OPPENHEIMER REAL ASSET FUND
485BPOS, 2000-12-28
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                                                      Registration No. 333-14887
                                                              File No. 811-07857

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933                   [X]

Pre-Effective Amendment No. _____                                        [   ]


Post-Effective Amendment No.   7                                           [X]
                             -------


                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940                                                                [X]


Amendment No.    8                                                         [X]
              --------


--------------------------------------------------------------------------------
                           OPPENHEIMER REAL ASSET FUND
--------------------------------------------------------------------------------
                 (Exact Name of Registrant as Specified in Charter)

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                  6803 South Tucson Way, Englewood, Colorado 80112
--------------------------------------------------------------------------------
                (Address of Principal Executive Offices) (Zip Code)

--------------------------------------------------------------------------------
                                  303-671-3200
--------------------------------------------------------------------------------
                (Registrant's Telephone Number, including Area Code)

--------------------------------------------------------------------------------
                             Andrew J. Donohue, Esq.
--------------------------------------------------------------------------------
                             OppenheimerFunds, Inc.
              Two World Trade Center, New York, New York 10048-0203
--------------------------------------------------------------------------------
                      (Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):


[ ] Immediately  upon filing  pursuant to paragraph (b) [X] On December 29, 2000
pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph  (a)(1)
[ ] On  _______________  pursuant to  paragraph  (a)(1) [ ] 75 days after filing
pursuant to paragraph (a)(2) [ ] On _______________ pursuant to paragraph (a)(2)
of Rule 485


If appropriate, check the following box:

[ ]  This  post-effective  amendment  designates  a  new  effective  date  for a
previously filed post-effective amendment.


<PAGE>


Oppenheimer
Real Asset Fund(R)



Prospectus dated December 29, 2000






















As with all  mutual  funds,  the  Securities  and  Exchange  Commission  has not
approved or disapproved  the Fund's  securities nor has it determined  that this
Prospectus  is  accurate  or  complete.  It is a criminal  offense to  represent
otherwise.






Oppenheimer  Real Asset  Fund(R)  is a mutual  fund.  It seeks to provide  total
return by investing  primarily in  commodity-linked  hybrid instruments and U.S.
government securities.

      Hybrid  instruments are derivative  investments  that have higher risks of
volatility  and loss of principal.  You should  carefully  consider  these risks
before investing.

      This Prospectus contains important information about the Fund's objective,
its  investment  policies,  strategies  and risks.  It also  contains  important
information  about  how to buy and sell  shares  of the Fund and  other  account
features.  Please read this Prospectus  carefully  before you invest and keep it
for future reference about your account.









                             (logo) OppenheimerFunds
The Right Way to Invest




<PAGE>


148

CONTENTS


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

                    ABOUT THE FUND

                    The Fund's Investment Objective and Strategies
                    Main Risks of Investing in the Fund
                    The Fund's Past Performance
                    Fees and Expenses of the Fund
                    About the Fund's Investments
                    How the Fund is Managed


                    ABOUT YOUR ACCOUNT

                    How to Buy Shares
                    Class A Shares
                    Class B Shares
                    Class C Shares
                    Class N Shares
                    Class Y Shares

                    Special Investor Services
                    AccountLink
                    PhoneLink
                    OppenheimerFunds Internet Web Site
                    Retirement Plans

                    How to Sell Shares
                    By Mail
                    By Telephone

                    How to Exchange Shares
                    Shareholder Account Rules and Policies
                    Dividends, Capital Gains and Taxes
                    Financial Highlights

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



<PAGE>



A B O U T  T H E  F U N D


The Fund's Objective and Investment Strategies

What Is the Fund's  Investment  Objective?  The Fund seeks total  return.  Total
return refers to the change in value of an investment in shares of the Fund over
time resulting from changes in the value of the Fund's investments and income on
those investments.

What Does the Fund MAINLY Invest In? The Fund  normally  invests at least 65% of
its assets in:
o  "Hybrid instruments" that are commodity-linked derivative investments, mainly
    structured notes, and

o   futures  contracts,   options,   interest  rate  swaps,  forward  contracts,
    investment-grade and  non-investment-grade  corporate bonds and notes, money
    market   instruments  and  securities  issued  or  guaranteed  by  the  U.S.
    government or its agencies and instrumentalities,  including mortgage-backed
    securities.


      Commodity-linked derivative investments provide investors with exposure to
the investment  returns of "real assets" that trade in the  commodities  markets
without investing directly in physical commodities. "Real assets," as opposed to
stocks  or  bonds,  are  assets  that  have  tangible  properties,  such as oil,
livestock, and agricultural or metal products.


How Do the portfolio managers Decide What Investments to Buy or Sell? The Fund's
portfolio  managers generally allocate the Fund's investments among a variety of
different  commodity  sectors,  based on the weightings of the components of the
Fund's  benchmark  index,  the Goldman Sachs  Commodity  Index (the  "GSCI(R)").
However, the Fund is actively managed and its investment  allocations may differ
from the weightings in the GSCI. As a result,  the Fund's  performance is likely
to differ from the performance of the GSCI.


The Fund  attempts to provide its  shareholders  with exposure to the returns of
the  commodity  markets  through  commodity-linked  investments,  rather than by
investing  directly in physical  commodities.  To do so, the portfolio  managers
invest  a  substantial  percentage  of the  Fund's  assets  in  commodity-linked
derivative  investments while also investing a substantial portion of the Fund's
assets in U.S.  government  securities  and other  debt  securities  to  provide
liquidity and income.

      The  portfolio  managers  currently  use a  four-step  process  to  select
commodity-linked  investments for the Fund. This process may change over time or
other factors and strategies may be employed:
o    Macro-Economic  Analysis:  They evaluate the overall  business cycle using
     macroeconomic  analysis, to develop their expectations regarding potential
     commodity returns.
o    Commodity  Sector  Allocation:  They use that broad economic  analysis to
     make target allocations of the Fund's assets among the five broad commodity
     sectors in the GSCI: energy, agriculture,  livestock, industrial metals and
     precious metals.  The portfolio  managers perform a sub-sector  analysis to
     identify supply and demand imbalances for the commodities in a sector. They
     analyze the structure for futures  prices for those  commodities  to try to
     find  sectors  that they  believe may provide  growth  opportunities.  As a
     result,  the Fund's  allocation of its  investments  within each sector may
     differ (at times,  significantly)  from the  sector  weightings  within the
     GSCI.
o    Security  Selection:  The  portfolio  managers  then  select  the  mix  of
     structured  notes,  futures and other  investments to implement the Fund's
     commodity exposure, and government securities, bonds and other investments
     to provide liquidity and income.
o    Performance  and Portfolio  Risk  Monitoring:  On an ongoing  basis,  the
     portfolio  managers  monitor  the  performance  and  risks  of  the  Fund's
     investments.

Who Is the Fund  Designed  For?  The Fund is designed for  aggressive  investors
seeking total return over the long term, mainly from commodity-linked derivative
investments.  The Fund is not designed for investors  seeking  current income or
preservation of capital.  Because commodity market returns may not be correlated
with the returns of equity and debt markets over the long term, an investment in
the Fund may provide useful diversification in an investor's overall portfolio.

      However,  the Fund is not a complete  investment program and should not be
an  investor's  sole  investment  because  its  performance  is  linked  to  the
performance of highly  volatile  commodities.  Investors  should consider buying
shares of the Fund only as part of an overall  portfolio  strategy that includes
other asset classes,  such as fixed-income and equity investments.  Investors in
the  Fund  should  be  willing  to  assume  the  greater  risks  of  potentially
significant   short-term  share  price   fluctuations   because  of  the  Fund's
investments in commodity-linked instruments.


Main Risks of Investing in the Fund

All investments have risks to some degree. The Fund's investments are subject to
changes in their value from a number of factors,  described below. There is also
the risk that poor investment  selection by the Fund's Sub-Advisor,  Oppenheimer
Real Asset  Management,  Inc., will cause the Fund to  underperform  other funds
having a similar investment objective.

Special Risks of hybrid or derivative  investments.  In general  terms, a hybrid
instrument is a derivative  investment,  which is an investment  contract  whose
value depends on (or is derived from) the value of an underlying asset, interest
rate, index or commodity.

      The  commodity-linked  structured notes and futures contracts in which the
Fund invests are hybrid instruments that have substantial risks,  including risk
of  loss  of a  significant  portion  of  their  principal  value.  Because  the
performance  of these  notes is  linked  to the  performance  of the  underlying
commodity prices, these investments are subject to "market risks" that relate to
the  movements  of prices  in the  commodity  markets.  They may be  subject  to
additional  special  risks  that  do not  affect  traditional  equity  and  debt
securities:
o     Risk of loss of interest.  If payment of interest on a structured  note or
      other hybrid instrument is linked to the value of a particular  commodity,
      futures  contract,  index or other economic  variable,  the Fund might not
      receive all (or a portion) of the interest due on its  investment if there
      is a loss of value of the underlying investment.
o     Risk of loss of principal.  To the extent that the amount of the principal
      to be  repaid  upon  maturity  is  linked  to the  value  of a  particular
      commodity,  futures contract,  index or other economic variable,  the Fund
      might not  receive  all or a portion of the  principal  at maturity of the
      investment.  At any  time,  the risk of loss  associated  with  particular
      instruments in the Fund's portfolio may be  significantly  higher than 50%
      of the value of the investment.
o     Lack of secondary  market. A liquid secondary market may not exist for the
      specially  created  hybrid  instruments  the Fund buys,  which may make it
      difficult  for  the  Fund  to  sell  them  at an  acceptable  price  or to
      accurately value them.
o     Risk of greater volatility.  The value of the commodity-linked  derivative
      investments the Fund buys may fluctuate  significantly  because the values
      of the  underlying  investments  to which they are  linked are  themselves
      extremely  volatile.  Additionally,  economic  leverage  will increase the
      volatility of these hybrid instruments as they may increase or decrease in
      value more quickly than the underlying commodity, index, futures contract,
      or other economic variable.


      If the  Sub-Advisor  uses a  derivative  instrument  at the wrong  time or
judges market conditions incorrectly, the strategies may result in a significant
loss to the Fund and reduce the Fund's  return.  The Fund could also  experience
losses if the prices of its hedging  instruments,  futures and options positions
were not properly correlated with its other investments.


      If the issuer of the derivative  does not pay the amount due, the Fund can
lose money on the investment. Interest rate and stock market changes in the U.S.
and abroad may influence the  performance of  derivatives.  Also, the underlying
security or investment  on which the  derivative  is based,  and the  derivative
itself, may not perform the way the Sub-Advisor expected it to. If that happens,
the Fund's share price could decline.

Credit  Risk.   Commodity-linked  notes  issued  by  banks,   broker-dealers  or
corporations are subject to credit risk. Credit risk is the risk that the issuer
might  not  pay  interest  when  due  or  repay  principal  at  maturity  of the
obligation.  If the issuer  fails to pay  interest,  the Fund's  income might be
reduced, and if the issuer fails to pay principal, the value of that investment,
and the Fund's share prices may fall.

      The Fund will  attempt to limit credit risk,  to the extent  possible,  by
engaging  in  transactions  with  counterparties  that have an  investment-grade
credit  rating,  or a Letter of Credit  from a major  money  center bank or some
other form of credit enhancement.  However, the Fund can invest up to 10% of its
total assets in below-investment-grade securities that have greater credit risks
than  investment-grade  securities.  A downgrade in an issuer's credit rating or
other  adverse  news  about an issuer  can  reduce  the  value of that  issuer's
securities.

Hedging Risk. The Fund can use hedging instruments, such as options, futures and
swaps to hedge against  declines in the value of its portfolio  investments,  as
well as to seek greater returns.  There are special risks in particular  hedging
strategies  the Fund might use.  For  example,  if a covered call written by the
Fund is exercised on an  investment  that has  increased in value above the call
price,  the Fund will be required to sell the  investment  at the call price and
will not be able to realize any profit on the  investment  above the call price.
In  writing  a put,  there is a risk  that the Fund may be  required  to buy the
underlying security at a disadvantageous  price if the market value is below the
put price.


Risks of Non-Diversification. The Fund is "non-diversified" under the Investment
Company Act.  That means that the Fund can invest in the  securities of a single
issuer without limit.  This policy gives the Fund more  flexibility to invest in
the  obligations  of a  single  issuer  than  if it were a  "diversified"  fund.
However,  the Fund intends to diversify its  investments so that it will qualify
as a "regulated investment company" under the Internal Revenue Code (although it
reserves the right not to qualify). Under that requirement,  with respect to 50%
of its  total  assets,  the  Fund  may  invest  up to 25% of its  assets  in the
securities of any one issuer.  To the extent the Fund invests a relatively  high
percentage  of its  assets in the  obligations  of a single  issuer or a limited
number of  issuers,  the Fund is  subject  to  additional  risk of loss if those
obligations lose market value or the issuer of those obligations defaults.


Interest Rate Risks.  Debt securities are subject to changes in their value when
prevailing  interest  rates  change.  When  interest  rates fall,  the values of
already-issued  debt securities  generally rise. When prevailing  interest rates
rise, the values of already-issued debt securities generally fall. The magnitude
of these  fluctuations  is  generally  greater for debt  securities  with longer
maturities. The Fund's share prices can go up or down when interest rates change
because of the effect of the change on the value of the Fund's portfolio of debt
securities.

o    Prepayment Risks. The interest-only  and  principal-only  mortgage-backed
     securities  the Fund can buy are  especially  sensitive  to  interest  rate
     changes,  which can affect not only  their  prices but can also  change the
     prepayment  assumptions  about those  investments and income flows the Fund
     receives from them. Mortgage- backed securities are subject to the risks of
     unanticipated  prepayment.  The  risk is that  when  interest  rates  fall,
     borrowers  under the mortgages that underlie these  securities  will prepay
     their  mortgages  more  quickly  than  expected,  causing the issuer of the
     security  to  prepay  the  principal  to the Fund  prior to the  security's
     expected  maturity.  The Fund may be required to reinvest the proceeds at a
     lower interest rate, reducing its income.

      Mortgage-  backed  securities  subject to prepayment  risk generally offer
      less  potential  for gains when  prevailing  interest  rates fall and have
      greater potential for loss when prevailing interest rates rise. The impact
      of  prepayments on the price of a security may be difficult to predict and
      may  increase  the  volatility  of the price.  If the Fund buys  mortgage-
      backed  securities  at  a  premium,   accelerated   prepayments  on  those
      securities  could  cause  the  Fund to  lose a  portion  of its  principal
      investment represented by the premium.

risks of leverage.  Some derivatives the Fund buys involve a degree of leverage.
For example,  a hybrid  instrument  linked to the value of a commodity index may
return income  calculated as a multiple of the price  movement of the underlying
index.


      Economic  leverage occurs when an investor has the right to a return on an
investment  that  exceeds  the return  that the  investor  would be  expected to
receive  based  on  the  amount  contributed  to  the  investment.  Economically
leveraged  hybrid  instruments can increase the gain or the loss associated with
changes in the value of an  underlying  commodity,  index,  futures  contract or
other  economic  variable.  The Fund has  limits on the  leverage  ratio of each
hybrid investment it buys as well as on its overall portfolio.


How Risky is the Fund Overall?  The Fund's  derivative  investments may be quite
volatile and may lose principal  value.  The risks described above  collectively
form the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and the prices of its shares. Particular
investments and investment strategies also have risks. These risks mean that you
can lose money by investing in the Fund.  When you redeem your shares,  they may
be worth more or less than what you paid for them.  There is no  assurance  that
the Fund will achieve its investment objective.

      The  Sub-Advisor  attempts to reduce some of these risks by  investing  in
instruments  linked  to  different  sectors  of the  commodity  markets,  by not
investing 25% or more of its assets in securities issued by companies in any one
industry, and by carefully researching investments before they are purchased for
the  portfolio.  However,  the Fund's  share  prices can be  expected to be very
volatile.  In the OppenheimerFunds  spectrum of funds, the Fund is an aggressive
fund.  The Fund is expected to have a higher  share  price  volatility  than the
other Oppenheimer funds that invest mainly in equity or fixed-income  securities
because of the  special  risks to which the Fund's  derivative  investments  are
subject.

An  investment  in the Fund is not a deposit of any bank,  and is not insured or
guaranteed by the Federal Deposit Insurance  Corporation or any other government
agency.


The Fund's Past Performance

The bar chart and table below show one measure of the risks of  investing in the
Fund,  by showing the Fund's  performance  (for its Class A shares) for the full
calendar  years  since the Fund's  inception  (3/31/97)  and by showing  how the
average  annual  total  returns  of the  Fund's  shares  compare  to  those of a
broad-based  market  index.  The  Fund's  past  investment  performance  is  not
necessarily an indication of how the Fund will perform in the future.

Annual Total Returns (Class A) (as of 12/31 each year)

[See  appendix to  prospectus  for data in bar chart  showing  the annual  total
return]


For  the  period  from  1/1/00  through  9/30/00,  the  cumulative  return  (not
annualized) of Class A shares was 36.65%.  Sales charges are not included in the
calculations  of return in this bar chart,  and if those charges were  included,
the returns  would be less than those shown.  During the period shown in the bar
chart,  the highest return (not  annualized)  for a calendar  quarter was 16.69%
(3Q'99)  and the lowest  return  (not  annualized)  for a calendar  quarter  was
-25.88% (4Q'98).




<PAGE>




Average Annual Total Returns          1 Year     Life of class
for the periods ended December
31, 1999
----------------------------------------------------------------

Class A Shares (inception        28.97%            -14.90%
3/31/97)

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

Goldman Sachs Commodity          40.92%            -6.38%1
Index (GSCI(R))

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

Class B Shares (inception        31.03%            -14.60%
3/31/97)

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

Class C Shares (inception        34.95%            -13.76%
3/31/97)

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

Class Y Shares (inception        37.10%            -12.94%
3/31/97)

----------------------------------------------------------------
From 3/31/97.
--------------------------------------------------------------------------------

The Fund's average annual total returns include  applicable  sales charges:  for
Class A, the current  maximum  initial  sales charge of 5.75%;  for Class B, the
contingent deferred sales charge of 5% (1-year) and 3% (life-of-class);  and for
Class C, the 1% contingent deferred sales charge for the 1-year period. There is
no  sales  charge  for  Class  Y.  The  returns  measure  the  performance  of a
hypothetical   account  and  assume  that  all   dividends   and  capital  gains
distributions  have been reinvested in additional shares. The performance of the
Fund's  Class  A  shares  is  compared  to the  Goldman  Sachs  Commodity  Index
(GSCI(R)),  a  composite  index of  commodity  sector  returns  representing  an
unleveraged,  long-term  investment  in  commodity  futures.  Index  performance
includes  reinvestment  of income but does not reflect  transaction  costs.  The
Fund's  investments  vary from those in the index and the Fund is not an "index"
fund. Class N shares were not publicly offered during the period shown.


Fees and Expenses of the Fund


The following  tables are provided to help you  understand the fees and expenses
you may pay if you buy and hold  shares of the Fund.  The Fund pays a variety of
expenses directly for management of its assets, administration,  distribution of
its shares and other  services.  Those expenses are  subtracted  from the Fund's
assets to  calculate  the Fund's net asset  values per share.  All  shareholders
therefore pay those  expenses  indirectly.  Shareholders  pay other  transaction
expenses  directly,  such as sales  charges.  The numbers below are based on the
Fund's  expenses  during its fiscal year ended August 31, 2000,  except that the
numbers  for  Class N shares,  which is a new  class,  are  based on the  Fund's
anticipated expenses for Class N shares during the upcoming year.


Shareholder Fees (charges paid directly from your investment):

                           Class A   Class B      Class C   Class N    Class Y
                           Shares      Shares     Shares      Shares     Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Sales Charge        5.75%       None       None        None       None
(Load) on purchases
(as % of offering price)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Maximum Deferred Sales      None1       5%2         1%3        1%4        None
Charge (Load) (as % of
the lower of the
original offering price
or redemption proceeds)
-------------------------

1. A contingent deferred sales charge may apply to redemptions of investments of
   $1 million or more ($500,000 for retirement plan accounts) of Class A shares.
   See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase.  The contingent deferred
   sales charge declines to 1% in the sixth year and is eliminated after that.

3.  Applies to shares redeemed within 12 months of purchase.
4.  Applies  to  shares  redeemed  within 18 months  of a  retirement  plan's
    first purchase of Class N shares.


Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)

                          Class A      Class B   Class C    Class N      Class Y
                            Shares     Shares      Shares     Shares      Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Management Fees             1.00%       1.00%      1.00%         1.00%   1.00%

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

Distribution and/or         0.23%       1.00%      1.00%         0.25%    None
Service (12b-1) Fees

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

Other Expenses              0.27%       0.27%      0.27%         0.27%   0.09%

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

Total Annual Operating      1.50%       2.27%      2.27%         1.52%   1.09%
Expenses

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

Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial  expenses,  and  accounting  and legal  expenses the Fund pays.  Other
expenses for Class Y shares may be greater in future years.
--------------------------------------------------------------------------------


Examples.  The  following  examples are intended to help you compare the cost of
investing  in the Fund with the cost of investing  in other  mutual  funds.  The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.

      The first example assumes that you redeem all of your shares at the end of
those  periods.  The second  example  assumes  that you keep your  shares.  Both
examples also assume that your investment has a 5% return each year and that the
class's  operating  expenses remain the same. Your actual costs may be higher or
lower because  expenses  will vary over time.  Based on these  assumptions  your
expenses would be as follows:

If shares are redeemed:     1 Year        3 Years       5 Years     10 Years1
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Class A Shares               $719         $1,022        $1,346       $2,263

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

Class B Shares               $730         $1,009        $1,415       $2,234

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

Class C Shares               $330          $709         $1,215       $2,605

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

Class N Shares               $255          $480          $829        $1,813

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

Class Y Shares               $111          $347          $601        $1,329

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

If shares are not           1 Year        3 Years       5 Years     10 Years1
redeemed:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Class A Shares               $719         $1,022        $1,346       $2,263

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

Class B Shares               $230          $709         $1,215       $2,234

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

Class C Shares               $230          $709         $1,215       $2,605

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

Class N Shares               $155          $480          $829        $1,813

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

Class Y Shares               $111          $347          $601        $1,329

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

In the first example,  expenses include the initial sales charge for Class A and
the applicable Class B, Class C or Class N contingent deferred sales charges. In
the second example,  the Class A expenses include the sales charge, but Class B,
Class C or  Class N  expenses  do not  include  the  contingent  deferred  sales
charges.
1.  Class B  expenses  for  years 7 through  10 are  based on Class A  expenses,
    because Class B shares automatically convert to Class A after 6 years.

About the Fund's Investments

The Fund's Principal Investment Policies. The allocation of the Fund's portfolio
among  different  investments  will vary over time based upon the  Sub-Advisor's
evaluation of economic and market trends.  The Fund's portfolio might not always
include all of the different types of investments described below. The Statement
of Additional  Information  contains more detailed  information about the Fund's
investment policies and risks.

      Because  the Fund's  assets are not  invested  solely in  commodity-linked
investments,   and  because  the  Fund's  commodity-linked  investments  may  be
allocated in amounts that vary from the proportional weightings in the GSCI, the
Fund is not an "index" fund.

Commodity-Linked  Derivative  Investments.   The  value  of  a  commodity-linked
      derivative  investment  typically  is based upon the price  movements of a
      physical  commodity  (such as  heating  oil,  livestock,  or  agricultural
      products),  a commodity futures contract or commodity index, or some other
      readily  measurable  economic variable dependent upon changes in the value
      of commodities or the commodities markets.

      The Fund  invests  in  commodity-linked  derivative  investments  that are
      hybrid  instruments  that qualify for  exemption  from certain  regulation
      under the Commodity Exchange Act so that the Fund will not be considered a
      "commodity  pool."  Appendix A to the Statement of Additional  Information
      describes these qualifying hybrid  instruments.  The Fund may invest up to
      100% of its total assets in qualifying hybrid  instruments.  Additionally,
      from time to time the Fund may invest in other hybrid  instruments that do
      not qualify for  exemption  from certain  regulation  under the  Commodity
      Exchange Act.

o    Index-Linked and Commodity-Linked "Structured" Notes. The Fund invests in
     derivative debt instruments with principal and/or coupon payments linked to
     the value of commodities,  commodity futures contracts,  or the performance
     of commodity  indices,  such as the GSCI. These are  "commodity-linked"  or
     "index-linked"  notes. They are sometimes referred to as "structured notes"
     because the terms of the debt instrument may be structured by the issuer of
     the  note  and of the  purchaser.  These  notes  may be  issued  by  banks,
     brokerage firms, insurance companies and other corporations.

      The values of these  notes will rise or fall in response to changes in the
      underlying  commodity or related index or  investment.  These notes expose
      the Fund economically to movements in commodity  prices,  but a particular
      note is  primarily  a debt  obligation.  These  notes also are  subject to
      credit and interest  rate risks that in general  affect the values of debt
      securities.  Therefore,  at the maturity of the note, the Fund may receive
      more or less principal than it originally invested. The Fund might receive
      interest payments on the note that are more or less than the stated coupon
      interest payments.

      To try to reduce  this risk,  the Fund does not expect to invest more than
      25% of its  total  assets  in  structured  notes  under  whose  terms  the
      potential loss, either at redemption or maturity,  exceeds 50% of the face
      value of the notes.  That amount is calculated at the time of  investment.
      The Fund  does not  intend to  invest  more than 10% of its total  assets,
      determined at the time of investment, in notes that mature in more than 19
      months.

Futures and Options. The Fund uses futures contracts and put and call options to
      attempt to increase its investment  return,  and to manage its exposure to
      changing interest rates,  commodity prices,  securities  prices, and other
      economic  variables.  In the  broadest  sense,  futures and options may be
      considered derivative investments.

      The Fund  can  purchase  and sell  commodity  futures  contracts,  forward
      contracts,  options  on  futures  contracts  and  options  and  futures on
      commodity indices,  to adjust its exposure to the returns of the commodity
      markets from its other commodity-linked investments. The Fund can also buy
      and sell other types of futures contracts and options relating to them.

o     Put and Call Options. A call option gives the buyer the right, but not the
      obligation,  to purchase an underlying  asset at a specified  price. A put
      option  gives the  buyer the  right,  but not the  obligation,  to sell an
      underlying  asset  at a  specified  price.  The  Fund  may  buy  and  sell
      exchange-traded and over-the-counter options.

      The Fund may write calls if they are  "covered."  For calls on securities,
      that means the Fund owns the securities  that are subject to the call. For
      other types of calls,  the Fund must segregate  liquid assets to cover its
      obligation  under the call.  There is no limit on the amount of the Fund's
      total assets that may be subject to covered calls. The Fund may also write
      puts. In doing so, the Fund must segregate liquid assets to cover the put.
      No more than 50% of the  Fund's  total  assets may be subject to puts that
      the Fund writes.

o     Futures Contracts. A futures contract obligates the seller to deliver at a
      specified date a specified  quantity of a commodity at a specified  price.
      In practice,  only a very small percentage of all futures contracts result
      in  actual  delivery  of the  underlying  commodity.  Generally,  the Fund
      expects to satisfy or offset its delivery  obligations by taking an equal,
      but opposite position in the futures market in the same commodity.

Forward  Contracts.  The Fund may  invest in  forward  contracts  to buy or sell
      foreign  currency for future  delivery at a fixed price.  The Fund may use
      them to try to "lock in" the U.S.  dollar price of a security  denominated
      in a foreign  currency  that the Fund has purchased or sold, or to protect
      against  possible  losses from changes in the  relative  value of the U.S.
      dollar and a foreign  currency.  The Fund may also use "cross  hedging," a
      technique that seeks to hedge against changes in currencies other than the
      currency  in which a security  the Fund holds is  denominated.  The use of
      forward  contracts  might  reduce  the gain on an  investment  that  would
      otherwise result from a change in the relationship between the U.S. dollar
      and the foreign currency in which the investment is denominated.

Swap  Transactions.   Swap  transactions  are  privately  negotiated  agreements
      between the Fund and a counterparty  to exchange or swap  investment  cash
      flows or assets at specified  intervals in the future. The obligations may
      extend beyond one year.

      There is no central exchange or market for swap transactions and therefore
      they are less liquid investments than exchange-traded  instruments. If the
      Fund were to sell a swap it owned to a third  party,  the Fund would still
      remain  primarily  liable  for the  obligations  under the swap  contract.
      Additionally,  the Fund  will bear the risk  that the  counterparty  could
      default under a swap agreement.

      The Fund can engage in total return  swaps.  A total return swap gives the
      Fund the right to receive the appreciation in value of an underlying asset
      in return for paying a fee to the  counterparty.  The fee paid by the Fund
      will  typically be  determined by  multiplying  the face value of the swap
      agreement  by an  agreed-upon  interest  rate.  If  the  underlying  asset
      declines  in value  over  the term of the  swap,  the Fund  would  also be
      required to pay the dollar value of that decline to the counterparty.

      The Fund intends to invest only in swap  transactions that are exempt from
      regulation by the Commodity Futures Trading Commission under the Commodity
      Exchange Act. These  qualifying  swap  transactions  are described in more
      detail in Appendix B to the Statement of Additional Information.

Debt  Securities.  The Fund buys debt securities of corporations as well as
     the  U.S.   government  or  its  agencies  and   instrumentalities.   These
     investments may have short-,  medium-,  or long-term  maturities.  The Fund
     buys debt securities for liquidity purposes as well as the income they pay.

U.S.  Government  Securities.  The Fund  invests  in  securities  issued or
     guaranteed by the U.S.  government  or its agencies and  instrumentalities.
     Some of those securities are directly issued by the U.S. Treasury,  such as
     U.S. Treasury bills, notes and bonds. They are backed by the full faith and
     credit of the U.S.  government  and are deemed to have the  highest  credit
     quality.  Some  securities  issued  by U.S.  government  agencies,  such as
     Government National Mortgage Corporation  pass-through mortgage obligations
     ("Ginnie  Maes"),  are also backed by the full faith and credit of the U.S.
     government.  Others are  supported  by the right of the agency to borrow an
     amount from the U.S.  government  limited to a specific line of credit (for
     example,   "Fannie   Mae"  bonds  issued  by  Federal   National   Mortgage
     Corporation).  Others are  supported  only by the credit of the agency that
     issued the security  (for  example,  "Freddie  Mac"  obligations  issued by
     Federal Home Loan Mortgage Corporation).

o     Mortgage-Backed Securities and Collateralized  Mortgage-Backed Obligations
      ("CMOs").  The Fund may invest in securities issued by the U.S. government
      or its agencies and instrumentalities that represent an interest in a pool
      of mortgage loans.  These include CMOs and other  "pass-through"  mortgage
      securities.  The  issuer's  obligation  to  make  interest  and  principal
      payments  on a  mortgage-backed  security  is  secured  by the  underlying
      portfolio of mortgages or mortgage-backed securities.

o     "Stripped"  Securities.  "Stripped"  securities are the separate income or
      principal   components   of  a  debt   security.   Some   CMOs  or   other
      mortgage-related  securities may be stripped, with each component having a
      different  proportion of principal or interest  payments.  One class might
      receive all the interest and the other all the principal payments.

      Stripped  securities that receive  interest-only  are subject to increased
      volatility  in price when  interest  rates change and have the  additional
      risk that if the principal  underlying  the CMO is prepaid  (which is more
      likely  to  happen  if  interest  rates  fall),  the  Fund  will  lose the
      anticipated  cash  flow  from the  interest  on the  mortgages  that  were
      prepaid.  Principal-only  securities  are also  sensitive  to  changes  in
      interest rates. When prepayments on  principal-only  CMOs fall, the timing
      of the  cash  flows  to  these  securities  increases,  making  them  more
      sensitive  to interest  rate  changes.  Stripped  securities  that receive
      principal  payments only are also subject to the additional  risk that the
      security will be less liquid during demand or supply imbalances.

Repurchase Agreements.  The Fund can enter into repurchase agreements.  They may
      be  used  for  cash  management  purposes  or  in  swap  transactions  for
      liquidity.  In a  repurchase  transaction,  the Fund buys a  security  and
      simultaneously  sells it to the  seller  for  delivery  at a future  date.
      Repurchase agreements must be fully collateralized. However, if the seller
      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.  If the  default  on the part of the
      seller is due to its  bankruptcy,  the  Fund's  ability to  liquidate  the
      collateral may be delayed or limited.

Money Market Instruments. The Fund can invest in money market instruments, which
      are short-term debt obligations  (having a maturity of 13 months or less).
      They  include  U.S.  government  obligations,  commercial  paper and other
      short-term  commercial  obligations.  Money  market  obligations  can also
      include certificates of deposit,  bankers' acceptances,  bank deposits and
      other financial institution obligations of a domestic or foreign bank. The
      Fund may keep a portion of its assets in cash.

Industry Focus.  The Fund  will not  invest  25% or more of its total  assets in
      hybrid instruments and securities issued by companies in any one industry.
      However,  the  Fund  will  invest  25% or  more  of its  total  assets  in
      securities,  hybrid instruments and other instruments linked to industries
      in the five basic commodity sectors of the GSCI. In addition, the Fund can
      invest  more  than 25% of its  total  assets  in  hybrid  instruments  and
      securities  issued by companies in the  financial  services  sector (which
      includes,  for example, the banking,  brokerage and insurance industries).
      In that case, the Fund's share values will fluctuate in response to events
      affecting issuers in that sector.

Can the Fund's  Investment  Objective and Policies  Change?  The Fund's Board of
Trustees can change  non-fundamental  investment  policies  without  shareholder
approval,  although  significant changes will be described in amendments to this
Prospectus.  Fundamental  policies  cannot be changed  without the approval of a
majority  of  the  Fund's  outstanding  voting  shares.  The  Fund's  investment
objective  is a  fundamental  policy.  Other  investment  restrictions  that are
fundamental policies are listed in the Statement of Additional  Information.  An
investment policy is not fundamental  unless this Prospectus or the Statement of
Additional Information says that it is.

Other Investment  Strategies.  To seek its objective,  the Fund can also use the
investment  techniques and strategies described below. The Fund might not always
use all of them. These  techniques and strategies have risks,  although some are
designed to help reduce overall investment or market risks.

High-Yield Securities. The Fund can invest up to 10% of its total assets in debt
      securities  that are below  investment  grade.  These are debt  securities
      rated below the four highest rating categories of a nationally  recognized
      ratings organization such as Standard and Poor's Rating Services,  Moody's
      Investors  Service,  Inc.  or  unrated  securities  that  the  Sub-Advisor
      believes  are  comparable  to  rated   securities  in  those   categories.
      High-yield,  lower-grade  debt securities,  whether rated or unrated,  are
      speculative investments sometimes referred to as "junk bonds."

      Lower-grade  debt securities have special risks that may 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 debt 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 allow it to make the payments of interest
      due on the outstanding obligation.  The issuer's low credit worthiness may
      also increase the potential for its insolvency.  These risks mean that the
      Fund  may  not  achieve  the  expected   return  from  its  investment  in
      lower-grade  debt  securities,  and that the Fund's  net asset  values per
      share may be adversely affected by declines in value of these securities.

"Private-Label" Mortgage-Backed  Securities,  CMOs, and Zero-Coupon Obligations.
      The Fund may purchase  mortgage-backed  securities,  CMOs and  zero-coupon
      bonds sold by private-issuers, such as banks, savings and loans, and other
      entities.   These  obligations  of  private-issuers   are  not  backed  or
      guaranteed  by the U.S.  government,  and pose  greater  credit  risk than
      securities   issued  by  the  U.S.   government,   or  its   agencies  and
      instrumentalities.

Portfolio   Turnover.   The  Fund  may   engage   in   short-term   trading   of
      commodity-linked  investments to try to achieve its  objective.  Portfolio
      turnover affects brokerage costs.  However, the Fund purchases many of its
      investments  directly  from dealers  without  using  brokers.  If the Fund
      realizes  capital gains when it sells its portfolio  investments,  it must
      generally pay those gains out to  shareholders,  increasing  their taxable
      distributions.   The  financial  highlights  table  at  the  end  of  this
      Prospectus shows the Fund's  portfolio  turnover rates during prior fiscal
      years.


Illiquid and Restricted  Securities.  Investments may be illiquid because of the
      absence of an active trading market,  making it difficult to value them or
      dispose of them promptly at an acceptable price. A restricted  security is
      one that has a  contractual  restriction  on its resale or which cannot be
      sold publicly until it is registered under the Securities Act of 1933. The
      Fund will not  invest  more  than 15% of its net  assets  in  illiquid  or
      restricted securities. That percentage limitation generally does not apply
      to certain restricted securities that are eligible for resale to qualified
      institutional  purchasers.  The  Manager  monitors  holdings  of  illiquid
      securities on an ongoing  basis to determine  whether to sell any holdings
      to maintain adequate liquidity.


Temporary  Defensive  Investments.  In times of  unstable  or adverse  market or
      economic conditions, the Fund can invest up to 100% of its total assets in
      temporary defensive investments.  Generally they would be cash equivalents
      (such as commercial  paper),  money market  instruments,  short-term  debt
      securities, U.S. government securities, or repurchase agreements. They can
      also include other  investment-grade debt securities.  The Fund might also
      hold these types of securities pending the investment of proceeds from the
      sale  of Fund  shares  or  portfolio  securities  or to  meet  anticipated
      redemptions of Fund shares. To the extent the Fund invests  defensively in
      these securities,  it might not achieve its investment  objective of total
      return.


How the Fund is Managed

The Manager and the sub-advisor.  The Fund is managed by OppenheimerFunds,  Inc.
(the  "Manager").  Oppenheimer  Real  Asset  Management,  Inc.,  a  wholly-owned
subsidiary of the Manager,  is the  Sub-Advisor for the Fund. The Sub-Advisor is
responsible  for selecting the Fund's  investments  and handling its  day-to-day
business.   The  Manager  carries  out  its  duties,  subject  to  the  policies
established  by the  Fund's  Board of  Trustees,  under an  investment  advisory
agreement  with  the  Fund  that  states  the  Manager's  responsibilities.  The
agreement  sets the fees the Fund pays to the Manager and describes the expenses
that the Fund is responsible to pay to conduct its business. The Sub-Advisor has
a sub-advisory agreement with the Manager and is paid by the Manager.


      The  Manager  has been an  investment  advisor  since  January  1960.  The
Sub-Advisor was organized in 1996. The Manager (including  subsidiaries) managed
more than $125  billion  in assets as of  September  30,  2000  including  other
Oppenheimer funds, with more than 5 million  shareholder  accounts.  The Manager
and the Sub-Advisor are located at Two World Trade Center, 34th Floor, New York,
New York 10048-0203.


Portfolio  Managers.  The portfolio  managers of the Fund are John Kowalik and
      Kevin  Baum.  They  are  the  persons  principally  responsible  for the
      day-to-day  management of the Fund's portfolio.  Mr. Kowalik is a Senior
      Vice  President  of the Manager and a Vice  President of the Fund and of
      the  Sub-Advisor.  Messrs.  Kowalik  and  Baum are  Chartered  Financial
      Analysts.


     Mr.  Kowalik became a Senior Vice President of the Manager in June 1998 and
     joined the Fund's  portfolio  management team May 24, 1999.  Before joining
     the Manager, Mr. Kowalik was Managing Director and Senior Portfolio Manager
     at Prudential  Global Advisors  (1989-June  1998). Mr. Kowalik serves as an
     officer and portfolio manager of other  Oppenheimer  funds. Mr. Baum joined
     the Fund's portfolio  management team on May 24, 1999. He has served as the
     Fund's principal trader since its inception in March 1997. Previously,  Mr.
     Baum was a trading and  securities  analyst for the Manager  (1993-February
     1997).


Advisory Fees.  Under  the  investment  advisory  agreement,  the Fund  pays the
      Manager an  advisory  fee at an annual  rate that  declines  as the Fund's
      assets grow:  1.0% of the first $200 million of average annual net assets,
      0.90% of the next $200 million,  0.85% of the next $200 million,  0.80% of
      the next $200 million,  and 0.75% of net assets in excess of $800 million.
      Under the  sub-advisory  agreement,  the Manager pays the  Sub-Advisor the
      following  annual fees:  0.50% of the first $200 million of average annual
      net  assets,  0.45% of the next  $200  million,  0.425%  of the next  $200
      million,  0.40% of the next $200 million,  and 0.375% of the net assets in
      excess of $800 million. The Fund's management fee for its last fiscal year
      ended August 31, 2000 was 1.00% of average annual net assets of each class
      of shares.


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

How to Buy Shares

HOW DO you buy SHARES? You can buy shares several ways, as described below.  The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.

BuyingShares  Through  Your  Dealer.  You can buy  shares  through  any  dealer,
      broker,  or  financial  institution  that has a sales  agreement  with the
      Distributor.  Your  dealer will place your order with the  Distributor  on
      your behalf.
BuyingShares Through the Distributor.  Complete an OppenheimerFunds  New Account
      Application  and  return  it with a  check  payable  to  "OppenheimerFunds
      Distributor,  Inc." Mail it to P.O. Box 5270,  Denver,  Colorado 80217. If
      you don't list a dealer on the  application,  the Distributor  will act as
      your agent in buying the shares.  However,  we recommend  that you discuss
      your investment with a financial  advisor before you make a purchase to be
      sure that the Fund is appropriate for you.
   o  Paying by Federal Funds Wire. Shares purchased through the Distributor may
      be paid for by Federal  Funds  wire.  The  minimum  investment  is $2,500.
      Before  sending  a  wire,  call  the  Distributor's   Wire  Department  at
      1.800.525.7048  to  notify  the  Distributor  of the wire  and to  receive
      further instructions.
   o  Buying Shares Through OppenheimerFunds  AccountLink. With AccountLink, you
      pay for  shares by  electronic  funds  transfers  from your bank  account.
      Shares are  purchased  for your  account by a transfer  of money from your
      bank account  through the Automated  Clearing House (ACH) system.  You can
      provide  those  instructions  automatically,  under an Asset Builder Plan,
      described  below,  or by  telephone  instructions  using  OppenheimerFunds
      PhoneLink,  also described below. Please refer to "AccountLink," below for
      more details.
   o  Buying Shares Through Asset Builder Plans.  You may purchase shares of the
      Fund (and up to four other  Oppenheimer  funds)  automatically  each month
      from your account at a bank or other financial  institution under an Asset
      Builder  Plan  with   AccountLink.   Details  are  in  the  Asset  Builder
      Application and the Statement of Additional Information.

How Much  Must  You  Invest?  You can buy Fund  shares  with a  minimum  initial
investment of $1,000.  You can make  additional  investments at any time with as
little as $25. There are reduced minimum  investments  under special  investment
plans.
   o  With Asset Builder  Plans,  403(b)  plans,  Automatic  Exchange  Plans and
      military allotment plans, you can make initial and subsequent  investments
      for as little as $25.  You can make  additional  purchases of at least $25
      through AccountLink.
   o  Under retirement plans, such as IRAs, pension and profit-sharing plans and
      401(k)  plans,  you can start your account with as little as $250. If your
      IRA is  started  as an  Asset  Builder  Plan,  the  $25  minimum  applies.
      Additional purchases may be for as little as $25.
   o  The minimum investment requirement does not apply to reinvesting dividends
      from the Fund or other  Oppenheimer  funds (a list of them  appears in the
      Statement of  Additional  Information,  or you can ask your dealer or call
      the Transfer  Agent),  or reinvesting  distributions  from unit investment
      trusts that have made arrangements with the Distributor.

At What Price Are Shares Sold? Shares are sold at their offering price, which is
the net asset value per share plus any initial  sales charge that  applies.  The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado,  or after any agent  appointed by the
Distributor receives the order and sends it to the Distributor. Net Asset Value.

The Fund calculates the net asset value of each class of shares
      as of the close of The New York Stock  Exchange,  on each day the Exchange
      is open for trading (referred to in this Prospectus as a "regular business
      day").  The Exchange  normally closes at 4:00 P.M., New York time, but may
      close earlier on some days. All references to time in this Prospectus mean
      "New York time."

      The net asset value per share is  determined  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. To determine net asset value, the Fund's Board
      of Trustees has established procedures to value the Fund's securities,  in
      general,  based on market value. The Board has adopted special  procedures
      for valuing  illiquid  securities and  obligations for which market values
      cannot be readily  obtained.  Because  some  foreign  securities  trade in
      markets and on exchanges that operate on weekends and U.S.  holidays,  the
      values of some of the Fund's foreign  investments  may change on days when
      investors cannot buy or redeem Fund shares.

The   Offering  Price.  To receive the offering  price for a particular  day, in
      most cases the Distributor or its designated agent must receive your order
      by the time of day The New York Stock  Exchange  closes  that day. If your
      order is  received  on a day when the  Exchange  is closed or after it has
      closed,  the order will receive the next offering price that is determined
      after your order is received.

BuyingThrough a Dealer.  If you buy shares  through a dealer,  your  dealer must
      receive the order by the close of The New York Stock Exchange and transmit
      it to the  Distributor  so that it is  received  before the  Distributor's
      close of  business  on a regular  business  day  (normally  5:00  P.M.) to
      receive that day's offering price.  Otherwise,  the order will receive the
      next offering price that is determined.

WHAT  CLASSES OF SHARES DOES THE FUND  OFFER?  The Fund  offers  investors  five
different  classes  of  shares.   The  different  classes  of  shares  represent
investments in the same portfolio of securities,  but the classes are subject to
different  expenses and will likely have  different  share prices.  When you buy
shares,  be sure to specify  the class of shares.  If you do not choose a class,
your investment will be made in Class A shares.


<PAGE>



Class A Shares.  If you buy Class A shares,  you pay an initial sales charge (on
investments  up to $1 million  for  regular  accounts  or  $500,000  for certain
retirement  plans).  The amount of that sales charge will vary  depending on the
amount you invest. The sales charge rates are listed in "How Can You Buy Class A
Shares?" below.
Class B Shares.  If you buy Class B shares,  you pay no sales charge at the time
      of purchase,  but you will pay an annual  asset-based sales charge. If you
      sell your shares within six years of buying them,  you will normally pay a
      contingent  deferred sales charge.  That contingent  deferred sales charge
      varies depending on how long you own your shares, as described in "How Can
      You Buy Class B Shares?" below.
Class C Shares.  If you buy Class C shares,  you pay no sales charge at the time
      of purchase,  but you will pay an annual  asset-based sales charge. If you
      sell your shares within 12 months of buying them,  you will normally pay a
      contingent  deferred  sales charge of 1%, as described in "How Can You Buy
      Class C Shares?" below.

Class N  Shares.  Class N shares  are  offered  only  through  retirement  plans
      (including IRAs and 403(b) plans) that purchase  $500,000 or more of Class
      N shares of one or more  Oppenheimer  funds, or through  retirement  plans
      (not including IRAs and 403(b) plans) that have assets of $500,000 or more
      or 100 or more eligible plan participants.  Non-retirement  plan investors
      cannot buy Class N shares directly.  If you buy Class N shares, you pay no
      sales  charge  at the  time  of  purchase,  but  you  will  pay an  annual
      asset-based  sales charge.  If you sell your shares  within  eighteen (18)
      months of the retirement plan's first purchase of Class N shares,  you may
      pay a contingent deferred sales charge of 1%, as described in "How Can You
      Buy Class N Shares?" below.

Class Y  Shares.   Class  Y  shares   generally  are  offered  only  to  certain
      institutional  investors that have special agreements with the Distributor
      and to  individual  investors  making  purchases of $2 million or more, as
      described in "How Can You Buy Class Y Shares?" below.

Which  class of shares  should you  choose?  Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your  investment.  If your  goals  and  objectives
change  over  time  and you  plan to  purchase  additional  shares,  you  should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different  types of sales charges on your  investment  will vary your investment
results over time.

      The  discussion  below  is  not  intended  to be  investment  advice  or a
recommendation,  because each investor's financial considerations are different.
The  discussion  below  assumes that you will purchase only one class of shares,
and not a combination of shares of different classes. Of course,  these examples
are based on approximations of the effects of current sales charges and expenses
projected over time, and do not detail all of the  considerations in selecting a
class of shares.  You should analyze your options  carefully with your financial
advisor before making that choice.


How   Long Do You Expect to Hold Your  Investment?  While future financial needs
      cannot be predicted  with  certainty,  knowing how long you expect to hold
      your  investment  will assist you in selecting  the  appropriate  class of
      shares.  Because of the effect of class-based  expenses,  your choice will
      also depend on how much you plan to invest. For example, the reduced sales
      charges  available for larger  purchases of Class A shares may, over time,
      offset the effect of paying an initial  sales  charge on your  investment,
      compared to the effect over time of higher class-based  expenses on shares
      of Class B or Class C. For retirement plans that qualify to purchase Class
      N shares,  Class N shares will generally be more advantageous than Class C
      shares;  Class B shares are not available for purchase by such  retirement
      plans.


   o  Investing for the Shorter Term.  While the Fund is meant to be a long-term
      investment,  if you have a relatively  short-term investment horizon (that
      is, you plan to hold your shares for not more than six years),  you should
      probably consider purchasing Class A or Class C shares rather than Class B
      shares.  That is because of the effect of the Class B contingent  deferred
      sales charge if you redeem within six years,  as well as the effect of the
      Class B asset-based  sales charge on the investment  return for that class
      in  the  short-term.  Class  C  shares  might  be the  appropriate  choice
      (especially for  investments of less than  $100,000),  because there is no
      initial sales charge on Class C shares, and the contingent  deferred sales
      charge does not apply to amounts you sell after holding them one year.

      However,  if you plan to invest more than  $100,000 for the shorter  term,
      then as your investment horizon increases toward six years, Class C shares
      might not be as advantageous as Class A shares. That is because the annual
      asset-based  sales charge on Class C shares will have a greater  impact on
      your account over the longer term than the reduced  front-end sales charge
      available for larger purchases of Class A shares.


      And for  non-retirement  plan  investors who invest $1 million or more, in
      most cases Class A shares will be the most advantageous  choice, no matter
      how long you intend to hold your shares.  For that reason, the Distributor
      normally  will not accept  purchase  orders of $500,000 or more of Class B
      shares or $1 million or more of Class C shares from a single investor.


    o Investing for the Longer Term. If you are investing less than $100,000 for
      the  longer-term,  for example for  retirement,  and do not expect to need
      access  to your  money  for  seven  years or more,  Class B shares  may be
      appropriate.


Are   There  Differences  in Account  Features  That Matter to You? Some account
      features   may  not  be  available  to  Class  B,  Class  C  and  Class  N
      shareholders.  Other features may not be advisable  (because of the effect
      of the contingent  deferred sales charge) for Class B, Class C and Class N
      shareholders.  Therefore,  you should carefully review how you plan to use
      your investment account before deciding which class of shares to buy.

      Additionally,  the  dividends  payable  to  Class B,  Class C and  Class N
      shareholders  will be reduced by the  additional  expenses  borne by those
      classes that are not borne by Class A or Class Y shares, such as the Class
      B, Class C and Class N asset-based sales charge described below and in the
      Statement of Additional Information.  Share certificates are not available
      for Class B, Class C and Class N shares,  and if you are considering using
      your shares as collateral for a loan, that may be a factor to consider.

How   Do Share Classes  Affect  Payments to My Broker?  A financial  advisor may
      receive  different  compensation  for selling one class of shares than for
      selling  another class.  It is important to remember that Class B, Class C
      and Class N  contingent  deferred  sales  charges  and  asset-based  sales
      charges  have the same purpose as the  front-end  sales charge on sales of
      Class A shares: to compensate the Distributor for concessions and expenses
      it pays to dealers and  financial  institutions  for selling  shares.  The
      Distributor  may pay  additional  compensation  from its own  resources to
      securities  dealers  or  financial  institutions  based  upon the value of
      shares of the Fund owned by the dealer or  financial  institution  for its
      own account or for its customers.


Special Sales Charge  Arrangements  and Waivers.  Appendix E to the Statement of
Additional  Information  details the  conditions for the waiver of sales charges
that apply in certain  cases,  and the special  sales charge rates that apply to
purchases of shares of the Fund by certain groups or under specified  retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the  Distributor  when  purchasing
shares or the Transfer  Agent when redeeming  shares that the special  condition
applies.

HOW CAN you BUY CLASS A SHARES? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases,  described  below,  purchases are not subject to an initial sales charge,
and the  offering  price will be the net asset value.  In other  cases,  reduced
sales  charges may be  available,  as  described  below or in the  Statement  of
Additional Information.  Out of the amount you invest, the Fund receives the net
asset value to invest for your account.

      The sales  charge  varies  depending  on the  amount of your  purchase.  A
portion of the sales charge may be retained by the  Distributor  or allocated to
your dealer as a concession.  The Distributor  reserves the right to reallow the
entire  concession to dealers.  The current  sales charge rates and  concessions
paid to dealers and brokers are as follows:

 -------------------------------------------------------------------------------
 Amount of Purchase  Front-End Sales     Front-End Sales    Concession As
                     Charge As a         Charge As a
                     Percentage of       Percentage of Net  Percentage of
                     Offering Price      Amount Invested    Offering Price
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Less than $25,000          5.75%              6.10%               4.75%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 $25,000 or more            5.50%              5.82%               4.75%
 but less than
 $50,000
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 $50,000 or more            4.75%              4.99%               4.00%
 but less than
 $100,000
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 $100,000 or more
 but less than              3.75%              3.90%               3.00%
 $250,000
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 $250,000 or more
 but less than              2.50%              2.56%               2.00%
 $500,000
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 $500,000 or more           2.00%              2.04%               1.60%
 but less than $1
 million
 -------------------------------------------------------------------------------
Class A Contingent  Deferred  Sales Charge.  There is no initial sales charge on
      purchases  of Class A shares of any one or more of the  Oppenheimer  funds
      aggregating  $1 million or more or for  certain  purchases  by  particular
      types of  retirement  plans  described  in Appendix E to the  Statement of
      Additional Information.  The Distributor pays dealers of record concession
      in an amount  equal to 1.0% of purchases of $1 million or more (other than
      purchases  by  those  retirement  accounts).  For  those  retirement  plan
      accounts,  the concession is 1.0% of the first $2.5 million, plus 0.50% of
      the next $2.5 million,  plus 0.25% of purchases over $5 million,  based on
      the  cumulative  purchases  during  the  prior 12 months  ending  with the
      current  purchase.  In either case,  the  concession  will be paid only on
      purchases that were not previously subject to a front-end sales charge and
      dealer  concession.1   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 of Class C shares of one or more Oppenheimer  funds held by the
      plan for more than one year.
1  No concession will be paid 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.

      If you redeem any of those  shares  within an  18-month  "holding  period"
      measured  from  the  end  of the  calendar  month  of  their  purchase,  a
      contingent  deferred sales charge (called the "Class A contingent deferred
      sales  charge") may be deducted from the redemption  proceeds.  That sales
      charge will be equal to 1.0% of the lesser of (1) the  aggregate net asset
      value of the redeemed shares at the time of redemption  (excluding  shares
      purchased by reinvestment of dividends or capital gain  distributions)  or
      (2) the  original  net asset  value of the  redeemed  shares.  The Class A
      contingent  deferred sales charge will not exceed the aggregate  amount of
      the concessions  the  Distributor  paid to your dealer on all purchases of
      Class A shares of all Oppenheimer  funds you made that were subject to the
      Class A contingent deferred sales charge.

Can   You  Reduce  Class A Sales  Charges?  You may be  eligible  to buy Class A
      shares  at  reduced   sales  charge  rates  under  the  Fund's  "Right  of
      Accumulation"  or a Letter of  Intent,  as  described  in  "Reduced  Sales
      Charges" in the Statement of Additional Information.

HOW CAN you BUY CLASS B SHARES?  Class B shares are sold at net asset  value per
share without an initial sales charge.  However,  if Class B shares are redeemed
within 6 years of the end of the calendar month of their purchase,  a contingent
deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent  deferred sales charge is paid to compensate the  Distributor for its
expenses of providing  distribution-related  services to the Fund in  connection
with the sale of Class B shares.

      The amount of the  contingent  deferred  sales  charge  will depend on the
number  of years  since you  invested  and the  dollar  amount  being  redeemed,
according to the following  schedule for the Class B contingent  deferred  sales
charge holding period:




<PAGE>




Years Since Beginning of Month in       Contingent Deferred Sales Charge on
Which                                   Redemptions in That Year
Purchase Order was Accepted             (As % of Amount Subject to Charge)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
0 - 1                                   5.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1 - 2                                   4.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2 - 3                                   3.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
3 - 4                                   3.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
4 - 5                                   2.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
5 - 6                                   1.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
6 and following                         None
----------------------------------------
In the table, a "year" is a 12-month period.  In applying the sales charge,  all
purchases are considered to have been made on the first regular  business day of
the month in which the purchase was made.

      Automatic  Conversion  of Class B  Shares.  Class B  shares  automatically
convert to Class A shares 72 months after you  purchase  them.  This  conversion
feature  relieves  Class B  shareholders  of the  asset-based  sales charge that
applies  to Class B shares  under the Class B  Distribution  and  Service  Plan,
described  below. The conversion is based on the relative net asset value of the
two  classes,  and no sales load or other  charge is  imposed.  When any Class B
shares that you hold  convert,  any other  Class B shares that were  acquired by
reinvesting  dividends  and  distributions  on the  converted  shares  will also
convert to Class A shares. For further information on the conversion feature and
its tax  implications,  see "Class B Conversion"  in the Statement of Additional
Information.

How Can you Buy Class C Shares?  Class C shares are sold at net asset  value per
share without an initial sales charge.  However,  if Class C shares are redeemed
within a holding period of 12 months from the end of the calendar month of their
purchase,  a contingent  deferred sales charge of 1.0% will be deducted from the
redemption  proceeds.  The Class C contingent  deferred  sales charge is paid to
compensate the  Distributor  for its expenses of providing  distribution-related
services to the Fund in connection with the sale of Class C shares.


HOW CAN YOU BUY CLASS N SHARES?  As discussed above,  Class N shares are offered
only through  retirement  plans  (including IRAs and 403(b) plans) that purchase
$500,000 or more of Class N shares of one or more  Oppenheimer  funds or through
retirement  plans (not  including  IRAs and 403(b)  plans)  that have  assets of
$500,000  or more  or 100 or more  eligible  participants.  Non-retirement  plan
investors cannot buy Class N shares directly.

     A  contingent  deferred  sales  charge of 1.00%  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

o     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.


   Retirement  plans  that  offer  Class N shares  may  impose  charges  on plan
participant  accounts.  The  procedures  for  buying,  selling,  exchanging  and
transferring  the  Fund's  other  classes of shares  (other  than the time those
orders must be received by the  Distributor  or Transfer  Agent in Colorado) and
the special account features  applicable to purchasers of those other classes of
shares  described  elsewhere in this  prospectus  do not apply to Class N shares
offered through a group retirement plan.  Instructions for purchasing redeeming,
exchanging or  transferring  Class N shares offered  through a group  retirement
plan must be submitted by the plan, not by plan  participants  for whose benefit
the shares are held.


Who Can Buy Class Y Shares? Class Y shares are sold at net asset value per share
without a sales charge  directly to  institutional  investors  that have special
agreements  with the Distributor  for this purpose.  They may include  insurance
companies,  registered  investment  companies and employee  benefit  plans.  For
example,  Massachusetts  Mutual Life  Insurance  Company,  an  affiliate  of the
Manager, may purchase Class Y shares of the Fund and other Oppenheimer funds (as
well as Class Y shares of funds  advised  by  MassMutual)  for asset  allocation
programs,  investment  companies or separate investment accounts it sponsors and
offers to its customers.

      The Distributor may also accept purchase orders from individual  investors
who invest $2 million or more in their account.  An individual  investor may not
acquire Class Y shares that would represent 10% of the Fund's total assets.


      An  institutional  investor  that buys Class Y shares  for its  customers'
accounts  may impose  charges on those  accounts.  The  procedures  for  buying,
selling,  exchanging and  transferring the Fund's other classes of shares (other
than the time those orders must be received by the Distributor or Transfer Agent
at  their  Colorado  office)  and the  special  account  features  available  to
investors  buying those other  classes of shares do not apply to Class Y shares.
Instructions  for  purchasing,  redeeming,  exchanging or  transferring  Class Y
shares held by  institutional  investors must be submitted by the  institutional
investor, not by its customers for whose benefit the shares are held.


Distribution and Service (12b-1) Plans.

Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
      shares.  It reimburses the Distributor for a portion of its costs incurred
      for services provided to accounts that hold Class A shares.  Reimbursement
      is made  quarterly at an annual rate of up to 0.25% of the average  annual
      net assets of Class A shares of the Fund. The  Distributor  currently uses
      all of those  fees to pay  dealers,  brokers,  banks and  other  financial
      institutions  quarterly for providing  personal service and maintenance of
      accounts of their customers that hold Class A shares.


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 pay the Distributor for its services and costs in distributing
      Class B,  Class C and Class N 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 shares  and on Class C shares  and the Fund pays
      the  Distributor an annual  asset-based  sales charge of 0.25% per year on
      Class N shares.  The Distributor  also receives a service fee of 0.25% per
      year  under  the  Class B and  Class C  Distribution  and  Service  Plans.
      Although the Distributor is entitled to receive a service fee of 0.25% per
      year under the Class N Distribution  and Service Plan, the Fund's Trustees
      have  not  authorized  the Fund to pay a  service  fee at this  time.  The
      asset-based  sales  charge and service fees  increase  Class B and Class C
      expenses  by 1.00% and the  asset-based  sales  charge  increases  Class N
      expenses  by 0.25% of the net  assets  per year of the  respective  class.
      Because these fees are paid out of the Fund's assets on an ongoing  basis,
      over time these fees will  increase  the cost of your  investment  and may
      cost you more than other types of sales charges.


      The Distributor uses the service fees to compensate  dealers for providing
      personal  services  for  accounts  that hold  Class B,  Class C or Class N
      shares.  The Distributor pays the 0.25% service fees to dealers in advance
      for the first  year after the shares  were sold by the  dealer.  After the
      shares have been held for a year, the Distributor pays the service fees to
      dealers on a quarterly basis.


      The Distributor currently pays a sales concession of 3.75% of the purchase
      price of Class B shares to dealers  from its own  resources at the time of
      sale.  Including  the advance of the service fee, the total amount paid by
      the  Distributor  to the  dealer at the time of sales of Class B shares is
      therefore 4.00% of the purchase price. The Distributor retains the Class B
      asset-based sales charge.


      The Distributor currently pays a sales concession of 0.75% of the purchase
      price of Class C shares to dealers  from its own  resources at the time of
      sale.  Including  the advance of the service fee, the total amount paid by
      the  Distributor  to the  dealer  at the time of sale of Class C shares is
      therefore  1.00%  of  the  purchase  price.   The  Distributor   pays  the
      asset-based sales charge as an ongoing concession to the dealer on Class C
      shares that have been outstanding for a year or more.

      The Distributor currently pays a sales concession of 1.00% of the purchase
      price of Class N shares to dealers  from its own  resources at the time of
      sale.  The  Distributor  retains the  asset-based  sales charge on Class N
      shares.


Special Investor Services

ACCOUNTLINK.  You can use our AccountLink feature to link your Fund account with
an  account  at a U.S.  bank  or  other  financial  institution.  It  must be an
Automated Clearing House (ACH) member. AccountLink lets you:
    o transmit funds  electronically to purchase shares by telephone  (through a
      service  representative  or by  PhoneLink)  or  automatically  under Asset
      Builder Plans, or
    o have the Transfer Agent send redemption proceeds or transmit dividends and
      distributions  directly to your bank  account.  Please  call the  Transfer
      Agent for more information.

      You may  purchase  shares by  telephone  only after your  account has been
established.  To purchase  shares in amounts up to $250,000  through a telephone
representative,  call the Distributor at  1.800.852.8457.  The purchase  payment
will be debited from your bank account.


      AccountLink  privileges  should be requested on your  Application  or your
dealer's settlement  instructions if you buy your shares through a dealer. After
your account is established,  you can request AccountLink  privileges by sending
signature-guaranteed  instructions to the Transfer Agent. AccountLink privileges
will apply to each  shareholder  listed in the  registration  on your account as
well as to your dealer  representative  of record  unless and until the Transfer
Agent receives written  instructions  terminating or changing those  privileges.
After you establish  AccountLink  for your  account,  any change of bank account
information  must be made by  signature-guaranteed  instructions to the Transfer
Agent signed by all shareholders that own the account.


PHONELINK.  PhoneLink is the  OppenheimerFunds  automated  telephone system that
enables shareholders to perform a number of account  transactions  automatically
using a touch-tone  phone.  PhoneLink  may be used on  already-established  Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1.800.533.3310.
Purchasing Shares.  You may purchase  shares in amounts up to $100,000 by phone,
      by  calling   1.800.533.3310.   You  must  have  established   AccountLink
      privileges  to link  your  bank  account  with the  Fund to pay for  these
      purchases.
Exchanging  Shares.  With the  OppenheimerFunds  Exchange  Privilege,  described
      below,  you can  exchange  shares  automatically  by phone  from your Fund
      account to another  OppenheimerFunds  account you have already established
      by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone  automatically by calling the
      PhoneLink  number  and the Fund will send the  proceeds  directly  to your
      AccountLink bank account.  Please refer to "How to Sell Shares," below for
      details.

CAN YOU SUBMIT  TRANSACTION  REQUESTS BY FAX? You may send  requests for certain
types of account transactions to the Transfer Agent by fax (telecopier).  Please
call 1.800.525.7048 for information about which transactions may be handled this
way.  Transaction  requests  submitted  by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.

OPPENHEIMERFUNDS  INTERNET WEB SITE. You can obtain  information about the Fund,
as well as your account balance, on the  OppenheimerFunds  Internet web site, at
http://www.oppenheimerfunds.com.   Additionally,   shareholders  listed  in  the
account  registration  (and the dealer of record)  may request  certain  account
transactions  through a special  section of that web site.  To  perform  account
transactions,  you must first obtain a personal  identification  number (PIN) by
calling  the  Transfer  Agent  at  1.800.533.3310.  If you do not  want  to have
Internet  account  transaction  capability  for your  account,  please  call the
Transfer Agent at 1.800.525.7048.  At times, the web site may be inaccessible or
its transaction features may be unavailable.

AUTOMATIC  WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares  automatically  or exchange them to another  OppenheimerFunds
account on a regular  basis.  Please  call the  Transfer  Agent or  consult  the
Statement of Additional Information for details.


REINVESTMENT  PRIVILEGE.  If you  redeem  some or all of your Class A or Class B
shares  of the  Fund,  you have up to 6 months  to  reinvest  all or part of the
redemption  proceeds  in Class A shares of the Fund or other  Oppenheimer  funds
without  paying a sales charge.  This  privilege  applies only to Class A shares
that you purchased  subject to an initial sales charge and to Class A or Class B
shares on which you paid a  contingent  deferred  sales charge when you redeemed
them. This privilege does not apply to Class C, Class N and Class Y shares.  You
must be sure to ask the  Distributor  for this  privilege  when  you  send  your
payment.


RETIREMENT  PLANS.  You may buy  shares  of the Fund for  your  retirement  plan
account.  If you  participate  in a plan  sponsored by your  employer,  the plan
trustee  or  administrator  must buy the  shares  for  your  plan  account.  The
Distributor also offers a number of different  retirement plans that individuals
and employers can use:
Individual Retirement  Accounts  (IRAs).  These include regular IRAs, Roth IRAs,
      SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are  Simplified  Employee  Pension Plan IRAs for small  business
      owners or self-employed individuals.
403(b)(7)  Custodial Plans.  These are tax-deferred  plans for employees of
     eligible  tax-exempt   organizations,   such  as  schools,   hospitals  and
     charitable organizations.
401(k) Plans.  These are special retirement plans for businesses.
Pension and Profit-Sharing Plans.  These plans are designed for businesses and
      self-employed individuals.
      Please  call  the   Distributor  for   OppenheimerFunds   retirement  plan
documents, which include applications and important plan information.


How to Sell Shares

You can sell  (redeem)  some or all of your shares on any regular  business day.
Your shares will be sold at the next net asset value calculated after your order
is received in proper form (which means that it must comply with the  procedures
described  below) and is accepted by the Transfer Agent.  The Fund lets you sell
your shares by writing a letter or by  telephone.  You can also set up Automatic
Withdrawal  Plans to redeem  shares on a regular  basis.  If you have  questions
about any of these  procedures,  and especially if you are redeeming shares in a
special  situation,  such as due to the death of the owner or from a  retirement
plan  account,  please call the Transfer  Agent first,  at  1.800.525.7048,  for
assistance.

Certain Requests Require a Signature Guarantee. To protect you and the Fund from
      fraud,  the  following  redemption  requests  must be in writing  and must
      include a signature guarantee (although there may be other situations that
      also require a signature guarantee):

   o You wish to redeem more than $100,000 and receive a check o The  redemption
     check is not payable to all shareholders listed on the account

     statement
   o The redemption check is not sent to the address of record on your account
     statement
   o Shares are being  transferred  to a Fund account with a different  owner or
     name
   o Shares are being redeemed by someone (such as an Executor) other than the
     owners.

Where Can You Have Your Signature  Guaranteed?  The Transfer Agent will accept a
      guarantee  of  your  signature  by a  number  of  financial  institutions,
      including:
o     a U.S. bank, trust company, credit union or savings association,
o     a foreign bank that has a U.S. correspondent bank,
o     a U.S. registered dealer or broker in securities, municipal securities or
      government securities, or
o     a U.S. national securities exchange, a registered securities  association
      or a clearing agency.

     If you are  signing  on  behalf  of a  corporation,  partnership  or  other
business or as a fiduciary, you must also include your title in the signature.

Retirement Plan  Accounts.  There are  special  procedures  to sell shares in an
      OppenheimerFunds  retirement  plan account.  Call the Transfer Agent for a
      distribution  request form.  Special income tax  withholding  requirements
      apply  to  distributions   from  retirement   plans.  You  must  submit  a
      withholding  form with your  redemption  request to avoid delay in getting
      your money and if you do not want tax  withheld.  If your  employer  holds
      your retirement plan account for you in the name of the plan, you must ask
      the plan trustee or  administrator  to request the sale of the Fund shares
      in your plan account.

HOWDO you SELL SHARES BY MAIL?  Write a letter of instruction  that includes:
     o Your name
     o The Fund's name
     o Your Fund account number (from your account statement)
     o The dollar amount or number of shares to be redeemed
     o Any special payment  instructions o Any share certificates for the shares
       you are selling
     o The  signatures  of all  registered  owners  exactly  as the  account  is
       registered, and
     o Any special  documents  requested by the Transfer  Agent to assure proper
       authorization of the person asking to sell the shares.

Use the following address for            Send courier or express mail
Requests by mail:                        requests to:
OppenheimerFunds Services                OppenheimerFunds Services
P.O. Box 5270                            10200 E. Girard Avenue, Building D
Denver Colorado 80217                    Denver, Colorado 80231

HOW DO you SELL  SHARES BY  TELEPHONE?  You and your  dealer  representative  of
record may also sell your shares by telephone.  To receive the redemption  price
calculated on a particular  regular  business day, your call must be received by
the Transfer  Agent by the close of The New York Stock  Exchange that day, which
is  normally  4:00 P.M.,  but may be  earlier  on some days.  You may not redeem
shares  held in an  OppenheimerFunds  retirement  plan  account or under a share
certificate by telephone.
   o To redeem shares through a service representative, call 1.800.852.8457
   o To redeem shares automatically on PhoneLink, call 1.800.533.3310

Whichever  method  you use,  you may  have a check  sent to the  address  on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.

Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
      in any 7-day period.  The check must be payable to all owners of record of
      the shares and must be sent to the address on the account statement.  This
      service is not  available  within 30 days of  changing  the  address on an
      account.

Telephone  Redemptions  Through  AccountLink.  There  are no  dollar  limits  on
      telephone  redemption  proceeds sent to a bank account designated when you
      establish AccountLink. Normally the ACH transfer to your bank is initiated
      on the business day after the redemption.  You do not receive dividends on
      the  proceeds  of the shares  you  redeemed  while they are  waiting to be
      transferred.

CAN YOU SELL SHARES THROUGH your DEALER?  The Distributor has made  arrangements
to repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that  service.  If your shares are held in the
name of your dealer, you must redeem them through your dealer.


how contingent deferred sales charges affect redemptions. If you purchase shares
subject  to a Class A,  Class B, Class C or Class N  contingent  deferred  sales
charge and redeem any of those shares during the  applicable  holding period for
the class of shares, the contingent  deferred sales charge will be deducted from
the  redemption  proceeds,  unless you are  eligible  for a waiver of that sales
charge  based  on the  categories  listed  in  Appendix  E to the  Statement  of
Additional Information and you advise the Transfer Agent of your eligibility for
the waiver when you place your redemption request.

      With respect to Class N shares, a 1% contingent deferred sales charge will
be imposed if:
o    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,
o    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.


      A contingent  deferred sales charge will be based on the lesser of the net
asset value of the redeemed shares at the time of redemption or the original net
asset value. A contingent deferred sales charge is not imposed on:
   o  the amount of your account value represented by an increase in net asset
      value over the initial purchase price,
   o  shares purchased by the reinvestment of dividends or capital gains
      distributions, or

   o  shares  redeemed in the special  circumstances  described in Appendix E to
      the Statement of Additional Information.


      To determine  whether a  contingent  deferred  sales  charge  applies to a
redemption, the Fund redeems shares in the following order:
   1. shares   acquired  by  reinvestment  of  dividends  and  capital  gains
      distributions,
   2. shares held for the holding period that applies to the class, and
   3. shares held the longest during the holding period.

      Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the  applicable  contingent  deferred sales charge  holding  period,  the
holding period will carry over to the fund whose shares you acquire.  Similarly,
if you acquire shares of this Fund by exchanging  shares of another  Oppenheimer
fund that are still  subject  to a  contingent  deferred  sales  charge  holding
period, that holding period will carry over to this Fund.

How to Exchange Shares

Shares of the Fund may be exchanged for shares of certain  Oppenheimer  funds at
net asset value per share at the time of exchange,  without sales charge. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions:
   o  Shares of the fund  selected  for exchange  must be available  for sale in
      your state of residence.
   o  The  prospectuses  of both funds must offer the exchange  privilege.
   o  You must hold the shares you buy when you  establish  your account for at
      least 7 days  before you can  exchange  them. After the  account is open 7
      days, you can exchange shares every regular business day.
   o  You must meet the minimum purchase  requirements for the fund whose shares
      you purchase by exchange.
   o  Before  exchanging  into a fund, you must obtain and read its  prospectus.
      Shares of a particular  class of the Fund may be exchanged only for shares
      of the same class in the other  Oppenheimer  funds.  For example,  you can
      exchange  Class A shares of this  Fund only for Class A shares of  another
      fund.   In  some  cases,   sales   charges  may  be  imposed  on  exchange
      transactions.  For tax purposes, exchanges of shares involve a sale of the
      shares of the fund you own and a purchase of the shares of the other fund,
      which  may  result  in a  capital  gain or loss.  Please  refer to "How to
      Exchange  Shares" in the  Statement  of  Additional  Information  for more
      details.  You can find a list of Oppenheimer funds currently available for
      exchanges in the  Statement  of  Additional  Information  or obtain one by
      calling a service  representative at 1.800.525.7048.  That list can change
      from time to time.



<PAGE>


HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by
telephone:

Written Exchange  Requests.  Submit an  OppenheimerFunds  Exchange Request form,
      signed by all owners of the account.  Send it to the Transfer Agent at the
      address on the back cover.  Exchanges  of shares  held under  certificates
      cannot be processed  unless the Transfer Agent  receives the  certificates
      with the request.

Telephone Exchange  Requests.  Telephone exchange requests may be made either by
      calling a service representative at 1.800.852.8457,  or by using PhoneLink
      for automated exchanges by calling 1.800.533.3310. Telephone exchanges may
      be made only between  accounts that are  registered  with the same name(s)
      and  address.  Shares  held under  certificates  may not be  exchanged  by
      telephone.

ARE THERE  LIMITATIONS  ON EXCHANGES?  There are certain  exchange  policies you
should be aware of:
   o  Shares are normally  redeemed from one fund and  purchased  from the other
      fund in the exchange transaction on the same regular business day on which
      the  Transfer  Agent  receives an exchange  request  that  conforms to the
      policies described above. It must be received by the close of The New York
      Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
      some days.  However,  either fund may delay the  purchase of shares of the
      fund you are exchanging into up to seven days if it determines it would be
      disadvantaged by a same-day exchange. For example, the receipt of multiple
      exchange  requests  from a "market  timer" might  require the Fund to sell
      securities at a disadvantageous time or price.
   o  Because excessive trading can hurt fund performance and harm shareholders,
      the Fund  reserves  the  right to  refuse  any  exchange  request  that it
      believes will  disadvantage  it, or to refuse multiple  exchange  requests
      submitted by a shareholder or dealer.
   o  The Fund may amend,  suspend or terminate  the  exchange  privilege at any
      time. The Fund will provide you notice whenever it is required to do so by
      applicable  law,  but it may  impose  changes  at any time  for  emergency
      purposes.
   o  If the Transfer Agent cannot  exchange all the shares you request  because
      of a restriction  cited above,  only the shares eligible for exchange will
      be exchanged.

Shareholder Account Rules and Policies

More information  about the Fund's policies and procedures for buying,  selling,
and exchanging shares is contained in the Statement of Additional Information.

The   offering  of  shares  may be  suspended  during  any  period  in which the
      determination  of net asset value is  suspended,  and the  offering may be
      suspended by the Board of Trustees at any time the Board believes it is in
      the Fund's best interest to do so.
Telephone transaction privileges for purchases,  redemptions or exchanges may be
      modified,  suspended or  terminated by the Fund at any time. If an account
      has more than one owner,  the Fund and the Transfer  Agent may rely on the
      instructions of any one owner. Telephone privileges apply to each owner of
      the account and the dealer representative of record for the account unless
      the Transfer Agent receives cancellation instructions from an owner of the
      account.
The   Transfer Agent will record any telephone  calls to verify data  concerning
      transactions  and has adopted other  procedures to confirm that  telephone
      instructions   are   genuine,   by   requiring   callers  to  provide  tax
      identification  numbers and other  account  data or by using PINs,  and by
      confirming such  transactions in writing.  The Transfer Agent and the Fund
      will not be  liable  for  losses  or  expenses  arising  out of  telephone
      instructions reasonably believed to be genuine.
Redemption or transfer  requests  will not be honored  until the Transfer  Agent
      receives all required  documents  in proper form.  From time to time,  the
      Transfer Agent in its discretion may waive certain of the requirements for
      redemptions stated in this Prospectus.
Dealers that perform account  transactions for their clients by participating in
      NETWORKING  through  the  National  Securities  Clearing  Corporation  are
      responsible  for  obtaining  their  clients'  permission  to perform those
      transactions, and are responsible to their clients who are shareholders of
      the Fund if the dealer performs any transaction erroneously or improperly.
The   redemption price for shares will vary from day to day because the value of
      the securities in the Fund's portfolio  fluctuates.  The redemption price,
      which is the net asset  value per  share,  will  normally  differ for each
      class of shares.  The redemption  value of your shares may be more or less
      than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
      or through  AccountLink (as elected by the shareholder)  within seven days
      after the Transfer Agent receives redemption  instructions in proper form.
      However,  under unusual  circumstances  determined by the  Securities  and
      Exchange  Commission,  payment may be delayed or  suspended.  For accounts
      registered  in the  name of a  broker-dealer,  payment  will  normally  be
      forwarded within three business days after redemption.
The   Transfer  Agent may delay  forwarding a check or  processing a payment via
      AccountLink  for recently  purchased  shares,  but only until the purchase
      payment  has  cleared.  That delay may be as much as 10 days from the date
      the shares  were  purchased.  That  delay may be  avoided if you  purchase
      shares by Federal Funds wire or certified check, or arrange with your bank
      to provide  telephone or written assurance to the Transfer Agent that your
      purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
      value has  fallen  below  $200 for  reasons  other  than the fact that the
      market value of shares has dropped. In some cases involuntary  redemptions
      may be made to repay the Distributor  for losses from the  cancellation of
      share purchase orders.
Sharesmay be "redeemed in kind" under unusual  circumstances  (such as a lack of
      liquidity in the Fund's  portfolio to meet  redemptions).  This means that
      the  redemption  proceeds  will be paid with  liquid  securities  from the
      Fund's portfolio.
"Backup  withholding"  of  federal  income tax may be  applied  against  taxable
      dividends,  distributions and redemption proceeds (including exchanges) if
      you fail to furnish the Fund your correct,  certified  Social  Security or
      Employer  Identification Number when you sign your application,  or if you
      under-report your income to the Internal Revenue Service.
To    avoid sending  duplicate copies of materials to households,  the Fund will
      mail only one copy of each  prospectus,  annual and semi-annual  report to
      shareholders  having the same last name and address on the Fund's records.
      The  consolidation of these mailings,  called  householding,  benefits the
      Fund through reduced mailing expense.

      If you want to receive  multiple copies of these  materials,  you may call
      the  Transfer  Agent at  1.800.525.7048.  You may also notify the Transfer
      Agent in writing.  Individual  copies of prospectuses  and reports will be
      sent to you within 30 days after the Transfer  Agent receives your request
      to stop householding.

Dividends, Capital Gains and Taxes

Dividends.  The Fund intends to declare  dividends  separately for each class of
shares from net investment  income, if any, on a quarterly basis in March, June,
September  and  December  and to pay  them on a date  selected  by the  Board of
Trustees.  Dividends and  distributions  paid to Class A and Class Y shares will
generally  be higher  than  dividends  for Class B,  Class C and Class N shares,
which normally have higher expenses than Class A and Class Y shares. There is no
fixed  dividend  rate and there can be no  assurance  as to the  payment  of any
dividends.

Capital  Gains.  The Fund may  realize  capital  gains on the sale of  portfolio
securities.  If it does, it may make  distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions  of dividends  and capital  gains  following the end of its fiscal
year.  There  can be no  assurance  that the Fund  will  pay any  capital  gains
distributions in a particular year.

WHAT  CHOICES  DO YOU  HAVE FOR  RECEIVING  DISTRIBUTIONS?  When  you open  your
account,  specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest  All  Distributions  in the Fund.  You can elect to  reinvest  all
     dividends and capital gains distributions in additional shares of the Fund.
Reinvest  Dividends  or  Capital   Gains.   You  can  elect  to  reinvest   some
      distributions  (dividends,  short-term  capital gains or long-term capital
      gains  distributions)  in the Fund  while  receiving  the  other  types of
      distributions  by check or having them sent to your bank  account  through
      AccountLink.
Receive All  Distributions  in Cash.  You can  elect to  receive a check for all
      dividends and capital gains  distributions  or have them sent to your bank
      through AccountLink.
Reinvest  Your  Distributions  in  Another  OppenheimerFunds  Account.  You  can
      reinvest  all  distributions  in the  same  class  of  shares  of  another
      OppenheimerFunds account you have established.

Taxes.  If your shares are not held in a tax-deferred  retirement  account,  you
should be aware of the  following  tax  implications  of  investing in the Fund.
Distributions  are subject to federal  income tax and may be subject to state or
local taxes.  Dividends  paid from  short-term  capital gains and net investment
income are taxable as ordinary  income.  Long-term  capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your  shares.  Whether you  reinvest  your  distributions  in
additional shares or take them in cash, the tax treatment is the same.

      The Fund has obtained an opinion of counsel  concerning  the  treatment of
hybrid  instruments for purposes of those  requirements.  That opinion is based,
among other things, on an analysis of the relevant law as applied to the type of
securities in which the Fund will invest. The opinion is not binding on the IRS.
If the Fund chooses not to qualify as a regulated investment company, if the IRS
challenges  the Fund's  opinion  and its  challenge  is  upheld,  or if the Fund
otherwise fails to qualify as a regulated  investment  company,  the Fund may be
disqualified as a regulated investment company. Then the Fund will be subject to
federal  income  tax on its net  income at regular  corporate  rates  (without a
deduction for  distributions to  shareholders).  When  distributed,  that income
would then be taxable to shareholders as an ordinary dividend.

      Every  year the Fund will  send you and the IRS a  statement  showing  the
amount of any taxable  distribution  you  received  in the  previous  year.  Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.

Avoid "Buying a Dividend."  If you buy shares on or just before the  ex-dividend
      date or just before the Fund  declares a capital gains  distribution,  you
      will pay the full price for the  shares and then  receive a portion of the
      price back as a taxable capital gain.

Remember,  There May be Taxes on  Transactions.  Because the Fund's share prices
      fluctuate,  you may have a capital  gain or loss when you sell or exchange
      your shares.  A capital gain or loss is the  difference  between the price
      you paid for the shares and the price you received when you sold them. Any
      capital gain is subject to capital gains tax.

Returns of Capital Can Occur. In certain cases,  distributions  made by the Fund
      may be considered a non-taxable return of capital to shareholders. If that
      occurs, it will be identified in notices to shareholders.

      This  information  is  only  a  summary  of  certain  federal  income  tax
information  about your  investment.  You should  consult  with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.

Financial Highlights


The Financial  Highlights  Table is presented to help you  understand the Fund's
financial  performance  for  the  past 4  fiscal  periods.  Certain  information
reflects  financial  results for a single Fund share.  The total  returns in the
table  represent  the rate that an  investor  would have  earned (or lost) on an
investment   in  the  Fund   (assuming   reinvestment   of  all   dividends  and
distributions).  This information has been audited by Deloitte & Touche LLP, the
Fund's  independent  auditors,  whose  report,  along with the Fund's  financial
statements,  is included in the  Statement of Additional  Information,  which is
available on request. Class N shares were not publicly offered during any of the
periods shown.  Therefore,  information on Class N shares is not included in the
following tables or in the Fund's other financial statements.

FINANCIAL HIGHLIGHTS


<TABLE>
<CAPTION>
 Class A                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                       <C>
<C>               <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.74
$5.81           $10.31           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .32
 .20              .29              .09
 Net realized and unrealized gain (loss)                      2.40
 .09            (4.59)             .22

------------------------------------------------------------
 Total income (loss) from investment operations               2.72
 .29            (4.30)             .31
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.28)
(.36)            (.20)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.18
$5.74           $ 5.81           $10.31

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         48.55%
6.50%          (42.43)%           3.10%

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

 Net assets, end of period (in thousands)                 $161,547
$109,328          $62,568          $37,687
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $126,143
$66,106          $59,251          $18,361
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        4.81%
3.73%            4.59%            4.27%
 Expenses                                                     1.50%
1.82%            1.66%(4)         1.74%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>

1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

 | OPPENHEIMER REAL ASSET FUND
<PAGE>

FINANCIAL HIGHLIGHTS  Continued


<TABLE>
<CAPTION>
 Class B                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                        <C>
<C>              <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.75
$5.76           $10.27           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .27
 .16              .28              .07
 Net realized and unrealized gain (loss)                      2.40
 .10            (4.62)             .20

---------------------------------------------------------
 Total income (loss) from investment operations               2.67
 .26            (4.34)             .27
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.22)
(.27)            (.17)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.20
$5.75           $ 5.76           $10.27

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         47.44%
5.75%          (42.89)%           2.70%

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

 Net assets, end of period (in thousands)                  $27,156
$18,690          $17,357          $16,471
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $21,416
$15,454          $22,659          $ 7,388
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        4.03%
2.95%            3.87%            3.35%
 Expenses                                                     2.27%
2.58%            2.39%(4)         2.56%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>

1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.



 | OPPENHEIMER REAL ASSET FUND
<PAGE>


<TABLE>
<CAPTION>
 Class C                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                        <C>
<C>              <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.73
$5.76           $10.26           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .27
 .15              .26              .08
 Net realized and unrealized gain (loss)                      2.39
 .11            (4.60)             .18

---------------------------------------------------------
 Total income (loss) from investment operations               2.66
 .26            (4.34)             .26
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.22)
(.29)            (.16)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.17
$5.73           $ 5.76           $10.26

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         47.43%
5.68%          (42.87)%           2.60%

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

 Net assets, end of period (in thousands)                  $20,256
$15,965          $10,243          $10,616
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $16,536
$10,477          $12,060          $ 5,599
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        4.03%
2.96%            3.87%            3.34%
 Expenses                                                     2.27%
2.58%            2.38%(4)         2.56%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>


1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

 | OPPENHEIMER REAL ASSET FUND
<PAGE>

FINANCIAL HIGHLIGHTS  Continued


<TABLE>
<CAPTION>
 Class Y                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                          <C>
<C>             <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.72
$5.81           $10.31           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .36
 .20              .42              .20
 Net realized and unrealized gain (loss)                      2.38
 .10            (4.71)             .11

---------------------------------------------------------
 Total income (loss) from investment operations               2.74
 .30            (4.29)             .31
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.30)
(.39)            (.21)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.16
$5.72           $ 5.81           $10.31

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         49.20%
6.77%          (42.38)%           3.10%

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

 Net assets, end of period (in thousands)                       $1
$1               $1               $1
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $1
$1               $1               $1
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        5.28%
3.88%            4.84%            4.75%
 Expenses                                                     1.09%
1.68%            1.40%(4)         1.57%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>


1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

 | OPPENHEIMER REAL ASSET FUND




<PAGE>


INFORMATION AND SERVICES

For More Information on Oppenheimer Real Asset Fund(R)
The following additional  information about the Fund is available without charge
upon request:

STATEMENT  OF  ADDITIONAL   INFORMATION   This  document   includes   additional
information about the Fund's investment policies,  risks, and operations.  It is
incorporated by reference into this  Prospectus  (which means it is legally part
of this Prospectus).

ANNUAL  AND  SEMI-ANNUAL   REPORTS  Additional   information  about  the  Fund's
investments  and  performance is available in the Fund's Annual and  Semi-Annual
Reports to  shareholders.  The Annual  Report  includes a  discussion  of market
conditions  and investment  strategies  that  significantly  affected the Fund's
performance during its last fiscal year.

How to Get More Information:
You can  request  the  Statement  of  Additional  Information,  the  Annual  and
Semi-Annual Reports, and other information about the Fund or your account:

----------------------------------------------------------------------------
By Telephone:                 Call OppenheimerFunds Services toll-free:
                              1.800.525.7048
----------------------------------------------------------------------------
----------------------------------------------------------------------------
By Mail:                      Write to:
                            OppenheimerFunds Services
                              P.O. Box 5270
                           Denver, Colorado 80217-5270
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On the Internet:              You can send us a request by e-mail or
                              read or down-load documents on the
                            OppenheimerFunds website:
                              http://www.oppenheimerfunds.com
----------------------------------------------------------------------------

You can also obtain copies of the Statement of Additional  Information and other
Fund  documents  and  reports by visiting  the SEC's  Public  Reference  Room in
Washington,  D.C.  (Phone  1.202.942.8090)  or the EDGAR  database  on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a  duplicating   fee  by  electronic   request  at  the  SEC's  e-mail  address:
[email protected],  or by  writing  to  the  SEC's  Public  Reference  Section,
Washington, D.C. 20549-0102.


No one has been authorized to provide any information  about the Fund or to make
any  representations  about  the  Fund  other  than  what is  contained  in this
Prospectus.  This  Prospectus is not an offer to sell shares of the Fund,  nor a
solicitation  of an offer to buy shares of the Fund,  to any person in any state
or other jurisdiction where it is unlawful to make such an offer.


The Fund's SEC File No. 811-07857         The Fund's shares are distributed by:
PR0735.001.1200
Printed on recycled paper.             [logo] OppenheimerFunds Distributor, Inc.



<PAGE>


                            Appendix to Prospectus of
                           Oppenheimer Real Asset Fund


      Graphic material included in the Prospectus of Oppenheimer Real Asset Fund
under the heading "Annual Total Returns (Class A)(% as of 12/31 each year)":

      A bar chart will be included in the Prospectus of  Oppenheimer  Real Asset
Fund  (the  "Fund")  depicting  the  annual  total  returns  of  a  hypothetical
investment in Class A shares of the Fund for the past 2 calendar years,  without
deducting  sales  charges.  Set forth below is the relevant data point that will
appear in the bar chart:

Calendar                Annual
Year                    Total
Ended                   Return


12/31/98                -44.85%
12/31/99                36.84%




































735PSP-b00.doc


<PAGE>


Oppenheimer Real Asset Fund(R)

6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048


Statement of Additional Information dated December 29, 2000

      This  Statement  of  Additional  Information  is  not a  Prospectus.  This
document  contains  additional   information  about  the  Fund  and  supplements
information  in the  Prospectus  dated  December  29,  2000.  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, by calling the Transfer Agent at the toll-free  number shown above, or by
downloading    it   from   the    OppenheimerFunds    Internet   web   site   at
www.oppenheimerfunds.com.


Contents                                                                Page

About the Fund

Additional Information about the Fund's Investment Policies and Risks...  2
   The Fund's Investment Policies.......................................  2
   Other Investment Techniques and Strategies...........................  17
   Other Investment Restrictions........................................  34
How the Fund is Managed.................................................  36
   Organization and History.............................................  36
   Trustees and Officers of the Fund....................................  37
   The Manager and the Sub-Advisor......................................  43
Brokerage Policies of the Fund..........................................  44
Distribution and Service Plans..........................................  46
Performance of the Fund.................................................  50


About Your Account

How To Buy Shares.......................................................  54
How To Sell Shares......................................................  62
How To Exchange Shares..................................................  67
Dividends, Capital Gains and Taxes......................................  70
Additional Information About the Fund...................................  71


Financial Information About the Fund

Independent Auditors' Report............................................  72
Financial Statements ...................................................  73


Appendix A:  CFTC Exemption for Qualifying Hybrid Instruments ..........A-1
Appendix B:  CFTC Exemption for Swap Transactions ......................B-1
Appendix C:  Bond Ratings ..............................................C-1
Appendix D:  Corporate Industry Classifications.........................D-1
Appendix E:  Special Sales Charge Arrangements and Waivers..............E-1


<PAGE>


                              A B O U T T H E F U N D

        Additional Information About the Fund's Investment Policies and Risks

      The  investment  objective  and policies of the Fund are  discussed in the
Prospectus. Set forth below is supplemental information about those policies and
the types of securities in which the Fund may invest,  as well as the strategies
the Fund may use to try to achieve its investment objective. Certain capitalized
terms used in this Statement of Additional Information have the same meanings as
those terms have in the Prospectus.

The  Fund's  Investment  Policies.  The Fund  intends  to invest in a  portfolio
consisting  primarily  of  commodity-linked  derivative  investments,  including
structured  notes that are hybrid  instruments,  options,  futures  and  forward
contracts,  swaps,  and other debt  securities  such as corporate  debt and U.S.
government  securities for liquidity and income. The prices of  commodity-linked
hybrid  investments  may  move  in  different  directions  than  investments  in
traditional  equity  and debt  securities  when the  value of those  traditional
securities  is  declining  due to adverse  economic  conditions.  As an example,
during periods of rising inflation,  historically debt securities have tended to
decline in value due to the  general  increase  in  prevailing  interest  rates.
Conversely,  during those same  periods of rising  inflation,  historically  the
prices of certain commodities,  such as oil and metals, have tended to increase.
Of course,  there cannot be any guarantee that these investments will perform in
that  manner  in  the  future,   and  certain  times  the  price   movements  of
commodity-linked investments have been parallel to debt and equity securities.

      During the period 1970 through 1996, the correlation between the quarterly
investment  returns  of  commodities  and the  quarterly  investment  returns of
traditional  financial  assets such as stocks and bonds  generally was negative.
That is, as financial assets increased in value, the value of commodities tended
to decrease in value.  This  inverse  relationship  occurred  generally  because
commodities  have  historically  tended to increase and decrease in value during
different parts of the business cycle than financial  assets.  Nevertheless,  at
various  times,  commodities  prices  may  move in  tandem  with the  prices  of
financial  assets and thus may not  provide  overall  portfolio  diversification
benefits.  In fact,  during 1995 and 1996 commodities  prices generally were not
negatively correlated with financial assets. However, in 1997 and 1998 commodity
prices generally were negatively correlated with financial assets.

      The  reverse  may be  true  during  "bull  markets,"  when  the  value  of
traditional  securities  such as stocks  and  bonds is  increasing.  Under  such
favorable  economic  conditions,  the Fund's  investments may be expected not to
perform as well as an investment in traditional securities.  Over the long term,
the returns on the Fund's  investments  are  expected to exhibit low or negative
correlation with stocks and bonds.

      The Fund intends to spread its investments among instruments  linked to at
least five broad commodity  market sectors under normal market  conditions.  The
five  principal  sectors  of  the  Goldman  Sachs  Commodity  Index  ("GSCI(R)")
include:(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.


<PAGE>


      In selecting investments for the Fund's portfolio,  Oppenheimer Real Asset
Management,  Inc. (the  "Sub-Advisor")  evaluates the merits of the  investments
primarily  through the exercise of its own investment  analysis.  In the case of
hybrid  instruments,  that process may include the  evaluation of the underlying
commodity,  futures contract, index or other economic variable that is linked to
the instrument,  the issuer of the instrument,  and whether the principal of the
instrument is protected by any form of credit enhancement or guarantee.

      The percentage of the Fund's assets linked to particular commodity markets
will  vary  from  time to time  based  on the  Sub-Advisor's  assessment  of the
appreciation  possibilities of particular markets as well as rates of inflation,
interest rates,  current spot market prices and other non-economic and political
factors that may affect specific  markets.  In addition,  the Fund may invest in
mortgage-backed securities,  collateralized mortgages,  obligations,  other debt
securities,  equities,  real estate investment trusts, money market instruments,
and government securities to maintain liquidity and provide income.

|X| Investments in Hybrid Instruments. A primary vehicle for gaining exposure to
the commodities markets is through hybrid  instruments.  These are either equity
or debt derivative  securities with one or more  commodity-dependent  components
that have payment features similar to a commodity futures contract,  a commodity
option  contract,  or a combination of both.  Therefore,  these  instruments are
"commodity-linked."  They are considered "hybrid"  instruments because they have
both  commodity-like and security-like  characteristics.  Hybrid instruments are
derivative  instruments because at least part of their value is derived from the
value of an  underlying  commodity,  futures  contract,  index or other  readily
measurable economic variable.

o Qualifying Hybrid Instruments.  The Fund may invest in hybrid instruments that
qualify  under  Part  34 of  the  rules  under  the  Commodity  Futures  Trading
Commission  (the "CFTC") for an exemption  from all  provisions of the Commodity
Exchange  Act (the  "Act").  See  Appendix  A to this  Statement  of  Additional
Information, "CFTC Exemption for Qualifying Hybrid Instruments."

o Principal Protection. Hybrid instruments may be principal protected, partially
protected,  or offer no  principal  protection.  A  principal  protected  hybrid
instrument  means that the issuer will pay,  at a minimum,  the par value of the
note at  maturity.  Therefore,  if the  commodity  value  to  which  the  hybrid
instrument is linked  declines over the life of the note,  the Fund will receive
at maturity the face or stated value of the note.

      With a principal  protected  hybrid  instrument,  the Fund will receive at
maturity  the  greater of the par value of the note or the  increase in value of
the underlying  commodity or index.  This  protection  is, in effect,  an option
whose  value is  subject to the  volatility  and price  level of the  underlying
commodity.  This optionality can be added to a hybrid structure,  but only for a
cost  higher  than  that of a  partially  protected  (or no  protection)  hybrid
instrument.  The Sub-Advisor's  decision on whether to use principal  protection
depends  in part on the cost of the  protection.  In  addition,  the  protection
feature depends upon the ability of the issue to meet its obligation to buy back
the security, and therefore depends on the creditworthiness of the issuer.

      With full principal  protection,  the Fund will receive at maturity of the
hybrid  instrument  either the stated  par value of the  hybrid  instrument,  or
potentially,  an amount  greater  than the  stated  par value if the  underlying
commodity,  index,  futures  contract or  economic  variable to which the hybrid
instrument  is  linked  has  increased  in  value.  Partially  protected  hybrid
instruments  may suffer  some loss of  principal  if the  underlying  commodity,
index,  futures contract or economic  variable to which the hybrid instrument is
linked  declines  in value  during the term of the hybrid  instrument.  However,
partially  protected hybrid  instruments have a specified limit as to the amount
of principal that they may lose.

o Hybrid Instruments Without Principal  Protection.  The Fund may also invest in
hybrid instruments that offer no principal protection.  At maturity,  there is a
risk that the  underlying  commodity  price,  futures  contract,  index or other
economic variable may have declined  sufficiently in value such that some or all
of the face value of the hybrid  instrument  might not be returned.  Some of the
hybrid instruments that the Fund may invest in may have no principal  protection
and the hybrid instrument could lose all of its value.

      With a partially-protected or  no-principal-protection  hybrid instrument,
the Fund may receive at maturity an amount less than the note's par value if the
commodity,  index or other  economic  variable value to which the note is linked
declines over the term of the note.  The  Sub-Advisor,  at its  discretion,  may
invest in a partially  protected  principal  structured  note or a note  without
principal  protection.   In  deciding  to  purchase  a  note  without  principal
protection,  the  Sub-Advisor  may consider,  among other  things,  the expected
performance  of the  underlying  commodity  futures  contract,  index  or  other
economic variable over the term of the note, the cost of the note, and any other
economic factors which the Sub-Advisor believes are relevant.

o Limitations on Leverage.  As discussed in the  Prospectus,  some of the hybrid
instruments  in which the Fund  invests  may  involve  leverage.  To avoid being
subject  to undue  leverage  risk,  the Fund will  seek to limit  the  amount of
economic leverage it has under one hybrid instrument in which it invests and the
leverage of the Fund's overall  portfolio.  The Fund will not invest in a hybrid
instrument if, at the time of purchase:
1. that instrument's "leverage ratio" exceeds 300% of the price increase in the
   underlying commodity, futures contract, index or other economic
   variable; or
2. the Fund's "portfolio leverage ratio" exceeds 150%, measured at the time of
   purchase.

      "Leverage  ratio"  is the  expected  increase  in the  value  of a  hybrid
instrument,  assuming a one percent price increase in the underlying  commodity,
futures  contract,  index or other economic factor. In other words, for a hybrid
instrument with a leverage factor of 150%, a 1% gain in the underlying  economic
variable  would be  expected  to result  in a 1.5% gain in value for the  hybrid
instrument. "Portfolio leverage ratio" is defined as the average (mean) leverage
ratio of all instruments in the Fund's portfolio,  weighted by the market values
of such instruments or, in the case of futures contracts, their notional values.

o Counterparty  Risk. A significant  risk of Hybrid  Instruments is counterparty
risk. Unlike exchange-traded  futures and options, which are standard contracts,
hybrid instruments are customized securities,  tailor-made by a specific issuer.
With a listed futures or options  contract,  an investor's  counterparty  is the
exchange clearinghouse.  Exchange clearinghouses are capitalized by the exchange
members and typically have high investment  grade ratings  (ratings of AAA or AA
by  Standard  &  Poor's).   Therefore,  the  risk  is  small  that  an  exchange
clearinghouse might be unable to meet its obligations at maturity.


      However, with a hybrid instrument,  the Fund will take on the counterparty
credit risk of the issuer. That is, at maturity of the hybrid instrument,  there
is a risk that the  issuer may be unable to perform  its  obligations  under the
structured note.  Issuers of hybrid instruments are typically large money center
banks, broker-dealers,  other financial institutions and large corporations.  To
minimize this risk the Fund will transact, to the extent possible,  with issuers
who  have  an  investment-grade  credit  rating  from  a  nationally  recognized
statistical rating organization ("NRSRO").

|X|  Options and Futures. The Fund can buy and sell options, futures and forward
contracts for various purposes:
o    to try to manage the risk that the prices of its portfolio securities and
     instruments may decline,
o    to establish a position in the futures or options market as a temporary
     substitute for purchasing individual securities or instruments,
o    to attempt to enhance its income or return by purchasing and selling
     call  and put  options  on  commodity  futures,  commodity  indices,
     financial indices or securities.

      The Fund can buy futures related to:
o     foreign currencies (these are called forward contracts),
o     financial indices, such as U.S. or foreign government securities indices,
      corporate debt securities indices or equity securities indices (these
      are referred to as financial futures),
o     interest rates (these are referred to as interest rate futures), and
o     commodities (these are referred to as commodities futures)

      The Fund may enter into futures  contracts or related options for purposes
that may be considered speculative. In those cases, the aggregate initial margin
for  futures   contracts   and   premiums  for  options  (or,  in  the  case  of
non-qualifying hybrid instruments, the portion of the margin attributable to the
options  premium)  will not exceed 5% of the Fund's net  assets.  That amount is
calculated after taking into account  realized profits and unrealized  losses on
such futures contracts.

|X| Commodity Futures  Contracts.  The Fund can invest a substantial  portion of
its assets in commodity futures contracts.  Some of the special  characteristics
and risks of these investments are described below.

      Commodity  futures  contracts  are an agreement  between two parties.  One
party agrees to buy an asset from the other party at a later date at a price and
quantity  agreed-upon when the contract is made. Commodity futures contracts are
traded on futures exchanges. These futures exchanges offer a central marketplace
in which to  transact  futures  contracts,  a  clearing  corporation  to process
trades,  a  standardization  of  expiration  dates and contract  sizes,  and the
availability of a secondary  market.  Futures markets also specify the terms and
conditions of delivery as well as the maximum  permissible price movement during
a trading session.  Additionally,  the commodity futures exchanges have position
limit  rules that limit the amount of futures  contracts  that any one party may
hold in a particular  commodity at any point in time. These position limit rules
are  designed to prevent any one  participant  from  controlling  a  significant
portion of the market.

      In the futures markets,  the exchange clearing corporation takes the other
side in all  transactions,  either  buying or  selling  directly  to the  market
participants.  The clearinghouse acts as the counterparty to all exchange-traded
futures contracts.  That is, the Fund's obligation is to the clearinghouse,  and
the Fund will look to the  clearinghouse  to satisfy the Fund's rights under the
futures contract.

      When  purchasing  stocks or bonds,  the buyer  acquires  ownership  in the
security,  however buyers of futures  contracts are not entitled to ownership of
the  underlying  commodity  until and unless they  decide to accept  delivery at
expiration of the contract. In practice, delivery of the underlying commodity to
satisfy a futures  contract  rarely occurs because most futures  traders use the
liquidity  of the central  marketplace  to sell their  futures  contract  before
expiration.

o Price Limits. The commodity futures exchanges impose on each commodity futures
contract a maximum  permissible price movement for each trading session.  If the
maximum  permissible  price  movement is  achieved  on any trading  day, no more
trades may be executed  above (or below,  if the price has moved  downward) that
limit. If the Fund wishes to execute a trade outside the daily permissible price
movement,  it would be prevented from doing so by exchange rules, and would have
to wait for another trading session to execute its transaction.

o Price Volatility. Despite the daily price limits on the futures exchanges, the
price volatility of commodity futures  contracts has been  historically  greater
than that for  traditional  securities  such as stocks and bonds.  To the extent
that the Fund invests in commodity  futures  contracts,  the assets of the Fund,
and therefore the prices of Fund shares, may be subject to greater volatility.

o  Marking-to-Market  Futures Positions.  The futures  clearinghouse marks every
futures  contract to market at the end of each  trading  day, to ensure that the
outstanding  futures  obligations  are limited by the maximum daily  permissible
price movement.  This process of marking-to-market is designed to prevent losses
from  accumulating  in any futures  account.  Therefore,  if the Fund's  futures
positions  have declined in value,  the Fund may be required to post  additional
margin to cover this decline.  Alternatively,  if the Fund's  futures  positions
have increased in value, this increase will be credited to the Fund's account.

o     Special Risks of Commodity Futures Contracts.

o Storage  Costs.  As in the financial  futures  markets,  there are hedgers and
speculators  in  the  commodity  futures  markets.   However,  unlike  financial
instruments,  there are costs of physical storage associated with purchasing the
underlying  commodity.  For instance,  a large  manufacturer of baked goods that
wishes to hedge against a rise in the price of wheat has two choices: (i) it can
purchase  the wheat today in the cash market and store the  commodity  at a cost
until it needs  the  wheat  for its  manufacturing  process,  or (ii) it can buy
commodity  futures  contracts.  The price of the commodity futures contract will
reflect the storage costs of purchasing the physical commodity.

      These  storage  costs  include  the time  value of money  invested  in the
physical  commodity  plus the actual  costs of storing  the  commodity  less any
benefits from  ownership of the physical  commodity that are not obtained by the
holder of a futures contract (this is sometimes  referred to as the "convenience
yield").  To the  extent  that these  storage  costs  change  for an  underlying
commodity while the Fund is long futures contracts on that commodity,  the value
of the futures contract may change proportionately.

o  Reinvestment  Risk. In the  commodity  futures  markets,  if producers of the
underlying commodity wish to hedge the price risk of selling the commodity, they
will  sell  futures  contracts  today to lock in the price of the  commodity  at
delivery tomorrow. In order to induce speculators to take the corresponding long
side of the same futures  contract,  the  commodity  producer must be willing to
sell the  futures  contract  at a price that is below the  expected  future spot
price.  Conversely,  if the  predominate  hedgers in the futures  market are the
purchasers of the underlying  commodity who purchase futures  contracts to hedge
against a rise in prices,  then speculators will only take the short side of the
futures  contract if the futures price is greater than the expected  future spot
price of the commodity.

                  The  changing  nature of the  hedgers and  speculators  in the
commodity  markets will influence  whether futures prices are above or below the
expected future spot price. This can have significant  implications for the Fund
when it is time to reinvest the proceeds from a maturing futures contract into a
new  futures  contract.  If the nature of  hedgers  and  speculators  in futures
markets has shifted such that commodity  purchasers are the predominate  hedgers
in the market,  the Fund might reinvest at higher futures prices or choose other
related commodity investments

o  Additional  Economic  Factors.  The  values  of  commodities  which  underlie
commodity  futures  contracts are subject to additional  variables  which may be
less  significant  to the values of  traditional  securities  such as stocks and
bonds. Variables such as drought, floods, weather,  livestock disease, embargoes
and tariffs may have a larger  impact on commodity  prices and  commodity-linked
instruments,  including futures contracts, hybrid instruments, commodity options
and commodity swaps, than on traditional securities.  These additional variables
may create additional  investment risks which subject the Fund's  investments to
greater volatility than investments in traditional securities.

o Leverage. There is much greater leverage in futures trading than in stocks. As
a registered investment company, the Fund must pay in full for all securities it
purchases.  In other words,  the Fund is not allowed to purchase  securities  on
margin.  However,  the Fund is allowed to purchase futures  contracts on margin.
The initial  margin  requirements  are  typically  between 3% and 6% of the face
value of the  contract.  That  means the Fund is only  required  to pay up front
between 3% to 6% percent of the face value of the futures  contract.  Therefore,
the Fund has a higher degree of leverage in its futures contract  purchases than
in its stock  purchases.  As a result there may be differences in the volatility
of rates of return between securities  purchases and futures contract purchases,
with the returns from futures contracts being more volatile.

|X|  Options.  The Fund may  purchase  and sell call and put  options on futures
contracts,  including commodity futures contracts,  commodity indices, financial
indices,   securities  indices,   currencies,   financial  futures,   swaps  and
securities. A call option gives the buyer the right, but not the obligation,  to
purchase an underlying  asset at a specified  (strike) price. A put option gives
the buyer the right,  but not the obligation,  to sell an underlying  asset at a
specified price. Options may be exchange traded or traded  over-the-counter (off
the exchange markets) directly with dealers. The Fund may use options as part of
its trading strategy as well as for hedging purposes, as described in "Hedging,"
below.

o Over-The-Counter  Options. The Fund may buy and sell over-the-counter options.
Over-the-counter options are not traded on an exchange. They are traded directly
with dealers. To the extent an over-the-counter  option is a tailored investment
for the Fund, it may be less liquid than an exchange-traded  option. Further, as
with other  derivative  investments,  over-the-counter  options  are  subject to
counterparty  risk.  The Fund will have the  credit  risk that the  seller of an
over-the-counter  option  will not  perform  its  obligations  under the  option
agreement  if the Fund  exercises  the  option.  To reduce  this risk,  the Fund
intends to transact these trades, to the extent  practicable,  with issuers that
have  an   investment-grade   credit   rating.   The   Fund  may  buy  and  sell
over-the-counter options on commodity indices, individual commodities, commodity
futures contracts, securities, financial indices, interest rates, currencies and
swaps.

o  Exchange-Traded  Options.  The Fund  buy and sell  trade  listed  options  on
commodity futures  contracts.  Options on commodity futures contracts are traded
on the same exchange on which the  underlying  futures  contract is listed.  The
Fund may  purchase  and sell  options on  commodity  futures  listed on U.S. and
foreign futures  exchanges.  Options  purchased on futures  contracts on foreign
exchanges are exposed to the risk of foreign currency  fluctuations  against the
U.S.  dollar.  The  Fund  may  also buy and  sell  exchange  listed  options  on
securities, commodity indices, financial indices, interest rates and currencies.

o  Options  on Swaps.  The Fund may trade  options  on swap  contracts  or "swap
options."  Swap call options  provide the holder of the option with the right to
enter a swap contract having a specified  (strike) swap formula,  while swap put
options  provide the holder with the right to sell or terminate a swap contract.
Swap options are not  exchange-traded  and the Fund will bear the credit risk of
the option seller.  Additionally,  if the Fund exercises a swap call option with
the option seller,  the credit risk of the  counterparty  is extended to include
the term of the swap agreement.

|X| Swaps. A swap contract is essentially like a portfolio of forward contracts,
under  which one party  agrees to  exchange  an asset (for  example,  bushels of
wheat) for another asset (cash) at specified  dates in the future.  A one-period
swap  contract  operates  in a manner  similar to a forward or futures  contract
because  there is an agreement to swap a commodity  for cash at only one forward
date.  The Fund may engage in swap  transactions  that have more than one period
and therefore more than one exchange of assets.

      The Fund may invest in total return swaps to gain  exposure to the overall
commodity  markets.  In a total return  commodity swap the Fund will receive the
price  appreciation  of a commodity  index, a portion of the index,  or a single
commodity in exchange for paying an  agreed-upon  fee. If the commodity  swap is
for one period, the Fund will pay a fixed fee,  established at the outset of the
swap.  However,  if the term of the commodity swap is more than one period, with
interim swap  payments,  the Fund will pay an adjustable or floating fee. With a
"floating"  rate, the fee is pegged to a base rate such as the London  Interbank
Offered Rate  ("LIBOR"),  and is adjusted  each period.  Therefore,  if interest
rates increase over the term of the swap  contract,  the Fund may be required to
pay a higher fee at each swap reset date.
o

<PAGE>


            Counterparty Risk. Swap contracts are private  transactions that are
customized to meet the specific investment requirements of the parties. The Fund
will be exposed to the performance risk of its counterparty. If the counterparty
is unable to perform its obligations  under the swap contract at maturity of the
swap or any interim  payment date,  the Fund may not receive the payments due it
under the swap agreement.  To reduce this risk, the Fund will enter in swaps, to
the extent possible,  with  counterparties who have an  investment-grade  rating
from an NRSRO.

o Contractual Liability. Swaps are privately negotiated transactions between the
Fund and a  counterparty.  All of the  rights  and  obligations  of the Fund are
detailed  in the swap  contract,  which  binds  the  Fund and its  counterparty.
Because a swap transaction is a privately-negotiated  contract, the Fund remains
liable for all obligations under the contract until the swap contract matures or
is purchased by the swap counterparty.  Therefore, even if the Fund were to sell
the swap contract to a third party,  the Fund would remain  primarily liable for
the  obligations  under  the  swap  transaction.  The  only  way for the Fund to
eliminate its primary  obligations  under the swap agreement is to sell the swap
contract back to the original counterparty. Additionally, the Fund must identify
liquid  assets on its books to the extent of the Fund's  obligations  to pay the
counterparty under the swap agreement.

o Price Risk.  Total return commodity swaps expose the Fund to the price risk of
the underlying  commodity,  index, futures contract or economic variable. If the
price of the underlying commodity or index increases in value during the term of
the swap, the Fund will receive the price appreciation. However, if the price of
the commodity or index  declines in value during the term of the swap,  the Fund
will  be  required  to  pay  to  its   counterparty  the  amount  of  the  price
depreciation.  The  amount  of the  price  depreciation  paid by the Fund to its
counterparty  would be in addition to the  financing fee paid by the Fund to the
same counterparty.

o Lack of  Liquidity.  Although  the swap market is  well-developed  for primary
participants,  there is only a limited secondary market. Swaps are not traded or
listed on an exchange and over-the-counter trading of existing swap contracts is
limited.  Therefore,  if the Fund  wishes to sell its swap  contract  to a third
party, it may not be able to do so at a favorable price.

o Regulatory  Risk.  Qualifying swap  transactions are exempt from regulation by
the CFTC. Additionally, swap contracts have not been determined to be securities
under the rules promulgated by the Securities and Exchange  Commission  ("SEC").
Consequently,  swap  contracts  are not regulated by either the CFTC or the SEC,
and swap  participants  may not be afforded  the  protections  of the  Commodity
Exchange Act or the federal securities laws.

      To reduce this risk, the Sub-Advisor  will only enter into swap agreements
with counterparties who use standard International Swap and Dealers Association,
Inc. ("ISDA") contract  documentation.  ISDA establishes  industry standards for
the documentation of swap agreements.  Virtually all principal swap participants
use  ISDA  documentation  because  it has  an  established  set of  definitions,
contract terms, and counterparty obligations.

      ISDA  documentation  also  includes  a "master  netting  agreement"  which
provides that all swaps transacted between the Fund and a counterparty under the
master agreement shall be regarded as parts of an integral agreement. If, on any
date,  amounts are  payable in the same  currency in respect of one or more swap
transactions,  the net  amount  payable on that date in that  currency  shall be
paid. In addition,  the master  netting  agreement may provide that if one party
defaults  generally or on one swap, the counterparty may terminate the remaining
swaps with that party. Under such agreements, if there is a default resulting 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 with respect to each swap
(i.e.,  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."

|X| Other Debt  Securities.  Additional  information is provided below about the
types of debt and fixed income  securities the Fund may invest in, primarily for
liquidity purposes.

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 one
to ten years when issued) and Treasury  Bonds (which have  maturities  generally
greater than ten years when issued). U.S. Treasury obligations are backed by the
full  faith and  credit of the United  States  and are  considered  to be of the
highest  credit  quality,  although  they are  generally  not  rated  by  rating
organizations.

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 Zero-Coupon U.S. Government Securities. Some of the U.S. government securities
the Fund can buy may be zero-coupon bonds that pay no interest and are issued at
a  substantial  discount  from their  face  value.  They are  subject to greater
fluctuations  in market  value as interest  rates  change  than  interest-paying
securities.  For  financial and tax purposes,  interest  accrues on  zero-coupon
bonds even though cash is not actually  received by the Fund.  The Fund may have
to pay out the imputed income on zero-coupon  securities  without  receiving the
actual cash currently.

      Zero-coupon securities do not make periodic interest payments and are sold
at a deep  discount  from their face value at maturity.  The buyer  recognizes a
rate of return determined by the gradual appreciation of the security,  which is
redeemed at face value on a specified  maturity date.  This discount  depends on
the time remaining until  maturity,  as well as prevailing  interest rates,  the
liquidity  of the security  and the credit  quality of the issuer.  The discount
typically decreases as the maturity date approaches.

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

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

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.

      During  periods  of  rapidly  rising   interest   rates,   prepayments  of
mortgage-related  securities  may occur at slower than  expected  rates.  Slower
prepayments  effectively  may lengthen a  mortgage-related  security's  expected
duration.  Generally,  that would cause the value of the  security to  fluctuate
more widely in responses to changes in interest rates. If the prepayments on the
Fund's  mortgage-related   securities  were  to  decrease  broadly,  the  Fund's
effective  duration,  and  therefore its  sensitivity  to interest rate changes,
would increase.

      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.

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 entities 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  invests  are of the  "fully  modified
pass-through"  type. They provide that the registered holders of the Ginnie Maes
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 Maes,
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 Ginnie Maes 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 owned 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  ("FHLMC")  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 United  States or any of its agencies
or instrumentalities other than Fannie Mae.

o Commercial (Privately-Issued) Mortgage-Related Securities. The Fund may invest
in commercial mortgage-related securities issued by private entities.  Generally
these are  multi-class  debt or pass  through  certificates  secured by mortgage
loans on  commercial  properties.  They are  subject to the  credit  risk of the
issuer.  These  securities  typically are  structured  to provide  protection to
investors in senior classes from possible losses on the underlying  loans.  They
do so by having holders of subordinated classes take the first loss if there are
defaults on the underlying  loans.  They may also be protected to some extent by
guarantees, reserve funds or additional collateralization mechanisms.

o  "Stripped"  Mortgage-related  Securities.  The Fund may  invest  in  stripped
mortgage-related  securities that are created by segregating the cash flows from
underlying  mortgage  loans or  mortgage  securities  to create  two or more new
securities.  Each  has a  specified  percentage  of  the  underlying  security's
principal or interest payments. These are a form of derivative investment.

            Mortgage  securities  may be  partially  stripped so that each class
receives  some  interest and some  principal.  However,  they may be  completely
stripped. In that case all of the interest is distributed to holders of one type
of  security,  known as an  "interest-only"  security,  or "I/O," and all of the
principal is  distributed  to holders of another  type of  security,  known as a
"principal-only"  security  or "P/O."  Strips  can be created  for pass  through
certificates or CMOs.

            The  yields  to  maturity  of I/Os and P/Os  are very  sensitive  to
principal repayments (including prepayments) on the underlying mortgages. If the
underlying  mortgages   experience  greater  than  anticipated   prepayments  of
principal,  the Fund might not fully  recoup its  investment  in an I/O based on
those  assets.  If  underlying   mortgages   experience  less  than  anticipated
prepayments  of  principal,  the yield on the P/Os based on them  could  decline
substantially.

o Forward  Rolls.  The Fund can enter  into  "forward  roll"  transactions  with
respect to mortgage-related  securities.  In this type of transaction,  the Fund
sells a  mortgage-related  security  to a buyer  and  simultaneously  agrees  to
repurchase a similar  security  (the same type of security,  and having the same
coupon and  maturity) at a later date at a set price.  The  securities  that are
repurchased  will have the same interest rate as the  securities  that are sold,
but  typically  will be  collateralized  by different  pools of mortgages  (with
different  prepayment  histories)  than the  securities  that  have  been  sold.
Proceeds  from  the  sale  are  invested  in  short-term  instruments,  such  as
repurchase agreements. The income from those investments, plus the fees from the
forward roll transaction,  are expected to generate income to the Fund in excess
of the yield on the securities that have been sold.

      The Fund will only  enter  into  "covered"  rolls.  To assure  its  future
payment of the purchase  price,  the Fund will identify on its books cash,  U.S.
government  securities or other high-grade debt securities in an amount equal to
the payment obligation under the roll.

      These transactions have risks.  During the period between the sale and the
repurchase,  the Fund will not be entitled  to receive  interest  and  principal
payments on the  securities  that have been sold. It is possible that the market
value of the  securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.

o Commercial  Paper.  The Fund may invest in  commercial  paper,  including  the
following:  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 that are deemed illiquid are
subject to the  limitation on  investments  by the Fund in illiquid  securities,
described in the Prospectus.

o Floating Rate and Variable Rate  Obligations.  Variable rate  obligations  may
have a demand  feature  that  allows  the Fund to tender the  obligation  to the
issuer or a third  party prior to its  maturity.  The tender may be at par value
plus accrued interest, according to the terms of the obligations.

      The  interest  rate on a floating  rate  demand  note is based on a stated
prevailing  market rate,  such as a bank's prime rate, the 91-day U.S.  Treasury
Bill rate, or some other standard,  and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand note is also based
on a stated  prevailing  market rate but is adjusted  automatically at specified
intervals of not less than one year. Generally, the changes in the interest rate
on such  securities  reduce the  fluctuation in their market value.  As interest
rates  decrease  or  increase,   the  potential  for  capital   appreciation  or
depreciation is less than that for fixed-rate  obligations of the same maturity.
The  Sub-Advisor  may determine  that an unrated  floating rate or variable rate
demand  obligation meets the Fund's quality  standards by reason of being backed
by a letter of credit or  guarantee  issued by a bank that meets  those  quality
standards.

      Floating rate and variable  rate demand notes that have a stated  maturity
in excess of one year may have  features  that  permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice.  The issuer of that type of note
normally has a corresponding  right in its discretion,  after a given period, to
prepay  the  outstanding  principal  amount of the note plus  accrued  interest.
Generally  the issuer  must  provide a specified  number of days'  notice to the
holder.

o  Asset-Backed  Securities.  Asset-backed  securities  are  typically  based on
account receivables or consumer loans. The value of an asset-backed  security is
affected  by  changes  in the  market's  perception  of the  asset  backing  the
security,  the  creditworthiness  of the servicing  agent for the loan pool, the
originator  of the loans,  or the  financial  institution  providing  any credit
enhancement,  and is also affected if any credit enhancement has been exhausted.
The risks of investing in  asset-backed  securities  are  ultimately  related to
payment of consumer  loans by the  individual  borrowers.  As a purchaser  of an
asset-backed  security,  the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower.  The underlying
loans are subject to prepayments, which may shorten the weighted average life of
asset-backed securities and may lower their return, in the same manner as in the
case of mortgage-backed securities and CMOs, described above, for prepayments of
a pool of mortgage loans underlying mortgage-backed securities.

o  Zero-Coupon  Securities  of  Private-Issuers.  The Fund may  also  invest  in
zero-coupon  securities  issued by  private-issuers  such as domestic or foreign
corporations.  These  securities  have the same interest rate risks as described
above  for  zero-coupon  U.S.  Treasury   securities.   An  additional  risk  of
private-issuer zero-coupon securities is the credit risk that the issuer will be
unable to make payment at maturity of the obligation.

o Bank  Obligations  and Instruments  Secured By Them. The bank  obligations the
Fund may invest in include time deposits,  certificates of deposit, and bankers'
acceptances.  They must be (i)  obligations of a domestic bank with total assets
of at least $1 billion or (ii)  obligations  of a foreign bank with total assets
of at least U.S. $1 billion.  The Fund may also invest in instruments secured by
such  obligations  (for  example,  debt that is  guaranteed  by the  bank).  For
purposes of this policy,  the term "bank"  includes  commercial  banks,  savings
banks, and savings and loan associations  which may or may not be members of the
Federal Deposit Insurance Corporation.

      Time deposits are non-negotiable deposits in a bank for a specified period
of time at a  stated  interest  rate.  They may or may not be  subject  to early
withdrawal  penalties.  However,  time  deposits  that are subject to withdrawal
penalties,  other than those  maturing in seven days or less, are subject to the
limitation on investments by the Fund in illiquid investments.

      Bankers' acceptances are marketable  short-term credit instruments used to
finance  the  import,  export,  transfer  or storage  of goods.  They are deemed
"accepted" when a bank guarantees their payment at maturity.

o  Other  Board-Approved  Instruments.   The  Fund  may  invest  in  other  debt
instruments (including new instruments that may be developed in the future) that
the  Fund's  Board  of  Trustees  determines  are  consistent  with  the  Fund's
investment objective and investment policies.

o  High-Yield  Securities.  The Fund may invest up to 10% of its total assets in
high-risk,  high-yield,  lower-grade  debt  securities  (commonly  called  "junk
bonds"),  whether  they are  rated or  unrated.  While  the Fund may  invest  in
lower-grade debt securities, it is not currently contemplated that the Fund will
do so to a  significant  extent.  The  Sub-Advisor  will not rely  solely on the
ratings  assigned  by  rating  services,   and  the  Fund  may  invest,  without
limitation,   in  unrated   securities  which  offer,  in  the  opinion  of  the
Sub-Advisor,  comparable yields and risks as those rated securities in which the
Fund may invest.

      High-yield  securities  are  rated  "BB" or  below  by  Standard  & Poor's
Corporation  or "Ba" or below by  Moody's  Investors  Service,  Inc.,  or have a
similar credit risk rating by another rating organization.  If they are unrated,
the Sub-Advisor will assign a rating to them that the Sub-Advisor believes is of
comparable  quality to rated  securities.  High-yield  securities are considered
more risky than  investment-grade  bonds  because  there is greater  uncertainty
regarding  the  economic  viability  of the  issuer.  The  Fund  may  invest  in
securities rated as low as "C" by Moody's or "D" by S&P.

o     Special Risks of High-Yield Securities. Risks of high-yield securities may
include:
(1)  limited liquidity and secondary market support,
(2)  substantial market price volatility resulting from changes in prevailing
     interest rates,
(3)  subordination to the prior claims of banks and other senior lenders,
(4)  the operation of mandatory sinking fund or  call/redemption  provisions
     during  periods of  declining  interest  rates that could cause the Fund to
     reinvest  premature  redemption  proceeds only in lower yielding  portfolio
     securities,
(5)  the possibility that earnings of the issuer may be insufficient to meet its
     debt service, and
(6)  the issuer's low  creditworthiness  and potential for insolvency during
     periods of rising interest rates and economic downturn.

      As a result of the  limited  liquidity  of  high-yield  securities,  their
prices  have  at  times  experienced   significant  and  rapid  decline  when  a
substantial  number of holders  decided to sell. A decline is also likely in the
high-yield bond market during an economic  downturn.  An economic downturn or an
increase in  interest  rates could  severely  disrupt the market for  high-yield
bonds and adversely affect the value of outstanding bonds and the ability of the
issuers to repay principal and interest.

Other Investment Techniques and Strategies

|X|  Foreign  Securities.  The Fund  may  invest  in  securities  (which  may be
denominated  In U.S.  dollars or non-U.S.  currencies)  issued or  guaranteed by
foreign  corporations,  certain  supranational  entities  (described  below) and
foreign  governments or their agencies or  instrumentalities,  and in securities
issued by U.S.  corporations  denominated in non-U.S.  currencies.  The types of
foreign debt  obligations and other  securities in which the Fund may invest are
the same types of debt  securities  identified  above.  Foreign  securities  are
subject,  however, to additional risks not associated with domestic  securities,
as  discussed  below.  These  additional  risks  may be  more  pronounced  as to
investments in securities  issued by emerging  market  countries or by companies
located in emerging market countries.

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   foreign exchange contracts;
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   foreign withholding taxes on interest and dividends;
o   possibilities in some countries of expropriation, nationalization,
    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 Risks of Conversion to Euro. There may be transaction costs and risks relating
to the conversion of certain  European  currencies to the Euro that commenced on
January 1, 1999. However,  their current currencies (for example, the franc, the
mark, and the lira) will also continue in use until January 1, 2002.  After that
date,  it is  expected  that  only the euro will be used in those  countries.  A
common  currency  is  expected to confer  some  benefits  in those  markets,  by
consolidating  the government  debt market for those countries and reducing some
currency risks and costs. But the conversion to the new currency will affect the
Fund operationally and also has potential risks, some of which are listed below.
Among other things, the conversion will affect:

               o  issuers in which the Fund  invests,  because of changes in the
                  competitive  environment  from a consolidated  currency market
                  and  greater  operational  costs  from  converting  to the new
                  currency. This might depress stock values.
               o  vendors the Fund depends on to carry out its business, such as
                  its  custodian  (which holds the foreign  securities  the Fund
                  buys), the Manager (which must price the Fund's investments to
                  deal with the  conversion  to the euro) and  brokers,  foreign
                  markets and securities depositories. If they are not prepared,
                  there could be delays in settlements  and additional  costs to
                  the Fund.
               o  exchange contracts and derivatives that are outstanding during
                  the  transition  to  the  euro.  The  lack  of  currency  rate
                  calculations  between the affected  currencies and the need to
                  update the  Fund's  contracts  could  pose extra  costs to the
                  Fund.

      The lack of currency rate calculations between the affected currencies and
the need to update the Fund's contracts could pose extra costs to the Fund.

      The Manager has upgraded  (at its  expense)  its computer and  bookkeeping
systems  to deal with the  conversion.  The Fund's  custodian  has  advised  the
Manager of its plans to deal with the  conversion,  including how it will update
its record keeping systems and handle the redenomination of outstanding  foreign
debt.  The  Fund's  portfolio  managers  will also  monitor  the  effects of the
conversion  on the issuers in which the Fund  invests.  The  possible  effect of
these factors on the Fund's  investments  cannot be determined with certainty at
this time,  but they may reduce  the value of some of the  Fund's  holdings  and
increase its operational costs.

|X|  Investment-Grade  Bonds.  The  Fund may  invest  in  investment-grade  debt
obligations rated in the four highest investment categories by Standard & Poor's
Corporation,  Moody's Investors Service,  Inc., or by another NRSRO. If they are
unrated,  they will be assigned a rating by the  Sub-Advisor to be considered of
similar  quality  to  obligations  that  are  rated  investment   grade.   These
investments may include:

o   Corporate Bonds.  The Fund may invest in debt securities issued by domestic
corporations.

o  Foreign  Bonds.  The Fund may  invest  in bonds  and  other  debt  securities
denominated  in  currencies  other  than  the  U.S.  dollar.  Generally,   these
securities are issued by foreign  corporations  and foreign  governments and are
traded on foreign  markets.  Investment  in  foreign  debt  securities  that are
denominated in foreign  currencies  involve certain  additional risks, which are
described above, in "Foreign Securities."

o Participation  Interests.  Participation interests are interests in loans made
to U.S. or foreign  companies or to foreign  governments.  These  interests  are
typically  acquired from banks or brokers that have made the loan or are members
of the  lending  syndicate.  No more than 5% of the  Fund's  net  assets  may be
invested in participation interests of the same borrower.

      The  value of loan  participation  interests  depends  primarily  upon the
creditworthiness of the borrower, and its ability to pay interest and principal.
Borrowers  may have  difficulty  making  payments.  If a borrower  fails to make
scheduled interest or principal payments, the Fund could experience a decline in
the net  asset  value of its  shares.  Certain  participation  interests  may be
illiquid and are subject to the Fund's  limitations  on  investments in illiquid
securities.  The Manager has set certain creditworthiness  standards for issuers
of loan participations, and monitors their creditworthiness.  Some borrowers may
have senior  securities rated as low as "C" by Moody's or "D" by S&P, but may be
deemed acceptable credit risks.

      Participation  interests provide the Fund an undivided  interest in a loan
made by the issuing  financial  institution  in the  proportion  that the Fund's
participation  interest  bears to the total  principal  amount of the loan.  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.  In the event of a failure by the financial institution to perform its
obligation in connection with the participation  agreement, the Fund might incur
certain costs and delays in realizing  payment or may suffer a loss of principal
and/or interest.

|X| Borrowing. From time to time, the Fund may borrow from banks on an unsecured
basis.  Such borrowing may be used to fund shareholder  redemptions or for other
purposes.  The Fund will borrow only from banks.  Under the  requirements of the
Investment Company Act, the Fund may borrow only to the extent that the value of
that Fund's total assets,  less its liabilities other than borrowings,  is equal
to at least 300% of all  borrowings  including  the proposed  borrowing.  . As a
fundamental  policy,  the amount of  borrowings  is limited to not more than one
third of its total assets.  If the value of the Fund's assets so computed should
fail to meet the 300% asset coverage  requirement,  the Fund is required  within
three  days to  reduce  its  bank  debt to the  extent  necessary  to meet  such
requirement.  It might have to sell a portion of its  investments at a time when
independent investment judgment would not dictate such sale.

      Since  substantially  all of the Fund's  assets  fluctuate  in value,  but
borrowing obligations are fixed, when the Fund has outstanding  borrowings,  its
net asset value per share  correspondingly  will tend to increase  and  decrease
more when portfolio  assets fluctuate in value than otherwise would be the case.
While  borrowings  from banks may  represent up to one-third of the Fund's total
assets,  the Fund does not  intend to make any  investment  purchases  while its
borrowings exceed 5% of its total assets.

      The Fund will  borrow  only if it can do so  without  putting up assets as
security for a loan. The Fund will pay interest on its borrowings. Borrowing may
subject the Fund to greater risks and costs than funds that do not borrow. These
risks may include the possible reduction of income and increased  fluctuation in
the Fund's net asset value per share.

|X|  When-Issued  and  Delayed-Delivery  Transactions.  The  Fund  can  purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a  "delayed-delivery"  basis.  "When-issued"  or  "delayed-delivery"  refers  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, the
Fund makes no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement. There is a risk of loss
to the Fund if the value of the security  changes prior to the settlement  date,
and there is the risk that the other party may not perform.

      The Fund may engage in when-issued transactions to secure what the Manager
considers to be an  advantageous  price and yield at the time the  obligation is
entered  into.  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 purposes of investment
leverage.  Although  the Fund will enter into  when-issued  or  delayed-delivery
purchase  transactions  to  acquire  securities,  the  Fund  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 deliver or receive against a forward commitment, it may incur a gain or
loss.

      At the time the Fund makes the  commitment  to purchase or sell a security
on a when-issued or  delayed-delivery  basis,  it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction,  it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.

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

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

      In  a  repurchase  transaction,   the  Fund  buys  a  security  from,  and
simultaneously  resells it to, an approved vendor for delivery on an agreed-upon
future date.  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 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.

      The  majority  of these  transactions  run from day to day,  and  delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase  agreements  having a maturity  beyond  seven days are subject to the
Fund's limits on holding  illiquid  investments.  The Fund will not enter into a
repurchase  agreement  that causes more than 10% of its net assets to be subject
to repurchase  agreements having a maturity beyond seven days. There is no limit
on the  amount of the  Fund's  net  assets  that may be  subject  to  repurchase
agreements having maturities of seven days or less.

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


o Reverse Repurchase Agreements.  The Fund can use reverse repurchase agreements
on debt  obligations it owns, as a cash  management  tool, but not as a means of
leveraging investments.  Under a reverse repurchase agreement, the Fund sells an
underlying  debt  obligation  and  simultaneously  obtains the commitment of the
purchaser to sell the security  back to the Fund 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. Before the Fund enters
into a reverse repurchase agreement,  the Sub-Advisor must be satisfied that the
seller, typically a bank or broker-dealer, is creditworthy.

           These  transactions  involve the risk of default or insolvency by the
seller,  including  possible  delays in the  Fund's  ability  to  dispose of the
underlying  collateral.  An  additional  risk is 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 will be considered  borrowings by the Fund and will be subject to the
asset  coverage  requirement  under the  Fund's  policy on  borrowing  discussed
elsewhere in this Statement of Additional Information.

|X|  Illiquid and  Restricted  Securities.  . Under the policies and  procedures
established  by the Fund's Board of Trustees,  the  Sub-Advisor  determines  the
liquidity  of  certain  of the  Fund's  investments.  To enable the Fund to sell
restricted  securities not registered under the Securities Act of 1933, the Fund
may  have  to  cause  those  securities  to  be  registered.   The  expenses  of
registration  of  restricted  securities  may be negotiated by the Fund with the
issuer  at the  time  such  securities  are  purchased  by  the  Fund,  if  such
registration  is required  before such  securities  may be sold  publicly.  When
registration  must be arranged  because the Fund wishes to sell the security,  a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price  fluctuation  during that period.  The Fund
expects  to  acquire  hybrid   instruments   having  regulatory  or  contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such  securities  and might  lower the amount  realizable  upon the sale of such
securities.

      The Fund has percentage  limitations that apply to purchases of restricted
and  illiquid  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 pursuant to Rule 144A under the
Securities Act of 1933,  provided that those  securities have been determined to
be  liquid  by the  Board  of  Trustees  of the  Fund  or 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 holding of that security may be deemed
to be illiquid.

|X| Loans of Portfolio  Securities.  To attempt to generate income, the Fund may
lend  its  portfolio   securities  to  brokers,   dealers  and  other  financial
institutions.  The Fund must  receive  collateral  for a loan.  These  loans are
limited to not more than  one-third  of the Fund's net assets and are subject to
other conditions described below. The Fund presently does not intend to lend its
portfolio  securities,  but if it does, the value of securities  loaned will not
exceed one-third of the value of its total assets in the coming year.

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

      When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities  used as  collateral,  and (c) interest on
any short-term debt securities purchased with such loan collateral. Each 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|  Hedging.  As  described  in  the  Prospectus,  the  Fund  can  use  hedging
instruments.  To attempt to protect against  declines in the market value of the
Fund's portfolio,  to permit the Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate selling securities
for investment reasons, the Fund could:
o     sell futures contracts,
o     buy puts on such futures or on securities, or
o     write covered calls on securities or futures. Covered calls may also
      be used to increase the Fund's income,  but the Sub-Advisor does not
      expect to engage extensively in that practice.

      The Fund may use hedging to establish a position in the securities  market
as a temporary substitute for purchasing particular securities. In that case the
Fund will  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.

      When hedging to protect against  declines in the dollar value of a foreign
currency-denominated security, the Fund may:
o    buy puts on that foreign  currency  and on foreign  currency  futures,
o    write calls on that currency or on such futures contracts, or
o    enter  into  forward  contracts  at a higher or lower  rate than the spot
     ("cash") rate.

      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 may buy and sell interest rate futures contracts, commodities,
futures contracts, financial futures, and forward contracts.

      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.

      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.

      The  Fund  does not pay or  receive  money  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.  Alternatively,  the Fund may maintain  accounts  with  futures  brokers,
provided that the Fund and the futures  brokers comply with the  requirements of
the rules under the Investment Company Act.

      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  are  effected  through a
clearinghouse  associated  with the exchange on which the  contracts are traded.
While the terms of  interest  rate  futures  contracts  call for  settlement  by
delivery or  acquisition  of debt  securities,  in most cases the  obligation is
fulfilled by entering into an offsetting  position.  Financial futures contracts
are similar to interest rate futures, but settlement is made in cash.

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

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

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

      The precise matching of the amounts under forward  contracts and the value
of the securities  involved  generally  will not be possible  because the future
value  of  securities  denominated  in  foreign  currencies  will  change  as  a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the  Sub-Advisor  may 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 may 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  may  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 Comparison of Commodity Futures and Forward  Contracts.  Futures contracts and
forward  contracts  achieve the same economic  effect:  both are an agreement to
purchase a specified amount of a specified  commodity at a specified future date
for a price agreed-upon today. However, there are significant differences in the
operation of the two contracts.  Forward  contracts are individually  negotiated
transactions and are not exchange traded.  Therefore,  with a forward  contract,
the Fund  would  make a  commitment  to carry  out the  purchase  or sale of the
underlying commodity at expiration.

      For  example,  if the Fund were to buy a forward  contract  to  purchase a
certain  amount of gold at a set price per ounce for  delivery in three  months'
time and then, two months later, the Fund wished to liquidate that position,  it
would contract for the sale of the gold at a new price per ounce for delivery in
one months' time. At  expiration  of both forward  contracts,  the Fund would be
required to buy the gold at the set price under the first  forward  contract and
sell it at the agreed-upon price under the second forward contract.  Even though
the Fund has effectively  offset its gold position with the purchase and sale of
the two  forward  contracts,  it must still  honor the  original  commitment  at
maturity of the two  contracts.  By  contrast,  futures  exchanges  have central
clearinghouses which keep track of all positions. To offset a long position in a
futures  contract,  the Fund  simply  needs to sell a  similar  contract  on the
exchange.  The  exchange  clearinghouse  will record both the  original  futures
contract purchase and the offsetting sale, and there is no further commitment on
the part of the Fund.

      Only a very small  percentage  of commodity  futures  contracts  result in
actual delivery of the underlying commodity.  Additionally,  any gain or loss on
the purchase and sale of the futures  contracts is recognized  immediately  upon
the offset,  while with a forward  contract,  profit or loss is recognized  upon
maturity of the forward contracts.

o Put and Call  Options.  The Fund may buy and sell certain kinds of put options
("puts") and call options ("calls").  The Fund may 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 swaps and the
other types of futures described above.

o Writing  Covered  Call  Options.  The Fund may 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. There is no
limit on the amount of assets that 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.

      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 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 the 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.

      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 write call options on financial and commodity  indices.  When
writing a call on a index,  the Fund receives a premium and agrees to pay to the
call buyer a cash amount equal to the appreciation of the index in excess of the
option  strike  price over the call period.  If the index  declines in value the
Fund has no payment  obligation and retains the option  premium.  When writing a
call option on an index,  the Fund will  segregate  liquid  assets  equal to the
settlement value of the option.

      The Fund may also write  calls on a futures  contract  without  owning the
futures contract or securities  deliverable under the contract. To do so, at the
time the call is  written,  the Fund must cover the call by  identifying  on its
books 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 may sell put options. A put option on securities
gives the purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.

      If the  Fund  writes a put,  the put  must be  covered  by  liquid  assets
identified on the Fund's books. The premium the Fund receives from writing a put
represents a profit, as long as the price of the underlying  investment  remains
equal to or above the exercise price of the put. However,  the Fund also assumes
the obligation  during the option period to buy the underlying  investment  from
the buyer of the put at the exercise price,  even if the value of the investment
falls below the exercise price.

      If a put the Fund has written  expires  unexercised,  the Fund  realizes a
gain in the amount of the premium less the transaction  costs  incurred.  If the
put is  exercised,  the  Fund  must  fulfill  its  obligation  to  purchase  the
underlying  investment at the exercise price. That price will usually exceed the
market value of the  investment at that time. In that case, the Fund may incur a
loss if it sells the underlying  investment.  That loss will be equal to the sum
of the sale price of the underlying  investment  and the premium  received minus
the sum of the exercise price and any transaction costs the Fund incurred.

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

o Purchasing  Calls and Puts. The Fund may purchase calls to protect against the
possibility  that the Fund's  portfolio  will not  participate in an anticipated
rise in the  securities  market.  When the  Fund  buys a call  (other  than in a
closing purchase transaction), it pays a premium. 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 may buy puts whether or not it holds the underlying investment in
its portfolio.  When the Fund purchases a put, it pays a premium and,  except as
to puts on indices, has the right to sell the underlying  investment to a seller
of a put on a corresponding investment during the put period at a fixed exercise
price.

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

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

o Buying and Selling  Options on Foreign  Currencies.  The Fund can buy and sell
calls and puts on foreign currencies.  They include puts and calls that trade on
a securities or commodities exchange or in the  over-the-counter  markets or are
quoted by major  recognized  dealers in such  options.  The Fund would 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 may 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 may 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 may be one that occurs due to an  expected  adverse  change in the
exchange  rate.  This  is  known  as  a  "cross-hedging"   strategy.   In  those
circumstances,  the Fund covers the option by maintaining cash, U.S.  government
securities or other liquid, high grade debt securities in an amount equal to the
exercise price of the option, in a segregated  account with the Fund's custodian
bank.

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 portfolio  turnover rate and
brokerage  commissions.  The exercise of calls written by the Fund may 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  may 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 could
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  may
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 may 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  may  decline.  If the  Fund  then  concludes  not to  invest  in
securities  because of concerns that the market may 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 Regulatory Aspects of Hedging  Instruments.  When using futures and options on
futures,  the  Fund  is  required  to  operate  within  certain  guidelines  and
restrictions  with respect to the use of futures as  established by the CFTC. In
particular, the Fund is exempted from registration with the CFTC as a "commodity
pool operator" if the Fund complies with the requirements of Rule 4.5 adopted by
the CFTC.  The Rule does not limit the  percentage of the Fund's assets that may
be used for futures margin and related options  premiums for a bona fide hedging
position.  However,  under the Rule,  the Fund must limit its aggregate  initial
futures  margin and related  options  premiums to not more than 5% of the Fund's
net assets for hedging  strategies  that are not  considered  bona fide  hedging
strategies  under the Rule. Under the Rule, the Fund must also use short futures
and options on futures solely for bona fide hedging  purposes within the meaning
and intent of the applicable provisions of the Commodity Exchange Act.

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

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

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.



<PAGE>


Other Investment Restrictions

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

      The Fund's investment  objective is a fundamental  policy.  Other policies
described in the  Prospectus  or this  Statement of Additional  Information  are
"fundamental"  only if they are identified as such. The Fund's Board of Trustees
can change  non-fundamental  policies  without  shareholder  approval.  However,
significant  changes to investment  policies will be described in supplements or
updates to the  Prospectus  or this  Statement  of  Additional  Information,  as
appropriate.  The Fund's most significant  investment  policies are described in
the Prospectus.

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

o The Fund  will not  purchase  the  securities,  hybrid  instruments  and other
instruments  of any  issuer  if, as a result,  25% or more of the  Fund's  total
assets would be invested in the securities of companies whose principal business
activities  are in the  same  industry.  This  restriction  does  not  apply  to
securities issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities,  or repurchase  agreements secured by them. However, the Fund
will invest 25% or more of its total assets in  securities,  hybrid  instruments
and other instruments,  including futures and forward contracts, related options
and swaps, linked to the energy and natural resources,  agriculture,  livestock,
industrial metals, and precious metals industries.  The individual components of
an index will be considered as separate industries for this purpose.

o The Fund will not issue any senior security.  However, the Fund may enter into
commitments  to purchase  securities  in accordance  with the Fund's  investment
program,   including  reverse  repurchase   agreements,   delayed-delivery   and
when-issued  securities,   which  may  be  considered  the  issuance  of  senior
securities. Additionally, the Fund may engage in transactions that may result in
the issuance of a senior  security to the extent  permitted under the Investment
Company  Act  and  applicable  regulations,  interpretations  of the  Investment
Company Act or an  exemptive  order.  The Fund may also engage in short sales of
securities  to  the  extent  permitted  in  its  investment  program  and  other
restrictions. The purchase or sale of hybrid instruments,  futures contracts and
related  options  shall not be  considered  to involve  the  issuance  of senior
securities.  Moreover, the Fund may borrow money as authorized by the Investment
Company Act.

o The Fund will not purchase or sell physical  commodities  unless acquired as a
result of ownership of securities or other  instruments.  This restriction shall
not prevent the Fund from purchasing or selling hybrid instruments,  options and
futures  contracts with respect to individual  commodities  or indices,  or from
investing in securities or other instruments  backed by physical  commodities or
indices.

o The Fund will not purchase or sell real estate unless  acquired as a result of
direct ownership of securities or other instruments.  This restriction shall not
prevent the Fund from  investing in  securities or other  instruments  backed by
real estate or  securities  of  companies  engaged in the real estate  business,
including real estate investment trusts.  This restriction does not preclude the
Fund from buying  securities backed by mortgages on real estate or securities of
companies  engaged in such  activities.  The Fund can also invest in real estate
operating companies and shares of companies engaged in other real estate related
businesses.

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

o The Fund  cannot  make loans  except (a) through  lending of  securities,  (b)
through the purchase of debt  instruments or similar  evidences of indebtedness,
(c) through an inter-fund lending program with other affiliated funds,  provided
that no such loan may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of its total  assets  (taken at market  value at the
time of such loans), and (d) through repurchase agreements; or

o The Fund  cannot  borrow  money in  excess of 331/3% of the value of its total
assets.  The Fund may  borrow  only  from  banks  and/or  affiliated  investment
companies.  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 of 1940.

      The percentage  restrictions  described above and in the Fund's Prospectus
(other than the percentage  limitations  that apply on an on-going  basis) apply
only at the time of investment  and require no action by the Fund as a result of
subsequent changes in relative values.

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

Non-Diversification of the Fund's Investments. The Fund is "non-diversified," as
defined  in  the  Investment  Company  Act.  Funds  that  are  diversified  have
restrictions against investing too much of their assets in the securities of any
one  "issuer."  That means  that the Fund can  invest  more of its assets in the
securities of a single issuer than a fund that is diversified.

      Being  non-diversified  poses additional  investment risks, because if the
Fund  invests  more of its assets in fewer  issuers,  the value of its shares is
subject to greater  fluctuations  from adverse  conditions  affecting any one of
those issuers. However, the Fund does limit its investments in the securities of
any one issuer to qualify for tax purposes as a "regulated  investment  company"
under the Internal Revenue Code. By qualifying,  it does not have to pay federal
income taxes if more than 90% of its earnings are  distributed to  shareholders.
To qualify, the Fund must meet a number of conditions.  First, not more than 25%
of the market value of the Fund's total assets may be invested in the securities
of a single issuer. Second, with respect to 50% of the market value of its total
assets,  (1) no more  than 5% of the  market  value of its total  assets  may be
invested in the  securities  of a single  issuer,  and (2) the Fund must not own
more than 10% of the outstanding voting securities of a single issuer.



<PAGE>


How the Fund Is Managed

Organization and History.  The Fund is an open-end,  non-diversified  management
investment  company with an unlimited number of authorized  shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in July 1996.

      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.

|X| Classes of Shares. The Board of Trustees has the power,  without shareholder
approval,  to divide unissued  shares of the Fund into two or more classes.  The
Board has done so, and the Fund  currently has five classes of shares:  Class A,
Class B, Class C, Class N and Class Y. All classes invest in the same investment
portfolio. Each class of shares:
o     has its own dividends and distributions,
o     pays certain expenses which may be different for the different classes,
o     may have a different net asset value,
o     may have separate voting rights on matters in which interests of one class
      are  different  from  interests of another  class,  and
o     votes as a class on matters that affect that class alone.

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

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

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

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

|X| 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
contracts  further state that the Trustees  shall have no personal  liability to
any such person, to the extent permitted by law.

Trustees  and Officers of the Fund.  The Fund's  Trustees and officers and their
principal  occupations and business  affiliations during the past five years are
listed  below.  Trustees  denoted  with an  asterisk  (*) below are deemed to be
"interested  persons" of the Fund under the  Investment  Company Act. All of the
Trustees  are also  trustees,  directors  or  managing  general  partners of the
following Denver-based Oppenheimer funds2:
2  Ms. Macaskill and Mr. Bowen are not Trustees or Directors of Oppenheimer
   Integrity  Funds or Panorama  Series  Fund,  Inc.  Fossel and Bowen are not
   Trustees  of  Centennial  New York Tax  Exempt  Trust or  Managing  General
   Partners of Centennial America Fund, L.P. Messrs.  Armstrong,  Cameron, and
   Marshall are not Trustees or  Directors  of any of the  Centennial  Trusts,
   Oppenheimer  Main Street  Funds,  Inc.,  or  Oppenheimer  Cash  Reserves or
   Managing General Partners of Centennial America Fund, L.P. Messrs.  Cameron
   and Marshall are not Trustees or Directors of Oppenheimer  Integrity Funds,
   Oppenheimer  Limited-Term  Government Fund,  Oppenheimer  Municipal Fund or
   Panorama Series Fund, Inc.

<PAGE>




Oppenheimer Cash Reserves                Oppenheimer  Senior  Floating  Rate
                                         Fund
Oppenheimer Champion Income Fund         Oppenheimer Strategic Income Fund
Oppenheimer Capital Income Fund          Oppenheimer   Total   Return  Fund,
                                         Inc.
Oppenheimer High Yield Fund              Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund      Panorama Series Fund, Inc.
Oppenheimer Integrity Funds              Centennial America Fund, L. P.
Oppenheimer Limited-Term Government
Fund                                     Centennial  California  Tax  Exempt
                                         Trust
Oppenheimer Main Street Funds, Inc.      Centennial Government Trust
Oppenheimer Main Street Small Cap Fund   Centennial Money Market Trust
Oppenheimer Main Street Opportunity Fund Centennial   New  York  Tax  Exempt
                                         Trust
Oppenheimer Municipal Fund               Centennial Tax Exempt Trust
Oppenheimer Real Asset Fund



<PAGE>


Ms. Macaskill and Messrs. Swain, Bishop, Wixted,  Donohue,  Farrar and Zack, who
are officers of the Fund, respectively hold the same offices with the other

Denver-based  Oppenheimer  funds.  As of December  11,  2000,  the  Trustees and
officers of the Fund as a group owned less than 1% of the outstanding  shares of
the Fund.

The foregoing  statement  does not reflect  shares held of record by an employee
benefit plan for employees of the Manager other than shares  beneficially  owned
under that plan by the officers of the Fund listed below.  Ms. Macaskill and Mr.
Donohue, are trustees of that plan.


James C. Swain*, Chairman, Chief Executive Officer and Trustee, Age: 67.
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager (since  September 1988);  formerly  President and a
director of Centennial Asset Management  Corporation,  a wholly-owned subsidiary
of the  Manager and  Chairman  of the Board of  Shareholder  Services,  Inc.,  a
transfer agent subsidiary of the Manager.


Bridget A. Macaskill*, President and Trustee, Age: 52.
Two World Trade Center, New York, New York 10048-0203

Chairman (since August 2000), Chief Executive Officer (since September 1995) and
a director  (since  December  1994)of the Manager;  President,  Chief  Executive
Officer and a director (since March 2000) of OFI Private  Investments,  Inc., an
investment  adviser  subsidiary  of the  Manager;  Chairman  and a  director  of
Shareholder  Services,  Inc.  (since  August  1994)  and  Shareholder  Financial
Services,  Inc.  (since  September  1995),  transfer agent  subsidiaries  of the
Manager; President (since September 1995) and a director (since October 1990) of
Oppenheimer  Acquisition Corp., the Manager's parent holding company;  President
(since  September  1995) and a director  (since  November  1989) of  Oppenheimer
Partnership  Holdings,  Inc.,  a  holding  company  subsidiary  of the  Manager;
President and a director (since October 1997) of OppenheimerFunds  International
Ltd., an offshore fund  management  subsidiary of the Manager and of Oppenheimer
Millennium  Funds plc; a director of HarbourView  Asset  Management  Corporation
(since July 1991) and of Oppenheimer  Real Asset  Management,  Inc.  (since July
1996),  investment adviser  subsidiaries of the Manager (the  "Sub-Advisor");  a
director (since April 2000) of  OppenheimerFunds  Legacy  Program,  a charitable
trust program  established by the Manager; a director of Prudential  Corporation
plc (a U.K.  financial  service  company);  President  and a  trustee  of  other
Oppenheimer funds; formerly President of the Manager (June 1991 - August 2000).


William L. Armstrong, Trustee, Age: 63.
11 Carriage Lane, Littleton, Colorado 80121

Chairman of the  following  private  mortgage  banking  companies:  Cherry Creek
Mortgage  Company (since 1991),  Centennial State Mortgage Company (since 1994),
The El Paso Mortgage Company (since 1993),  Transland Financial  Services,  Inc.
(since 1997); Chairman of the following private companies: Frontier Real Estate,
Inc.  (residential real estate  brokerage)  (since 1994),  Frontier Title (title
insurance  agency) (since 1995),  Great Frontier  Insurance  (insurance  agency)
(since 1995) and  Ambassador  Media  Corporation  (since 1984);  Director of the
following public companies:  Storage Technology  Corporation (computer equipment
company) (since 1991), Helmerich & Payne, Inc. (oil and gas  drilling/production
company) (since 1992),  UNUMProvident (insurance company) (since 1991); formerly
Director of  International  Family  Entertainment  (television  channel) (1992 -
1997) and Natec Resources,  Inc. (air pollution  control  equipment and services
company) (1991-1995); formerly U.S. Senator (January 1979-January 1991).


Robert G. Avis*, Trustee, Age: 69.
One North Jefferson Ave., St. Louis, Missouri 63103

Director and President of A.G. Edwards Capital, Inc. (General Partner of private
equity  funds),  formerly,  until  March  2000,  Chairman,  President  and Chief
Executive  Officer of A.G. Edwards Capital,  Inc.;  formerly,  until March 1999,
Vice  Chairman and  Director of A.G.  Edwards,  Inc.  and Vice  Chairman of A.G.
Edwards & Sons,  Inc.  (its  brokerage  company  subsidiary);  until March 1999,
Chairman of A.G. Edwards Trust Company and A.G.E.  Asset Management  (investment
advisor);  until March 2000, a Director of A.G.  Edwards & Sons and A.G. Edwards
Trust Company.


George C. Bowen, Trustee, Age: 64.
9224 Bauer Ct., Lone Tree, Colorado 80124
Formerly (until April 1999) Mr. Bowen held the following positions:  Senior Vice
President  (since  September  1987)  and  Treasurer  (since  March  1985) of the
Manager;  Vice President  (since June 1983) and Treasurer  (since March 1985) of
the Distributor;  Vice President (since October 1989) and Treasurer (since April
1986) of HarbourView Asset Management Corporation;  Senior Vice President (since
February 1992),  Treasurer (since July 1991) Assistant  Secretary and a director
(since December 1991) of Centennial  Asset  Management  Corporation;  President,
Treasurer and a director of Centennial  Capital  Corporation  (since June 1989);
Vice  President  and Treasurer  (since  August 1978) and Secretary  (since April
1981) of Shareholder Services, Inc.; Vice President,  Treasurer and Secretary of
Shareholder Financial Services,  Inc. (since November 1989); Assistant Treasurer
of Oppenheimer  Acquisition Corp.  (since March 1998);  Treasurer of Oppenheimer
Partnership  Holdings,  Inc. (since November 1989); Vice President and Treasurer
of  Oppenheimer  Real Asset  Management,  Inc.  (since July 1996);  Treasurer of
OppenheimerFunds  International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997).

Edward L. Cameron, Trustee, Age: 62.
Spring Valley Road, Morristown, New Jersey 07960
Formerly  (from  1974-1999)  a  partner  with   PricewaterhouseCoopers  LLC  (an
accounting firm) and Chairman, Price Waterhouse LLP Global Investment management
Industry Services Group (from 1994-1998).

Jon S. Fossel, Trustee, Age: 58.
P.O. Box 44, Mead Street, Waccabuc, New York 10597

Formerly (until October 1995) Chairman and a director of the Manager;  President
and a director of Oppenheimer Acquisition Corp.,  Shareholder Services, Inc. and
Shareholder Financial Services, Inc.


Sam Freedman, Trustee, Age: 59.
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly (until October 1994) Chairman and Chief Executive Officer of
OppenheimerFunds Services, Chairman, Chief Executive Officer and a director of
Shareholder Services, Inc., Chairman, Chief Executive Officer and director of
Shareholder Financial Services, Inc., Vice President and director of Oppenheimer
Acquisition Corp. and a director of OppenheimerFunds, Inc.



<PAGE>


Raymond J. Kalinowski, Trustee, Age: 71.
44 Portland Drive, St. Louis, Missouri 63131
Formerly  a  director  of Wave  Technologies  International,  Inc.  (a  computer
products training company), self-employed consultant (securities matters).

C. Howard Kast, Trustee, Age: 78.
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).

Robert M. Kirchner, Trustee, Age: 79.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).

F. William Marshall, Jr., Trustee Age: 58.
87 Ely Road, Longmeadow, MA  01106
Formerly (until 1999) Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank);
President,  Chief Executive Officer and Director of SIS Bankcorp.,  Inc. and SIS
Bank (formerly Springfield Institution for Savings) (1993-1999);  Executive Vice
President (until 1999) of Peoples Heritage Financial Group,  Inc.;  Chairman and
Chief  Executive  Office of Bank of Ireland First  Holdings,  Inc. and First New
Hampshire Banks  (1990-1993);  Trustee (since 1996) of MassMutual  Institutional
Funds and of MML Series Investment Fund (open-end investment companies).

John S. Kowalik,  Vice President and Portfolio Manager;  Age: 43
Two World Trade Center,  New York,  New York  10048-0203
Senior Vice President of the Manager (since July 1998) and of HarbourView  Asset
Management  Corporation  (since April 2000); an officer and portfolio manager of
other Oppenheimer funds; formerly Managing Director and Senior Portfolio Manager
at Prudential Global Advisors (June 1989 - June 1998).

Andrew J. Donohue, Vice President and Secretary, Age: 50.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President  (since January 1993),  General  Counsel (since October
1991) and a director  (since  September  1995) of the  Manager;  Executive  Vice
President  (since  September  1993) and a director  (since  January 1992) of the
Distributor;  Executive Vice  President,  General  Counsel and a director (since
September  1995)  of  HarbourView  Asset  Management  Corporation,   Shareholder
Services, Inc., Shareholder Financial Services, Inc. and Oppenheimer Partnership
Holdings,  Inc., of OFI Private  Investments,  Inc.  (since March 2000),  and of
PIMCO Trust  Company  (since May 2000);  President  and a director of Centennial
Asset  Management  Corporation  (since  September 1995) and of Oppenheimer  Real
Asset  Management,  Inc. (since July 1996); Vice President and a director (since
September  1997)  of   OppenheimerFunds   International   Ltd.  and  Oppenheimer
Millennium Funds plc; a director (since April 2000) of  OppenheimerFunds  Legacy
Program, a charitable trust program established by the Manager;  General Counsel
(since May 1996) and  Secretary  (since April 1997) of  Oppenheimer  Acquisition
Corp.; an officer of other Oppenheimer funds.

Brian W. Wixted, Treasurer, Principal Financial and Accounting Officer, Age: 41.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
(since March 1999) of  HarbourView  Asset  Management  Corporation,  Shareholder
Services,  Inc.,  Oppenheimer  Real Asset  Management  Corporation,  Shareholder
Financial  Services,  Inc. and Oppenheimer  Partnership  Holdings,  Inc., of OFI
Private   Investments,   Inc.   (since  March  2000)  and  of   OppenheimerFunds
International  Ltd.  and  Oppenheimer  Millennium  Funds plc  (since  May 2000);
Treasurer and Chief  Financial  Officer (since May 2000) of PIMCO Trust Company;
Assistant  Treasurer (since March 1999) of Oppenheimer  Acquisition Corp. and of
Centennial Asset Management Corporation;  an officer of other Oppenheimer funds;
formerly Principal and Chief Operating  Officer,  Bankers Trust Company - Mutual
Fund  Services  Division  (March 1995 - March 1999);  Vice  President  and Chief
Financial Officer of CS First Boston Investment Management Corp. (September 1991
- March 1995).

Robert G. Zack, Assistant Secretary, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate  General Counsel (since May
1981) of the Manager,  Assistant Secretary of Shareholder Services,  Inc. (since
May  1985),   Shareholder  Financial  Services,   Inc.  (since  November  1989);
OppenheimerFunds  International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.

Robert J. Bishop, Assistant Treasurer, Age: 42.
6803 South Tucson Way, Englewood, Colorado 80112
Vice  President  of the  Manager/Mutual  Fund  Accounting  (since May 1996);  an
officer of other Oppenheimer funds;  formerly an Assistant Vice President of the
Manager/Mutual  Fund Accounting  (April 1994 - May 1996),  and a Fund Controller
for the Manager.

Scott T. Farrar, Assistant Treasurer, Age: 35.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer  Millennium  Funds plc (since October 1997); an officer
of  other  Oppenheimer  Funds;  formerly  an  Assistant  Vice  President  of the
Manager/Mutual  Fund Accounting  (April 1994 - May 1996),  and a Fund Controller
for the Manager.


      |X| Remuneration of Trustees. The officers of the Fund and two Trustees of
the Fund (Ms.  Macaskill  and Mr.  Swain) are  affiliated  with the  Manager and
receive  no salary  or fee from the Fund.  The  remaining  Trustees  of the Fund
received the compensation  shown below. The compensation  from the Fund was paid
during its fiscal year ended August 31, 2000. The  compensation  from all of the
Denver-based  Oppenheimer  funds  includes  the  compensation  from the Fund and
represents  compensation  received  as a  director,  trustee,  managing  general
partner or member of a committee of the Board during the calendar year 1999. Mr.
Marshall was not a Trustee during the calendar year 1999 or during the Fund's
most recent fiscal year end.



<PAGE>



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

                                                      Total Compensation
                                                      from all
                                                      Denver-Based
                                     Aggregate         Oppenheimer Funds
Trustee's Name and Position    Compensation from Fund    (38 Funds) 1

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

William Armstrong2                       $86                 $14,542
  Review Committee Member

---------------------------------------------------------------------------
---------------------------------------------------------------------------
Robert G. Avis                           $179                $67,998
---------------------------------------------------------------------------
---------------------------------------------------------------------------
George Bowen                            $110                $23,879
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Edward L. Cameron3                      $39                 $2,430
  Audit Committee Member

---------------------------------------------------------------------------
---------------------------------------------------------------------------
Jon. S. Fossel                           $186                $66,586
  Review Committee Member
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Sam Freedman                            $194                $73,998
  Chairman, Review Committee

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

Raymond J. Kalinowski                   $189                $73,248
  Former Audit Committee
  Member

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

C. Howard Kast                          $211                $78,873
  Chairman, Audit Committee
  and Review Committee Member

---------------------------------------------------------------------------
---------------------------------------------------------------------------
Robert M. Kirchner                       $185                $69,248
  Audit Committee Member
---------------------------------------------------------------------------

* Effective July 1, 2000, William A. Baker and Ned M. Steel resigned as Trustees
of the Fund and  subsequently  became  Trustees  Emeritus  of the Fund.  For the
fiscal year ended  September  30, 2000,  Messrs.  Baker and Steele each received
$179  aggregate  compensation  from  the Fund and for the  calendar  year  ended
December  31, 1999,  they each  received  $67,998  total  compensation  from all
Denver-based Oppenheimer funds.

1.    For  the  1999  calendar year.

     Total  Compensation  for  the  1999  calendar  year  includes  compensation
     received  for serving as a Trustee or  Director  of 29 of the  Denver-based
     Oppenheimer funds.
3.   Total  Compensation  for the 1999 calendar  year  includes  compensation
     received  for serving as a Trustee or  Director  of 16 of the  Denver-based
     Oppenheimer funds.


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

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



Major  Shareholders.  As of December  11,  2000,  the only  persons who owned of
record or were known by the Fund to own  beneficially 5% or more of any class of
the Fund's outstanding shares were:

     Charles  Schwab & Co.,  Inc., 101  Montgomery  Street,  San  Francisco,  CA
     94104-4122,  which  owned  4,555,394.781  Class  A  shares  (23.69%  of the
     then-outstanding Class A shares) for the benefit of its customers.

     CIBC World Markets Corp., P.O. Box 3484 Church Street Station, New York, NY
     10008-3484,  which  owned  1,412,867.865  Class  A  shares  (7.34%  of  the
     then-outstanding Class A shares) for the benefit of its customers.

     Merrill  Lynch  Pierce  Fenner & Smith,  Inc.,  4800 Deer Lake Drive  East,
     Jacksonville,  Florida 32246, which owned 196,785,549 Class B shares (5.49%
     of the  then-outstanding  Class B shares)  and  149,505.946  Class C shares
     (6.56% of the  then-outstanding  Class C  shares)  for the  benefit  of its
     customers.

     FROJACK CO, PO Box 6001, Grand Forks, ND 58206-6001, which owned 45,222.759
     Class Y shares (99.77% of the then-outstanding Class Y shares).


The Manager and the  Sub-Advisor.  The Manager is  wholly-owned  by  Oppenheimer
Acquisition  Corp., a holding company  controlled by  Massachusetts  Mutual Life
Insurance Company. The Sub-Advisor is a wholly-owned subsidiary of the Manager.

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


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


|X| The  Investment  Advisory  Agreement  and the  Sub-Advisory  Agreement.  The
Investment Advisory Agreement (the "Advisory Agreement") between the Manager and
the Fund requires the Manager, at its expense, to provide the Fund with adequate
office  space,  facilities  and  equipment,  and to provide  and  supervise  the
activities  of all  administrative  and clerical  personnel  required to provide
effective corporate  administration for the Fund,  including 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.


      Expenses not expressly assumed by the Manager under the Advisory Agreement
or the Sub-Advisor  under the  Sub-Advisory  Agreement are paid by the Fund. The
Advisory  Agreement  lists  examples  of  expenses  paid by the Fund.  The major
categories relate to interest,  taxes,  brokerage  concessions,  fees to certain
Trustees,  legal and audit expenses,  custodian and transfer agent and custodian
expenses,  share issuance costs,  certain  printing and  registration  costs and
non-recurring expenses, including litigation costs.




<PAGE>


--------------------------------------------------------------------------------
   Fiscal Years Ended 8/31     Management  Fees  Paid
                              to OppenheimerFunds,
                               Inc.1
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------
           1998                                 $938,980
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
           1999                                 $918,924
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

           2000                                $1,640,298

-------------------------------------------------------------------------------
1. Includes subadvisory fees paid by the Manager to the Sub-Advisor.

      The advisory  agreement and the sub-advisory  agreement states that in the
absence of willful misfeasance, bad faith or gross negligence in the performance
of its duties,  or reckless  disregard for its  obligations and duties under the
advisory agreement,  the Manager and the Sub-Advisor are not liable for any loss
resulting  from a good faith error or omission on their part with respect to any
of their duties thereunder.  The respective advisory and sub-advisory agreements
permit the  Manager and the  Sub-Advisor  to act as  investment  advisor for any
other person,  firm or corporation,  and the advisory agreement permits the Fund
to use the name "Oppenheimer" in connection with other investment  companies for
which the Manager  acts as  investment  advisor or general  distributor.  If the
Manager shall no longer act as an investment  advisor to the Fund,  the right of
the Fund to use the name "Oppenheimer" as part of its name may be withdrawn.


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


      Under the Sub-Advisory Agreement,  the Sub-Advisor is authorized to select
brokers (other than affiliates) that provide  brokerage and/or research services
for the Fund  and/or  the  other  accounts  over  which the  Sub-Advisor  or its
affiliates have investment discretion.  The concessions paid to such brokers may
be higher  than  another  qualified  broker  would have  charged if a good faith
determination  is  made by the  Sub-Advisor  that  the  concession  is fair  and
reasonable   in   relation   to  the   services   provided.   Subject  to  these
considerations,  as a factor  in  selecting  brokers  for the  Fund's  portfolio
transactions,  the Sub-Advisor may also consider sales of shares of the Fund and
other  investment  companies for which the Sub-Advisor or an affiliate serves as
investment advisor.


Brokerage Practices Followed by the Sub-Advisor.  Most securities purchases made
by the Fund are in principal  transactions at net prices. The Fund usually deals
directly  with the  selling or  purchasing  principal  or market  maker  without
incurring  charges  for the  services  of a  broker  on its  behalf  unless  the
Sub-Advisor determines that a better price or execution may be obtained by using
the  services  of a  broker.  Therefore,  the Fund  does not  incur  substantial
brokerage costs.  Portfolio  securities  purchased from  underwriters  include a
commission or concession  paid by the issuer to the  underwriter in the price of
the  security.  Portfolio  securities  purchased  from dealers  include a spread
between the bid and asked price.  The Fund seeks to obtain  prompt  execution of
these orders at the most favorable net price.

      The Sub-Advisor allocates brokerage for the Fund subject to the provisions
of the  Sub-Advisory  Agreement and the  procedures and rules  described  above.
Generally,  the Sub-Advisor's  portfolio  traders allocate  brokerage based upon
recommendations from the Sub-Advisor's portfolio managers. 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 effecting  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.  When possible,  the Sub-Advisor tries to combine concurrent
orders to  purchase or sell the same  security by more than one of the  accounts
managed by the  Sub-Advisor  or its  affiliates.  The  transactions  under those
combined  orders are averaged as to price and allocated in  accordance  with the
purchase or sale orders actually placed for each account.

      The investment  advisory  agreement and the Sub-Advisory  Agreement permit
the Manager and the Sub-Advisor to allocate brokerage for research services. The
investment  research services provided by a particular broker may be useful only
to one or more of the advisory  accounts of the  Manager,  the  Sub-Advisor  and
their 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
or 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 Manager or 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  Manager  or  the
Sub-Advisor in the investment  decision-making process may be paid in commission
dollars.


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


      The  research   services  provided  by  brokers  broadens  the  scope  and
supplements  the research  activities of the Manager and the  Sub-Advisor.  That
research provides additional views and comparisons for consideration,  and helps
the Manager and 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 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.

      Other  funds  advised  by the  Manager  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
or the  Sub-Advisor  purchase  the same  security  on the same day from the same
dealer, the Manager or the Sub-Advisor may average the price of the transactions
and allocate the average among the funds.

------------------------------------------------------------------------------
  Fiscal Year Ended 8/31:     Total Brokerage Commissions Paid by the Fund1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
           1998                                 $142,841
------------------------------------------------------------------------------
------------------------------------------------------------------------------
           1999                                 $255,025
------------------------------------------------------------------------------
------------------------------------------------------------------------------

           2000                                 $345,504

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

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

    The  compensation  paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table  below.  Class N shares  were not  publicly  offered
during the Fund's fiscal years depicted and therefore are not included in any of
the charts located in this section of the Statement of Additional Information.

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

Fiscal    Aggregate     Class A       Concessions   Concessions   Concessions
          Front-End     Front-End
          Sales         Sales         on Class A    on Class B    on Class C
Year      Charges on    Charges       Shares        Shares        Shares
Ended     Class A       Retained by   Advanced by   Advanced by   Advanced by
8/31:     Shares        Distributor   Distributor1  Distributor1  Distributor1

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
  1998      $725,009      $155,030      $139,534      $774,603      $111,824
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
  1999      $227,646      $68,5232       $18,386      $139,618      $53,055
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

  2000      $252,235      $60,3982       $43,335      $229,087      $50,682

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

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. Includes amounts  retained by a broker-dealer  that is an affiliate or parent
   of the distributor.

-------------------------------------------------------------------------------
Fiscal Years   Class A Contingent   Class B Contingent   Class C Contingent
               Deferred Sales       Deferred Sales       Deferred Sales
               Charges Retained by  Charges Retained by  Charges Retained by
Ended 8/31:    Distributor          Distributor          Distributor
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
     1998               $0                $145,593              $39,184
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
     1999              $132               $121,732              $9,877
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

     2000             $1,781              $118,600              $17,888

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

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 Trustees3,  cast in person at a meeting called for
the purpose of voting on that plan.
3  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.

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

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

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

      While the Plans are in effect,  the  Treasurer  of the Fund shall  provide
separate  written  reports  on the  plans  to the  Board  of  Trustees  at least
quarterly  for its review.  The Reports  shall detail the amount of all payments
made  under a plan 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,  no payment will be made to any  recipient in any quarter
in which the  aggregate net asset value of all Fund shares held by the recipient
for itself and its customers does not exceed a minimum amount,  if any, that may
be set from time to time by a majority of the Independent Trustees. The Board of
Trustees has set no minimum  amount of assets to qualify for payments  under the
plans.


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

      For the fiscal  period  ended August 31, 2000  payments  under the Class A
Plan totaled  $287,510,  all of which was paid by the Distributor to recipients.
That included $4,674 paid to an affiliate of the Manager's  parent company.  Any
unreimbursed  expenses the Distributor  incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years. The Distributor may not
use payments received from 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 Service and Distribution Plan Fees. Under
each plan, service fees and distribution fees are computed on the average of the
net asset value of shares in the respective class, determined as of the close of
each  regular  business  day  during  the  period.  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
and Class C shares are purchased. After the first year Class B or Class C 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.


      The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.00% and the asset-based sales charge increases Class N expenses by
0.25% of the net assets per year of the respective class.


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

         The  asset-based  sales  charges on Class B, Class C and Class N shares
allow  investors to buy shares  without a front-end  sales charge while allowing
the Distributor to compensate  dealers that sell those shares. The Fund pays the
asset-based  sales  charges to the  Distributor  for its  services  rendered  in
distributing B,each class of shares. The payments are made to the Distributor in
recognition that the Distributor:
o   pays sales concessions to authorized brokers and dealers at the time of sale
    and pays service fees as described above,
o   may  finance  payment of sales  concessions  and/or the  advance of the
    service fee payment to recipients  under the plans, or may provide such
    financing from its own resources or from the resources of an affiliate,

o   employs personnel to support distribution of Class B, Class C and Class N
    shares, and
o   bears  the  costs of sales  literature,  advertising  and  prospectuses
    (other than those  furnished to current  shareholders)  and state "blue
    sky" registration fees and certain other distribution expenses.


      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 and Class N plan is  terminated  by the Fund,  the
Board of Directors  may allow the Fund to continue  payments of the  asset-based
sales charge to the  Distributor  for  distributing  shares  before the plan was
terminated.




<PAGE>


--------------------------------------------------------------------------------
     Distribution Fees Paid to the Distributor for the Year Ended 8/31/00*
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class:       Total          Amount         Distributor's       Distributor's
                                                               Unreimbursed
                                           Aggregate           Expenses as %
             Payments       Retained by    Unreimbursed        of Net Assets
             Under Plan     Distributor    Expenses Under Plan of Class
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Class B Plan    $214,106      $176,3341        $1,420,390           5.23%

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

Class C Plan    $165,383       $70,5412          $99,957            0.49%

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

1.    Includes $818 paid to an affiliate of the Distributor's parent company.
2.    Includes $428 paid to an affiliate of the Distributor's parent company.
*  The Fund did not offer Class N Shares during its fiscal year ended 8/31/00.


      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  for the Fund's most recent fiscal year end. You can obtain  current
performance  information by calling the Fund's Transfer Agent at  1.800.525.7048
or    by    visiting    the    OppenheimerFunds    Internet    web    site    at
http://www.oppenheimerfunds.com.

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

      Use of  standardized  performance  calculations  enables  an  investor  to
compare the Fund's  performance  to the  performance of other funds for the same
periods.  However,  a number of factors  should be  considered  before using the
Fund's performance information as a basis for comparison with other investments:
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  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  The  Fund's  performance  returns  do not  reflect  the  effects  of taxes on
   dividends or capital gains distributions.
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  debt  investments,  the  types  of
investments the Fund holds, and its operating expenses that are allocated to the
particular class.

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


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

                 1/n
            (ERV)
            (---)   -1 = Average Annual Total Return
            ( 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 and 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.




<PAGE>


------------------------------------------------------------------------
        The Fund's Total Returns for the Periods Ended 8/31/00*
------------------------------------------------------------------------
------------------------------------------------------------------------
Class of   Cumulative Total         Average Annual Total Returns
Shares          Returns
            (Life of Class)
------------------------------------------------------------------------
------------------------------------------------------------------------
                                     1-Year          (Life-of-Class)
------------------------------------------------------------------------
------------------------------------------------------------------------
          After     Without   After      Without   After      Without
          Sales     Sales     Sales      Sales     Sales      Sales
          Charge    Charge    Charge     Charge    Charge     Charge
------------------------------------------------------------------------
------------------------------------------------------------------------

Class A    -11.50%   -6.10%1    40.01%    48.55%    -3.51%1    -1.83%1

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

Class B    -11.02%   -8.56%2    42.44%    47.44%    -3.36%2    -2.58%2

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

Class C    -8.67%    -8.67%3    46.43%    47.43%    -2.62%3    -2.62%3

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

Class Y    -5.36%    -5.36%4    49.20%    49.20%    -1.60%4    -1.60%4

------------------------------------------------------------------------
1.    Inception of Class A:   3/31/97
2.    Inception of Class B:   3/31/97
3.    Inception of Class C:   3/31/97
4.    Inception of Class Y:   3/31/97

* Class N shares are were not  offered  for sale  during the Fund's  fiscal year
ended 8/31/00.


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.


o


<PAGE>


      Lipper Rankings. From time to time the Fund may publish the ranking of the
performance of its classes of shares by Lipper Analytical Services,  Inc. Lipper
is a  widely-recognized  independent  mutual  fund  monitoring  service.  Lipper
monitors the performance of regulated investment companies,  including the Fund,
and ranks their performance for various periods based on 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.

o Morningstar  Ratings and Rankings.  From time to time the Fund may publish the
ranking  and/or  star  rating of the  performance  of its  classes  of shares by
Morningstar,  Inc., an independent mutual fund monitoring  service.  Morningstar
rates and ranks  mutual funds in broad  investment  categories:  domestic  stock
funds,  international stock funds,  taxable bond funds and municipal bond funds.
The Fund is included in the domestic stock funds category.

      Morningstar  proprietary  star ratings  reflect  historical  risk-adjusted
total investment return.  Investment return measures a fund's (or class's) one-,
three-,  five- and ten-year  average  annual  total  returns  (depending  on the
inception of the fund or class) in excess of 90-day U.S.  Treasury  bill returns
after  considering the fund's sales charges and expenses.  Risk is measured by a
fund's (or class's)  performance below 90-day U.S.  Treasury bill returns.  Risk
and  investment   return  are  combined  to  produce  star  ratings   reflecting
performance  relative to the other funds in the fund's  category.  Five stars is
the  "highest"  ranking (top 10% of funds in a  category),  four stars is "above
average" (next 22.5%),  three stars is "average" (next 35%), two stars is "below
average"  (next 22.5%) and one star is "lowest"  (bottom 10%).  The current star
rating is the fund's (or class's)  overall  rating,  which is the fund's  3-year
rating or its combined 3- and 5-year ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating  (weighted  40%/30%/30%,  respectively),
depending on the inception  date of the fund (or class).  Ratings are subject to
change monthly.

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

o 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.


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


How to Buy Shares

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

AccountLink.  When shares are purchased through AccountLink,  each purchase must
be at least $25.  Shares  will be  purchased  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 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 3 days after the transfers are initiated.  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 E to this
Statement of Additional  Information because the Distributor or dealer or broker
incurs little or no selling expenses.


|X| Right of  Accumulation.  To qualify  for the lower sales  charge  rates that
apply to  larger  purchases  of Class A  shares,  you and  your  spouse  can add
together:
o         Class  A and  Class B  shares  you  purchase  for  your  individual
          accounts,  or for your  joint  accounts,  or for  trust  or  custodial
          accounts on behalf of your children who are minors, and
o         Current  purchases  of Class A and  Class B  shares  of the Fund and
          other Oppenheimer funds to reduce the sales charge rate that applies
          to current purchases of Class A shares, and

o

<PAGE>
          Class  A and  Class B  shares  of  Oppenheimer  funds  you  previously
          purchased subject to an initial or contingent deferred sales charge to
          reduce the sales charge rate for current  purchases of Class A shares,
          provided that you still hold your investment in one of the Oppenheimer
          funds.

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

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


Oppenheimer Bond Fund
                                        Oppenheimer  Main Street Growth & Income
Oppenheimer California Municipal Fund   Fund
Oppenheimer Capital Appreciation Fund   Oppenheimer Main Street Opportunity Fund
Oppenheimer Capital Preservation Fund   Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Income Fund         Oppenheimer MidCap Fund
Oppenheimer Champion Income Fund        Oppenheimer Multiple Strategies Fund
Oppenheimer Convertible Securities Fund Oppenheimer Municipal Bond Fund
Oppenheimer Developing Markets Fund     Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Value Fund      Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund              Oppenheimer Quest Balanced Value Fund
                                        Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Emerging Technologies Fund  Inc.
                                        Oppenheimer  Quest  Global  Value  Fund,
Oppenheimer Enterprise Fund             Inc.
Oppenheimer Europe Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Florida Municipal Fund
Oppenheimer Quest Small Cap Fund
Oppenheimer Global Fund
Oppenheimer Quest Value Fund,  Inc.
Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Intermediate Municipal Fund
Oppenheimer Trinity Core Fund
Oppenheimer International Bond Fund
Oppenheimer Trinity Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Trinity Value Fund
Oppenheimer International Small Company Fund
Oppenheimer U.S. Government Trust
Oppenheimer Large Cap Growth Fund
Oppenheimer World Bond Fund
Oppenheimer Limited-Term Government Fund
Limited-Term New York Municipal Fund
Rochester Fund Municipals

And the following money market funds:


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

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

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

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

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

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


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

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


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

|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 public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.

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

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

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



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

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

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

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

      Before  you  establish  Asset  Builder  payments,   you  should  obtain  a
prospectus  of  the  selected  fund(s)  from  your  financial  advisor  (or  the
Distributor  ) and request an  application  from the  Distributor.  Complete the
application  and return  it.  You may  change  the amount of your Asset  Builder
payment or you can terminate these automatic  investments at any time by writing
to  the  Transfer  Agent.  The  Transfer  Agent  requires  a  reasonable  period
(approximately  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 charge or at reduced  sales charge  rates,  as
described in the Appendix E to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to Retirement
Plans whose records are maintained on a daily  valuation  basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent  record keeper that has a contract
or special  arrangement  with  Merrill  Lynch.  If on the date the plan  sponsor
signed the Merrill Lynch record keeping service agreement the Plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in Applicable  Investments,  then the Retirement  Plan may purchase only Class B
shares of the  Oppenheimer  funds.  Any  Retirement  Plans in that category that
currently  invest in Class B shares of the Fund will have  their  Class B shares
converted to Class A shares of the Fund when the Plan's  Applicable  Investments
reach $5 million.

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


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

      The  availability  of different  classes of shares  permits an investor to
choose  the  method  of  purchasing  shares  that  is more  appropriate  for the
investor.  That may depend on the amount of the purchase, the length of time the
investor  expects to hold  shares,  and other  relevant  circumstances.  Class A
shares  normally are sold  subject to an initial  sales  charge.  While Class B,
Class C and Class N shares  have no initial  sales  charge,  the  purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and Class
N shares is the same as that of the initial  sales charge on Class A shares - to
compensate the Distributor and brokers,  dealers and financial institutions that
sell shares of the Fund A  salesperson  who is entitled to receive  compensation
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 any order in the amount of  $500,000  or
more for Class B shares or $1  million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus  accounts).  That
is because  generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.


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


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

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

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

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

      Dealers  other  than  Exchange  members  may  conduct  trading  in certain
securities on days on which the Exchange is closed (including  weekends and U.S.
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.  For  example,  trading on European  and Asian stock
exchanges and over-the-counter markets normally is completed before the close of
The New York Stock Exchange.

      Changes in the values of securities traded on foreign exchanges or markets
as a result of  events  that  occur  after the  prices of those  securities  are
determined,  but before the close of The New York  Stock  Exchange,  will not be
reflected in the Fund's  calculation of its net asset values that day unless the
Board of  Trustees  determines  that the event is  likely  to effect a  material
change in the value of the  security.  The Manager may make that  determination,
under procedures established by the Board.

|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


<PAGE>


         Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(1)  if last sale information is regularly reported,  they are valued at the
     last reported sale price on the principal exchange on which they are traded
     or on NASDAQ, as applicable, on that day, or
(2)  if last sale information is not available on a valuation date, they are
     valued at the last reported sale price  preceding the valuation  date if it
     is  within  the  spread of the  closing  "bid"  and  "asked"  prices on the
     valuation  date or, if not,  at the closing  "bid"  price on the  valuation
     date.

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

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


How to Sell Shares

Information on how to sell shares of the Fund is stated in the  Prospectus.  The
information  below  provides  additional  information  about the  procedures and
conditions for redeeming shares.

Reinvestment Privilege.  Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o    Class A shares that you  purchased  subject to an initial sales charge or
     Class A shares on which a contingent  deferred sales charge which 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,  the Board of Trustees of the
Fund may determine  that it would be  detrimental  to the best  interests of the
remaining  shareholders of the Fund to make payment of a redemption order wholly
or partly in cash.  In that case,  the Fund may pay the  redemption  proceeds in
whole or in part by a  distribution  "in  kind" of  liquid  securities  from the
portfolio of the Fund, in lieu of cash.

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

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

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

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

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

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

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

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

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

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

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

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

|X| Automatic  Exchange Plans.  Shareholders can authorize the Transfer Agent to
exchange a  pre-determined  amount of shares of the Fund for shares (of the same
class)  of  other  Oppenheimer  funds  automatically  on a  monthly,  quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund account is $25.  Instructions should be
provided   on   the   OppenheimerFunds   Application   or   signature-guaranteed
instructions.  Exchanges made under these plans are subject to the  restrictions
that  apply  to  exchanges  as set  forth  in "How to  Exchange  Shares"  in the
Prospectus and below in this Statement of Additional Information.

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



<PAGE>


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

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

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

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

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

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

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


<PAGE>


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 Money Market Fund,
Inc.  are  deemed to be  "Class A Shares"  for this  purpose.  You can  obtain a
current  list of funds  showing  which funds offer which  classes by calling the
Distributor at 1.800.525.7048.
o     All of the  Oppenheimer  funds  currently  offer  Class  A, B and C shares
      except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
      Centennial Tax Exempt Trust,  Centennial Government Trust,  Centennial New
      York Tax  Exempt  Trust,  Centennial  California  Tax  Exempt  Trust,  and
      Centennial America Fund, L.P., which only offer Class A shares.
o     Oppenheimer  Main Street  California  Municipal Fund currently offers only
      Class A and Class B shares.
o     Class B,  Class C and  Class N shares of  Oppenheimer  Cash  Reserves  are
      generally  available  only by  exchange  from the same  class of shares of
      other  Oppenheimer  funds  or  through  OppenheimerFunds-sponsored  401(k)
      plans.
o     Only certain  Oppenheimer  funds currently  offer Class Y shares.  Class Y
      shares of  Oppenheimer  Real Asset Fund may not be exchanged for shares of
      any other fund.
o     Only certain  Oppenheimer funds currently offer Class N shares,  which are
      only offered to retirement  plans as described in the Prospectus.  Class N
      shares  can be  exchanged  only for  Class N shares  of other  Oppenheimer
      funds.
o     Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
      only  for  Class A  shares  of other  Oppenheimer  funds.  They may not be
      acquired by exchange of shares of any class of any other Oppenheimer funds
      except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
      Reserves acquired by exchange of Class M shares.
o     Class A shares of Senior  Floating Rate Fund are not available by exchange
      of Class A shares  of other  Oppenheimer  funds.  Class A shares of Senior
      Floating Rate Fund that are exchanged for shares of the other  Oppenheimer
      funds may not be exchanged back for Class A shares of Senior Floating Rate
      Fund.
o     Class X shares of Limited  Term New York  Municipal  Fund can be exchanged
      only for Class B shares of other Oppenheimer funds and no exchanges may be
      made to Class X shares.
o     Shares of Oppenheimer  Capital  Preservation Fund may not be exchanged for
      shares of Oppenheimer  Money Market Fund, Inc.,  Oppenheimer Cash Reserves
      or Oppenheimer  Limited-Term Government Fund. Only participants in certain
      retirement plans may purchase shares of Oppenheimer  Capital  Preservation
      Fund, and only those participants may exchange shares of other Oppenheimer
      funds for shares of Oppenheimer Capital Preservation Fund.
o    Class A shares of Oppenheimer Senior Floating Rate Fund are not available
     by exchange of shares of Oppenheimer Money Market Fund or Class A shares of
     Oppenheimer  Cash  Reserves.  If any Class A shares of another  Oppenheimer
     fund that are exchanged for Class A shares of Oppenheimer  Senior  Floating
     Rate Fund are subject to the Class A  contingent  deferred  sales charge of
     the other Oppenheimer fund at the time of exchange,  the holding period for
     that Class A contingent  deferred sales charge will carry over to the Class
     A shares of Oppenheimer Senior Floating Rate Fund acquired in the exchange.
     The Class A shares of  Oppenheimer  Senior  Floating  Rate Fund acquired in
     that  exchange  will be subject to the Class A Early  Withdrawal  Charge of
     Oppenheimer  Senior Floating Rate Fund if they are  repurchased  before the
     expiration of the holding period.

      Class A shares of  Oppenheimer  funds may be  exchanged at net asset value
for shares of any money  market fund offered by the  Distributor.  Shares of any
money market fund  purchased  without a sales charge may be exchanged for shares
of  Oppenheimer  funds  offered  with a sales  charge upon  payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.

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

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

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


      |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.  However,  when Class A shares
acquired  by  exchange of Class A shares of other  Oppenheimer  funds  purchased
subject to a Class A contingent  deferred  sales  charge are redeemed  within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares,  the Class A contingent  deferred sales charge is imposed on the
redeemed  shares.  The Class B  contingent  deferred  sales charge is imposed on
Class B shares  acquired by exchange if they are redeemed  within 6 years of the
initial  purchase  of the  exchanged  Class B  shares.  The  Class C  contingent
deferred sales charge is imposed on Class C shares  acquired by exchange if they
are redeemed  within 12 months of the initial  purchase of the exchanged Class C
shares.  With respect to class N shares,  a 1% contingent  deferred sales charge
will be imposed if the retirement  plan (not including IRAs and 403(b) plans) is
terminated  or Class N shares  of all  Oppenheimer  funds are  terminated  as an
investment  option of the plan and Class N shares are redeemed  within 18 months
after the plan's  first  purchase of Class N shares of any  Oppenheimer  fund or
with respect to an individual retirement plan or 403(b) plan, Class N shares are
redeemed  within 18 months of the plan's first purchase of Class N shares of any
Oppenheimer fund.

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


|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.  The Fund may accept  requests for  exchanges of up to 50
accounts per day from  representatives  of  authorized  dealers that qualify for
this privilege.

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

|X|  Processing  Exchange  Requests.  Shares to be exchanged are redeemed on the
regular  business day the Transfer Agent receives an exchange  request in proper
form (the "Redemption  Date").  Normally,  shares of the fund to be acquired are
purchased on the  Redemption  Date,  but such purchases may be delayed by either
fund up to five business days if it determines that it would be disadvantaged by
an immediate transfer of the redemption  proceeds.  The Fund reserves the right,
in its discretion,  to refuse any exchange request that may disadvantage it. For
example,  if the  receipt of  multiple  exchange  requests  from a dealer  might
require the  disposition  of portfolio  securities  at a time or at a price that
might be disadvantageous to the Fund, the Fund may refuse the request.  When you
exchange  some or all of your  shares  from one  fund to  another,  any  special
account feature such as an Asset Builder Plan or Automatic Withdrawal Plan, will
be switched to the new fund account unless you tell the Transfer Agent not to do
so. However, special redemption and exchange features such as Automatic Exchange
Plans and  Automatic  Withdrawal  Plans  cannot be  switched  to an  account  in
Oppenheimer Senior Floating Rate Fund.

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

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




<PAGE>


Dividends, Capital Gains and Taxes


Dividends and Distributions.  The Fund has no fixed dividend rate for any of its
share  classes 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.


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

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

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

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

      The Fund intends to qualify as a "regulated  investment company" under the
Internal  Revenue Code  (although  it reserves  the right not to qualify).  That
qualification enables the Fund to "pass through" its income and realized capital
gains to  shareholders  without having to pay tax on them.  This avoids a double
tax on that income and capital gains, since shareholders  normally will be taxed
on the dividends and capital gains they receive from the Fund (unless the Fund's
shares are held in a retirement  account or the shareholder is otherwise  exempt
from tax). If the Fund qualifies as a "regulated  investment  company" under the
Internal Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends  and  distributions.  The Fund  qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification  which the Fund might not meet
in any particular year. If it did not so qualify,  the Fund would be treated for
tax  purposes  as an  ordinary  corporation  and  receive no tax  deduction  for
payments made to shareholders.

      If prior  distributions  made by the Fund  must be  re-characterized  as a
non-taxable  return of capital at the end of the fiscal  year as a result of the
effect of the Fund's  investment  policies,  they will be  identified as such in
notices sent to shareholders.

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


Additional Information About the Fund

The Transfer  Agent.  OppenheimerFunds  Services,  the Fund's Transfer Agent, is
responsible  for  maintaining  the Fund's  shareholder  registry and shareholder
accounting records, and for shareholder servicing and administrative functions.

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

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


<PAGE>


INDEPENDENT AUDITORS' REPORT

================================================================================
The Board of Trustees and Shareholders of
Oppenheimer Real Asset Fund:

We have  audited  the  accompanying  statement  of  assets  and  liabilities  of
Oppenheimer  Real Asset Fund,  including  the  statement of  investments,  as of
August 31,  2000,  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 three years in
the period  then  ended and the period  from  March 31,  1997  (commencement  of
operations)  to August  31,  1997.  These  financial  statements  and  financial
highlights are the responsibility of the Fund's  management.  Our responsibility
is to express an opinion on these financial  statements and financial highlights
based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2000, by correspondence with the custodian and
brokers;  where  replies  were not received  from  brokers,  we performed  other
auditing procedures.  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 Real Asset Fund as of August 31, 2000, 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 three
years in the period then ended and the period from March 31, 1997  (commencement
of  operations)  to August 31, 1997, in conformity  with  accounting  principles
generally accepted in the United States of America.



/s/ Deloitte & Touche LLP
Deloitte & Touche LLP

Denver, Colorado
September 22, 2000

<PAGE>

STATEMENT OF INVESTMENTS  August 31, 2000

<TABLE>
<CAPTION>
                                                                       Principal
Market Value
                                                                          Amount
See Note 1
=============================================================================================
<S>                                                                <C>
<C>
 Mortgage-Backed Obligations--25.7%
---------------------------------------------------------------------------------------------
 Government Agency--10.7%
---------------------------------------------------------------------------------------------
 FHLMC/FNMA/Sponsored--10.2%
 Federal Home Loan Mortgage Corp., Collateralized
 Mtg. Obligations, Gtd. Multiclass Mtg. Participation
 Certificates, Series 1451, Cl. G, 7%, 9/15/06(1)                  $ 3,651,385    $
3,643,389
---------------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp.,
 Interest-Only Stripped Mtg.-Backed Security:
 Series 303, Cl. IO, 14.794%, 11/1/29(2)                            21,838,092
6,534,367
 Series 2007, Cl. PI, 11.219%, 11/15/27(2)                          11,406,667
2,545,113
---------------------------------------------------------------------------------------------
 Federal National Mortgage Assn.,
 Interest-Only Stripped Mtg.-Backed Security:
 Trust 1993-23, Cl. PN, 26.368%, 4/25/22(2,3)
3,624,240        970,617
 Trust 1993-138, Cl. JE, 8.908%, 8/25/23(2,4)                       14,057,142
7,687,499

-----------

21,380,985

---------------------------------------------------------------------------------------------
 GNMA/Guaranteed--0.5%
 Government National Mortgage Assn.,
 Interest-Only Stripped Mtg.-Backed Security:
 Series 1997-5, Cl. PJ, 10.165%, 5/20/22(2)
1,590,548        135,197
 Series 1999-33, Cl. PI, 11.287%, 4/16/27(2)
4,298,093        796,490

-----------

931,687

---------------------------------------------------------------------------------------------
 Private--15.0%
---------------------------------------------------------------------------------------------
 Commercial--0.4%
 Resolution Trust Corp., Commercial Mtg.
 Pass-Through Certificates,
 Series 1994-C2, Cl. G, 8%, 4/25/25
822,907        786,905
---------------------------------------------------------------------------------------------
 Multi-Family--0.8%
 Ocwen Capital Trust I, Collateralized Mtg. Obligations,
 Series 1999-OAC, Cl. 1, 9.50%, 4/27/29(3)                           1,738,376
1,694,374
---------------------------------------------------------------------------------------------
 Residential--13.8%
 Ameriquest Finance Trust, Collateralized Mtg. Obligations:
 Series 1999-1, Cl. D, 9.75%, 3/25/29(3)                             1,753,729
1,683,580
 Series 2000-1, 8.50%, 8/17/01                                       6,781,823
6,671,619
 Series 2000-1, Cl. D, 8.50%, 5/15/30(3)                             6,779,663
6,567,799
---------------------------------------------------------------------------------------------
 Amortizing Residential Collateral Trust, Collateralized
 Mtg. Obligations, Trust 2000-BC1, Cl. B, 8.901%, 1/25/30(3,5)       2,000,000
1,998,125
---------------------------------------------------------------------------------------------
 NC Finance Trust, Collateralized Mtg. Obligations,
 Series 1999-I, Cl. ECFD, 8.75%, 12/25/28                            2,454,717
2,295,160
---------------------------------------------------------------------------------------------
 Northwest Asset Securities Corp., Collateralized
 Mtg. Obligations, Series 1996-5, Cl. A17, 8%, 11/25/26              3,500,000
3,510,920
---------------------------------------------------------------------------------------------
 Option One Mortgage Trust, Collateralized Mtg. Obligations:
 Series 1999-3, Cl. BB, 10.80%, 12/15/29                             1,449,640
1,431,973
 Series 2000-2, Cl. CTFS, 10.81%, 5/26/30                            4,723,967
4,735,777

-----------

28,894,953

-----------
 Total Mortgage-Backed Obligations (Cost $54,264,648)
53,688,904


12 | OPPENHEIMER REAL ASSET FUND
<PAGE>


                                                                       Principal
Market Value
                                                                          Amount
See Note 1
==============================================================================================
 Corporate Bonds and Notes--9.7%

 Comdisco, Inc., 5.75% Sr. Nts., 2/15/01                           $ 7,000,000
$  6,888,847
----------------------------------------------------------------------------------------------
 Conseco, Inc., 7.875% Unsec. Nts., 12/15/00
6,000,000       5,550,000
----------------------------------------------------------------------------------------------
 General Motors Acceptance Corp.:
 5.40% Nts., 2/26/01
1,000,000         993,506
 7.125% Nts., 5/1/01
1,900,000       1,901,879
----------------------------------------------------------------------------------------------
 Tyco International Group Ltd. SA, 7.469% Nts., 9/5/00(5,6)
5,000,000       5,000,000

------------
 Total Corporate Bonds and Notes (Cost $20,864,283)
20,334,232

==============================================================================================
 Structured Instruments--35.2%

 AIG Goldman Sachs Commodity Index
 Total Return Linked Nts., 6.40%, 1/26/01(7)                         6,000,000
12,941,073
----------------------------------------------------------------------------------------------
 Bank of America Corp., Goldman Sachs Commodity Index
 Total Return Linked Nts., 6.84%, 7/27/01(7)                         9,000,000
11,127,600
----------------------------------------------------------------------------------------------
 Business Development Bank (Canada), Goldman Sachs
 Commodity Index Excess Return Linked Nts., 7.10%, 6/18/01(7)
6,000,000       8,091,000
----------------------------------------------------------------------------------------------
 Cargill Financial Services Corp., Goldman Sachs
 Commodity Index Total Return Linked Nts.:
 5.86%, 9/14/00(7)                                                  10,000,000
24,026,616
 6.11%, 12/15/00(7)
3,000,000       6,706,933
 6.20%, 3/30/01(7)                                                   5,000,000
10,620,589

------------
 Total Structured Instruments (Cost $39,000,000)
73,513,811

==============================================================================================
 Short-Term Notes--11.8%

 Asset Backed Capital Finance, Inc., 6.55%, 10/4/00
5,000,000       4,969,979
----------------------------------------------------------------------------------------------
 Block Financial Corp., 6.56%, 10/20/00
5,000,000       4,955,356
----------------------------------------------------------------------------------------------
 Lexington Parker Capital Co. LLC, 6.67%, 9/1/00
5,000,000       5,000,000
----------------------------------------------------------------------------------------------
 TRW, Inc., 6.77%, 1/19/01
5,000,000       4,868,361
----------------------------------------------------------------------------------------------
 Washington Mutual Finance Corp., 6.75%, 1/17/01
5,000,000       4,870,625

------------
 Total Short-Term Notes (Cost $24,664,321)
24,664,321

==============================================================================================
 Repurchase Agreements--17.2%

 Repurchase agreement with Banc One Capital Markets,
 Inc., 6.57%, dated 8/31/00, to be repurchased at
 $35,885,548 on 9/1/00, collateralized by U.S.
 Treasury Bonds, 6.25%-12%, 11/15/03-8/15/23, with a
 value of $15,358,030, U.S. Treasury Nts.,
 4.25%-7.50%, 12/31/00-2/15/07, with a value of
 $17,537,582 and U.S. Treasury Bills, 11/30/00, with a
 value of $3,755,839 (Cost $35,879,000)                             35,879,000
35,879,000
----------------------------------------------------------------------------------------------
 Total Investments, at Value (Cost $174,672,252)                          99.6%
208,080,268
----------------------------------------------------------------------------------------------
 Other Assets Net of Liabilities
0.4         879,702

---------------------------
 Net Assets                                                              100.0%
$208,959,970

===========================
</TABLE>


13 | OPPENHEIMER REAL ASSET FUND
<PAGE>

STATEMENT OF INVESTMENTS  Continued


Footnotes to Statement of Investments

1. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:

<TABLE>
<CAPTION>
                             Contracts     Expiration    Exercise     Premium
Market Value
                   Subject to Call/Put           Date       Price    Received
See Note 1
--------------------------------------------------------------------------------------------
<S>                                 <C>      <C>              <C>    <C>
<C>
 Crude Oil, Call                    50       10/17/00         $30    $ 32,200
$148,500
 Crude Oil, Call                    50        9/15/00          30
32,000        163,500
 Crude Oil, Put                     50       10/17/00          20
25,300            500
 Crude Oil, Put                     50        9/15/00          20
20,000            500

-----------------------
                                                                        $109,500
$313,000

=======================
</TABLE>


2.  Interest-Only  Strips  represent  the right to receive the monthly  interest
payments on an underlying pool of mortgage  loans.  These  securities  typically
decline in price as interest rates decline.  Most other fixed income  securities
increase in price when  interest  rates  decline.  The  principal  amount of the
underlying  pool  represents  the notional  amount on which current  interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment  rates than traditional  mortgage-backed  securities (for example,
GNMA  pass-throughs).  Interest rates disclosed  represent  current yields based
upon the  current  cost basis and  estimated  timing  and amount of future  cash
flows.
3. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
4. Securities with an aggregate market value of $4,921,875 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
5. Represents the current interest rate for a variable or increasing rate
security.
6.  Represents   securities  sold  under  Rule  144A,   which  are  exempt  from
registration under the Securities Act of 1933, as amended. These securities have
been  determined  to be  liquid  under  guidelines  established  by the Board of
Trustees.  These  securities  amount to  $5,000,000  or 2.39% of the  Fund's net
assets as of August 31, 2000.
7. Security is linked to the Goldman Sachs Commodity  Index. The index currently
contains   multiple   commodities  from  the  sectors  of  energy,   metals  and
agricultural  products.  Individual  components qualify for the inclusion in the
index based on liquidity and are weighted by their  respective  world production
quantities.

See accompanying Notes to Financial Statements.


14 | OPPENHEIMER REAL ASSET FUND
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES  August 31, 2000

<TABLE>
=============================================================================
<S>                                                              <C>
 Assets

 Investments, at value (including repurchase agreements of
 $35,879,000)(cost $174,672,252)--see accompanying statement     $208,080,268
-----------------------------------------------------------------------------
 Cash                                                                  33,136
-----------------------------------------------------------------------------
 Receivables and other assets:
 Interest and principal paydowns                                    1,281,486
 Shares of beneficial interest sold                                   582,919
 Daily variation on futures contracts                                 181,411
 Other                                                                  2,774
                                                                 ------------
 Total assets                                                     210,161,994

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

 Options written, at value (premiums received $109,500)
 --see accompanying statement                                         313,000
-----------------------------------------------------------------------------
 Payables and other liabilities:
 Shares of beneficial interest redeemed                               420,422
 Daily variation on futures contracts                                 218,059
 Transfer and shareholder servicing agent fees                         98,273
 Distribution and service plan fees                                    66,837
 Shareholder reports                                                   47,408
 Trustees' compensation                                                   535
 Other                                                                 37,490
                                                                 ------------
 Total liabilities                                                  1,202,024

=============================================================================
 Net Assets                                                      $208,959,970
                                                                 ============

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

 Paid-in capital                                                 $201,264,269
-----------------------------------------------------------------------------
 Undistributed net investment income                                2,018,568
-----------------------------------------------------------------------------
 Accumulated net realized loss on investment transactions         (30,843,864)
-----------------------------------------------------------------------------
 Net unrealized appreciation on investments                        36,520,997
                                                                 ------------
 Net Assets                                                      $208,959,970
                                                                 ============
</TABLE>


15 | OPPENHEIMER REAL ASSET FUND
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES  Continued

<TABLE>
===============================================================================================
<S>
<C>
 Net Asset Value Per Share

 Class A Shares:
 Net  asset  value and  redemption  price  per  share  (based  on net  assets of
 $161,547,214 and 19,741,644 shares of beneficial interest
outstanding)                   $8.18
 Maximum offering price per share (net asset value plus sales charge of 5.75% of
 offering
price)
$8.68
-----------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value,  redemption  price (excludes  applicable  contingent  deferred
 sales charge) and offering  price per share (based on net assets of $27,156,389
 and 3,310,426 shares of beneficial interest
outstanding)                                 $8.20
-----------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value,  redemption  price (excludes  applicable  contingent  deferred
 sales charge) and offering  price per share (based on net assets of $20,255,551
 and 2,478,556 shares of beneficial interest
outstanding)                                 $8.17
-----------------------------------------------------------------------------------------------
 Class Y Shares:
 Net asset value,  redemption  price and offering  price per share (based on net
 assets of $816 and 100 shares of beneficial interest
outstanding)                    $8.16
</TABLE>


See accompanying Notes to Financial Statements.


16 | OPPENHEIMER REAL ASSET FUND
<PAGE>

STATEMENT OF OPERATIONS  For the Year Ended August 31, 2000

<TABLE>
==================================================================================
<S>                                                                    <C>
 Investment Income

 Interest                                                              $10,330,647

==================================================================================
 Expenses
 Management fees                                                         1,640,298
----------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                   287,510
 Class B                                                                   214,106
 Class C                                                                   165,383
----------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                   226,083
 Class B                                                                    38,353
 Class C                                                                    29,599
----------------------------------------------------------------------------------
 Custodian fees and expenses                                                17,091
----------------------------------------------------------------------------------
 Trustees' compensation                                                      1,737
----------------------------------------------------------------------------------
 Other                                                                     128,951
                                                                       -----------
 Total expenses                                                          2,749,111
 Less expenses paid indirectly                                             (13,107)
                                                                       -----------
 Net expenses                                                            2,736,004

==================================================================================
 Net Investment Income                                                   7,594,643

==================================================================================
 Realized and Unrealized Gain

 Net realized gain on:
 Investments (including premiums on options exercised)                  23,931,321
 Closing of futures contracts                                            8,634,249
 Closing and expiration of option contracts written                        500,468
                                                                       -----------
 Net realized gain                                                      33,066,038

----------------------------------------------------------------------------------
 Net change in unrealized appreciation on investments                   23,990,935
                                                                       -----------
 Net realized and unrealized gain                                       57,056,973

==================================================================================
 Net Increase in Net Assets Resulting from Operations                  $64,651,616
                                                                       ===========
</TABLE>

See accompanying Notes to Financial Statements.


17 | OPPENHEIMER REAL ASSET FUND
<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
 Year Ended August 31,
2000          1999
=============================================================================================
<S>                                                                <C>
<C>
 Operations

 Net investment income                                             $  7,594,643  $
3,233,497
---------------------------------------------------------------------------------------------
 Net realized gain (loss)                                            33,066,038
(15,858,948)
---------------------------------------------------------------------------------------------
 Net change in unrealized appreciation                               23,990,935
21,857,973

--------------------------
 Net increase in net assets resulting from operations                64,651,616
9,232,522

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

 Dividends from net investment income:
 Class A                                                             (5,210,659)
(3,917,119)
 Class B
(705,643)     (778,666)
 Class C
(546,384)     (524,527)
 Class Y
(30)          (39)

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

 Net  increase  (decrease)  in net assets  resulting  from  beneficial  interest
 transactions:
 Class A                                                              7,426,376
43,162,353
 Class B                                                                760,344
1,213,947
 Class C                                                             (1,399,528)
5,427,691


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

 Total increase                                                      64,976,092
53,816,162
---------------------------------------------------------------------------------------------
 Beginning of period                                                143,983,878
90,167,716

--------------------------
 End of period (including undistributed net investment
 income of $2,018,568 and $883,405, respectively)                  $208,959,970
$143,983,878

==========================
</TABLE>

See accompanying Notes to Financial Statements.


18 | OPPENHEIMER REAL ASSET FUND
<PAGE>

FINANCIAL HIGHLIGHTS


<TABLE>
<CAPTION>
 Class A                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                       <C>
<C>               <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.74
$5.81           $10.31           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .32
 .20              .29              .09
 Net realized and unrealized gain (loss)                      2.40
 .09            (4.59)             .22

------------------------------------------------------------
 Total income (loss) from investment operations               2.72
 .29            (4.30)             .31
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.28)
(.36)            (.20)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.18
$5.74           $ 5.81           $10.31

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         48.55%
6.50%          (42.43)%           3.10%

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

 Net assets, end of period (in thousands)                 $161,547
$109,328          $62,568          $37,687
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                        $126,143
$66,106          $59,251          $18,361
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        4.81%
3.73%            4.59%            4.27%
 Expenses                                                     1.50%
1.82%            1.66%(4)         1.74%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>

1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

See accompanying Notes to Financial Statements.


19 | OPPENHEIMER REAL ASSET FUND
<PAGE>

FINANCIAL HIGHLIGHTS  Continued


<TABLE>
<CAPTION>
 Class B                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                        <C>
<C>              <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.75
$5.76           $10.27           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .27
 .16              .28              .07
 Net realized and unrealized gain (loss)                      2.40
 .10            (4.62)             .20

---------------------------------------------------------
 Total income (loss) from investment operations               2.67
 .26            (4.34)             .27
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.22)
(.27)            (.17)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.20
$5.75           $ 5.76           $10.27

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         47.44%
5.75%          (42.89)%           2.70%

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

 Net assets, end of period (in thousands)                  $27,156
$18,690          $17,357          $16,471
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $21,416
$15,454          $22,659          $ 7,388
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        4.03%
2.95%            3.87%            3.35%
 Expenses                                                     2.27%
2.58%            2.39%(4)         2.56%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>

1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

See accompanying Notes to Financial Statements.


20 | OPPENHEIMER REAL ASSET FUND
<PAGE>


<TABLE>
<CAPTION>
 Class C                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                        <C>
<C>              <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.73
$5.76           $10.26           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .27
 .15              .26              .08
 Net realized and unrealized gain (loss)                      2.39
 .11            (4.60)             .18

---------------------------------------------------------
 Total income (loss) from investment operations               2.66
 .26            (4.34)             .26
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.22)
(.29)            (.16)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.17
$5.73           $ 5.76           $10.26

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         47.43%
5.68%          (42.87)%           2.60%

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

 Net assets, end of period (in thousands)                  $20,256
$15,965          $10,243          $10,616
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $16,536
$10,477          $12,060          $ 5,599
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        4.03%
2.96%            3.87%            3.34%
 Expenses                                                     2.27%
2.58%            2.38%(4)         2.56%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>


1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

See accompanying Notes to Financial Statements.


21 | OPPENHEIMER REAL ASSET FUND
<PAGE>

FINANCIAL HIGHLIGHTS  Continued


<TABLE>
<CAPTION>
 Class Y                     Year Ended August 31,            2000
1999             1998          1997(1)
======================================================================================================================
<S>                                                          <C>
<C>             <C>              <C>
 Per Share Operating Data

 Net asset value, beginning of period                        $5.72
$5.81           $10.31           $10.00
----------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                         .36
 .20              .42              .20
 Net realized and unrealized gain (loss)                      2.38
 .10            (4.71)             .11

---------------------------------------------------------
 Total income (loss) from investment operations               2.74
 .30            (4.29)             .31
----------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                         (.30)
(.39)            (.21)              --
----------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $8.16
$5.72           $ 5.81           $10.31

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

======================================================================================================================
 Total Return, at Net Asset Value(2)                         49.20%
6.77%          (42.38)%           3.10%

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

 Net assets, end of period (in thousands)                       $1
$1               $1               $1
----------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $1
$1               $1               $1
----------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                        5.28%
3.88%            4.84%            4.75%
 Expenses                                                     1.09%
1.68%            1.40%(4)         1.57%(4)
----------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                        93%
86%             105%              39%
</TABLE>


1. For the period from March 31, 1997 (commencement of operations) to August 31,
1997.
2. Assumes a $1,000  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or commencement of operations),  with
all  dividends  and  distributions   reinvested  in  additional  shares  on  the
reinvestment  date, and redemption at the net asset value calculated on the last
business day of the fiscal period.  Sales charges are not reflected in the total
returns.  Total  returns  are not  annualized  for periods of less than one full
year.
3. Annualized for periods of less than one full year.
4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

See accompanying Notes to Financial Statements.


22 | OPPENHEIMER REAL ASSET FUND
<PAGE>

NOTES TO FINANCIAL STATEMENTS

================================================================================
1. Significant Accounting Policies
Oppenheimer  Real  Asset Fund (the Fund) 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 total  return.  The Fund's  investment
advisor is OppenheimerFunds,  Inc. (the Advisor). The Sub-Advisor is Oppenheimer
Real Asset  Management,  Inc. (the  Manager),  a wholly owned  subsidiary of the
Advisor.

   The Fund offers Class A, Class B, Class C 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 and Class C shares are sold without a front-end
sales charge but may be subject to a contingent  deferred  sales charge  (CDSC).
Class Y shares  are sold to certain  institutional  investors  without  either a
front-end sales charge or a CDSC. All classes of shares have identical rights to
earnings,  assets  and  voting  privileges,  except  that each class has its own
expenses  directly  attributable to that class and exclusive  voting rights with
respect to  matters  affecting  that  class.  Classes  A, B and C 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.
--------------------------------------------------------------------------------
Structured  Notes. The Fund invests in  commodity-linked  structured notes whose
market  value  and  redemption  price  are  linked  to  commodity  indices.  The
structured  notes are leveraged,  which increases the Fund's exposure to changes
in prices of the overall  commodities'  markets and  increases the potential for
the  notes'  volatility  relative  to the  principal  value  of the  securities.
Fluctuations in value of these securities  related to the commodity exposure are
recorded  as  unrealized  gains  and  losses  in  the   accompanying   financial
statements.  As of  August  31,  2000,  the  market  value of  these  securities
comprised  35.2% of the Fund's net assets,  and resulted in unrealized  gains at
August 31, 2000, of $34,513,811. The Fund also hedges a portion of the commodity
exposure generated by these securities, as discussed in Note 5.
--------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges or
other  domestic or foreign  exchanges are valued based on the last sale price of
the security  traded on that  exchange  prior to the time when the Fund's assets
are valued.  In the absence of a sale,  the  security is valued at the last sale
price on the prior  trading  day,  if it is within the spread of the closing bid
and asked prices,  and if not, at the closing bid price.  Securities  (including
restricted securities) for which quotations are not readily available are valued
primarily  using  dealer-supplied   valuations,   a  portfolio  pricing  service
authorized  by the Board of  Trustees,  or at their  fair  value.  Fair value is
determined  in good  faith  under  consistently  applied  procedures  under  the
supervision  of the Board of  Trustees.  Short-term  "money  market  type"  debt
securities  with  remaining  maturities  of  sixty  days or less are  valued  at
amortized cost (which approximates market value).


23 | OPPENHEIMER REAL ASSET FUND
<PAGE>

NOTES TO FINANCIAL STATEMENTS  Continued

================================================================================
1. Significant Accounting Policies Continued
Non-Diversification  Risk. The Fund is  "non-diversified"  and can invest in the
securities of a single issuer.  To the extent the Fund invests a relatively high
percentage  of its  assets in the  obligations  of a single  issuer or a limited
number of  issuers,  the Fund is  subject  to  additional  risk of loss if those
obligations  lose market  value or the  borrower or issuer of those  obligations
defaults.
--------------------------------------------------------------------------------
Repurchase  Agreements.  The Fund requires the custodian to take possession,  to
have  legally  segregated  in the Federal  Reserve  Book Entry System or to have
segregated  within the custodian's  vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of  purchase.  If the seller
of the agreement  defaults and the value of the collateral  declines,  or if the
seller  enters  an  insolvency  proceeding,  realization  of  the  value  of the
collateral by the Fund may be delayed or limited.
--------------------------------------------------------------------------------
Allocation of Income,  Expenses,  Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each  class  of  shares  based  upon  the  relative  proportion  of  net  assets
represented  by  such  class.  Operating  expenses  directly  attributable  to a
specific class are charged against the operations of that class.
--------------------------------------------------------------------------------
Federal  Taxes.  The Fund intends to continue to comply with  provisions  of the
Internal  Revenue Code  applicable  to  regulated  investment  companies  and to
distribute  all of its  taxable  income,  including  any  net  realized  gain on
investments  not  offset by loss  carryovers,  to  shareholders.  Therefore,  no
federal income or excise tax provision is required.

As of August 31, 2000, the Fund had available for federal income tax purposes an
unused capital loss carryover as follows:

                  Expiring
                  --------------------------------------
                      2006                    $7,316,667

--------------------------------------------------------------------------------
Dividends and  Distributions  to  Shareholders.  Dividends and  distributions to
shareholders,  which are determined in accordance  with income tax  regulations,
are recorded on the ex-dividend date.
--------------------------------------------------------------------------------
Classification  of Dividends and  Distributions to Shareholders.  Net investment
income (loss) and net realized  gain (loss) may differ for  financial  statement
and  tax  purposes  primarily  because  of  paydown  gains  and  losses  and the
recognition of certain foreign currency gains (losses) as ordinary income (loss)
for tax purposes.  The character of dividends and distributions  made during the
fiscal year from net investment income or net realized gains may differ from its
ultimate  characterization for federal income tax purposes.  Also, due to timing
of dividends and distributions, the fiscal year in which amounts are distributed
may  differ  from the  fiscal  year in which  the  income or  realized  gain was
recorded by the Fund.


24 | OPPENHEIMER REAL ASSET FUND
<PAGE>


   The Fund adjusts the  classification  of  distributions  to  shareholders  to
reflect the differences  between  financial  statement amounts and distributions
determined in accordance with income tax  regulations.  Accordingly,  during the
year ended August 31, 2000, amounts have been reclassified to reflect a decrease
in paid-in capital of $2,668, an increase in undistributed net investment income
of $3,236,  and an increase in  accumulated  net realized loss on investments of
$568. Net assets of the Fund were unaffected by the reclassifications.
--------------------------------------------------------------------------------
Expense Offset Arrangements. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
--------------------------------------------------------------------------------
Other.  Investment  transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Discount on securities  purchased is
accreted over the life of the respective securities,  in accordance with federal
income tax  requirements.  Realized gains and losses on investments  and options
written and  unrealized  appreciation  and  depreciation  are  determined  on an
identified  cost  basis,  which is the same  basis used for  federal  income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
   The preparation of financial statements in conformity with 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.


25 | OPPENHEIMER REAL ASSET FUND
<PAGE>

NOTES TO FINANCIAL STATEMENTS  Continued


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

<TABLE>
<CAPTION>
                                   Year Ended August 31, 2000            Year Ended
August 31, 1999
                                    Shares             Amount
Shares             Amount
---------------------------------------------------------------------------------------------------
<S>                            <C>              <C>
<C>              <C>
 Class A
 Sold                           19,035,222      $ 129,097,589
17,245,314       $ 90,733,511
 Dividends
and/or
 distributions reinvested          719,045          4,755,772
766,779          3,577,976
 Redeemed                      (19,055,621)      (126,426,985)
(9,734,453)       (51,149,134)

--------------------------------------------------------------------
 Net increase                      698,646      $   7,426,376
8,277,640       $ 43,162,353

====================================================================
---------------------------------------------------------------------------------------------------
 Class
B
 Sold                            1,604,800      $  10,848,818
1,423,730       $  7,465,056
 Dividends
and/or
 distributions reinvested           92,937            614,759
147,282            686,669
 Redeemed                       (1,636,924)       (10,703,233)
(1,333,586)        (6,937,778)

--------------------------------------------------------------------
 Net increase                       60,813      $     760,344
237,426       $  1,213,947

====================================================================
---------------------------------------------------------------------------------------------------
 Class
C
 Sold                            1,306,673      $   8,829,199
1,685,707       $  8,942,433
 Dividends
and/or
 distributions reinvested           75,088            491,412
105,553            492,150
 Redeemed                       (1,689,466)       (10,720,139)
(783,692)        (4,006,892)

--------------------------------------------------------------------
 Net increase (decrease)          (307,705)     $  (1,399,528)
1,007,568       $  5,427,691

====================================================================
---------------------------------------------------------------------------------------------------
 Class
Y
 Sold                                   --      $          --
--       $         --
 Dividends
and/or
 distributions reinvested               --                 --
--                 --
 Redeemed                               --                 --
--                 --

--------------------------------------------------------------------
 Net increase                           --      $          --
--       $         --

====================================================================
</TABLE>

================================================================================
3. Purchases and Sales of Securities
The aggregate  cost of purchases and proceeds  from sales of  securities,  other
than  short-term  obligations,   for  the  year  ended  August  31,  2000,  were
$108,487,384 and $102,673,467, respectively.

As of August 31, 2000, unrealized  appreciation  (depreciation) based on cost of
securities for federal income tax purposes of $198,199,448 was:

Gross unrealized appreciation      $36,125,432
Gross unrealized depreciation      (23,131,631)
                                   -----------
Net unrealized appreciation        $12,993,801
                                   ===========


26 | OPPENHEIMER REAL ASSET FUND
<PAGE>


================================================================================
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Advisor were in accordance with the
investment  advisory agreement with the Fund which provides for a fee of 1.0% of
the first $200  million of average net assets,  0.90% of the next $200  million,
0.85% of the next $200 million, 0.80% of the next $200 million, and 0.75% of net
assets in excess of $800 million. Under the sub-advisory agreement,  the Advisor
pays the Sub-Advisor the following  annual fees: 0.50% of the first $200 million
of average net assets,  0.45% of the next $200 million,  0.425% of the next $200
million,  0.40% of the next $200 million, and 0.375% of the net assets in excess
of $800 million.  The Fund's  management fee for the year ended August 31, 2000,
was an annualized rate of 1.00%, before any waiver by the Manager if applicable.
--------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts  as the  transfer  and  shareholder  servicing  agent  for  the  Fund on an
"at-cost" basis.  OFS also acts as the transfer and shareholder  servicing agent
for the other Oppenheimer funds.
--------------------------------------------------------------------------------
Distribution  and Service Plan Fees. Under its General  Distributor's  Agreement
with the Manager,  the Distributor acts as the Fund's  principal  underwriter in
the continuous public offering of the different classes of shares of the Fund.

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

<TABLE>
<CAPTION>
                       Aggregate        Class A     Commissions    Commissions
Commissions
                       Front-End      Front-End      on Class A     on Class B
on Class C
                   Sales Charges  Sales Charges          Shares
Shares         Shares
                      on Class A    Retained by     Advanced by    Advanced by
Advanced by
 Year Ended               Shares    Distributor  Distributor(1) Distributor(1)
Distributor(1)
---------------------------------------------------------------------------------------------
<S>                     <C>             <C>             <C>
<C>             <C>
 August 31, 2000        $252,235        $60,398         $43,335
$229,087        $50,682
</TABLE>

1. The Distributor  advances commission 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.

<TABLE>
<CAPTION>
                              Class A                  Class B
Class C
                  Contingent Deferred      Contingent Deferred     Contingent
Deferred
                        Sales Charges            Sales Charges           Sales
Charges
 Year Ended   Retained by Distributor  Retained by Distributor Retained by
Distributor
--------------------------------------------------------------------------------------
<S>                            <C>                    <C>
<C>
 August 31, 2000               $1,781                 $118,600
$17,888
</TABLE>

   The Fund has adopted a Service Plan for Class A shares and  Distribution  and
Service Plans for Class B and Class C 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.


27 | OPPENHEIMER REAL ASSET FUND
<PAGE>

NOTES TO FINANCIAL STATEMENTS  Continued


================================================================================
4. Fees and Other  Transactions  with Affiliates  Continued Class A Service Plan
Fees. Under the Class A service plan, the Distributor currently uses the fees it
receives from the Fund to pay brokers, dealers and other financial institutions.
The Class A service plan permits  reimbursements to the Distributor at a rate of
up to 0.25% of  average  annual  net  assets  of Class A shares  purchased.  The
Distributor makes payments to plan recipients quarterly at an annual rate not to
exceed 0.25% of the average  annual net assets  consisting  of Class A shares of
the Fund.  For the year ended August 31, 2000,  payments  under the Class A plan
totaled $287,510,  all of which were paid by the Distributor to recipients,  and
included $4,674 paid to an affiliate of the Manager.  Any unreimbursed  expenses
the Distributor  incurs with respect to Class A shares in any fiscal year cannot
be recovered in subsequent years.
--------------------------------------------------------------------------------
Class B and Class C Distribution and Service Plan Fees. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the  respective  class,  determined  as of the  close of each  regular
business  day during the period.  The Class B and Class C plans  provide for the
Distributor  to  be  compensated  at a  flat  rate,  whether  the  Distributor's
distribution  expenses  are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
   The Distributor  retains the asset-based sales charge on Class B shares.  The
Distributor  retains the  asset-based  sales charge on Class C shares during the
first year the shares are outstanding.  The asset-based sales charges on Class B
and Class C shares  allow  investors  to buy shares  without a  front-end  sales
charge while  allowing the  Distributor  to  compensate  dealers that sell those
shares.
   The  Distributor's  actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and  asset-based  sales charges from the Fund under
the plans.  If any plan is  terminated  by the Fund,  the Board of Trustees  may
allow the Fund to  continue  payments  of the  asset-based  sales  charge to the
Distributor for  distributing  shares before the plan was terminated.  The plans
allow for the  carry-forward  of  distribution  expenses,  to be recovered  from
asset-based sales charges in subsequent fiscal periods.

Distribution  fees paid to the  Distributor  for the year ended August 31, 2000,
were as follows:

<TABLE>
<CAPTION>
                                                      Distributor's
Distributor's
                                                          Aggregate
Unreimbursed
                                                       Unreimbursed     Expenses as
%
                   Total Payments    Amount Retained       Expenses     of Net
Assets
                       Under Plan     by Distributor     Under Plan          of
Class
--------------------------------------------------------------------------------------
<S>                      <C>                <C>          <C>
<C>
 Class B Plan            $214,106           $176,334     $1,420,390
5.23%
 Class C Plan             165,383             70,541         99,957
0.49
</TABLE>


28 | OPPENHEIMER REAL ASSET FUND
<PAGE>


================================================================================
5. Futures and Forwards Contracts
A futures or forward  contract is a commitment to buy or sell a specific  amount
of a commodity or  financial  instrument  at a particular  price on a stipulated
future date at a negotiated  price.  Futures contracts are traded on a commodity
exchange and forward contracts trade over-the-counter. The Fund may buy and sell
futures and forward  contracts that relate to broadly-based  securities  indices
"financial  futures",  debt  securities  "interest  rate  futures"  and  various
commodities  "commodity  index  futures"  inherent  in the  Fund's  holdings  of
structured  notes.  The Fund may also buy or write put or call  options on these
contracts.
   The Fund  generally  sells these  contracts  to hedge  against  increases  in
interest rates,  decreases in market value of portfolio  securities or decreases
in commodity prices and the resulting negative effect on the value of fixed rate
portfolio  securities.  The Fund may also purchase  contracts without owning the
underlying fixed-income security as an efficient or cost effective means to gain
exposure to changes in interest  rates or commodity  prices.  The Fund will then
either purchase the underlying fixed-income security or close the contract.
   Upon entering into a futures contract, the Fund is required to deposit either
cash or securities  (initial margin) in an amount equal to a certain  percentage
of the  contract  value.  Subsequent  payments  (variation  margin)  are made or
received by the Fund each day. The  variation  margin  payments are equal to the
daily  changes in the contract  value and are recorded as  unrealized  gains and
losses.  The Fund  recognizes a realized gain or loss when the futures  contract
closes or expires.
   Securities   held  in   collateralized   accounts  to  cover  initial  margin
requirements   on  open  futures   contracts  are  noted  in  the  Statement  of
Investments.  The Statement of Assets and  Liabilities  reflects a receivable or
payable for the daily mark to market for variation margin.
   Forward  contracts  settle in cash upon close of the  contract or on contract
expiration  date.  Forward  contracts held until  expiration  must be settled by
delivery  of the  commodity.  Generally,  the Fund will enter into a swap with a
counterparty,  whereby each agrees to sell each other a commodity,  but delivery
is not required upon expiration of the contract.
   Risks of entering  into these  contracts  (and related  options)  include the
possibility  that there may be an illiquid market and that a change in the value
of the  contract or option may not  correlate  with  changes in the value of the
underlying securities.


29 | OPPENHEIMER REAL ASSET FUND
<PAGE>

NOTES TO FINANCIAL STATEMENTS  Continued


================================================================================
5. Futures and Forwards Contracts Continued
As of August 31, 2000, the Fund had outstanding futures and forward contracts as
follows:

<TABLE>
<CAPTION>

Unrealized
                                  Expiration   Number of    Valuation as of
Appreciation
 Contract Description                   Date   Contracts    August 31, 2000
(Depreciation)
------------------------------------------------------------------------------------------
<S>                                 <C>              <C>        <C>
<C>
 Futures Contracts to Purchase
 Commodities
 Agriculture
 Corn                               12/14/00          90        $   884,250     $
30,937
 Cotton                              12/6/00          17            555,475
36,975
 Soybean                            11/14/00          65
1,641,250          7,125
 Wheat                              12/14/00         126          1,689,975
68,950
 Energy
 Brent Crude Oil                    10/16/00         126          3,934,980
292,580
 Crude Oil                           9/20/00         328         10,863,360
592,440
 Gas Oil                            11/10/00          30            891,750
67,500
 Gasoline Unleaded                   9/29/00          46          1,826,899
213,259
 Heating Oil                        12/29/00         325         12,987,975
1,047,375
 Natural Gas                         9/27/00          59          2,821,380
216,020
 Livestock
 Lean Hogs                          10/16/00          87          1,841,790
(138,150)
 Live Cattle                        10/31/00          19            509,010
(19,150)
 Industrial Metals
 Copper                             12/27/00          20
447,500          9,250
 London Metal Exchange Aluminum      1/16/01          20            797,750
22,250
 London Metal Exchange Zinc         11/14/00          20            590,250
(2,250)
 Precious Metals
 Platinum                           10/26/00           5            146,675
15,300
 Silver                             12/27/00           3             75,675
(1,725)
 Softs
 Coffee                             12/18/00           7            209,213
(13,913)
 Orange Juice                        11/8/00          12            131,220
(4,500)
 Sugar                               9/29/00          68            804,250
(18,390)
 Indices
 Goldman Sachs Commodities Index    10/17/00          50          3,021,250
96,250
 Goldman Sachs Commodities Index     9/18/00         377         23,029,988
1,515,488

----------

4,033,621

----------

 Futures Contracts to Sell
 Energy
 Brent Crude Oil                    11/15/00          10            307,200
(24,100)
 Heating Oil                        10/31/00          84          3,448,620
(132,300)
 Heating Oil                         9/29/00         140          5,803,560
(544,740)

----------

(701,140)

----------

$3,332,481

==========
</TABLE>


30 | OPPENHEIMER REAL ASSET FUND
<PAGE>


<TABLE>
<CAPTION>

Unrealized
                                  Expiration   Number of    Valuation as of
Appreciation
 Contract Description                   Date   Contracts    August 31, 2000
(Depreciation)
------------------------------------------------------------------------------------------
<S>                                  <C>             <C>        <C>
<C>
 Forward Contracts to Purchase
 Crude Oil                           11/8/00         400        $12,632,000    $
1,652,000

-----------
 Forward Contracts to Sell
 Brent Crude Oil                     11/8/00         400         12,288,000
(1,668,000)

-----------
                                                                               $
(16,000)

===========
</TABLE>

================================================================================
6. Option Activity
The Fund may buy and sell put and call  options,  or write put and covered  call
options on  portfolio  securities  in order to produce  incremental  earnings or
protect against changes in the value of portfolio securities.
   The Fund  generally  purchases put options or writes  covered call options to
hedge  against  adverse  movements in the value of portfolio  holdings.  When an
option is written,  the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
   Options  are valued  daily  based  upon the last sale price on the  principal
exchange  on  which  the  option  is  traded  and  unrealized   appreciation  or
depreciation  is  recorded.  The  Fund  will  realize  a gain or loss  upon  the
expiration  or closing of the option  transaction.  When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option,  or the cost of the security  for a purchased  put or call option is
adjusted by the amount of premium received or paid.
   Securities  designated  to cover  outstanding  call  options are noted in the
Statement of Investments  where applicable.  Shares subject to call,  expiration
date,  exercise price,  premium received and market value are detailed in a note
to the Statement of Investments.  Options written are reported as a liability in
the Statement of Assets and Liabilities.  Realized gains and losses are reported
in the Statement of Operations.
   The risk in writing a call  option is that the Fund gives up the  opportunity
for  profit if the  market  price of the  security  increases  and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.


31 | OPPENHEIMER REAL ASSET FUND
<PAGE>

NOTES TO FINANCIAL STATEMENTS  Continued


================================================================================
6. Option Activity Continued
Written option activity for the year ended August 31, 2000, was as follows:

<TABLE>
<CAPTION>
                                        Call Options                   Put Options
                             -----------------------------------------------------
                             Number of     Amount of      Number of      Amount of
                               Options      Premiums        Options       Premiums
----------------------------------------------------------------------------------
<S>                               <C>      <C>               <C>         <C>
 Options outstanding as of
 August 31, 1999                   200     $  32,000            300      $ 187,000
 Options written                   831       435,138          1,150        370,920
 Options closed or expired        (406)     (123,713)        (1,350)      (512,620)
 Options exercised                (525)     (279,225)            --             --
                             -----------------------------------------------------
 Options outstanding as of
 August 31, 2000                   100     $  64,200            100      $  45,300
                             =====================================================
</TABLE>

================================================================================
7. Illiquid or Restricted Securities
As of August 31,  2000,  investments  in  securities  included  issues  that are
illiquid.  A security may be considered illiquid if it lacks a readily available
market or if its  valuation  has not changed for a certain  period of time.  The
Fund  intends  to invest no more than 15% of its net assets  (determined  at the
time  of  purchase  and  reviewed  periodically)  in  illiquid  securities.  The
aggregate value of illiquid  securities  subject to this limitation as of August
31, 2000,  was  $12,914,495,  which  represents  6.18% of the Fund's net assets.
Certain restricted  securities,  eligible for resale to qualified  institutional
investors, are not subject to that limit.

================================================================================
8. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency  purposes  including,
without limitation,  funding of shareholder  redemptions provided asset coverage
for  borrowings  exceeds  300%.  The Fund has entered  into an  agreement  which
enables it to participate with other  Oppenheimer  funds in an unsecured line of
credit with a bank, which permits  borrowings up to $400 million,  collectively.
Interest is charged to each fund,  based on its  borrowings,  at a rate equal to
the  Federal  Funds Rate plus 0.45%.  Borrowings  are payable 30 days after such
loan is  executed.  The Fund  also pays a  commitment  fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
   The Fund had no borrowings outstanding during the year ended August 31, 2000.


32 | OPPENHEIMER REAL ASSET FUND
<PAGE>




<PAGE>

                                   Appendix A

--------------------------------------------------------------------------------
                  CFTC EXEMPTION FOR QUALIFYING HYBRID INSTRUMENTS
--------------------------------------------------------------------------------

Section 34.3 Hybrid Instrument Exemption

(a) A hybrid instrument is exempt from all provisions of the Commodity  Exchange
Act (the  "Act")  and any person or class of persons  offering,  entering  into,
rendering  advice or rendering other services with respect to such exempt hybrid
instrument is exempt for such activity from all provisions of the Act (except in
each case Section  2(a)(1)(B)),  provided the following terms and conditions are
met:

   (1)  The instrument is:

        (i) An equity or debt  security  within the meaning of Section 2(l) of
        the Securities Act of 1933; or

        (ii) A demand  deposit,  time deposit or transaction  account within the
        meaning of 12 CFR 204.2(b)(1), (c)(1) and (e), respectively,  offered by
        an insured depository institution as defined in Section 3 of the Federal
        Deposit Insurance Act; an insured credit union as defined in Section 101
        of the Federal  Credit Union Act; or a Federal or State branch or agency
        of a foreign bank as defined in Section 1 of the  International  Banking
        Act;

   (2)  The sum of the commodity-dependent values of the commodity-dependent
        components is less than the commodity-independent value of the
        commodity-independent component;

   (3)  Provided that:

        (i) An issuer  must  receive  full  payment of the  hybrid  instrument's
   purchase price,  and a purchaser or holder of a hybrid  instrument may not be
   required to make additional  out-of-pocket  payments to the issuer during the
   life of the instrument or at maturity; and

        (ii) The instrument is not marketed as a futures contract or a commodity
        option,  or, except to the extent  necessary to describe the functioning
        of the instrument or to comply with applicable disclosure  requirements,
        as having  the  characteristics  of a futures  contract  or a  commodity
        option; and

        (iii) The  instrument  does not provide for  settlement in the form of a
        delivery  instrument  that  is  specified  as  such  in the  rules  of a
        designated contract market;

   (4)  The instrument is initially issued or sold subject to applicable federal
        or state securities or banking laws to persons  permitted  thereunder to
        purchase or enter into the hybrid instrument.


<PAGE>

                                   Appendix B

                      CFTC EXEMPTION FOR SWAP TRANSACTIONS

Section 35.2 Exemption

A swap  agreement  is exempt  from all  provisions  of the Act and any person or
class of persons offering,  entering into,  rendering advice, or rendering other
services  with respect to such  agreement,  is exempt for such activity from all
provisions  of  the  Act  (except  in  each  case  the  provisions  of  Sections
2(a)(1)(B),  4b, and 4o of the Act and Section  32.9 of this  chapter as adopted
under Section 4c(b) of the Act, and the  provisions of Sections 6(c) and 9(a)(2)
of the Act to the extent these  provisions  prohibit  manipulation of the market
price of any  commodity  in  interstate  commerce  or for future  delivery on or
subject to the rules of any contract  market),  provided the following terms and
conditions are met:

      (a) the swap  agreement  is entered  into  solely  between  eligible  swap
participants at the time such persons enter into the swap agreement;

     (b) the swap agreement is not part of a fungible  class of agreements  that
are standardized as to their material economic terms;

      (c) the  creditworthiness  of any party  having  an  actual  or  potential
obligation  under  the swap  agreement  would  be a  material  consideration  in
entering into or determining the terms of the swap agreement, including pricing,
cost, or credit enhancement terms of the swap agreement; and

      (d)   the swap agreement is not entered into and traded on or through a
multilateral transaction execution facility;

      Provided,  however,  That paragraphs (b) and (d) of Rule 35.2 shall not be
deemed  to  preclude   arrangements  or  facilities   between  parties  to  swap
agreements,  that provide for netting of payment obligations resulting from such
swap agreements nor shall these  subsections be deemed to preclude  arrangements
or  facilities  among  parties to swap  agreements,  that provide for netting of
payments resulting from such swap agreements;  Provided further, That any person
may apply to the  Commission for exemption from any of the provisions of the Act
(except  2(a)(1)(B))  for other  arrangements  or facilities,  on such terms and
conditions  as the  Commission  deems  appropriate,  including  but not  limited
thereto, the applicability of other regulatory regimes.

<PAGE>


                                   Appendix C

                               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.

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

Long-Term (Taxable) Bond Ratings

Aaa:  Bonds  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 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 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 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  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 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 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 rated "Ca"  represent  obligations  which are  speculative  in a high
degree. Such issues are often in default or have other marked shortcomings.

C: Bonds  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.

Con. (...):  Bonds for which the security  depends on the completion of some act
or the  fulfillment of some condition are rated  conditionally.  These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating  experience,  (c) rentals that begin when facilities are
completed,  or (d) payments to which some other limiting condition attaches. The
parenthetical   rating  denotes  probable  credit  stature  upon  completion  of
construction or elimination of the basis of the condition.

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.

Short-Term Ratings - Taxable Debt

These ratings  apply to the ability of issuers to honor senior debt  obligations
having an original maturity not exceeding one year:

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 Rating Services

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

                            Long-Term Credit Ratings

AAA:  Bonds 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:  Bonds 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: Bonds 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: Bonds 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

Bonds 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: Bonds rated "BB" are less  vulnerable to nonpayment  than other  speculative
issues.  However,  these 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: Bonds 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: Bonds 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:  Bonds rated "CC" are currently highly vulnerable to nonpayment.

C: A  subordinated  debt or preferred  stock  obligation  rated "C" is 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 has been 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: Bonds rated "D" are in default. Payments on the obligation are not being made
on the date due even if the  applicable  grace  period has not  expired,  unless
Standard and Poor's  believes  that such payments will be made during such grace
period.  The "D"  rating  will  also 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. The
"r" symbol is attached to the ratings of instruments with significant  noncredit
risks.

Short-Term Issue Credit Ratings

A-1: Obligation is rated in the highest category. The obligor's capacity to meet
its financial  commitment on the obligation is strong.  Within this category,  a
plus (+) sign designation indicates the obligor's capacity to meet its financial
obligation is extremely strong.

A-2:  Obligation 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:  Obligation  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: Obligation 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:  Obligation  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:  Obligation is in payment  default.  Payments on the obligation have not been
made on the due date even if the applicable grace period has not expired, unless
Standard and Poor's  believes  that such payments will be made during such grace
period.  The "D"  rating  will  also be used  upon the  filing  of a  bankruptcy
petition  or the taking of a similar  action if payments  on an  obligation  are
jeopardized.

Fitch, Inc.
--------------------------------------------------------------------------------

International Long-Term Credit 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

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.


<PAGE>

                                   Appendix D
--------------------------------------------------------------------------------
                           Industry Classification
--------------------------------------------------------------------------------


<PAGE>


Aerospace/Defense
Agribusiness
Air Transportation
Asset-Backed
Auto Parts and Equipment
Automotive
Bank Holding Companies
Banks
   National Commercial Banks; Federal Reserve Charter
   State Commercial Banks, OCC Charter
   State Commercial Banks
   Commercial Banks, NEC
   Functions Related to Depository
      Banking, NEC
   Foreign Commercial Banks
   Foreign National Banks
Beverages
Broadcasting
Broker-Dealers
   Investment Advice
   Security & Commodity Brokers, Dealers,
      Exchanges & Services
   Security Brokers, Dealers & Flotation Cos.
   Commodity Brokers, Dealers, Exchange &
      Services
Building Materials
Cable Television
Chemicals
Commercial Finance
   Short-Term Business Credit Institutions
   Miscellaneous Business Credit
      Institutions
   Foreign-Sponsored Credit Institutions
   Finance Services
Communication Equipment
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
   Federal & Federally-Sponsored
      Credit Agencies
   Personal Credit Institutions Consumer Services Containers  Convenience Stores
Department  Stores  Diversified  Financial  Diversified  Media Drug  Wholesalers
Durable  Household  Goods  Education  Electric  Utilities  Electrical  Equipment
Electronics Energy Services Entertainment/Film  Environmental Food Food and Drug
Retailers Gas Utilities Gas  Transmission  Utilities  Health  Care/Drugs  Health
Care/Supplies & Services Homebuilders/Real Estate
   Mortgage Bankers & Correspondence
Hotel/Gaming
Industrial Services
Information Technology
Insurance
   Life Insurance
   Accident & Health Insurance
   Fire, Marine & Casualty Insurance
   Insurance Agents, Brokers & Services
   Insurance Carriers, NEC
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
   Gold & Silver Ores
   Gold
   Silver
   Miscellaneous Metal Ores
   Crude Petroleum Natural Gas
   Drilling Oil and Gas Wells
Nondurable Household Goods
Office Equipment
Oil and Gas Field Exploration Services
Oil - Domestic
Oil - International
Paper
Photography
Publishing
Railroads & Truckers
Restaurants
Savings & Loans
   Savings Institution, Federally Chartered
   Savings Institutions, Not Federally Chartered
Shipping
Special Purpose Financial
Specialty Printing
Specialty Retailing
Steel
Telecommunications - Long Distance
Telephone - Utility
Textile, Apparel & Home Furnishings
Tobacco
Trucks and Parts
Wireless Services



<PAGE>

                                   Appendix E

           OppenheimerFunds Special Sales Charge Arrangements and Waivers

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

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

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

(1) plans qualified under Sections 401(a) or 401(k) of the Internal Revenue
    Code,
(2) non-qualified  deferred  compensation plans,
(3) employee benefit plans3
(4) Group  Retirement  Plans4
(5) 403(b)(7)  custodial  plan accounts
(6) Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth
    IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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

--------------
1.    Certain waivers also apply to Class M shares of Oppenheimer Convertible
   Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a  continuously-offered
   closed-end  fund,  references to contingent  deferred  sales charges mean the
   Fund's  Early  Withdrawal   Charges  and  references  to  "redemptions"  mean
   "repurchases" of shares.
3. An "employee  benefit plan" means any plan or arrangement,  whether or not it
   is "qualified" under the Internal Revenue Code, under which Class A shares of
   an  Oppenheimer  fund  or  funds  are  purchased  by  a  fiduciary  or  other
   administrator  for the account of participants  who are employees of a single
   employer or of affiliated employers.  These may include, for example, medical
   savings accounts, payroll deduction plans or similar plans. The fund accounts
   must be registered in the name of the fiduciary or  administrator  purchasing
   the shares for the benefit of participants in the plan.
4. The term  "Group  Retirement  Plan"  means  any  qualified  or  non-qualified
   retirement  plan  for  employees  of a  corporation  or sole  proprietorship,
   members and  employees of a partnership  or  association  or other  organized
   group of persons  (the  members of which may include  other  groups),  if the
   group has made special  arrangements  with the Distributor and all members of
   the group  participating  in (or who are eligible to participate in) the plan
   purchase  Class A shares  of an  Oppenheimer  fund or funds  through a single
   investment dealer,  broker or other financial  institution  designated by the
   group.  Such plans  include 457 plans,  SEP-IRAs,  SARSEPs,  SIMPLE plans and
   403(b) plans other than plans for public  school  employees.  The term "Group
   Retirement Plan" also includes  qualified  retirement plans and non-qualified
   deferred  compensation  plans  and IRAs  that  purchase  Class A shares of an
   Oppenheimer fund or funds through a single investment dealer, broker or other
   financial institution that has made special arrangements with the Distributor
   enabling  those  plans to  purchase  Class A shares  at net  asset  value but
   subject to the Class A contingent deferred sales charge.

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

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

      There is no initial  sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent  deferred  sales charge if redeemed  within 18
months of the end of the calendar month of their  purchase,  as described in the
Prospectus (unless a waiver described  elsewhere in this Appendix applies to the
redemption).  Additionally,  on shares  purchased  under these  waivers that are
subject to the Class A contingent  deferred sales charge,  the Distributor  will
pay the  applicable  commission  described  in the  Prospectus  under  "Class  A
Contingent Deferred Sales Charge."4 This waiver provision applies to:
4  However,  that  commission  will not be paid on  purchases  of shares in
   amounts of $1 million or more  (including any right of  accumulation)  by a
   Retirement Plan that pays for the purchase with the redemption  proceeds of
   Class C shares of one or more  Oppenheimer  funds held by the Plan for more
   than one year.

|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases by a Retirement Plan (other than an IRA or 403(b)(7) custodial
plan) that:
(1)   buys shares costing $500,000 or more, or
(2)   has, at the time of purchase, 100 or more eligible employees or total plan
      assets of $500,000 or more, or
(3)   certifies  to the  Distributor  that it projects to have annual plan
      purchases of $200,000 or more.
|_| Purchases  by  an  OppenheimerFunds-sponsored   Rollover  IRA,  if  the
purchases are made:
(1)   through a broker, dealer, bank or registered investment adviser that
      has  made  special  arrangements  with  the  Distributor  for  those
      purchases, or
(2)   by a direct rollover of a distribution  from a qualified  Retirement
      Plan if the administrator of that Plan has made special arrangements
      with the Distributor for those purchases.
|_| Purchases  of Class A shares by  Retirement  Plans that have any of the
following record-keeping arrangements:
(1)  The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
     Inc.  ("Merrill Lynch") on a daily valuation basis for the Retirement Plan.
     On the date the plan sponsor  signs the  record-keeping  service  agreement
     with  Merrill  Lynch,  the Plan must have $3  million or more of its assets
     invested  in (a)  mutual  funds,  other  than  those  advised or managed by
     Merrill Lynch Asset  Management,  L.P.  ("MLAM"),  that are made  available
     under a Service  Agreement  between  Merrill  Lynch and the  mutual  fund's
     principal  underwriter or distributor,  and (b) funds advised or managed by
     MLAM (the funds  described  in (a) and (b) are  referred to as  "Applicable
     Investments").
(2)  The record  keeping for the  Retirement  Plan is  performed  on a daily
     valuation  basis by a record  keeper whose  services  are provided  under a
     contract or arrangement  between the Retirement  Plan and Merrill Lynch. On
     the date the plan sponsor signs the record keeping  service  agreement with
     Merrill  Lynch,  the  Plan  must  have $3  million  or  more of its  assets
     (excluding  assets  invested in money market funds)  invested in Applicable
     Investments.
(3)  The record  keeping for a  Retirement  Plan is handled  under a service
     agreement  with Merrill  Lynch and on the date the plan sponsor  signs that
     agreement,  the Plan has 500 or more eligible  employees (as  determined by
     the Merrill Lynch plan conversion manager).
|_|  Purchases by a Retirement  Plan whose record  keeper had a  cost-allocation
agreement with the Transfer Agent on or before May 1, 1999.


<PAGE>


             II. Waivers of Class A Sales Charges of Oppenheimer Funds

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

Class A shares purchased by the following investors are not subject to any Class
A sales  charges  (and  no  commissions  are  paid  by the  Distributor  on such
purchases):
|_|   The Manager or its affiliates.

|_|  Present or former  officers,  directors,  trustees and  employees  (and
     their  "immediate  families") of the Fund, the Manager and its  affiliates,
     and  retirement  plans  established by them for their  employees.  The term
     "immediate  family"  refers  to  one's  spouse,  children,   grandchildren,
     grandparents, parents, parents-in-law, brothers and sisters, sons-sons- and
     daughters-in-law,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.
|-|

<PAGE>


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

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

Class A shares issued or purchased in the following transactions are not subject
to  sales  charges  (and no  commissions  are  paid by the  Distributor  on such
purchases):
|_|  Shares  issued  in plans of  reorganization,  such as  mergers,  asset
     acquisitions and exchange offers, to which the Fund is a party.
|_|  Shares purchased by the reinvestment of dividends or other distributions
     reinvested  from  the  Fund or  other  Oppenheimer  funds  (other  than
     Oppenheimer  Cash  Reserves)  or  unit  investment   trusts  for  which
     reinvestment arrangements have been made with the Distributor.
|_|  Shares  purchased  through a  broker-dealer  that has  entered  into a
     special  agreement with the Distributor to allow the broker's  customers to
     purchase  and pay for shares of  Oppenheimer  funds  using the  proceeds of
     shares  redeemed in the prior 30 days from a mutual fund (other than a fund
     managed  by the  Manager  or any of its  subsidiaries)  on which an initial
     sales charge or contingent deferred sales charge was paid. This waiver also
     applies to shares  purchased  by  exchange of shares of  Oppenheimer  Money
     Market Fund,  Inc. that were  purchased  and paid for in this manner.  This
     waiver must be requested  when the  purchase  order is placed for shares of
     the Fund, and the Distributor  may require  evidence of  qualification  for
     this waiver.
|_|      Shares  purchased with the proceeds of maturing  principal units of any
         Qualified Unit Investment Liquid Trust Series.
|_|      Shares   purchased  by  the   reinvestment  of  loan  repayments  by  a
         participant in a Retirement  Plan for which the Manager or an affiliate
         acts as sponsor.

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

The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:
|_|      To make Automatic Withdrawal Plan payments that are limited annually to
         no more than 12% of the account value adjusted annually.
|_|      Involuntary  redemptions  of shares by operation of law or  involuntary
         redemptions of small  accounts  (please refer to  "Shareholder  Account
         Rules and Policies," in the applicable fund Prospectus).
|_|      For distributions from Retirement Plans, deferred compensation plans or
         other employee benefit plans for any of the following purposes:
(1)   Following the death or disability  (as defined in the Internal  Revenue
      Code)of the participant or beneficiary. The death or disability must occur
      after the participant's account was established.
(2)   To return excess contributions.
(3)   To return contributions made due to a mistake of fact.
(4)   Hardship withdrawals, as defined in the plan. 5
5  This provision does not apply to IRAs.

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

(10)  Participant-directed  redemptions to purchase  shares of a mutual
      fund (other than a fund managed by the Manager or a  subsidiary  of the
      Manager)  if  the  plan  has  made   special   arrangements   with  the
      Distributor.
(11)  Plan  termination  or  "in-service  distributions,"  if the redemption
      proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
|_|      For  distributions  from  Retirement  Plans having 500 or more eligible
         employees,  except  distributions  due  to  termination  of  all of the
         Oppenheimer funds as an investment option under the Plan.
|_|      For distributions  from 401(k) plans sponsored by  broker-dealers  that
         have entered into a special  agreement  with the  Distributor  allowing
         this waiver.


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

The Class B and Class C 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 and Class C  contingent  deferred  sales  charges will be waived for
redemptions of shares in the following cases: |_| Shares redeemed involuntarily,
as described in "Shareholder Account Rules and
         Policies," in the applicable Prospectus.
|_|      Redemptions  from accounts other than  Retirement  Plans  following the
         death or  disability  of the last  surviving  shareholder,  including a
         trustee  of a grantor  trust or  revocable  living  trust for which the
         trustee is also the sole beneficiary. The death or disability must have
         occurred after the account was established, and for disability you must
         provide  evidence  of a  determination  of  disability  by  the  Social
         Security Administration.
|_|      Distributions  from accounts for which the  broker-dealer of record has
         entered into a special  agreement  with the  Distributor  allowing this
         waiver.
|_|      Redemptions  of Class B shares held by  Retirement  Plans whose records
         are  maintained  on a daily  valuation  basis  by  Merrill  Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|      Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial  institutions that have entered into a
         special arrangement with the Distributor for this purpose.
|_|      Redemptions  requested in writing by a Retirement Plan sponsor of Class
         C shares of an  Oppenheimer  fund in amounts of $1 million or more held
         by the  Retirement  Plan for  more  than one  year,  if the  redemption
         proceeds  are  invested  in Class A shares  of one or more  Oppenheimer
         funds.
|-|

<PAGE>


Distributions  from Retirement  Plans or other employee  benefit plans for
any of the following purposes:
(1)   Following  the death or  disability  (as defined in the Internal
      Revenue Code) of the  participant or  beneficiary.  The death or
      disability  must  occur  after  the  participant's  account  was
      established in an Oppenheimer fund.
(2)   To return excess contributions made to a participant's account.
(3)   To return contributions made due to a mistake of fact.
(4)   To make hardship withdrawals, as defined in the plan.7
7  This provision does not apply to IRAs.

(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.8
8  This provision does not apply to loans from 403(b)(7)  custodial plans.

(9)   On account of the participant's separation from service.9
9  This  provision  does  not  apply  to  403(b)(7)  custodial  plans if the
   participant is less than age 55, nor to IRAs.

(10)  Participant-directed  redemptions to purchase shares of a mutual fund
      (other than a fund managed by the Manager or a subsidiary  of the Manager)
      offered as an investment  option in a Retirement Plan if the plan has made
      special arrangements with the Distributor.
(11)            Distributions   made  on  account  of  a  plan   termination  or
                "in-service"  distributions,"  if the  redemption  proceeds  are
                rolled over directly to an OppenheimerFunds-sponsored IRA.
(12)            Distributions  from Retirement Plans having 500 or more eligible
                employees,  but  excluding  distributions  made  because  of the
                Plan's  elimination as investment  options under the Plan of all
                of the Oppenheimer funds that had been offered.
(13)            For  distributions   from  a  participant's   account  under  an
                Automatic  Withdrawal Plan after the participant  reaches age 59
                1/2, as long as the aggregate  value of the  distributions  does
                not exceed 10% of the account's value, adjusted annually.
(14)            Redemptions of Class B shares under an Automatic Withdrawal Plan
                for an account  other than a Retirement  Plan,  if the aggregate
                value  of  the  redeemed  shares  does  not  exceed  10%  of the
                account's value, adjusted annually.
|_|  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 orits 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.



<PAGE>

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:



<PAGE>


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

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

Quest for Value U.S. Government          Quest for Value New York Tax-Exempt
Income Fund                              Fund
Quest for Value Investment Quality       Quest for Value National Tax-Exempt
Income Fund                              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
Number of Eligible   Charge as a % of    Charge as a % of    Commission as %
Employees or Members Offering Price      Net Amount Invested of Offering Price
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9 or Fewer                  2.50%               2.56%              2.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
At  least 10 but not        2.00%               2.04%              1.60%
more than 49
--------------------------------------------------------------------------------



<PAGE>


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

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

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

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

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

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

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

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

<PAGE>
      liquidation of a shareholder's account if the aggregate net asset value of
      shares held in the account is less than the  required  minimum  account
      value.

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


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

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

Connecticut Mutual Liquid Account           Connecticut Mutual Total Return
                                            Account
Connecticut Mutual Government Securities    CMIA LifeSpan Capital Appreciation
Account                                     Account
Connecticut Mutual Income Account           CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account           CMIA Diversified Income Account

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

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

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


<PAGE>


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

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

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

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

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

In addition to the waivers  set forth in the  Prospectus  and in this  Appendix,
above,  the contingent  deferred sales charge will be waived for  redemptions of
Class A and Class B shares of a Fund and  exchanges of Class A or Class B shares
of a Fund into  Class A or Class B shares of a Former  Connecticut  Mutual  Fund
provided  that  the  Class A or Class B shares  of the  Fund to be  redeemed  or
exchanged  were (i)  acquired  prior to March 18, 1996 or (ii) were  acquired by
exchange from an  Oppenheimer  fund that was a Former  Connecticut  Mutual Fund.
Additionally,  the shares of such Former  Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased  shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
    Internal Revenue Code;
(3) for   retirement   distributions   (or   loans)  to   participants   or
    beneficiaries  from retirement plans qualified under Sections 401(a) or
    403(b)(7)of the Code, or from IRAs, deferred compensation plans created
    under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or employee
    benefit plans;
(5)

<PAGE>
    in whole or in part, in connection with shares sold to any state,  county,
    or city,  or any  instrumentality,  department,  authority,  or  agency
    thereof, that is prohibited by applicable investment laws from paying a
    sales charge or commission in connection with the purchase of shares of
    any registered investment management company;
(6  in  connection  with  the  redemption  of  shares  of the Fund due to a
    combination  with  another  investment  company  by virtue of a merger,
    acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or liquidate the
    Fund;
(8) in connection with automatic  redemptions of Class A shares and Class B
    shares in certain  retirement  plan  accounts  pursuant to an Automatic
    Withdrawal  Plan but limited to no more than 12% of the original  value
    annually; or
(9) as  involuntary  redemptions  of shares by  operation  of law, or under
    procedures  set forth in the Fund's  Articles of  Incorporation,  or as
    adopted by the Board of Directors of the Fund.


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

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


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

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


<PAGE>


Oppenheimer Real Asset Fund(R)

Internet Web Site:
   www.oppenheimerfunds.com

Investment Advisor
   OppenheimerFunds, Inc.
   Two World Trade Center
   New York, New York 10048-0203

Distributor
   OppenheimerFunds Distributor, Inc.
   Two World Trade Center
   New York, New York 10048-0203

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

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

Independent Auditors
   Deloitte & Touche LLP
   555 Seventeenth Street
   Denver, Colorado 80202

Legal Counsel
   Myer, Swanson, Adams & Wolf, P.C.
   1600 Broadway
   Denver, Colorado 80202

Special Counsel
   Kramer Levin Naftalis & Frankel LLP
   919 Third Avenue
   New York, New York 10022


PX735.1200

<PAGE>

                           OPPENHEIMER REAL ASSET FUND

                                    FORM N-1A

                                     PART C

                                OTHER INFORMATION


Item 23.  Exhibits


Amended  and  Restated  Declaration  of Trust  dated  October  30,  2000:  Filed
herewith.

(b)   By-Laws, as amended through October 24, 2000: Filed herewith.


(c)       (i)  Specimen  Class A Share  Certificate:  Previously  filed with
          Post-Effective   No.4   (10/29/99),   to   Registrant's   registration
          statement, and incorporated herein by reference.

          (ii)  Specimen  Class  B  Share  Certificate:  Previously  filed  with
          Post-Effective   No.4   (10/29/99),   to   Registrant's   registration
          statement, and incorporated herein by reference.

          (iii)  Specimen  Class  C Share  Certificate:  Previously  filed  with
          Post-Effective   No.4   (10/29/99),   to   Registrant's   registration
          statement, and incorporated herein by reference.


          (iv)  Specimen  Class  N  Share  Certificate:  Previously  filed  with
          Post-Effective   No.6   (10/30/00),   to   Registrant's   registration
          statement, and incorporated herein by reference.


          (v)  Specimen  Class  Y  Share  Certificate:   Previously  filed  with
          Post-Effective   No.4   (10/29/99),   to   Registrant's   registration
          statement, and incorporated herein by reference.

(d)       (i) Investment Advisory Agreement dated 03/18/97: Previously filed
          with  Post-Effective  No.4  (10/29/99),  to Registrant's  registration
          statement, and incorporated herein by reference.

          (ii)  Sub-Advisory  Agreement  dated 03/08/99:  Previously  filed with
          Post-Effective   No.4   (10/29/99),   to   Registrant's   registration
          statement, and incorporated herein by reference.

(e)       (i) General  Distributor's  Agreement dated  03/31/97:  Previously
          filed with Post-Effective  Amendment No. 1 (9/18/97),  to Registrant's
          registration statement, and incorporated herein by reference.

          (ii) Form of Dealer Agreement of OppenheimerFunds  Distributor,  Inc.:
          Previously   filed  with   Pre-Effective   Amendment   No.  2  to  the
          Registration  Statement of  Oppenheimer  Trinity Value Fund (Reg.  No.
          333-79707), 8/25/99, and incorporated herein by reference.

          (iii) Form of Agency Agreement of OppenheimerFunds Distributor,  Inc.:
          Previously   filed  with   Pre-Effective   Amendment   No.  2  to  the
          Registration  Statement of  Oppenheimer  Trinity Value Fund (Reg.  No.
          333-79707),  8/25/99, and incorporated herein by reference.  (iv) Form
          of Broker Agreement of OppenheimerFunds Distributor,  Inc.: Previously
          filed with Pre-Effective Amendment No. 2 to the Registration Statement
          of Oppenheimer Trinity Value Fund (Reg. No. 333-79707),  8/25/99,  and
          incorporated herein by reference.

(f) Form of Deferred  Compensation  Plan for  Disinterested  Trustees/Directors:
Previously  filed  with  Post-Effective  Amendment  No.  40 to the  Registration
Statement of  Oppenheimer  High Yield Fund (Reg.  No.  2-62076),  10/27/98,  and
incorporated herein by reference.

(g)       (i) Custody  Agreement  dated 1/15/97  between  Registrant and The
          Bank of New York: Previously filed with Post-Effective Amendment No. 1
          (9/18/97) to Registrant's  registration  statement,  and  incorporated
          herein by reference.

          (ii) Foreign Custody Manager Agreement between Registrant and The Bank
          of New York: Previously filed with Pre-Effective Amendment No.2 to the
          Registration   Statement   of   Oppenheimer   World  Bond  Fund  (Reg.
          333-48973), 4/23/98, and incorporated herein by reference.

(h)   Not applicable.

(i)       (i) Opinion and Consent of Counsel dated 2/5/97.  Previously filed
          with   Post-Effective   Amendment  No.  1  (9/18/97)  to  Registrant's
          registration statement, and incorporated herein by reference.


          (ii) Opinion and Consent of Counsel for Class N shares dated  December
          28, 2000: Filed herewith.

(j)   Independent Auditors' Consent: Filed herewith.


(k)   Not applicable.

(l) Investment  Letter from  OppenheimerFunds,  Inc. to  Registrant.  Previously
filed with Registrant's  Pre-Effective Amendment No. 1, 2/5/97, and incorporated
herein by reference.

(m)       (i) Service Plan and Agreement  for Class A shares dated  3/18/97:
          Previously  filed with  Post-Effective  Amendment  No. 1 (9/18/97)  to
          Registrant's   registration  statement,  and  incorporated  herein  by
          reference.

          (ii) Amended and Restated  Distribution and Service Plan and Agreement
          for Class B shares dated 02/24/98:  Previously filed with Registrant's
          Post-Effective Amendment No. 3, (11/27/98), and incorporated herein by
          reference.

          (iii) Amended and Restated Distribution and Service Plan and Agreement
          for Class C shares dated 02/24/98:  Previously filed with Registrant's
          Post-Effective Amendment No. 3, (11/27/98), and incorporated herein by
          reference.


          (iv)  Distribution  and Service Plan for Class N shares dated  October
          24, 2000: Filed herewith.

(n)  Oppenheimer  Funds  Multiple  Class Plan under Rule 18f-3  updated  through
8/22/00:   Previously  filed  with  Post-Effective   Amendment  No.  62  to  the
Registration Statement of Oppenheimer  8/27/99,Money Market Fund, Inc. (Reg. No.
2-49887), 11/22/00, and incorporated herein by reference.


(o) --Powers of Attorney: For all Trustees except Edward L. Cameron,  previously
filed with  Post-Effective  Amendment  No. 41 to the  Registration  Statement of
Oppenheimer High Yield Fund (Reg. No. 2-62078), 8/26/99, and incorporated herein
by reference.

-- Power of Attorney: For Edward L. Cameron, filed with Post-Effective Amendment
No. 5 to the  Registration  Statement of  Oppenheimer  Real Asset Fund (Reg. No.
333-14887), 12/28/99, and incorporated herein by reference.


-- Power of Attorney: For F. William Marshall Jr., filed herewith.

(p) Amended and Restated Code of Ethics of the Oppenheimer  Funds dated March 1,
2000 under Rule 17j-1 of the Investment  Company Act of 1940:  Previously  filed
with the Initial  Registration  Statement of  Oppenheimer  Emerging  Growth Fund
(Reg. No. 333-44176), 8/21/00, and incorporated herein by reference.


Item 24.  Persons Controlled by or Under Common Control with the Fund
---------------------------------------------------------------------

None.

Item 25.  Indemnification

      Reference  is made to the  provisions  of  Article  Seven of  Registrant's
Amended  and  Restated  Declaration  of  Trust  filed as  Exhibit  23(a) to this
Registration Statement, and incorporated herein by reference.

      Insofar as  indemnification  for liabilities  arising under the Securities
Act of 1933 may be permitted to trustees,  officers and  controlling  persons of
Registrant  pursuant to the foregoing  provisions or otherwise,  Registrant  has
been advised that in the opinion of the Securities and Exchange  Commission such
indemnification  is against  public policy as expressed in the Securities Act of
1933  and  is,  therefore,   unenforceable.  In  the  event  that  a  claim  for
indemnification  against such liabilities  (other than the payment by Registrant
of expenses  incurred  or paid by a trustee,  officer or  controlling  person of
Registrant  in the  successful  defense of any action,  suit or  proceeding)  is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the  opinion  of its  counsel  the matter  has been  settled  by  controlling
precedent,  submit to a court of appropriate  jurisdiction  the question whether
such  indemnification  by it is  against  public  policy  as  expressed  in  the
Securities  Act of 1933 and will be governed by the final  adjudication  of such
issue.

Item 26.  Business and Other Connections of the Investment Adviser

(a) OppenheimerFunds,  Inc. is the investment adviser of the Registrant;  it and
certain subsidiaries and affiliates act in the same capacity to other investment
companies,  including without limitation those described in Parts A and B hereof
and listed in Item 26(b) below.

(b) There is set forth below  information as to any other business,  profession,
vocation  or  employment  of a  substantial  nature in which  each  officer  and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been,  engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.


Name and Current Position           Other Business and Connections
with OppenheimerFunds, Inc.         During the Past Two Years


Amy Adamshick,
Vice President                      Scudder  Kemper  Investments
                                    (July 1998 - May 2000)


Charles E. Albers,
Senior                              Vice President An officer  and/or  portfolio
                                    manager of certain  Oppenheimer funds (since
                                    April 1998); a Chartered Financial Analyst.

Edward Amberger,
Assistant Vice President            None.


Janette Aprilante,

Assistant Vice President            None.

Victor Babin,
Senior Vice President               None.


Bruce L. Bartlett,

Senior                              Vice President An officer  and/or  portfolio
                                    manager of certain Oppenheimer funds.

George Batejan,
Executive Vice President/
Chief Information Officer           Formerly Senior Vice President
                                    (until May 1998).


Kevin Baum,
Assistant Vice President            None.


Connie Bechtolt,
Assistant Vice President            None.

Kathleen Beichert,
Vice President                      None.

Rajeev Bhaman,
Vice President                      None.

Mark Binning
Assistant Vice President            None.

Robert J. Bishop,
Vice                                President  Vice  President  of  Mutual  Fund
                                    Accounting  (since May 1996);  an officer of
                                    other Oppenheimer funds.

John R. Blomfield,
Vice President                      None.

Chad Boll,
Assistant Vice President            None

Scott Brooks,
Vice President                      None.

Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division       Formerly,  Assistant Vice President of
                                    Rochester Fund Services, Inc.

Michael A. Carbuto,
Vice                                President   An  officer   and/or   portfolio
                                    manager of certain  Oppenheimer  funds; Vice
                                    President  of  Centennial  Asset  Management
                                    Corporation.

John Cardillo,
Assistant Vice President            None.

Elisa Chrysanthis
Assistant Vice President            None.

H.C. Digby Clements,
Vice President: Rochester Division  None.


O. Leonard Darling,
Vice Chairman, Executive Vice
President and Chief Investment
Officer and Director
                    Chairman  of the Board and a director  (since June 1999) and
                    Senior   Managing   Director   (since   December   1998)  of
                    HarbourView Asset Management Corporation;  a director (since
                    March 2000) of OFI Private Investments, Inc.; Trustee (1993)
                    of  Awhtolia  College -  Greece;  formerly  Chief  Executive
                    Officer  of   HarbourView   Asset   Management   Corporation
                    (December 1998 - June 1999).


John Davis
Assistant Vice President            EAB Financial (April 1998-February 1999).

Robert A. Densen,
Senior Vice President               None.

Ruggero de'Rossi
Vice President                      Formerly, Chief Strategist at ING Barings
                                    (July 1998 - March 2000).

Sheri Devereux,
Vice President                      None.

Max Dietshe
Vice President                      Deloitte & Touche LLP (1989-1999).

Craig P. Dinsell
Executive Vice President            None.

John Doney,
Vice                                President   An  officer   and/or   portfolio
                                    manager of certain Oppenheimer funds.

Andrew J. Donohue,
Executive Vice President,
General Counsel and Director
                    Executive  Vice  President  (since  September  1993)  and  a
                    director (since January 1992) of the Distributor;  Executive
                    Vice President, General Counsel (since September 1995) and a
                    director (since August 1994) of HarbourView Asset Management
                    Corporation,   Shareholder   Services,   Inc.,   Shareholder
                    Financial   Services,   Inc.  and  Oppenheimer   Partnership
                    Holdings,  Inc.,  of OFI Private  Investments,  Inc.  (since
                    March 2000),  and of PIMCO Trust  Company  (since May 2000);
                    President  and a director  of  Centennial  Asset  Management
                    Corporation  (since  September 1995) and of Oppenheimer Real
                    Asset Management, Inc. (since July 1996); Vice President and
                    a  director  (since  September  1997)  of   OppenheimerFunds
                    International  Ltd. and Oppenheimer  Millennium Funds plc; a
                    director  (since  April  2000)  of  OppenheimerFunds  Legacy
                    Program,  a  charitable  trust  program  established  by the
                    Manager;  General  Counsel  (since  May 1996) and  Secretary
                    (since  April 1997) of  Oppenheimer  Acquisition  Corp.;  an
                    officer of other Oppenheimer funds.

Bruce Dunbar,
Vice President                      None.


John Eiler
Vice President                      None.


Daniel Engstrom,
Assistant Vice President            None.

Armond Erpf
Assistant Vice President            None.

George Evans,
Vice                                President   An  officer   and/or   portfolio
                                    manager of certain Oppenheimer funds.

Edward N. Everett,
Assistant Vice President            None.

George Fahey,
Vice President                      None.

Leslie A. Falconio,
Vice                                President   An  officer   and/or   portfolio
                                    manager of certain  Oppenheimer funds (since
                                    6/99).

Scott Farrar,
Vice                                President Assistant Treasurer of Oppenheimer
                                    Millennium  Funds plc (since  October 1997);
                                    an officer of other Oppenheimer funds.

Katherine P. Feld,
Vice President, Senior Counsel
and Secretary
                    Vice President and Secretary of the  Distributor;  Secretary
                    and Director of  Centennial  Asset  Management  Corporation;
                    Vice  President  and  Secretary  of  Oppenheimer  Real Asset
                    Management,  Inc.; Secretary of HarbourView Asset Management
                    Corporation,   Oppenheimer   Partnership   Holdings,   Inc.,
                    Shareholder   Financial   Services,   Inc.  and  Shareholder
                    Services, Inc.

Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division
                    An officer,  Director  and/or  portfolio  manager of certain
                    Oppenheimer  funds;  presently he holds the following  other
                    positions:  Director  (since  1995) of ICI Mutual  Insurance
                    Company;  Governor  (since  1994)  of  St.  John's  College;
                    Director (since 1994 - present) of  International  Museum of
                    Photography at George Eastman House.

David Foxhoven,
Assistant Vice President            Formerly Manager, Banking Operations Dept
                                    (July 1996 - November 1998).


Colleen Franca,
Assistant Vice President            None.


Crystal French
Vice President                      None.

Dan Gangemi,
Vice President                      None.

Subrata Ghose
Assistant Vice President            Formerly, Equity Analyst at Fidelity
                                    Investments (1995 - March 2000).

Charles Gilbert,
Assistant Vice President            None.

Alan Gilston,
Vice President                      None.

Jill Glazerman,
Vice President                      None.


Paul Goldenberg,
Vice President                      Formerly, President of Advantageware
                                    (September 1992 - September 1999).


Mikhail Goldverg
Assistant Vice President            None.


Laura Granger,
Vice President                      Formerly, Portfolio Mngr at Fortis Advisors
                                    (July 1998-October 2000).


Jeremy Griffiths,
Executive Vice President,
Chief Financial Officer and
Director
                    Chief   Financial   Officer,   Treasurer   and  director  of
                    Oppenheimer  Acquisition Corp.;  Executive Vice President of
                    HarbourView Asset Management Corporation;  President.  Chief
                    Executive  Officer  and  director  of PIMCO  Trust  Company;
                    director of  OppenheimerFunds,  Legacy  Program  (charitable
                    trust program);  Vice President of OFI Private  Investments,
                    Inc.  and a Member and Fellow of the  Institute of Chartered
                    Accountants.

Robert Grill,
Senior Vice President               None.


Robert Guy,

Senior Vice President               None.


Robert Haley,
Assistant Vice President            None.

Kelly Haney,

Assistant Vice President            None.

Thomas B. Hayes,
Vice President                      None.


Dennis Hess,
Assistant Vice President            None.


Dorothy Hirshman,

Assistant Vice President            None.


Merryl Hoffman,
Vice President and
Senior Counsel                      None

Merrell Hora,
Assistant Vice President            None.

Scott T. Huebl,
Vice President                      None.


Margaret Hui
Assistant                           Vice  President  Formerly  Vice  President -
                                    Syndications   of  Sanwa   Bank   California
                                    (January 1998 - September 1999).


James Hyland,
Assistant                           Vice President  Formerly Manager of Customer
                                    Research    for    Prudential    Investments
                                    (February 1998 - July 1999).
David Hyun,
Vice                                President    Formerly   portfolio   manager,
                                    technology analyst and research associate at
                                    Fred Alger  Management,  Inc. (August 1993 -
                                    June 2000).

Steve Ilnitzki,
Senior Vice President               Formerly Vice President of Product Mngmnt
                                    at Ameritrade (until March 2000).

Kathleen T. Ives,
Vice President                      None.

William Jaume,
Vice President                      Senior Vice President (since April  2000) of
                                    HarbourView Asset Management Corporation.

Frank Jennings,
Vice                                President   An  officer   and/or   portfolio
                                    manager of certain Oppenheimer funds.

Andrew Jordan,
Assistant Vice President            None.


Deborah Kaback,

Vice President and
Senior Counsel                      Senior Vice President and Deputy General
                                    Counsel of Oppenheimer Capital (April
                                    1989-November 1999).

Lewis Kamman
Vice President                      Senior Consultant for Bell Atlantic Network
                                    Integration, Inc.(June 1997-December 1998).

Jennifer Kane
Assistant Vice President            None.

Lynn Oberist Keeshan
Senior                              Vice President  Formerly  (until March 1999)
                                    Vice  President,  Business  Development  and
                                    Treasury at Liz Claiborne, Inc.

Thomas W. Keffer,
Senior Vice President               None.

Erica Klein,
Assistant Vice President            None.

Walter Konops,
Assistant Vice President            None.
Avram Kornberg,
Senior Vice President               None.

Jimmy Kourkoulakos,
Assistant Vice President.           None.

John Kowalik,
Senior                              Vice President An officer  and/or  portfolio
                                    manager for certain OppenheimerFunds.

Joseph Krist,
Assistant Vice President            None.

Christopher Leavy
Senior                              Vice  President Vice President and Portfolio
                                    Manager   at   Morgan   Stanley   Investment
                                    Management   (1997-September  2000)  and  an
                                    Analyst  and  Portfolio  Manager  at Crestar
                                    Asset Management (1995-1997).

Michael Levine,
Vice President                      None.

Shanquan Li,
Vice President                      None.

Mitchell J. Lindauer,
Vice President and Assistant
General Counsel                     None.

Malissa Lischin
Assistant Vice President            Formerly Associate Manager, Investment
                                    Management  Analyst  at  Prudential  (1996 -
                                    March 2000).

David Mabry,
Vice President                      None.

Bridget Macaskill,
Chairman, Chief Executive Officer
and Director
                    President,  Chief  Executive  Officer and a director  (since
                    March 2000) of OFI Private Investments,  Inc., an investment
                    adviser  subsidiary of the Manager;  Chairman and a director
                    of  Shareholder  Services,  Inc.  (since  August  1994)  and
                    Shareholder Financial Services, Inc. (since September 1995),
                    transfer agent subsidiaries of the Manager; President (since
                    September  1995)  and a  director  (since  October  1990) of
                    Oppenheimer  Acquisition Corp., the Manager's parent holding
                    company;  President  (since  September  1995) and a director
                    (since November 1989) of Oppenheimer  Partnership  Holdings,
                    Inc., a holding company subsidiary of the Manager; President
                    and a  director  (since  October  1997) of  OppenheimerFunds
                    International  Ltd., an offshore fund management  subsidiary
                    of the Manager and of  Oppenheimer  Millennium  Funds plc; a
                    director of HarbourView Asset Management  Corporation (since
                    July 1991) and of Oppenheimer  Real Asset  Management,  Inc.
                    (since July 1996),  investment  adviser  subsidiaries of the
                    Manager;  a director (since April 2000) of  OppenheimerFunds
                    Legacy Program,  a charitable  trust program  established by
                    the Manager;  a director of  Prudential  Corporation  plc (a
                    U.K. financial service company);  President and a trustee of
                    other Oppenheimer  funds;  formerly President of the Manager
                    (June 1991 - August 2000).

Steve Macchia,
Vice President                      None.


Marianne Manzolillo,
Assistant                           Vice President Formerly,  Vice President for
                                    DLJ High Yield Research Department (February
                                    1993 - July 2000).

Luann Mascia,
Vice President                      None.


Philip T. Masterson,
Vice President                      None.

Loretta McCarthy,
Executive Vice President            None.

Lisa Migan,
Assistant Vice President            None.

Andrew J. Mika
Senior                              Vice   President   Formerly  a  Second  Vice
                                    President  for  Guardian  Investments  (June
                                    1990 - October 1999).

Joy Milan
Assistant Vice President            None.

Denis R. Molleur,
Vice President and
Senior Counsel                      None.

Nikolaos Monoyios,
Vice                                President A Vice President  and/or portfolio
                                    manager of certain Oppenheimer funds.


John Murphy,
President, Chief Operating
Officer                             and   Director   President   of   MassMutual
                                    Institutional Funds and the MML Series Funds
                                    until September 2000.


Kenneth Nadler,
Vice President                      None.

David Negri,
Senior                              Vice President An officer  and/or  portfolio
                                    manager of certain Oppenheimer funds.

Barbara Niederbrach,
Assistant Vice President            None.

Robert A. Nowaczyk,
Vice President                      None.

Ray Olson,
Assistant Vice President            None.

Gina M. Palmieri,
Vice                                President   An  officer   and/or   portfolio
                                    manager of certain  Oppenheimer funds (since
                                    June 1999).

Frank Pavlak,
Vice President
                    Formerly. Branch Chief of Investment Company Examinations at
                    U.S.  Securities  and Exchange  Commission  (January  1981 -
                    December 1998).

James Phillips
Assistant Vice President            None.

David Pellegrino
Vice President                      None.

Jane Putnam,
Vice                                President   An  officer   and/or   portfolio
                                    manager of certain Oppenheimer funds.

Michael Quinn,
Assistant Vice President            None.


Heather Rabinowitz,
Assistant Vice President            None.
Julie Radtke,
Vice President                      None.


Thomas Reedy,
Vice                                President Vice President  (since April 1999)
                                    of HarbourView Asset Management Corporation;
                                    an  officer  and/or  portfolio   manager  of
                                    certain Oppenheimer funds.

John Reinhardt,
Vice President: Rochester Division  None


David Robertson,
Senior                              Vice President  Formerly,  Director of Sales
                                    and   Marketing   for  Schroder   Investment
                                    Management  of North  America  (March 1998 -
                                    March 2000).


Jeffrey Rosen,
Vice President                      None.

Marci Rossell,
Vice President and                  Corporate Economist Economist  with  Federal
                                    Reserve Bank of Dallas (April 1996 -  March
                                    1999).

Richard H. Rubinstein,
Senior                              Vice President An officer  and/or  portfolio
                                    manager of certain Oppenheimer funds.

Lawrence Rudnick,
Assistant Vice President            None.

James Ruff,
Executive                           Vice President President and director of the
                                    Distributor;  Vice  President  (since  March
                                    2000) of OFI Private Investments, Inc.

Andrew Ruotolo
Executive Vice President
                    President  and  director  of  Shareholder  Services,   Inc.;
                    formerly Chief Operations Officer for American International
                    Group (August 1997-September 1999).

Rohit Sah,
Assistant Vice President            None.

Valerie Sanders,
Vice President                      None.

Kenneth Schlupp
Assistant Vice President            Assistant Vice President (since March 2000)
                                    of OFI Private Investments, Inc.

Jeff Schneider,
Vice President                      Formerly (until May 1999) Director, Personal
                                    Decisions International.

Ellen Schoenfeld,
Vice President                      None.


Brooke Schulte,
Assistant Vice President            None.


Allan Sedmak
Assistant Vice President            None.

Jennifer Sexton,
Vice President                      None.

Martha Shapiro,
Assistant Vice President            None.

Connie Song,
Assistant Vice President            None.

Richard Soper,
Vice President                      None.

Keith Spencer,
Vice President                      None.

Cathleen Stahl,

Vice President                      Assistant Vice President & Manager of Women
                                    & Investing Program.


Richard A. Stein,
Vice President:
Rochester Division  Assistant       Vice   President   (since  1995)  of
                                    Rochester Capitol Advisors, L.P.

Arthur Steinmetz,
Senior                              Vice President An officer  and/or  portfolio
                                    manager of certain Oppenheimer funds.

Jayne Stevlingson,
Vice President                      None.

Gregg Stitt,
Assistant Vice President            None.

John Stoma,
Senior Vice President               None.


Deborah Sullivan,
Assistant Vice President,
Assistant Counsel
                    Formerly,   Associate  General  Counsel,   Chief  Compliance
                    Officer, Corporate Secretary and Vice President of Winmill &
                    Co. Inc.  (formerly Bull & Bear Group,  Inc.), CEF Advisers,
                    Inc. (formerly Bull & Bear Advisers, Inc.), Investor Service
                    Center, Inc. and Midas Management Corporation (November 1997
                    - March 2000).


Kevin Surrett,
Assistant Vice President            Assistant Vice President of Product
                                    Development At Evergreen Investor Services,
                                    Inc.(June 1995 - May 1999).


Michael Sussman,
Assistant Vice President            None.


James C. Swain,
Vice                                Chairman  of the  Board  Chairman,  CEO  and
                                    Trustee, Director or Managing Partner of the
                                    Denver-based  Oppenheimer  Funds;  formerly,
                                    President and Director of  Centennial  Asset
                                    Management  Corporation  and Chairman of the
                                    Board of Shareholder Services, Inc.

Susan Switzer,
Assistant Vice President            None.

Anthony A. Tanner,
Vice President: Rochester Division  None.


James Taylor,
Assistant Vice President            None.


Paul Temple,
Vice President
                    Formerly (until May 2000) Director of Product Development at
                    Prudential.

Angela Uttaro,
Assistant Vice President            None.

Mark Vandehey,
Vice President                      None.

Maureen VanNorstrand,
Assistant Vice President            None.

Annette Von Brandis,
Assistant Vice President            None.

Phillip Vottiero,
Vice President                      Chief  Financial  officer for the Sovlink
                                    Group (April 1996 - June 1999).


Sloan Walker
Vice President


Teresa Ward,
Vice President                      None.

Jerry Webman,
Senior Vice President               Senior Investment Officer, Director of Fixed
                                    Income.

Barry Weiss,

Assistant Vice President            Fitch IBCA (1996 - January 2000).


Christine Wells,
Vice President                      None.

Joseph Welsh,
Assistant Vice President            None.


Catherine White,
Assistant                           Vice  President  Formerly,   Assistant  Vice
                                    President  with Gruntal & Co. LLC (September
                                    1998 - October 2000); member of the American
                                    Society of Pension  Actuaries  (ASPA)  since
                                    1995.


William L. Wilby,
Senior                              Vice President  Senior  Investment  Officer,
                                    Director of International  Equities;  Senior
                                    Vice   President   of   HarbourView    Asset
                                    Management Corporation.

Donna Winn,
Senior Vice President               Vice President (since  March  2000) of  OFI
                                    Private Investments, Inc.


Philip Witkower,
Senior Vice President               Formerly Vice President of Prudential
                                    Investments (1993 - November 2000)


Brian W. Wixted,
Senior Vice President and
Treasurer
                    Treasurer (since March 1999) of HarbourView Asset Management
                    Corporation,  Shareholder Services,  Inc.,  Oppenheimer Real
                    Asset   Management   Corporation,    Shareholder   Financial
                    Services, Inc. and Oppenheimer  Partnership Holdings,  Inc.,
                    of OFI Private  Investments,  Inc. (since March 2000) and of
                    OppenheimerFunds    International   Ltd.   and   Oppenheimer
                    Millennium  Funds plc (since May 2000);  Treasurer and Chief
                    Financial  Officer  (since May 2000) of PIMCO Trust Company;
                    Assistant   Treasurer  (since  March  1999)  of  Oppenheimer
                    Acquisition   Corp.  and  of  Centennial   Asset  Management
                    Corporation; an officer of other Oppenheimer funds; formerly
                    Principal and Chief Operating Officer, Bankers Trust Company
                    - Mutual Fund Services Division (March 1995 - March 1999).

Carol Wolf,
Senior Vice President
                    An officer and/or portfolio  manager of certain  Oppenheimer
                    funds;  serves on the  Board of  Chinese  Children  Adoption
                    International Parents Council,  Supporters of Children,  and
                    the Advisory Board of Denver  Children's  Hospital  Oncology
                    Department.

Kurt Wolfgruber
Senior Vice President
                    Senior Investment  Officer,  Director of Domestic  Equities;
                    member of the Investment  Product  Review  Committee and the
                    Executive   Committee  of   HarbourView   Asset   Management
                    Corporation; formerly (until April 2000) a Managing Director
                    and Portfolio Manager at J.P. Morgan Investment  Management,
                    Inc.

Caleb Wong,
Vice President
                    An officer and/or portfolio  manager of certain  Oppenheimer
                    funds (since June 1999) .

Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel
                    Assistant Secretary of Shareholder Services, Inc. (since May
                    1985),  Shareholder Financial Services, Inc. (since November
                    1989),  OppenheimerFunds  International Ltd. and Oppenheimer
                    Millennium  Funds plc (since  October  1997);  an officer of
                    other Oppenheimer funds.

Jill Zachman,
Assistant Vice President:
Rochester Division                  None.

Neal Zamore,
Vice President                      Director e-Commerce; formerly (until May
                                    2000) Vice President at GE Capital.

Mark Zavanelli,
Assistant Vice President            None.

Arthur J. Zimmer,
Senior                              Vice President  Senior Vice President (since
                                    April 1999) of HarbourView  Asset Management
                                    Corporation;  Vice  President of  Centennial
                                    Asset  Management  Corporation;  an  officer
                                    and/or   portfolio    manager   of   certain
                                    Oppenheimer funds.

Susan Zimmerman,
Vice President                      None.

The  Oppenheimer  Funds  include  the  New  York-based  Oppenheimer  Funds,  the
Denver-based  Oppenheimer  Funds and the Oppenheimer  Quest /Rochester Funds, as
set forth below:

            New York-based Oppenheimer Funds


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


            Quest/Rochester Funds

            Limited Term New York Municipal Fund
            Oppenheimer Convertible Securities Fund
            Oppenheimer MidCap Fund
            Oppenheimer Quest Capital Value Fund, Inc.
            Oppenheimer Quest For Value Funds
            Oppenheimer Quest Global Value Fund, Inc.
            Oppenheimer Quest Value Fund, Inc.
            Rochester Fund Municipals

            Denver-based Oppenheimer Funds

            Centennial America Fund, L.P.
            Centennial California Tax Exempt Trust
            Centennial Government Trust
            Centennial Money Market Trust
            Centennial New York Tax Exempt Trust
            Centennial Tax Exempt Trust
            Oppenheimer Cash Reserves
            Oppenheimer Champion Income Fund
            Oppenheimer Capital Income Fund
            Oppenheimer High Yield Fund
            Oppenheimer Integrity Funds
            Oppenheimer International Bond Fund
            Oppenheimer Limited-Term Government Fund
            Oppenheimer Main Street Opportunity Fund
            Oppenheimer Main Street Small Cap Fund
            Oppenheimer Main Street  Funds,  Inc.
            Oppenheimer Municipal Fund
            Oppenheimer Real Asset Fund
            Oppenheimer Senior Floating Rate Fund
            Oppenheimer Strategic Income Fund
            Oppenheimer Total Return Fund, Inc.
            Oppenheimer Variable Account Funds
            Panorama Series Fund, Inc.

The  address of  OppenheimerFunds,  Inc.,  OppenheimerFunds  Distributor,  Inc.,
HarbourView  Asset Management Corp.,  Oppenheimer  Partnership  Holdings,  Inc.,
Oppenheimer  Acquisition  Corp. and OFI Private  Investments,  Inc. is Two World
Trade Center, New York, New York 10048-0203.


The  address of the New  York-based  Oppenheimer  Funds,  the Quest  Funds,  the
Rochester-based funds, the Denver-based Oppenheimer Funds, Shareholder Financial
Services,   Inc.,  Shareholder  Services,   Inc.,   OppenheimerFunds   Services,
Centennial  Asset  Management   Corporation,   Centennial   Capital  Corp.,  and
Oppenheimer  Real Asset  Management,  Inc. is 6803 South Tucson Way,  Englewood,
Colorado 80112.


Item 27. Principal Underwriter

(a)  OppenheimerFunds  Distributor,  Inc. is the Distributor of the Registrant's
shares.  It is also the  Distributor  of each of the other  registered  open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this  Registration  Statement and listed in Item
26(b) above (except  Oppenheimer  Multi-Sector  Income Trust and Panorama Series
Fund, Inc.) and for MassMutual Institutional Funds.

(b)   The directors and officers of the Registrant's principal underwriter are:

Name & Principal                 Positions & Offices        Positions & Offices
Business Address                 with Underwriter           with Registrant

Jason Bach                       Vice President             None
31 Raquel Drive
Marietta, GA 30064

William Beardsley (2)            Vice President             None

Peter Beebe                      Vice President             None
876 Foxdale Avenue
Winnetka, IL  60093

Douglas S. Blankenship           Vice President             None
17011 Woodbank
Spring, TX  77379

Kevin Brosmith                   Senior Vice President      None.
856 West Fullerton
Chicago, IL  60614

Susan Burton(2)                  Vice President             None

Robert Coli                      Vice President             None
12 White Tail Lane
Bedminster, NJ 07921

William Coughlin                 Vice President             None
1730 N. Clark Street
#3203
Chicago, IL 60614

Jeff Damia(2)                    Vice President             None

Stephen Demetrovits(2)           Vice President             None

Christopher DeSimone             Vice President             None
5105 Aldrich Avenue South
Minneapolis, MN 55419

Michael Dickson                  Vice President             None
21 Trinity Avenue
Glastonburg, CT 06033

Joseph DiMauro                   Vice President             None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236


Steven Dombrowser                Vice President             None


Andrew John Donohue(2)           Executive Vice             Secretary
                             President and Director

G. Patrick Dougherty (2)         Vice President             None

Cliff Dunteman                   Vice President             None
940 Wedgewood Drive
Crystal Lake, IL 60014

Wendy H. Ehrlich                 Vice President             None
4 Craig Street
Jericho, NY 11753

Kent Elwell                      Vice President             None
35 Crown Terrace
Yardley, PA  19067

George Fahey                     Vice President             None
9 Townview Ct.
Flemington, NJ 08822

Eric Fallon                      Vice President             None
10 Worth Circle
Newton, MA  02158

Katherine P. Feld(2)             Vice President and         None
                               Corporate Secretary

Mark Ferro                       Vice President             None
43 Market Street
Breezy Point, NY 11697

Ronald H. Fielding(3)            Vice President             None


Brian Flahive                    Assistant Vice President   None


John ("J") Fortuna(2)            Vice President             None

Ronald R. Foster                 Senior Vice President      None
11339 Avant Lane
Cincinnati, OH 45249

Victoria Friece(1)               Assistant Vice President   None

Luiggino Galleto                 Vice President             None
10302 Riesling Court
Charlotte, NC 28277

Michelle Gans                    Vice President             None
18771 The Pines
Eden Prairie, MN 55347

L. Daniel Garrity                Vice President             None
27 Covington Road
Avondale Estates, GA 30002

Lucio Giliberti                  Vice President             None
6 Cyndi Court
Flemington, NJ 08822

Ralph Grant(2)                   Senior Vice President/     None
                             National Sales Manager

Michael Guman                    Vice President             None
3913 Pleasent Avenue
Allentown, PA 18103


Tonya Hammet                     Assistant Vice President   None


Webb Heidinger                   Vice President             None
90 Gates Street
Portsmouth, NH 03801

Phillip Hemery                   Vice President             None
184 Park Avenue
Rochester, NY 14607

Edward Hrybenko (2)              Vice President             None


Brian Husch(2)                   Vice President             None


Richard L. Hymes(2)              Assistant Vice President   None

Byron Ingram(1)                  Assistant Vice President   None

Kathleen T. Ives(1)              Vice President             None

Eric K. Johnson                  Vice President             None
28 Oxford Avenue
Mill Valley, CA 94941

Mark D. Johnson                  Vice President             None
409 Sundowner Ridge Court
Wildwood, MO  63011

Elyse Jurman                     Vice President             None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL  33062

John Kavanaugh                   Vice President             None
2 Cervantes Blvd., Apt. #301
San Francisco, CA 94123


Brian G. Kelly                   Vice President             None
60 Larkspur Road

Fairfield, CT  06430

Michael Keogh(2)                 Vice President             None

Lisa Klassen(1)                  Assistant Vice President   None

Richard Klein                    Senior Vice President      None
4820 Fremont Avenue So.
Minneapolis, MN 55409

Brent Krantz                     Vice President             None
2609 SW 149th Place
Seattle, WA 98166

Oren Lane                        Vice President             None
5286 Timber Bend Drive
Brighton, MI  48116

Dawn Lind                        Vice President             None
21 Meadow Lane
Rockville Centre, NY 11570

James Loehle                     Vice President             None
30 Wesley Hill Lane
Warwick, NY 10990

John Lynch (2)                   Vice President             None

Michael Magee(2)                 Vice President             None

Steve Manns                      Vice President             None
1941 W. Wolfram Street
Chicago, IL  60657

Todd Marion                      Vice President             None
3 St. Marks Place
Cold Spring Harbor, NY 11724

LuAnn Mascia(2)                  Assistant Vice President   None

Theresa-Marie Maynier            Vice President             None
2421 Charlotte Drive
Charlotte, NC  28203

Anthony Mazzariello              Vice President             None
704 Beaver Road
Leetsdale, PA 15056

John McDonough                   Vice President             None
3812 Leland Street
Chevy Chase, MD  20815

Kent McGowan                     Vice President             None
18424 12th Avenue West
Lynnwood, WA 98037

Laura Mulhall(2)                 Senior Vice President      None

Charles Murray                   Vice President             None
18 Spring Lake Drive
Far Hills, NJ 07931

Wendy Murray                     Vice President             None
32 Carolin Road
Upper Montclair, NJ 07043

Denise-Marie Nakamura            Vice President             None
4111 Colony Plaza
Newport Beach, CA 92660

John Nesnay                      Vice President             None
9511 S. Hackberry Street
Highlands Ranch, CO 80126

Kevin Neznek(2)                  Vice President             None

Chad V. Noel                     Vice President             None
2408 Eagleridge Drive
Henderson, NV  89014


Raymond Olson(1)                 Assistant Vice President   None
                                 & Treasurer


Alan Panzer                      Assistant Vice President   None
925 Canterbury Road, Apt. #848
Atlanta, GA 30324

Kevin Parchinski                 Vice President             None
8409 West 116th Terrace
Overland Park, KS 66210

Gayle Pereira                    Vice President             None
2707 Via Arboleda
San Clemente, CA 92672

Brian Perkes                     Vice President             None
8734 Shady Shore Drive
Frisco, TX 75034

Charles K. Pettit                Vice President             None
22 Fall Meadow Drive
Pittsford, NY  14534

Bill Presutti(2)                 Vice President             None

Steve Puckett                    Vice President             None
5297 Soledad Mountain Road
San Diego, CA  92109

Elaine Puleo(2)                  Senior Vice President      None


Christopher Quinson              Vice President             None


Minnie Ra                        Vice President             None
100 Dolores Street, #203
Carmel, CA 93923

Dustin Raring                    Vice President             None
184 South Ulster
Denver, CO 80220

Michael Raso                     Vice President             None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY  10538

Douglas Rentschler               Vice President             None
677 Middlesex Road
Grosse Pointe Park, MI 48230


Michelle Simone Richter(2)       Assistant Vice President   None


Ruxandra Risko(2)                Vice President             None

David Robertson(2)               Senior Vice President,     None
                              Director of Variable
                                 Accounts

Kenneth Rosenson                 Vice President             None
26966 W. Malibu
Cove Colony Drive
Malibu, CA 90265

James Ruff(2)                    President & Director       None

William Rylander (2)             Vice President             None

Alfredo Scalzo                   Vice President             None
9616 Lale Chase Island Way
Tampa, FL  33626

Michael Sciortino                Vice President             None
785 Beau Chene Drive
Mandeville, LA  70471

Eric Sharp                       Vice President             None
862 McNeill Circle
Woodland, CA  95695

Kristen Sims (2)                 Vice President             None

Douglas Smith                    Vice President             None
808 South 194th Street
Seattle,WA 98148

David Sturgis                    Vice President             None
81 Surrey Lane
Boxford, MA 01921

Brian Summe                      Vice President             None
239 N. Colony Drive
Edgewood, KY 41017

Michael Sussman(2)               Vice President             None

Andrew Sweeny                    Vice President             None
5967 Bayberry Drive
Cincinnati, OH 45242

George Sweeney                   Senior Vice President      None
5 Smokehouse Lane
Hummelstown, PA  17036

Scott McGregor Tatum             Vice President             None
704 Inwood
Southlake, TX  76092

Martin Telles(2)                 Senior Vice President      None

David G. Thomas                  Vice President             None
2200 North Wilson Blvd.
Suite 102-176
Arlington, VA 22201

Tanya Valency (2)                Assistant Vice President   None
Mark Vandehey(1)                 Vice President             None

Brian Villec (2)                 Vice President             None

Andrea Walsh(1)                  Vice President             None

Suzanne Walters(1)               Assistant Vice President   None

Michael Weigner                  Vice President             None
5722 Harborside Drive
Tampa, FL 33615

Donn Weise                       Vice President             None
3249 Earlmar Drive
Los Angeles, CA  90064

Marjorie Williams                Vice President             None
6930 East Ranch Road
Cave Creek, AZ  85331


Philip Witkower                  Senior Vice President      None


Cary Wozniak                     Vice President             None
18808 Bravata Court
San Diego, CA 92128

Gregor Yuska(2)                  Vice President             None

(1)6803 South Tucson Way, Englewood, CO 80112
(2)Two World Trade Center, New York, NY 10048
(3)350 Linden Oaks, Rochester, NY 14623

(c)   Not applicable.

Item 28. Location of Accounts and Records

The accounts,  books and other documents required to be maintained by Registrant
pursuant  to  Section  31(a) of the  Investment  Company  Act of 1940 and  rules
promulgated  thereunder are in the possession of  OppenheimerFunds,  Inc. at its
offices at 6803 South Tucson Way, Englewood, Colorado 80112.

Item 29. Management Services

Not applicable

Item 30. Undertakings
Not applicable.


<PAGE>


                                   SIGNATURES


Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration  Statement  pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its  behalf by the  undersigned,  thereunto  duly  authorized,  in the
County of Arapahoe and State of Colorado on the 27th day of December, 2000.



                                    OPPENHEIMER REAL ASSET FUND

                                           /s/ James C. Swain *
                                    By:______________________________
                                            James C. Swain, Chairman


Pursuant to the  requirements of the Securities Act of 1933,  this  Registration
Statement  has been signed below by the following  persons in the  capacities on
the dates indicated:

Signatures                          Title                         Date

/s/ James C. Swain*                 Chairman of the
-----------------------------       Board of Trustees
James C. Swain                      and Principal Executive

                                    Officer                    December 27, 2000


/s/ Bridget A. Macaskill*           President

-----------------------------       and Trustee                December 27, 2000
Bridget A. Macaskill

/s/ Brian W. Wixted*                Treasurer and Chief        December 27, 2000
-----------------------------       Financial and
Brian W. Wixted                     Accounting Officer

/s/ William L. Armstrong*           Trustee                    December 27, 2000

-----------------------------
William L. Armstrong


/s/ Robert G. Avis*                 Trustee                    December 27, 2000

-----------------------------
Robert G. Avis


/s/ Edward L. Cameron               Trustee                    December 27, 2000

-----------------------------
Edward L. Cameron


/s/ Jon S. Fossel*                  Trustee                    December 27, 2000

-----------------------------
Jon S. Fossel


/s/ Sam Freedman*                   Trustee                    December 27, 2000

-----------------------------
Sam Freedman


/s/ Raymond J. Kalinowski*          Trustee                    December 27, 2000

-----------------------------
Raymond J. Kalinowski


/s/ C. Howard Kast*                 Trustee                    December 27, 2000

-----------------------------
C. Howard Kast


/s/ Robert M. Kirchner*             Trustee                    December 27, 2000

-----------------------------
Robert M. Kirchner


/s/ F. William Marshall, Jr.*       Trustee                    December 27, 2000
-----------------------------
F. William Marshall, Jr.

*By: /s/ Robert G. Zack
-----------------------------



Robert G. Zack, Attorney-in-Fact                               December 27, 2000




<PAGE>


                           OPPENHEIMER REAL ASSET FUND


                        Post Effective Amendment No. 7
                          Registration No. 333-14887



                                  EXHIBIT INDEX


Form N-1A
Item No.    Description


23(a)      Amended and Restated Declaration of Trust dated October 30, 2000.

23(b)      By-Laws, as amended through October 24, 2000.

23(i)(ii)  Opinion and Consent of Counsel for Class N shares  dated  October 24,
           2000.

23(j)      Independent Auditors' Consent

23(m)(iv)  Distribution and Service Plan and Agreement for Class N shares
           dated October 24, 2000.

23(o)      Power of Attorney:  F. William Marshall, Jr.

























735Part C-B(Dec00).doc





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