                                                                      394,914
Other                                                                                           171,204
                                                                                       -----------------
Total liabilities                                                                           485,248,288

--------------------------------------------------------------------------------------------------------
NET ASSETS                                                                             $  7,257,783,290
                                                                                       =================

--------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
--------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                             $     4,245,788
--------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                7,058,641,728
--------------------------------------------------------------------------------------------------------
Accumulated net investment loss                                                                (518,804)
--------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                               (183,339,719)
--------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                  378,754,297
                                                                                       -----------------
NET ASSETS                                                                             $  7,257,783,290
                                                                                       =================


                      25 | OPPENHEIMER QUEST BALANCED 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 $3,054,761,474 and
177,656,623 shares of beneficial interest outstanding)                                         $  17.19
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price)                                                                       $  18.24
-------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $2,549,068,929 and 149,851,508
shares of beneficial interest outstanding)                                                     $  17.01
-------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,207,728,547 and 70,974,694
shares of beneficial interest outstanding)                                                     $  17.02
-------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $207,449,822 and 12,165,656
shares of beneficial interest outstanding)                                                     $  17.05
-------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$238,774,518 and 13,930,350 shares of beneficial interest outstanding)                         $  17.14

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      26 | OPPENHEIMER QUEST BALANCED FUND

STATEMENT OF OPERATIONS  For the Year Ended October 31, 2004
--------------------------------------------------------------------------------

------------------------------------------------------------------------------
INVESTMENT INCOME
------------------------------------------------------------------------------
Interest                                                     $     53,905,201
------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,056,744)         52,980,496
------------------------------------------------------------------------------
Portfolio lending fees                                              1,244,910
                                                             -----------------
Total investment income                                           108,130,607

------------------------------------------------------------------------------
EXPENSES
------------------------------------------------------------------------------
Management fees                                                    50,570,841
------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                             6,845,930
Class B                                                            24,952,922
Class C                                                            11,290,179
Class N                                                               898,689
------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                             5,581,622
Class B                                                             5,660,443
Class C                                                             1,936,187
Class N                                                               525,000
Class Y                                                               323,294
------------------------------------------------------------------------------
Shareholder communications:
Class A                                                               271,924
Class B                                                               486,354
Class C                                                               136,633
Class N                                                                 5,120
------------------------------------------------------------------------------
Trustees' compensation                                                234,490
------------------------------------------------------------------------------
Custodian fees and expenses                                            89,533
------------------------------------------------------------------------------
Other                                                                 184,452
                                                             -----------------
Total expenses                                                    109,993,613
Less reduction to custodian expenses                                  (18,426)
Less payments and waivers of expenses                                 (22,255)
                                                             -----------------
Net expenses                                                      109,952,932

------------------------------------------------------------------------------
NET INVESTMENT LOSS                                                (1,822,325)

------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
------------------------------------------------------------------------------
Net realized gain on:
Investments                                                       875,445,667
Net increase from payment by affiliate                              2,628,259
                                                             -----------------
Net realized gain                                                 878,073,926
------------------------------------------------------------------------------
Net change in unrealized appreciation on investments             (298,061,553)

------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS         $    578,190,048
                                                             =================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      27 | OPPENHEIMER QUEST BALANCED FUND

STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

YEAR ENDED OCTOBER 31,                                                   2004               2003
-------------------------------------------------------------------------------------------------
OPERATIONS
-------------------------------------------------------------------------------------------------
Net investment income (loss)                                 $     (1,822,325)   $    37,392,073
-------------------------------------------------------------------------------------------------
Net realized gain                                                 878,073,926         76,105,001
-------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)             (298,061,553)     1,233,709,607
                                                             ------------------------------------
Net increase in net assets resulting from operations              578,190,048      1,347,206,681

-------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                            (5,329,694)       (18,094,923)
Class B                                                                    --         (8,058,436)
Class C                                                                    --         (3,846,362)
Class N                                                               (50,738)          (766,994)
Class Y                                                              (811,934)        (1,843,901)

-------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A                                                           531,512,099        116,535,156
Class B                                                            33,158,209         24,803,540
Class C                                                           132,642,652           (900,239)
Class N                                                            49,356,993         27,405,091
Class Y                                                            37,480,083         25,736,832

-------------------------------------------------------------------------------------------------
NET ASSETS
-------------------------------------------------------------------------------------------------
Total increase                                                  1,356,147,718      1,508,176,445
-------------------------------------------------------------------------------------------------
Beginning of period                                             5,901,635,572      4,393,459,127
                                                             ------------------------------------
End of period (including accumulated net investment income
(loss) of $(518,804) and $1,979,679, respectively)           $  7,257,783,290    $ 5,901,635,572
                                                             ====================================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      28 | OPPENHEIMER QUEST BALANCED FUND

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

CLASS A     YEAR ENDED OCTOBER 31,                     2004                2003             2002             2001            2000
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    15.69       $       12.02       $    16.09       $    16.66    $      16.41
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .07                 .16              .17              .46             .36
Net realized and unrealized gain (loss)                1.46                3.64            (3.53)            (.20)            .55
                                                 -----------------------------------------------------------------------------------
Total from investment operations                       1.53                3.80            (3.36)             .26             .91
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.03)               (.13)            (.27)            (.53)           (.28)
Distributions from net realized gain                     --                  --             (.44)            (.30)           (.38)
                                                 -----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                        (.03)               (.13)            (.71)            (.83)           (.66)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $    17.19       $       15.69       $    12.02       $    16.09    $      16.66
                                                 ===================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                     9.79%              31.87%          (21.88)%           1.64%           5.78%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $3,054,761       $   2,287,707       $1,667,143       $1,763,404    $  1,027,560
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $2,759,594       $   1,902,499       $1,960,568       $1,353,860    $  1,020,483
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                  0.38%               1.60%            1.20%            2.61%           2.24%
Total expenses                                         1.21% 3,4           1.38% 3,4        1.51% 3,4        1.47% 3         1.45% 3
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                 106%                 92%             108%              88%            105%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

2. Annualized for periods of less than one full year.

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      29 | OPPENHEIMER QUEST BALANCED FUND

FINANCIAL HIGHLIGHTS  Continued
--------------------------------------------------------------------------------

CLASS B     YEAR ENDED OCTOBER 31,                     2004               2003            2002            2001             2000
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    15.61       $       11.98       $    16.00       $    16.52     $   16.28
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                           (.07)                .06              .07              .35           .25
Net realized and unrealized gain (loss)                1.47                3.63            (3.52)            (.19)          .55
                                                 ---------------------------------------------------------------------------------
Total from investment operations                       1.40                3.69            (3.45)             .16           .80
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     --                (.06)            (.13)            (.38)         (.18)
Distributions from net realized gain                     --                  --             (.44)            (.30)         (.38)
                                                 ---------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          --                (.06)            (.57)            (.68)         (.56)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $    17.01       $       15.61       $    11.98       $    16.00     $   16.52
                                                 =================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                     8.97%              30.89%          (22.38)%           1.03%         5.10%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $2,549,069       $   2,306,366       $1,759,167       $1,836,130     $ 925,476
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $2,495,872       $   1,985,215       $2,068,300       $1,307,367     $ 873,470
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                          (0.40)%              0.84%            0.56%            2.00%         1.64%
Total expenses                                         2.00% 3,4           2.15% 3,4        2.15% 3,4        2.07% 3       2.06% 3
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                 106%                 92%             108%              88%          105%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

2. Annualized for periods of less than one full year.

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      30 | OPPENHEIMER QUEST BALANCED FUND

CLASS C     YEAR ENDED OCTOBER 31,                     2004               2003             2002             2001             2000
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    15.60       $       11.97        $    16.00        $    16.51     $   16.27
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                           (.06)                .07               .07               .34           .25
Net realized and unrealized gain (loss)                1.48                3.62             (3.52)             (.18)          .55
                                                 -----------------------------------------------------------------------------------
Total from investment operations                       1.42                3.69             (3.45)              .16           .80
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     --                (.06)             (.14)             (.37)         (.18)
Distributions from net realized gain                     --                  --              (.44)             (.30)         (.38)
                                                 -----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          --                (.06)             (.58)             (.67)         (.56)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $    17.02       $       15.60        $    11.97        $    16.00     $   16.51
                                                 ===================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                     9.10%              30.99%           (22.40)%            1.05%         5.10%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period (in thousands)         $1,207,729       $     982,288        $  763,338        $  751,229     $ 341,824
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $1,129,522       $     835,198        $  903,426        $  502,037     $ 336,336
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                          (0.34)%              0.92%             0.58%             2.00%         1.64%
Total expenses                                         1.94% 3,4           2.08% 3,4         2.13% 3,4         2.07% 3       2.06% 3
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                 106%                 92%              108%               88%          105%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

2. Annualized for periods of less than one full year.

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      31 | OPPENHEIMER QUEST BALANCED FUND

FINANCIAL HIGHLIGHTS  Continued
--------------------------------------------------------------------------------

CLASS N     YEAR ENDED OCTOBER 31,                               2004         2003        2002           2001 1
-----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                       $    15.58     $   11.94     $  16.05      $   16.84
-----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                             .03           .11          .20            .22
Net realized and unrealized gain (loss)                          1.45          3.63        (3.56)          (.83)
                                                           ------------------------------------------------------
Total from investment operations                                 1.48          3.74        (3.36)          (.61)
-----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                             (.01)         (.10)        (.31)          (.18)
Distributions from net realized gain                               --            --         (.44)            --
                                                           ------------------------------------------------------
Total dividends and/or distributions to shareholders             (.01)         (.10)        (.75)          (.18)
-----------------------------------------------------------------------------------------------------------------
Net asset value, end of period                             $    17.05     $   15.58     $  11.94      $   16.05
                                                           ======================================================

-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                               9.47%        31.50%      (21.99)%        (3.71)%
-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                   $  207,450     $ 142,866     $ 85,744      $  19,649
-----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                          $  180,201     $ 112,416     $ 70,477      $   4,977
-----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                            0.04%         1.23%        1.07%          2.75%
Total expenses                                                   1.55%         1.74%        1.67%          1.58%
Expenses after payments and waivers and
reduction to custodian expenses                                   N/A 4        1.70%         N/A 4,5        N/A 4
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                           106%           92%         108%            88%

1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

3. Annualized for periods of less than one full year.

4. Reduction to custodian expenses less than 0.01%.

5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      32 | OPPENHEIMER QUEST BALANCED FUND

CLASS Y     YEAR ENDED OCTOBER 31,                     2004               2003            2002            2001           2000 1
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    15.62      $       11.96      $    16.05       $    16.67     $       15.65
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .12                .20             .25              .74               .15
Net realized and unrealized gain (loss)                1.46               3.64           (3.52)            (.40)              .99
                                                 -----------------------------------------------------------------------------------
Total from investment operations                       1.58               3.84           (3.27)             .34              1.14
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.06)              (.18)           (.38)            (.66)             (.12)
Distributions from net realized gain                     --                 --            (.44)            (.30)               --
                                                 -----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                        (.06)              (.18)           (.82)            (.96)             (.12)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $    17.14      $       15.62      $    11.96       $    16.05     $       16.67
                                                 ===================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    10.17%             32.40%         (21.48)%           2.14%             7.32%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $  238,775      $     182,409      $  118,068       $  134,654     $         144
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $  216,973      $     145,793      $  137,322       $   77,394     $          32
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  0.70%              1.89%           1.75%            2.97%             2.46%
Total expenses                                         0.90% 4            1.05% 4         0.96% 4,5        1.00% 4           0.98% 4
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                 106%                92%            108%              88%              105%

1. For the period from May 1, 2000 (inception of offering) to October 31, 2000.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

3. Annualized for periods of less than one full year.

4. Reduction to custodian expenses less than 0.01%.

5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      33 | OPPENHEIMER QUEST BALANCED FUND

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES

Oppenheimer Quest Balanced Fund (the Fund), formerly Oppenheimer Quest Balanced
Value Fund, a series of Oppenheimer Quest For Value Funds, is an open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek a combination of
growth of capital and investment income. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Manager has entered into a subadvisory
agreement with OpCap Advisors.

      The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.

      The following is a summary of significant accounting policies consistently
followed by the Fund.

--------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of 60 days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities may be valued primarily
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Trustees. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially affected by
what the Manager identifies as a significant event occurring before the Fund's
assets are valued but after the close of their respective exchanges will be fair
valued. Fair


                      34 | OPPENHEIMER QUEST BALANCED FUND

value is determined in good faith using consistently applied procedures under
the supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).

--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars as of the close of The New York Stock Exchange (the
Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for
business. Amounts related to the purchase and sale of foreign securities and
investment income are translated at the rates of exchange prevailing on the
respective dates of such transactions. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.

      Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.

      The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.

--------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.

--------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.

The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.


                      35 | OPPENHEIMER QUEST BALANCED FUND

NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued


                                                             NET UNREALIZED
                                                               APPRECIATION
                                                           BASED ON COST OF
                                                             SECURITIES AND
   UNDISTRIBUTED    UNDISTRIBUTED          ACCUMULATED    OTHER INVESTMENTS
   NET INVESTMENT       LONG-TERM                 LOSS   FOR FEDERAL INCOME
   INCOME                    GAIN   CARRYFORWARD 1,2,3         TAX PURPOSES
   ------------------------------------------------------------------------
   $ --                      $ --        $ 181,820,457        $ 377,235,039

1. As of October 31, 2004, the Fund had $181,820,457 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of October 31, 2004,
details of the capital loss carryforward were as follows:

                       EXPIRING
                       ------------------------
                       2010       $ 181,820,457

2. During the fiscal year ended October 31, 2004, the Fund utilized
$876,964,925 of capital loss carryforward to offset capital gains realized in
that fiscal year.

3. During the fiscal year ended October 31, 2003, the Fund utilized $28,726,716
of capital loss carryforward to offset capital gains realized in that fiscal
year.

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly,
the following amounts have been reclassified for October 31, 2004. Net assets
of the Fund were unaffected by the reclassifications.
                                                            INCREASE TO
                                      REDUCTION TO      ACCUMULATED NET
                REDUCTION TO       ACCUMULATED NET        REALIZED LOSS
                PAID-IN CAPITAL    INVESTMENT LOSS       ON INVESTMENTS
                -------------------------------------------------------
                $ 2,887,949            $ 5,516,208          $ 2,628,259

The tax character of distributions paid during the years ended October 31, 2004
and October 31, 2003 was as follows:

                                        YEAR ENDED           YEAR ENDED
                                  OCTOBER 31, 2004     OCTOBER 31, 2003
      -----------------------------------------------------------------
      Distributions paid from:
      Ordinary income                  $ 6,192,366         $ 32,610,616

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for federal income tax purposes as of October 31, 2004 are noted below. The
primary difference between book and tax appreciation or depreciation of
securities and other investments, if applicable, is attributable to the tax
deferral of losses or tax realization of financial statement unrealized gain or
loss.


                      36 | OPPENHEIMER QUEST BALANCED FUND

                 Federal tax cost of securities    $  7,253,803,742
                                                   =================

                 Gross unrealized appreciation     $    489,766,765
                 Gross unrealized depreciation         (112,531,726)
                                                   -----------------
                 Net unrealized appreciation       $    377,235,039
                                                   =================

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for
the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
October 31, 2004, the Fund's projected benefit obligations were increased by
$105,807 and payments of $8,643 were made to retired trustees, resulting in an
accumulated liability of $493,757 as of October 31, 2004.

      The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the Plan.

--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
and paid quarterly. Capital gain distributions, if any, are declared and paid
annually.

--------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.

--------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. The Fund pays interest to its custodian on
such cash overdrafts at a rate equal to the Federal Funds Rate plus 0.50%. The
Reduction to Custodian Expenses line item, if applicable, represents earnings on
cash balances maintained by the Fund during the period. Such interest expense
and other custodian fees may be paid with these earnings.

--------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.


                      37 | OPPENHEIMER QUEST BALANCED FUND

NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

OTHER. The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

--------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST

The Fund has authorized an unlimited number of $.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:

                              YEAR ENDED OCTOBER 31, 2004        YEAR ENDED OCTOBER 31, 2003
                                 SHARES            AMOUNT          SHARES             AMOUNT
---------------------------------------------------------------------------------------------
CLASS A
Sold                         63,546,703    $1,061,970,225      44,599,273     $  625,350,191
Dividends and/or
distributions reinvested        289,741         4,693,898       1,211,270         15,682,192
Redeemed                    (32,026,858)     (535,152,024)    (38,714,556)      (524,497,227)
                            -----------------------------------------------------------------
Net increase                 31,809,586      $531,512,099       7,095,987     $  116,535,156
                            =================================================================

---------------------------------------------------------------------------------------------
CLASS B
Sold                         25,825,685    $  427,597,730      26,928,476     $  374,945,073
Dividends and/or
distributions reinvested             --                --         526,821          6,544,923
Redeemed                    (23,752,602)     (394,439,521)    (26,540,590)      (356,686,456)
                            -----------------------------------------------------------------
Net increase                  2,073,083    $   33,158,209         914,707     $   24,803,540
                            =================================================================

---------------------------------------------------------------------------------------------
CLASS C
Sold                         18,943,131    $  313,720,431      13,717,232     $  193,481,707
Dividends and/or
distributions reinvested             --                --         237,055          2,946,014
Redeemed                    (10,924,983)     (181,077,779)    (14,751,471)      (197,327,960)
                            -----------------------------------------------------------------
Net increase (decrease)       8,018,148    $  132,642,652        (797,184)    $     (900,239)
                            =================================================================

---------------------------------------------------------------------------------------------
CLASS N
Sold                          6,779,800    $  112,445,795       4,959,184     $   68,509,566
Dividends and/or
distributions reinvested          3,094            49,396          59,656            756,892
Redeemed                     (3,787,108)      (63,138,198)     (3,028,836)       (41,861,367)
                            -----------------------------------------------------------------
Net increase                  2,995,786    $   49,356,993       1,990,004     $   27,405,091
                            =================================================================

---------------------------------------------------------------------------------------------
CLASS Y
Sold                          5,092,722    $   84,840,588       3,864,165     $   53,749,796
Dividends and/or
distributions reinvested         50,227           811,929         141,014          1,843,889
Redeemed                     (2,893,159)      (48,172,434)     (2,193,394)       (29,856,853)
                            -----------------------------------------------------------------
Net increase                  2,249,790    $   37,480,083       1,811,785     $   25,736,832
                            =================================================================


                      38 | OPPENHEIMER QUEST BALANCED FUND

--------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the year ended
October 31, 2004, were $5,989,574,445 and $4,418,554,146, respectively. There
were purchases of $1,497,698,090 and sales of $1,974,055,866 of U.S. government
and government agency obligations for the year ended October 31, 2004.

--------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund. Effective January 1, 2004, the
agreement provides for a fee at an annual rate of 0.85% of the first $1 billion
of average annual net assets of the Fund, 0.81% of the next $2 billion, 0.76% of
the next $1 billion, 0.71% of the next $1 billion, 0.65% of the next $1 billion,
0.60% of the next $1 billion, 0.55% of the next $1 billion and 0.50% of average
annual net assets in excess of $8 billion. From June 15, 2003 through December
31, 2003, the annual advisory fee rate was: 0.85% of the first $1 billion of
average annual net assets of the Fund, 0.81% of the next $2 billion, 0.76% of
the next $1 billion, 0.71% of the next $1 billion, 0.65% of the next $1 billion
and 0.60% of average annual net assets in excess of $6 billion.

--------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
preparing and filing the Fund's tax returns.

--------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager retains OpCap Advisors (the Sub-Advisor) to
provide the day-to-day portfolio management of the Fund. The Manager pays the
Sub-Advisor a monthly fee based on the fee schedule set forth in the Fund's
prospectus. For the year ended October 31, 2004, the Manager paid $15,004,710 to
the Sub-Advisor for its services to the Fund.

--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2004, the Fund paid
$13,967,672 to OFS for services to the Fund.

      Additionally, Class Y shares are subject to minimum fees of $10,000 for
assets of $10 million or more. The Class Y shares are subject to the minimum
fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.

--------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. Under the Plan, the Fund pays a service fee to the Distributor of up to
0.25% of the average annual net assets of Class A shares. The Distributor
currently uses all of those fees to


                      39 | OPPENHEIMER QUEST BALANCED FUND

NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued

pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Under the Plan, the Fund may also pay an asset-based sales
charge to the Distributor. Beginning January 1, 2003, the Board of Trustees set
the annual asset-based sales charge rate at zero. Fees incurred by the Fund
under the Plan are detailed in the Statement of Operations.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of up to 0.25% per year under each plan. If either
the Class B, Class C or Class N plan is terminated by the Fund or by the
shareholders of a class, the Board of Trustees and its independent trustees must
determine whether the Distributor shall be entitled to payment from the Fund of
all or a portion of the service fee and/or asset-based sales charge in respect
to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at October 31,
2004 for Class B, Class C and Class N shares were $60,959,378, $20,556,604 and
$3,804,005, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.

--------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.

                                           CLASS A         CLASS B         CLASS C        CLASS N
                           CLASS A      CONTINGENT      CONTINGENT      CONTINGENT     CONTINGENT
                         FRONT-END        DEFERRED        DEFERRED        DEFERRED       DEFERRED
                     SALES CHARGES   SALES CHARGES   SALES CHARGES   SALES CHARGES  SALES CHARGES
                       RETAINED BY     RETAINED BY     RETAINED BY     RETAINED BY    RETAINED BY
YEAR ENDED             DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR    DISTRIBUTOR
-------------------------------------------------------------------------------------------------
October 31, 2004       $ 3,479,343        $ 55,427     $ 4,944,985       $ 146,159      $ 276,218

--------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory
agreement, the Fund's Manager terminated that practice in July 2003.
Subsequently, the Manager paid the Fund $2,628,259, an amount equivalent to
certain of such commissions incurred in prior years.

      OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class.
During the year ended October 31, 2004, OFS waived $7,944, $11,955 and $2,356
for Class A, Class B and Class C shares, respectively. This undertaking may be
amended or withdrawn at any time.


                      40 | OPPENHEIMER QUEST BALANCED FUND

--------------------------------------------------------------------------------
5. SECURITIES LENDING

The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund also continues to receive
interest or dividends paid on the securities loaned. As of October 31, 2004, the
Fund had on loan securities valued at $391,744,555. Cash of $398,789,111 was
received as collateral for the loans, of which $371,044,358 has been invested in
approved instruments.

--------------------------------------------------------------------------------
6. LITIGATION

Six complaints have been filed as putative derivative and class actions against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund,
and nine Directors/ Trustees of certain of the Funds other than this Fund
(collectively, the "Directors/Trustees"). The complaints allege that the Manager
charged excessive fees for distribution and other costs, improperly used assets
of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay
brokers to promote sales of the Funds, and failed to properly disclose the use
of Fund assets to make those payments in violation of the Investment Company Act
of 1940 and the Investment Advisers Act of 1940. The complaints further allege
that by permitting and/or participating in those actions, the Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law. By order dated October 27, 2004, these
six actions, and future related actions, were consolidated by the U.S. District
Court for the Southern District of New York into a single consolidated
proceeding in contemplation of the filing of a superseding consolidated and
amended complaint.

      OppenheimerFunds believes that it is premature to render any opinion as to
the likelihood of an outcome unfavorable to them, the Funds or the
Directors/Trustees and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss. However,
OppenheimerFunds, the Funds and the Directors/Trustees believe that the
allegations contained in the complaints are without merit and intend to defend
these lawsuits vigorously.



                                  Appendix A

                             RATINGS DEFINITIONS
                             -------------------

Below are summaries of the rating definitions used by the
nationally-recognized rating agencies listed below. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate.
The summaries below are based upon publicly available information provided by
the rating organizations.

Moody's Investors Service, Inc. ("Moody's")

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

Aaa: Bonds and preferred stock rated "Aaa" are judged to be the best quality.
They carry the smallest degree of investment risk.  Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure.  While the various protective elements are likely to change, the
changes that can be expected are most unlikely to impair the fundamentally
strong position of such issues.

Aa: Bonds and preferred stock rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what are
generally known as high-grade bonds.  They are rated lower than the best
bonds because margins of protection may not be as large as with "Aaa"
securities or fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risk appear
somewhat larger than that of "Aaa" securities.

A: Bonds and preferred stock rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment some
time in the future.

Baa: Bonds and preferred stock rated "Baa" are considered medium-grade
obligations; that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and have speculative characteristics as well.

Ba: Bonds and preferred stock rated "Ba" are judged to have speculative
elements. Their future cannot be considered well-assured.  Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Bonds and preferred stock rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.

Caa: Bonds and preferred stock rated "Caa" are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds and preferred stock rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C:  Bonds and preferred stock rated "C" are the lowest class of rated bonds
and can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a
ranking in the lower end of that generic rating category. Advanced refunded
issues that are secured by certain assets are identified with a # symbol.

PRIME RATING SYSTEM (SHORT-TERM RATINGS - TAXABLE DEBT)
These ratings are opinions of the ability of issuers to honor senior
financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.

Prime-1: Issuer has a superior ability for repayment of senior short-term
debt obligations.

Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained.

Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions
may be more pronounced. Variability in earnings and profitability may result
in changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.

Not Prime: Issuer does not fall within any Prime rating category.

Standard & Poor's Ratings Services ("Standard & Poor's"), a division of The
McGraw-Hill Companies, Inc.

LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations:
o     Likelihood of payment-capacity and willingness of the obligor to meet
      its financial commitment on an obligation in accordance with the terms
      of the obligation;
o     Nature of and provisions of the obligation; and
o     Protection afforded by, and relative position of, the obligation in the
      event of bankruptcy, reorganization, or other arrangement under the
      laws of bankruptcy and other laws affecting creditors' rights.
   The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority
in bankruptcy, as noted above.

AAA: An obligation  rated "AAA" have the highest rating assigned by Standard &
Poor's.  The  obligor's  capacity  to meet  its  financial  commitment  on the
obligation is extremely strong.

AA: An obligation  rated "AA" differ from the highest rated  obligations  only
in small degree.  The obligor's  capacity to meet its financial  commitment on
the obligation is very strong.

A: An  obligation  rated "A" are  somewhat  more  susceptible  to the  adverse
effects of changes in circumstances  and economic  conditions than obligations
in  higher-rated  categories.  However,  the  obligor's  capacity  to meet its
financial commitment on the obligation is still strong.

BBB:  An  obligation  rated  "BBB"  exhibit  adequate  protection  parameters.
However,  adverse  economic  conditions  or  changing  circumstances  are more
likely to lead to a weakened  capacity  of the  obligor to meet its  financial
commitment on the obligation.

BB, B, CCC, CC, and C
An obligation rated `BB', `B', `CCC', `CC', and `C' are regarded as having
significant speculative characteristics. `BB' indicates the least degree of
speculation and `C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

BB: An obligation  rated "BB" are less  vulnerable  to  nonpayment  than other
speculative  issues.   However,  they  face  major  ongoing  uncertainties  or
exposure to adverse business,  financial,  or economic  conditions which could
lead to the obligor's  inadequate capacity to meet its financial commitment on
the obligation.

B: An obligation  rated "B" are more vulnerable to nonpayment than obligations
rated "BB",  but the obligor  currently has the capacity to meet its financial
commitment  on  the  obligation.  Adverse  business,  financial,  or  economic
conditions  will likely impair the obligor's  capacity or  willingness to meet
its financial commitment on the obligation.

CCC: An obligation  rated "CCC" are currently  vulnerable to  nonpayment,  and
are dependent upon favorable business,  financial, and economic conditions for
the obligor to meet its financial  commitment on the obligation.  In the event
of adverse business,  financial,  or economic  conditions,  the obligor is not
likely  to  have  the  capacity  to  meet  its  financial  commitment  on  the
obligation.

CC: An obligation rated "CC" are currently highly vulnerable to nonpayment.

C:  Subordinated  debt or preferred stock  obligations rated "C" are currently
highly  vulnerable  to  nonpayment.  The "C"  rating  may be  used to  cover a
situation where a bankruptcy  petition has been filed or similar action taken,
but  payments  on this  obligation  are  being  continued.  A "C" also will be
assigned to a preferred  stock issue in arrears on  dividends  or sinking fund
payments, but that is currently paying.

D: An obligation rated "D" are in payment default.  The "D" rating category is
used when payments on an  obligation  are not made on the date due even if the
applicable  grace period has not expired,  unless  Standard & Poor's  believes
that such payments will be made during such grace period.  The "D" rating also
will be used  upon the  filing of a  bankruptcy  petition  or the  taking of a
similar action if payments on an obligation are jeopardized.

The ratings from "AA" to "CCC" may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within the major rating
categories.

c: The `c' subscript is used to provide additional information to investors
that the bank may terminate its obligation to purchase tendered bonds if the
long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.

p: The letter `p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.

Continuance of the ratings is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.

r: The `r' highlights derivative, hybrid, and certain other obligations that
Standard & Poor's believes may experience high volatility or high variability
in expected returns as a result of noncredit risks. Examples of such
obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an `r'
symbol should not be taken as an indication that an obligation will exhibit
no volatility or variability in total return.

N.R. Not rated.

Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.

Bond Investment Quality Standards

Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories (`AAA', `AA', `A', `BBB',
commonly known as investment-grade ratings) generally are regarded as
eligible for bank investment. Also, the laws of various states governing
legal investments impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance
companies, and fiduciaries in general

SHORT-TERM ISSUE CREDIT RATINGS
Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. In the U.S., for example, that means
obligations with an original maturity of no more than 365 days-including
commercial paper.

A-1: A short-term obligation rated "A-1" is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity
to meet its financial commitment on these obligations is extremely strong.

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.

B: A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet
its financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet
its financial commitment on the obligation.

C: A short-term obligation rated "C" is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation.

D: A short-term obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.

NOTES:
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in
making that assessment:
o     Amortization schedule-the larger the final maturity relative to other
      maturities, the more likely it will
      be treated as a note; and
o     Source of payment-the more dependent the issue is on the market for its
      refinancing, the more likely
      it will be treated as a note.

SP-1: Strong capacity to pay principal and interest. An issue with a very
strong capacity to pay debt service is given a (+) designation.

SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3: Speculative capacity to pay principal and interest.

Fitch, Inc.
International credit ratings assess the capacity to meet foreign currency or
local currency commitments. Both "foreign currency" and "local currency"
ratings are internationally comparable assessments. The local currency rating
measures the probability of payment within the relevant sovereign state's
currency and jurisdiction and therefore, unlike the foreign currency rating,
does not take account of the possibility of foreign exchange controls
limiting transfer into foreign currency.

INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings.

Investment Grade:

AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.

A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.

Speculative Grade:

BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.


B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.

CCC, CC C: High Default Risk.  Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.

DDD, DD, and D: Default. The ratings of obligations in this category are
based on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected recovery values
are highly speculative and cannot be estimated with any precision, the
following serve as general guidelines. "DDD" obligations have the highest
potential for recovery, around 90%-100% of outstanding amounts and accrued
interest. "DD" indicates potential recoveries in the range of 50%-90%, and
"D" the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy
a higher portion of their outstanding obligations, while entities rated "D"
have a poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories.  Plus and minus signs are
not added to the "AAA" category or to categories below "CCC," nor to
short-term ratings other than "F1" (see below).

INTERNATIONAL SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings. A short-term rating has a time horizon of less than 12 months for
most obligations, or up to three years for U.S. public finance securities,
and thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.

F1: Highest credit quality. Strongest capacity for timely payment of
financial commitments. May have an added "+" to denote any exceptionally
strong credit feature.

F2: Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of higher ratings.

F3: Fair credit quality. Capacity for timely payment of financial commitments
is adequate. However, near-term adverse changes could result in a reduction
to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.

C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.

D: Default. Denotes actual or imminent payment default.









                                     B-1
                                  Appendix B

                           Industry Classifications

Aerospace & Defense                  Household Products
Air Freight & Couriers               Industrial Conglomerates
Airlines                             Insurance
Auto Components                      Internet & Catalog Retail
Automobiles                          Internet Software & Services
Beverages                            IT Services
Biotechnology                        Leisure Equipment & Products
Building Products                    Machinery
Chemicals                            Marine
Consumer Finance                     Media
Commercial Banks                     Metals & Mining
Commercial Services & Supplies       Multiline Retail
Communications Equipment             Multi-Utilities
Computers & Peripherals              Office Electronics
Construction & Engineering           Oil & Gas
Construction Materials               Paper & Forest Products
Containers & Packaging               Personal Products
Distributors                         Pharmaceuticals
Diversified Financial Services       Real Estate
Diversified Telecommunication        Road & Rail
Services
Electric Utilities                   Semiconductors and Semiconductor
                                     Equipment
Electrical Equipment                 Software
Electronic Equipment & Instruments   Specialty Retail
Energy Equipment & Services          Textiles, Apparel & Luxury Goods
Food & Staples Retailing             Thrifts & Mortgage Finance
Food Products                        Tobacco
Gas Utilities                        Trading Companies & Distributors
Health Care Equipment & Supplies     Transportation Infrastructure
Health Care Providers & Services     Water Utilities
Hotels Restaurants & Leisure         Wireless Telecommunication Services
Household Durables








                                    C-C-11

                                  Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers
--------------------------------------------------------------

In certain cases, the initial sales charge that applies to purchases of Class
A shares2 of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived.3  That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.

Not all waivers apply to all funds. For example, waivers relating to
Retirement Plans do not apply to Oppenheimer municipal funds, because shares
of those funds are not available for purchase by or on behalf of retirement
plans. Other waivers apply only to shareholders of certain funds.

For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds,
the term "Retirement Plan" refers to the following types of plans:
         1) plans qualified under Sections 401(a) or 401(k) of the Internal
            Revenue Code,
         2) non-qualified deferred compensation plans,
         3) employee benefit plans4
         4) Group Retirement Plans5
         5) 403(b)(7) custodial plan accounts
         6) Individual Retirement Accounts ("IRAs"), including traditional
            IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the
"Transfer Agent") of the particular Oppenheimer fund. These waivers and
special arrangements may be amended or terminated at any time by a particular
fund, the Distributor, and/or OppenheimerFunds, Inc. (referred to in this
document as the "Manager").

Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
I.






 Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
------------------------------------------------------------------------------

Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to
Initial Sales Charge but May Be Subject to the Class A Contingent Deferred
Sales Charge (unless a waiver applies).

      There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases
may be subject to the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer Rochester National
Municipals and Rochester Fund Municipals) of the beginning of the calendar
month of their purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the redemption).
Additionally, on shares purchased under these waivers that are subject to the
Class A contingent deferred sales charge, the Distributor will pay the
applicable concession described in the Prospectus under "Class A Contingent
Deferred Sales Charge."6 This waiver provision applies to:
|_|   Purchases of Class A shares aggregating $1 million or more.
|_|   Purchases of Class A shares by a Retirement Plan that was permitted to
         purchase such shares at net asset value but subject to a contingent
         deferred sales charge prior to March 1, 2001. That included plans
         (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
         costing $500,000 or more, 2) had at the time of purchase 100 or more
         eligible employees or total plan assets of $500,000 or more, or 3)
         certified to the Distributor that it projects to have annual plan
         purchases of $200,000 or more.
|_|   Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
         purchases are made:
         1) through a broker, dealer, bank or registered investment adviser
            that has made special arrangements with the Distributor for those
            purchases, or
         2) by a direct rollover of a distribution from a qualified
            Retirement Plan if the administrator of that Plan has made
            special arrangements with the Distributor for those purchases.
|_|   Purchases of Class A shares by Retirement Plans that have any of the
         following record-keeping arrangements:
         1) The record keeping is performed by Merrill Lynch Pierce Fenner &
            Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
            Retirement Plan. On the date the plan sponsor signs the
            record-keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets invested in (a) mutual
            funds, other than those advised or managed by Merrill Lynch
            Investment Management, L.P. ("MLIM"), that are made available
            under a Service Agreement between Merrill Lynch and the mutual
            fund's principal underwriter or distributor, and  (b)  funds
            advised or managed by MLIM (the funds described in (a) and (b)
            are referred to as "Applicable Investments").
         2) The record keeping for the Retirement Plan is performed on a
            daily valuation basis by a record keeper whose services are
            provided under a contract or arrangement between the Retirement
            Plan and Merrill Lynch. On the date the plan sponsor signs the
            record keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets (excluding assets
            invested in money market funds) invested in Applicable
            Investments.
         3) The record keeping for a Retirement Plan is handled under a
            service agreement with Merrill Lynch and on the date the plan
            sponsor signs that agreement, the Plan has 500 or more eligible
            employees (as determined by the Merrill Lynch plan conversion
            manager).
II.






            Waivers of Class A Sales Charges of Oppenheimer Funds
------------------------------------------------------------------------------

A. Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers.

Class A shares purchased by the following investors are not subject to any
Class A sales charges (and no concessions are paid by the Distributor on such
purchases):
|_|   The Manager or its affiliates.
|_|   Present or former officers, directors, trustees and employees (and
         their "immediate families") of the Fund, the Manager and its
         affiliates, and retirement plans established by them for their
         employees. The term "immediate family" refers to one's spouse,
         children, grandchildren, grandparents, parents, parents-in-law,
         brothers and sisters, sons- and daughters-in-law, a sibling's
         spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
         relatives by virtue of a remarriage (step-children, step-parents,
         etc.) are included.
|_|   Registered management investment companies, or separate accounts of
         insurance companies having an agreement with the Manager or the
         Distributor for that purpose.
|_|   Dealers or brokers that have a sales agreement with the Distributor, if
         they purchase shares for their own accounts or for retirement plans
         for their employees.
|_|   Employees and registered representatives (and their spouses) of dealers
         or brokers described above or financial institutions that have
         entered into sales arrangements with such dealers or brokers (and
         which are identified as such to the Distributor) or with the
         Distributor. The purchaser must certify to the Distributor at the
         time of purchase that the purchase is for the purchaser's own
         account (or for the benefit of such employee's spouse or minor
         children).
|_|   Dealers, brokers, banks or registered investment advisors that have
         entered into an agreement with the Distributor providing
         specifically for the use of shares of the Fund in particular
         investment products made available to their clients. Those clients
         may be charged a transaction fee by their dealer, broker, bank or
         advisor for the purchase or sale of Fund shares.
|_|   Investment advisors and financial planners who have entered into an
         agreement for this purpose with the Distributor and who charge an
         advisory, consulting or other fee for their services and buy shares
         for their own accounts or the accounts of their clients.
|_|   "Rabbi trusts" that buy shares for their own accounts, if the purchases
         are made through a broker or agent or other financial intermediary
         that has made special arrangements with the Distributor for those
         purchases.
|_|   Clients of investment advisors or financial planners (that have entered
         into an agreement for this purpose with the Distributor) who buy
         shares for their own accounts may also purchase shares without sales
         charge but only if their accounts are linked to a master account of
         their investment advisor or financial planner on the books and
         records of the broker, agent or financial intermediary with which
         the Distributor has made such special arrangements . Each of these
         investors may be charged a fee by the broker, agent or financial
         intermediary for purchasing shares.
|_|   Directors, trustees, officers or full-time employees of OpCap Advisors
         or its affiliates, their relatives or any trust, pension, profit
         sharing or other benefit plan which beneficially owns shares for
         those persons.
|_|   Accounts for which Oppenheimer Capital (or its successor) is the
         investment advisor (the Distributor must be advised of this
         arrangement) and persons who are directors or trustees of the
         company or trust which is the beneficial owner of such accounts.
|_|   A unit investment trust that has entered into an appropriate agreement
         with the Distributor.
|_|   Dealers, brokers, banks, or registered investment advisers that have
         entered into an agreement with the Distributor to sell shares to
         defined contribution employee retirement plans for which the dealer,
         broker or investment adviser provides administration services.
|_|   Retirement Plans and deferred compensation plans and trusts used to
         fund those plans (including, for example, plans qualified or created
         under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
         Code), in each case if those purchases are made through a broker,
         agent or other financial intermediary that has made special
         arrangements with the Distributor for those purchases.
|_|   A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
         Advisors) whose Class B or Class C shares of a Former Quest for
         Value Fund were exchanged for Class A shares of that Fund due to the
         termination of the Class B and Class C TRAC-2000 program on November
         24, 1995.
|_|   A qualified Retirement Plan that had agreed with the former Quest for
         Value Advisors to purchase shares of any of the Former Quest for
         Value Funds at net asset value, with such shares to be held through
         DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
         arrangement was consummated and share purchases commenced by
         December 31, 1996.

B. Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions.

Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_|   Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds
         (other than Oppenheimer Cash Reserves) or unit investment trusts for
         which reinvestment arrangements have been made with the Distributor.
|_|   Shares purchased by the reinvestment of loan repayments by a
         participant in a Retirement Plan for which the Manager or an
         affiliate acts as sponsor.
|_|   Shares purchased in amounts of less than $5.

C. Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.

The Class A contingent deferred sales charge is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
|_|   To make Automatic Withdrawal Plan payments that are limited annually to
         no more than 12% of the account value adjusted annually.
|_|   Involuntary redemptions of shares by operation of law or involuntary
         redemptions of small accounts (please refer to "Shareholder Account
         Rules and Policies," in the applicable fund Prospectus).
|_|   For distributions from Retirement Plans, deferred compensation plans or
         other employee benefit plans for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established.
         2) To return excess contributions.
         3) To return contributions made due to a mistake of fact.
4)    Hardship withdrawals, as defined in the plan.7
         5) Under a Qualified Domestic Relations Order, as defined in the
            Internal Revenue Code, or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.
         9) Separation from service.8
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) if the plan has made special
            arrangements with the Distributor.
         11)      Plan termination or "in-service distributions," if the
            redemption proceeds are rolled over directly to an
            OppenheimerFunds-sponsored IRA.
|_|   For distributions from 401(k) plans sponsored by broker-dealers that
         have entered into a special agreement with the Distributor allowing
         this waiver.
|_|   For distributions from retirement plans that have $10 million or more
         in plan assets and that have entered into a special agreement with
         the Distributor.
|_|   For distributions from retirement plans which are part of a retirement
         plan product or platform offered by certain banks, broker-dealers,
         financial advisors, insurance companies or record keepers which have
         entered into a special agreement with the Distributor.
III.    Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
                                         Funds
---------------------------------------------------------------------------------

The Class B, Class C and Class N contingent deferred sales charges will not
be applied to shares purchased in certain types of transactions or redeemed
in certain circumstances described below.

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_|   Shares redeemed involuntarily, as described in "Shareholder Account
         Rules and Policies," in the applicable Prospectus.
|_|   Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|_|   The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability by the Social Security
         Administration.
|_|   Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|   Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|   Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into
         a special arrangement with the Distributor for this purpose.
|_|   Redemptions of Class C shares of an Oppenheimer fund in amounts of $1
         million or more requested in writing by a Retirement Plan sponsor
         and submitted more than 12 months after the Retirement Plan's first
         purchase of Class C shares, if the redemption proceeds are invested
         to purchase Class N shares of one or more Oppenheimer funds.
|_|   Distributions9 from Retirement Plans or other employee benefit plans
         for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established in an Oppenheimer fund.
         2) To return excess contributions made to a participant's account.
         3) To return contributions made due to a mistake of fact.
         4) To make hardship withdrawals, as defined in the plan.10
         5) To make distributions required under a Qualified Domestic
            Relations Order or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.11
         9) On account of the participant's separation from service.12
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) offered as an investment option in a
            Retirement Plan if the plan has made special arrangements with
            the Distributor.
         11)      Distributions made on account of a plan termination or
            "in-service" distributions, if the redemption proceeds are rolled
            over directly to an OppenheimerFunds-sponsored IRA.
         12)      For distributions from a participant's account under an
            Automatic Withdrawal Plan after the participant reaches age 59 1/2,
            as long as the aggregate value of the distributions does not
            exceed 10% of the account's value, adjusted annually.
         13)      Redemptions of Class B shares under an Automatic Withdrawal
            Plan for an account other than a Retirement Plan, if the
            aggregate value of the redeemed shares does not exceed 10% of the
            account's value, adjusted annually.
         14)      For distributions from 401(k) plans sponsored by
            broker-dealers that have entered into a special arrangement with
            the Distributor allowing this waiver.
|_|   Redemptions of Class B shares or Class C shares under an Automatic
         Withdrawal Plan from an account other than a Retirement Plan if the
         aggregate value of the redeemed shares does not exceed 10% of the
         account's value annually.

B. Waivers for Shares Sold or Issued in Certain Transactions.

The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_|   Shares sold to the Manager or its affiliates.
|_|   Shares sold to registered management investment companies or separate
         accounts of insurance companies having an agreement with the Manager
         or the Distributor for that purpose.
|_|   Shares issued in plans of reorganization to which the Fund is a party.
|_|   Shares sold to present or former officers, directors, trustees or
         employees (and their "immediate families" as defined above in
         Section I.A.) of the Fund, the Manager and its affiliates and
         retirement plans established by them for their employees.
IV.






   Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
           Funds Who Were Shareholders of Former Quest for Value Funds
-------------------------------------------------------------------------------

The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described
below for certain persons who were shareholders of the former Quest for Value
Funds.  To be eligible, those persons must have been shareholders on November
24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those
former Quest for Value Funds.  Those funds include:
   Oppenheimer Quest Value Fund, Inc.           Oppenheimer Small Cap Value
   Fund
   Oppenheimer Quest Balanced Fund              Oppenheimer Quest
   International Value Fund, Inc.
   Oppenheimer Quest Opportunity Value Fund

      These arrangements also apply to shareholders of the following funds
when they merged (were reorganized) into various Oppenheimer funds on
November 24, 1995:

   Quest for Value U.S. Government Income Fund  Quest for Value New York
   Tax-Exempt Fund
   Quest for Value Investment Quality Income Fund     Quest for Value
   National Tax-Exempt Fund
   Quest for Value Global Income Fund     Quest for Value California
   Tax-Exempt Fund

      All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds."  The waivers of initial and contingent
deferred sales charges described in this Appendix apply to shares of an
Oppenheimer fund that are either:
|_|   acquired by such shareholder pursuant to an exchange of shares of an
         Oppenheimer fund that was one of the Former Quest for Value Funds,
         or
|_|   purchased by such shareholder by exchange of shares of another
         Oppenheimer fund that were acquired pursuant to the merger of any of
         the Former Quest for Value Funds into that other Oppenheimer fund on
         November 24, 1995.

A. Reductions or Waivers of Class A Sales Charges.

|X|   Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.

Purchases by Groups and Associations.  The following table sets forth the
initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities.
The rates in the table apply if that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995.

--------------------------------------------------------------------------------
                      Initial Sales       Initial Sales Charge   Concession as
Number of Eligible    Charge as a % of    as a % of Net Amount   % of Offering
Employees or Members  Offering Price      Invested               Price
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9 or Fewer                   2.50%                2.56%              2.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
At  least  10 but not        2.00%                2.04%              1.60%
more than 49
--------------------------------------------------------------------------------

------------------------------------------------------------------------------
      For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.







      Purchases made under this arrangement qualify for the lower of either
the sales charge rate in the table based on the number of members of an
Association, or the sales charge rate that applies under the Right of
Accumulation described in the applicable fund's Prospectus and Statement of
Additional Information. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Distributor.

|X|   Waiver of Class A Sales Charges for Certain Shareholders.  Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o     Shareholders who were shareholders of the AMA Family of Funds on
            February 28, 1991 and who acquired shares of any of the Former
            Quest for Value Funds by merger of a portfolio of the AMA Family
            of Funds.
o     Shareholders who acquired shares of any Former Quest for Value Fund by
            merger of any of the portfolios of the Unified Funds.

|X|   Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions.  The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:

      Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.

B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.

|X|   Waivers for Redemptions of Shares Purchased Prior to March 6, 1995.  In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
o     withdrawals under an automatic withdrawal plan holding only either
            Class B or Class C shares if the annual withdrawal does not
            exceed 10% of the initial value of the account value, adjusted
            annually, and
o     liquidation of a shareholder's account if the aggregate net asset value
            of shares held in the account is less than the required minimum
            value of such accounts.

|X|   Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent
deferred sales charge will be waived for redemptions of Class A, Class B or
Class C shares of an Oppenheimer fund. The shares must have been acquired by
the merger of a Former Quest for Value Fund into the fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on
or after March 6, 1995, but prior to November 24, 1995:
o     redemptions following the death or disability of the shareholder(s) (as
            evidenced by a determination of total disability by the U.S.
            Social Security Administration);
o     withdrawals under an automatic withdrawal plan (but only for Class B or
            Class C shares) where the annual withdrawals do not exceed 10% of
            the initial value of the account value; adjusted annually, and
o     liquidation of a shareholder's account if the aggregate net asset value
            of shares held in the account is less than the required minimum
            account value.
      A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class
B or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V.         Special Sales Charge Arrangements for Shareholders of Certain
          Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
                            Investment Accounts, Inc.
---------------------------------------------------------------------------

The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix)
of the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
   Oppenheimer U. S. Government Trust,
   Oppenheimer Bond Fund,
   Oppenheimer Value Fund and
   Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
   Connecticut Mutual Liquid Account         Connecticut Mutual Total Return
   Account
   Connecticut Mutual Government Securities Account   CMIA LifeSpan Capital
   Appreciation Account
   Connecticut Mutual Income Account         CMIA LifeSpan Balanced Account
   Connecticut Mutual Growth Account         CMIA Diversified Income Account

A. Prior Class A CDSC and Class A Sales Charge Waivers.

|X|   Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue
to make additional purchases of Class A shares at net asset value without a
Class A initial sales charge, but subject to the Class A contingent deferred
sales charge that was in effect prior to March 18, 1996 (the "prior Class A
CDSC"). Under the prior Class A CDSC, if any of those shares are redeemed
within one year of purchase, they will be assessed a 1% contingent deferred
sales charge on an amount equal to the current market value or the original
purchase price of the shares sold, whichever is smaller (in such redemptions,
any shares not subject to the prior Class A CDSC will be redeemed first).

      Those shareholders who are eligible for the prior Class A CDSC are:
         1) persons whose purchases of Class A shares of a Fund and other
            Former Connecticut Mutual Funds were $500,000 prior to March 18,
            1996, as a result of direct purchases or purchases pursuant to
            the Fund's policies on Combined Purchases or Rights of
            Accumulation, who still hold those shares in that Fund or other
            Former Connecticut Mutual Funds, and
         2) persons whose intended purchases under a Statement of Intention
            entered into prior to March 18, 1996, with the former general
            distributor of the Former Connecticut Mutual Funds to purchase
            shares valued at $500,000 or more over a 13-month period entitled
            those persons to purchase shares at net asset value without being
            subject to the Class A initial sales charge

      Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this
arrangement they will be subject to the prior Class A CDSC.

|X|





      Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of
the categories below and acquired Class A shares prior to March 18, 1996, and
still holds Class A shares:
         1) any purchaser, provided the total initial amount invested in the
            Fund or any one or more of the Former Connecticut Mutual Funds
            totaled $500,000 or more, including investments made pursuant to
            the Combined Purchases, Statement of Intention and Rights of
            Accumulation features available at the time of the initial
            purchase and such investment is still held in one or more of the
            Former Connecticut Mutual Funds or a Fund into which such Fund
            merged;
         2) any participant in a qualified plan, provided that the total
            initial amount invested by the plan in the Fund or any one or
            more of the Former Connecticut Mutual Funds totaled $500,000 or
            more;
         3) Directors of the Fund or any one or more of the Former
            Connecticut Mutual Funds and members of their immediate families;
         4) employee benefit plans sponsored by Connecticut Mutual Financial
            Services, L.L.C. ("CMFS"), the prior distributor of the Former
            Connecticut Mutual Funds, and its affiliated companies;
         5) one or more members of a group of at least 1,000 persons (and
            persons who are retirees from such group) engaged in a common
            business, profession, civic or charitable endeavor or other
            activity, and the spouses and minor dependent children of such
            persons, pursuant to a marketing program between CMFS and such
            group; and
         6) an institution acting as a fiduciary on behalf of an individual
            or individuals, if such institution was directly compensated by
            the individual(s) for recommending the purchase of the shares of
            the Fund or any one or more of the Former Connecticut Mutual
            Funds, provided the institution had an agreement with CMFS.

      Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.

      Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State
by Connecticut Mutual Life Insurance Company through the Panorama Separate
Account which is beyond the applicable surrender charge period and which was
used to fund a qualified plan, if that holder exchanges the variable annuity
contract proceeds to buy Class A shares of the Fund.

B. Class A and Class B Contingent Deferred Sales Charge Waivers.

In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B
shares of a Fund into Class A or Class B shares of a Former Connecticut
Mutual Fund provided that the Class A or Class B shares of the Fund to be
redeemed or exchanged were (i) acquired prior to March 18, 1996 or (ii) were
acquired by exchange from an Oppenheimer fund that was a Former Connecticut
Mutual Fund. Additionally, the shares of such Former Connecticut Mutual Fund
must have been purchased prior to March 18, 1996:
   1) by the estate of a deceased shareholder;
   2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
      the Internal Revenue Code;
   3) for retirement distributions (or loans) to participants or
      beneficiaries from retirement plans qualified under Sections 401(a) or
      403(b)(7)of the Code, or from IRAs, deferred compensation plans created
      under Section 457 of the Code, or other employee benefit plans;
4)    as tax-free returns of excess contributions to such retirement or
      employee benefit plans;
   5) in whole or in part, in connection with shares sold to any state,
      county, or city, or any instrumentality, department, authority, or
      agency thereof, that is prohibited by applicable investment laws from
      paying a sales charge or concession in connection with the purchase of
      shares of any registered investment management company;
   6) in connection with the redemption of shares of the Fund due to a
      combination with another investment company by virtue of a merger,
      acquisition or similar reorganization transaction;
   7) in connection with the Fund's right to involuntarily redeem or
      liquidate the Fund;
   8) in connection with automatic redemptions of Class A shares and Class B
      shares in certain retirement plan accounts pursuant to an Automatic
      Withdrawal Plan but limited to no more than 12% of the original value
      annually; or
   9) as involuntary redemptions of shares by operation of law, or under
      procedures set forth in the Fund's Articles of Incorporation, or as
      adopted by the Board of Directors of the Fund.
VI.       Special Reduced Sales Charge for Former Shareholders of Advance
                                America Funds, Inc.
------------------------------------------------------------------------------

Shareholders of Oppenheimer AMT-Free Municipals, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund
who acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance America
Funds, Inc. on March 30, 1990, may purchase Class A shares of those four
Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII.     Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
                            Convertible Securities Fund
------------------------------------------------------------------------------

Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to
purchase those shares at net asset value without sales charge:
|_|   the Manager and its affiliates,
|_|   present or former officers, directors, trustees and employees (and
         their "immediate families" as defined in the Fund's Statement of
         Additional Information) of the Fund, the Manager and its affiliates,
         and retirement plans established by them or the prior investment
         advisor of the Fund for their employees,
|_|   registered management investment companies or separate accounts of
         insurance companies that had an agreement with the Fund's prior
         investment advisor or distributor for that purpose,
|_|   dealers or brokers that have a sales agreement with the Distributor, if
         they purchase shares for their own accounts or for retirement plans
         for their employees,
|_|   employees and registered representatives (and their spouses) of dealers
         or brokers described in the preceding section or financial
         institutions that have entered into sales arrangements with those
         dealers or brokers (and whose identity is made known to the
         Distributor) or with the Distributor, but only if the purchaser
         certifies to the Distributor at the time of purchase that the
         purchaser meets these qualifications,
|_|   dealers, brokers, or registered investment advisors that had entered
         into an agreement with the Distributor or the prior distributor of
         the Fund specifically providing for the use of Class M shares of the
         Fund in specific investment products made available to their
         clients, and
|_|   dealers, brokers or registered investment advisors that had entered
         into an agreement with the Distributor or prior distributor of the
         Fund's shares to sell shares to defined contribution employee
         retirement plans for which the dealer, broker, or investment advisor
         provides administrative services.








Oppenheimer Quest Balanced FundSM

Internet Website
      www.oppenheimerfunds.com
      ------------------------

Investment Advisor
      OppenheimerFunds, Inc.
      Two World Financial Center
      225 Liberty Street, 11th Floor
      New York, New York 10281-1008

Sub-Advisor
      Oppenheimer Capital LLP
      1345 Avenue of the Americas, 49th Floor
      New York, New York 10105-4800

Distributor
      OppenheimerFunds Distributor, Inc.
      Two World Financial Center
      225 Liberty Street, 11th Floor
      New York, New York 10281-1008

Transfer Agent
      OppenheimerFunds Services
      P.O. Box 5270
      Denver, Colorado 80217
      1.800.CALL OPP(225.5677)

Custodian Bank
      Citibank, N.A.
      111 Wall Street
      New York, New York 10005

Independent Registered Public Accounting Firm
      KPMG LLP
      707 Seventeenth Street
      Denver, Colorado 80202

Legal Counsel
      Mayer, Brown, Rowe & Maw LLP
      1675 Broadway
      New York, New York 10019

1234
PX0257.0205.rev0405


--------
1 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not
have any direct or indirect financial interest in the operation of the
distribution plan or any agreement under the plan.
2 Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
3 In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent deferred sales
charges mean the Fund's Early Withdrawal Charges and references to
"redemptions" mean "repurchases" of shares.
4 An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class N shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
5 The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment
dealer, broker or other financial institution designated by the group. Such
plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans
other than plans for public school employees. The term "Group Retirement
Plan" also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase shares of an Oppenheimer fund or
funds through a single investment dealer, broker or other financial
institution that has made special arrangements with the Distributor.
6 However, that concession will not be paid on purchases of shares in amounts
of $1 million or more (including any right of accumulation) by a Retirement
Plan that pays for the purchase with the redemption proceeds of Class C
shares of one or more Oppenheimer funds held by the Plan for more than one
year.
7 This provision does not apply to IRAs.
8 This provision only applies to qualified retirement plans and 403(b)(7)
custodial plans after your separation from service in or after the year you
reached age 55.
9 The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
10 This provision does not apply to IRAs.
11 This provision does not apply to loans from 403(b)(7) custodial plans and
loans from the OppenheimerFunds-sponsored Single K retirement plan.
12 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.