Oppenheimer Convertible Securities Fund

497 1 pspsia.htm PROSPECTUS & SAI Oppenheimer Convertible Securities Fund

Oppenheimer
Convertible Securities Fund
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Prospectus dated February 25, 2003

Oppenheimer Convertible
Securities Fund is a mutual fund that
seeks a high level of total return as
its goal, through a combination of
current income and capital
appreciation. It invests primarily in
securities that are convertible into
common stock.

This Prospectus contains
important information about the Fund's
objective, its investment policies,
As with all mutual funds, the strategies and risks. It also contains
Securities and Exchange Commission has important information about how to buy
not approved or disapproved the Fund's and sell shares of the Fund and other
securities nor has it determined that account features. Please read this
this Prospectus is accurate or Prospectus carefully before you invest
complete. It is a criminal offense to and keep it for future reference about
represent otherwise. your account.

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Contents

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

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

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

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

Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
Retirement Plans

How to Sell Shares
By Wire
By Mail
By Telephone

How to Exchange Shares

Shareholder Account Rules and Policies

Dividends, Capital Gains and Taxes

Financial Highlights

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

The Fund's Investment Objective and Strategies

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WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks a high level of total
return on its assets through a combination of current income and capital
appreciation.
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WHAT DOES THE FUND MAINLY INVEST IN? As a matter of non-fundamental policy
that shall not be changed without advance notice to shareholders, the Fund
invests, under normal market conditions, at least 80% of its net assets (plus
borrowings for investment purposes) in convertible securities. Those
convertible securities include domestic and (to a limited extent) foreign
corporate bonds, notes, warrants and preferred stocks that can be exchanged
for (converted into) common stock of the issuer. The Fund can invest without
limit in lower-grade, high-yield convertible debt securities, sometimes
called "junk bonds," and many of the convertible bonds the Fund buys are
below investment grade.

The Fund has no limitations on the range of maturities of the debt
securities in which it can invest and therefore may hold bonds with short-,
medium- or long-term maturities. In addition, the Fund does not limit its
investments to securities of issuers in a particular market capitalization
range and can hold securities of small-cap, medium-cap and large-cap issuers.

While the Fund can also invest up to 20% of its net assets in
non-convertible debt securities and common stocks, not more than 15% of its
net assets can be invested in common stocks that do not pay dividends. These
investments are more fully explained in "About the Fund's Investments," below.

HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager uses a
disciplined, value-oriented investment approach based on a fundamental
"bottom-up" analysis of the financial condition of individual issuers rather
than overall market or industry conditions or trends. The portfolio manager
currently focuses on the factors below (which may vary in particular cases
and may change over time):

o The portfolio manager analyzes the balance sheet strength of individual
issuers, including current and historic financial condition, trading
activity in their securities, present and anticipated cash flows,
estimated values in relation to historic cost, the issuer's managerial
expertise, debt maturity schedules, current and future borrowing
requirements and any change in its condition that might affect its
ability to meet future obligations.
o The portfolio manager searches for convertible debt securities that
might offer participation in equity-like returns without excessive
price volatility.
o To avoid the volatility of owning stocks directly, the portfolio
manager generally sells stocks after they are obtained by converting
securities the Fund held.
o While the Fund is not required to sell securities to maintain 80% of
its net assets in convertible securities, if its investments in
non-convertible securities, cash and common stock exceed 20% of net
assets it will make new investments only in convertible securities
until the 80% standard is met.

WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking high total return over the long term from a fund that invests for
both current income and capital appreciation in convertible securities. Those
investors should be willing to assume the credit risks of a fund that
typically invests a significant amount of its assets in lower-grade bonds and
the changes in share prices that can occur when interest rates change. The
Fund is intended as a long-term investment, not a short-term trading vehicle,
and may be appropriate as part of an investor's retirement plan portfolio.
However, the Fund is not a complete investment program.

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 security selection by the Fund's investment
manager, OppenheimerFunds, Inc., (the "Manager"), will cause the Fund to
underperform other funds having a similar objective.

CREDIT RISK. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income might be reduced, and if the issuer fails to
repay principal, the value of that security and of the Fund's shares might be
reduced. Debt securities and preferred stocks issued by domestic and foreign
corporations are subject to risks of default. A downgrade in an issuer's
credit rating or other adverse news about an issuer can reduce the market
value of that issuer's securities.

Special Risks of Lower-Grade Securities. Because the Fund can invest without
limit in securities rated below investment grade to seek high income,
the Fund's credit risks are greater than those of funds that buy only
investment-grade bonds. Lower-grade debt securities may be subject to
greater market fluctuations and greater risks of loss of income and
principal than investment-grade debt securities. Securities that are
(or that have fallen) below investment grade are exposed to a greater
risk that the issuers of those securities might not meet their debt
obligations. The market for these securities may be less liquid, making
it difficult for the Fund to sell them quickly at an acceptable price.
These risks can reduce the Fund's share prices and the income it earns.

Special Risks of Small-Cap Issuers. While the Fund can buy convertible
securities of companies of small, medium or large market
capitalizations, to the extent the Fund invests in small-capitalization
companies, they may offer greater potential for high total return than
securities of larger issuers. Small-cap issuers may have less of a
trading market and may be subject to greater risks of default than
securities of larger issuers.

INTEREST RATE RISKS. The values of debt securities are subject to change when
prevailing interest rates change. When interest rates fall, the values of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally fall, and they may sell at
a discount from their face amount. The magnitude of these fluctuations will
often be greater for debt securities having longer maturities than for
shorter-term debt securities. The Fund's share prices can go up or down when
interest rates change because of the effect of the changes on the value of
the Fund's investments in debt securities. Also, if interest rates fall, the
Fund's investments in new securities at lower yields will reduce the Fund's
income.

STOCK MARKET RISKS. Because most of the Fund's investments are convertible
into common stock, the prices of the Fund's investments in convertible
securities are sensitive to events that affect the values of the issuer's
common stock. Those can include broad stock market events as well as events
affecting the particular issuer, such as poor earnings reports, loss of major
customers, major litigation, or regulatory changes affecting the issuer or
its industry. The income offered by fixed-income securities can help reduce
the effect of that volatility on the Fund's total return to some degree, but
the prices of the Fund's convertible securities will be affected by those
events.

THERE ARE SPECIAL RISKS IN USING DERIVATIVE INVESTMENTS. The Fund can use
derivatives to seek increased income or to try to hedge investment risks. In
general terms, a derivative investment is an investment contract whose value
depends on (or is derived from) the value of an underlying asset, interest
rate or index. Options, structured notes, and equity-linked debt securities
are examples of derivatives the Fund can use.

If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment. Also, the underlying security or investment
on which the derivative is based, and the derivative itself, might not
perform the way the Manager expected it to perform. If that happens, the
Fund's share prices could fall or the Fund could get less income than
expected. The Fund has limits on the amount of particular types of
derivatives it can hold and is not required to use them to seek its
objective. Using derivatives can cause the Fund to lose money on its
investments and/or increase the volatility of its share prices.

HOW RISKY IS THE FUND OVERALL? 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 values of debt securities, particularly lower-grade securities, can
be affected by a number of factors, such as interest rate changes and other
market factors, and the prices of the Fund's shares can go up and down. The
income from the Fund's investments may help cushion the Fund's total return
from changes in prices, but debt securities are subject to credit risks that
can also affect their values and income and the share prices of the Fund. In
the OppenheimerFunds spectrum, the Fund generally has more risks than bond
funds that focus primarily on U. S. government securities and
investment-grade bonds but may be less volatile than funds that focus solely
on investments in stocks.

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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.
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The Fund's Past Performance

The bar chart and table below show one measure of the risks of investing in
the Fund, by showing changes in the Fund's performance (for its Class M
shares) from year to year for the last 10 calendar years and by showing how
the average annual total returns of the Fund's shares, both before and after
taxes, compare to those of broad-based market indices. The after-tax returns
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are shown for Class M shares only and are calculated using the historical
highest individual federal marginal income tax rates in effect during the
periods shown, and do not reflect the impact of state or local taxes. The
after-tax returns for the other classes of shares will vary. In certain
cases, the figure representing "Return After Taxes on Distributions and Sale
of Fund Shares" may be higher than the other return figures for the same
period. A higher after-tax return results when a capital loss occurs upon
redemption and translates into an assumed tax deduction that benefits the
shareholder." The after-tax returns are calculated based on certain
assumptions mandated by regulation and your actual after-tax returns may
differ from those shown, depending on your individual tax situation. The
after-tax returns set forth below are not relevant to investors who hold
their fund shares through tax-deferred arrangements such as 401(k) plans or
IRAs or to institutional investors not subject to tax. The Fund's past
investment performance, before and after taxes, is not necessarily an
indication of how the Fund will perform in the future.

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

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

Sales charges and taxes are not included in the calculations of return in
this bar chart, and if those charges and taxes were included, the returns may
be less than those shown.

For the period from 1/1/02 through 12/31/02, the cumulative total return for
Class M shares before taxes was -7.16%. During the period shown
in the bar chart, the highest return (not annualized) before taxes for a
calendar quarter was 16.47% (4th Qtr 99) and the lowest return (not
annualized) before taxes for a calendar quarter was -10.70% (3rd
Qtr 98).

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Average Annual Total Returns 1 Year 5 Years 10 Years
for the periods ended (or life of (or life of
December 31, 2002 class, if less) class, if less)
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Class M Shares (inception
6/3/86) -10.17% 0.81% 7.37%
Return Before Taxes -11.87% -1.78% 4.50%
Return After Taxes on -6.19% -0.35% 4.77%
Distributions
Return After Taxes on
Distributions and Sale of
Fund Shares
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Lehman Bros. Aggregate Bond
Index (reflects no deduction
for fees, expenses or taxes) 10.25% 7.55% 7.51%1
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Goldman Sachs Convertible
Bond Index (reflects no
deduction for fees, expenses
or taxes) 18.45% 7.67% 10.82%1
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Standard amp; Poor's 500 Index -22.09% -0.58% 9.34%1
(reflects no deduction for
fees, expenses or taxex)
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Class A Shares (inception -11.96% 0.80% 6.08%
5/1/95)
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Class B Shares (inception -11.86% 0.91% 6.28%
5/1/95)
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Class C Shares (inception -8.28% 1.21% 4.50%
3/11/96)
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Class N Shares (inception -7.81% -5.43% N/A
3/1/01)
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1 From 12/31/92.
Class M shares were first publicly offered 6/3/86 as Class A shares and were
re-designated as Class M shares on 3/11/96. The Fund's Class Y shares, which
had been offered since 5/1/95, were re-designated as Class A shares on
3/11/96.

The Fund's average annual total returns include the current maximum initial
sales charges of 5.75% for Class A and 3.25% for Class M; the contingent
deferred sales charge of 5% (1-year) and 2% (5 year) for Class B; and the 1%
contingent deferred sales charge for the 1-year period for Class C and the
1-year period for Class N. Class B shares automatically convert to Class A
shares 72 months after purchase.

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 M Shares is compared
to the Goldman Sachs Convertible Bond 100 Index, an unmanaged index of
convertible securities and the Lehman Brothers Aggregate Bond Index, an
unmanaged index of U.S. corporate and government bonds. The index performance
reflects the reinvestment of income but does not consider the effects of
transaction costs. The Fund also compares its performance to that of the Samp;P
500 Index, an unmanaged index of common stocks, and those comparisons may be
found in the Fund's annual report. The Fund's investments may vary from the
securities in the indices.

Fees and Expenses 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 expenses directly, such as sales charges and account
transaction charges. The following tables are meant to help you understand
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
December 31, 2002.

Shareholder Fees (charges paid directly from your investment):

1. A contingent deferred sales charge may apply to redemptions of
investments of $1million or more ($500,000 for certain 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 twelve (12) months of purchase.
4. Applies to shares redeemed within eighteen (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)

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Class A Class B Class C Class M Class N
Shares Shares Shares Shares Shares
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Management Fees 0.48% 0.48% 0.48% 0.48% 0.48%
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Distribution 0.24% 1.00% 1.00% 0.73% 0.50%
and/or Service
(12b-1) Fees
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Other Expenses 0.27% 0.29% 0.28% 0.30% 0.45%
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Total Annual 0.99% 1.77% 1.76% 1.51% 1.43%
Operating
Expenses
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Expenses may vary in future years. "Other expenses" include transfer agent
fees, custodial expenses, and accounting and legal expenses the Fund pays.
The "Other Expenses" in the table are based on, among other things, the fees
the Fund would have paid if the transfer agent had not waived a portion of
its fee under a voluntary undertaking to the Fund to limit these fees to
0.35% per annum of all classes. That undertaking is effective October 1,
2001, is pro-rated for the remainder of the fiscal year ending after that
date, and may be amended or withdrawn at any time. After the waiver, the
actual "Other Expenses" and "Total Annual Operating Expense" were 0.40% and
1.38% for Class N shares. The transfer agent fees for the other classes of
shares did not exceed the expense limitation described above.

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:

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If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
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Class A Shares $670 $872 $1,091 $1,718
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Class B Shares $680 $857 $1,159 $1,6891
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Class C Shares $279 $554 $954 $2,073
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Class M Shares $474 $787 $1,122 $2,068
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Class N Shares $246 $452 $782 $1,713
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If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
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Class A Shares $670 $872 $1,091 $1,718
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Class B Shares $180 $557 $959 $1,6891
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Class C Shares $179 $554 $954 $2,073
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Class M Shares $474 $787 $1,122 $2,068
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Class N Shares $146 $452 $782 $1,713
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In the first example, expenses include the initial sales charge for Class A
and Class M and the applicable Class B, Class C or Class N contingent
deferred sales charges. In the second example, the Class A and Class M
expenses include the sales charge, but Class B, Class C and 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 shares 72 months
after purchase.

About the Fund's Investments

THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's
portfolio among different types of investments will vary over time based upon
the Manager'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.

The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of stock of any one
company and by not investing too great a percentage of the Fund's assets in
any one company. Also, the Fund does not concentrate 25% or more of its
investments in any one industry.

However, changes in the overall market prices of securities and the
income they pay can occur at any time. The share prices and yields of the
Fund will change daily based on changes in market prices of securities and
market conditions, and in response to other economic events.

Convertible Securities. Convertible debt securities pay interest and
convertible preferred stocks pay dividends until they mature or are
converted, exchanged or redeemed. Because of the conversion feature,
the price of a convertible security will normally vary in some
proportion to changes in the price of the underlying common stock. In
general, convertible securities:

o have higher yields than common stocks but lower yields than comparable
non-convertible securities,
o may be subject to less fluctuation in value than the underlying stock
because of their income, and
o provide potential for capital appreciation if the market price of the
underlying common stock increases (and in those cases may be thought
of as "equity substitutes").

The Fund does not invest only in securities of issuers in a particular
market capitalization range, and at times the Manager might increase
the relative emphasis of securities of issuers in a particular
capitalization range if the Manager believes they offer greater
opportunities for total return.

Securities of smaller, newer companies may offer greater potential for
higher returns, but they are also subject to greater risks of default
than larger, more established issuers. They may have unseasoned
management, they may lack established markets for their products or
services and may be dependent on only a few customers or suppliers for
a greater amount of their business. Also, they may not have the
financial strength to sustain them through business downturns or
adverse market conditions. These securities may have less of a trading
market than securities of larger issuers, and it might be harder for
the Fund to dispose of its holdings at an acceptable price when it
wants to sell them. As a result, to the extent the Fund invests in
securities of these issuers, they have greater risks. The Fund might
not achieve its expected returns from these securities and its share
price may fluctuate more to the extent that it holds these investments.

In selecting securities for the Fund's portfolio and evaluating their
yield potential and credit risk, the Manager does not rely solely on
ratings by rating organizations but evaluates business and economic
factors affecting an issuer as well. The debt securities the Fund buys
may be rated by nationally-recognized rating organizations such as
Moody's Investors Service, Inc. or Standard amp; Poor's Rating Service, or
they may be unrated securities assigned an equivalent rating by the
Manager. Credit ratings evaluate the expectation of scheduled payments
of interest and principal, not market risks. Rating agencies might not
always change their credit ratings of an issuer in a timely manner to
reflect the events that could affect an issuer's ability to make timely
payments on its obligations.

The Fund can invest in debt securities that are investment grade or
below investment grade in credit quality and at times will invest
substantial amounts of its assets in securities below investment grade
to seek higher income as part of its goal. "Investment-grade" rated
securities are those in the four highest rating categories of national
ratings organizations. The ratings definitions of the principal ratings
organizations are included in Appendix A to the Statement of Additional
Information.

Convertible Preferred Stock. Unlike common stock, preferred stock typically
has a stated dividend rate. When prevailing interest rates rise, the
value of preferred stock having a fixed dividend rate tends to fall.
The right to payment of dividends on preferred stock generally is
subordinate to the rights of the company's debt securities. Preferred
stock dividends may be cumulative (they remain a liability of the
company until paid) or non-cumulative.

Some convertible preferred stock with a mandatory conversion feature
has a set call price to buy the underlying common stock. If the
underlying common stock price is less than the call price, the holder
will pay more for the common stock than its market price. The issuer
might also be able to redeem the stock prior to the mandatory
conversion date, which could diminish the potential for capital
appreciation on the investment.

"Mandatory-Conversion" Securities. These securities may combine features of
both equity and debt securities. Normally they have a mandatory
conversion feature and an adjustable conversion ratio. One type of
mandatory conversion security is the convertible preferred stock
discussed above. Another is the "equity-linked" debt security, having a
principal amount at maturity that depends on the performance of a
specified equity security, such as the issuer's common stock. Their
values can also be affected by interest rate changes and credit risks
of the issuer. They may be structured in a way that limits their
potential for capital appreciation and the entire value of the security
may be at risk of loss depending on the performance of the underlying
equity security. Since the market for these securities is still
relatively new, they may be less liquid than other convertible
securities.

Lower-Grade Securities. Lower-grade convertible securities may offer greater
opportunities for higher returns than higher-grade securities.
Lower-grade securities are those rated below "Baa" by Moody's or lower
than "BBB" by Standard amp; Poor's or similar ratings by other
nationally-recognized rating organizations. The Fund does not invest in
securities rated below "C" or which are in default. While securities
rated "Baa" by Moody's or "BBB" by Samp;P are considered "investment
grade," they have some speculative characteristics.

o Special Risks of Lower-Grade Securities. While investment-grade
securities are subject to risks of non-payment of interest and
principal, in general, higher-yielding lower-grade bonds, whether rated
or unrated, have greater risks than investment-grade securities as
stated in "Main Risks of Investing in the Fund." There may be less of
a market for them and therefore they may be harder to sell at an
acceptable price. These risks mean that the Fund might not achieve the
expected income from lower-grade securities, and that the Fund's net
asset value per share could be affected by declines in value of these
securities.

The Fund also invests in investment-grade debt securities. It is not
required to dispose of debt securities whose ratings fall after the
Fund buys them. However, the portfolio manager will monitor those
holdings of issuers whose credit quality falls to determine whether the
Fund should sell them.

Derivative Investments. In addition to using hedging instruments such as
options, the Fund can use other derivative investments, such as
structured notes and "mandatory-conversion" securities, including
"equity-linked" debt securities, because they offer the potential for
increased income and principal value.

Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and stock market changes in
the U.S. and abroad may also influence the performance of derivatives.
As a result of these risks the Fund could realize less principal or
income from the investment than expected. Certain derivative
investments held by the Fund may be illiquid.

o "Structured" Notes. Structured notes are specially-designed derivative
debt investments. Payments of principal or interest on those notes are
linked to the value of an index (such as a currency or securities
index), an individual stock, or a commodity. The terms of the
instrument may be "structured" by the purchaser (the Fund) and the
borrower issuing the note.

The principal and/or interest payments depend on the performance of one
or more other securities or indices. The values of these notes will
therefore fall or rise in response to the changes in the values of the
underlying security or index. They are subject to both credit and
interest rate risks. Therefore, the Fund could receive more or less
than it originally invested when the notes mature. It might receive
less interest than the stated coupon payment if the underlying
investment or index does not perform as anticipated. Their values may
be very volatile and they may have a limited trading market, making it
difficult for the Fund to sell its investment at an acceptable price.

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 objective
is a not a fundamental policy but will not be changed by the Board without
advance notice to shareholders. 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 have risks, although some are
designed to help reduce overall investment or market risks.

Foreign Securities. The Fund can invest up to 15% of its net assets in
foreign securities. The Fund can buy securities of companies in both
developed markets and emerging markets. The Fund's foreign debt
investments can be denominated in U.S. dollars or in foreign
currencies. The Fund will buy foreign currency only in connection with
the purchase and sale of foreign securities and not for speculation.

o Risks of Foreign Investing. While foreign securities offer special
investment opportunities, there are also special risks that can reduce
the Fund's share prices and returns. The change in value of a foreign
currency against the U.S. dollar will result in a change in the U.S.
dollar value of securities denominated in that foreign currency.
Currency rate changes can also affect the distributions the Fund makes
from the income it receives from foreign securities as foreign currency
values change against the U.S. dollar. Foreign investing can result in
higher transaction and operating costs for the Fund. Foreign issuers
are not subject to the same accounting and disclosure requirements that
U.S. companies are subject to.

The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets,
foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or
other political and economic factors.

Zero-Coupon Securities. Some of the debt securities the Fund can buy are
zero-coupon bonds that pay no interest and are issued at a substantial
discount from their face value. Zero-coupon securities are subject to
greater fluctuations in price from interest rate changes than
interest-bearing securities. The Fund may have to pay out the imputed
income on zero-coupon securities without receiving the actual cash
currently.

Illiquid and Restricted Securities. Investments may be illiquid because they
do not have an active trading market, making it difficult to value them
or dispose of them promptly at an acceptable price. A restricted
security may have a contractual restriction on its resale or 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. Certain restricted securities that are eligible
for resale to qualified institutional purchasers may not be subject to
that limit. The Manager monitors holdings of illiquid securities on an
ongoing basis to determine whether to sell any holdings to maintain
adequate liquidity.

Hedging. The Fund can buy and sell put and call options. These are referred
to as "hedging instruments." The Fund is not required to use hedging
instruments to seek its objective. The Fund does not use hedging
instruments for speculative purposes and has limits on its use of them.

The Fund could write covered call options on stocks, purchase put
options on stocks and enter into closing transactions on these options
for a number of purposes. It might do so to try to manage its exposure
to the possibility that the prices of its portfolio securities may fall
or to try to increase its income.

Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, 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 and will not be
able to realize any profit if the investment has increased in value
above the call price.

If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's
return. The Fund could also experience losses if the prices of its
options positions were not correlated with its other investments or if
it could not close out a position because of an illiquid market.

Temporary Defensive and Interim Investments. For cash management purposes
the Fund can hold cash equivalents such as commercial paper, repurchase
agreements, U.S. Treasury bills and other short-term U.S. government
securities. In times of unstable market or economic conditions, the
Fund can invest up to 100% of its assets in temporary defensive
investments. These would ordinarily be short-term U.S. government
securities, commercial paper in the top two rating categories of a
national rating organization, bank obligations of domestic banks having
assets of at least $500 million or repurchase agreements. To the
extent the Fund invests defensively in these securities, it might not
achieve its investment objective.

Portfolio Turnover. The Fund's investment process may cause the Fund to
engage in active and frequent trading. Therefore, the Fund may engage
in short-term trading while trying to achieve its objective. Portfolio
turnover increases brokerage costs the Fund pays (and reduces
performance). Additionally, securities trading can cause the Fund to
realize capital gains that are distributed to shareholders as taxable
distributions. The Financial Highlights table at the end of this
Prospectus shows the Fund's portfolio turnover rate for each of the
past five fiscal years.

How the Fund Is Managed

THE MANAGER. The Manager chooses the Fund's investments and handles 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 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 Manager has been an investment advisor since January 1960. The
Manager (including subsidiaries and controlled affiliates) managed assets of
more than $120 billion as of September 30, 2002, including other Oppenheimer
funds with more than 7 million shareholder accounts. The Manager is located
at 498 Seventh Avenue, New York, New York 10018.

Portfolio Manager. The portfolio manager of the Fund is Edward Everett. Mr.
Everett has been a portfolio manager of the Fund since July 12, 1993
and he is the person principally responsible for the day-to-day
management of the Fund's portfolio. Mr. Everett is a Vice President of
the Manager. Prior to joining the Manager in January 1996, he was a
portfolio manager of Fielding Management Company, Inc., an investment
advisor.

Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 0.625% of the first $50 million of average
annual net assets of the Fund, 0.50% of the next $250 million, and
0.4375% of average annual net assets over $300 million. The Fund's
advisory fee for its last fiscal year ended December 31, 2002 was .48 %
of average annual net assets for each class of shares.

ABOUT your account

How to 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.

Buying Shares 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.
Buying Shares 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 1.800.225.5677 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 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.

WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
o If you establish one of the many types of retirement plan accounts that
OppenheimerFunds offers, more fully described below under "Special
Investor Services," you can start your account with as little as $500.
o By using an Asset Builder Plan or Automatic Exchange Plan (details are
in the Statement of Additional Information), or government allotment plan,
you can make subsequent investments (after making the initial investment
of $500) for as little as $50. For any type of account established under
one of these plans prior to November 1, 2002, the minimum additional
investment will remain $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.

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 ("the 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., Eastern time, but may close earlier on some days. All
references to time in this Prospectus mean "Eastern 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 and restricted 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.

If, after the close of the principal market on which a security held by
the Fund is traded, and before the time the Fund's securities are
priced that day, an event occurs that the Manager deems likely to cause
a material change in the value of such security, the Fund's Board of
Trustees has authorized the Manager, subject to the Board's review, to
ascertain a fair value for such security. A security's valuation may
differ depending on the method used for determining value.

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 the 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.
Buying Through a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of the 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, unless your dealer has made alternative
arrangements with the Distributor. 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.
------------------------------------------------------------------------------
------------------------------------------------------------------------------

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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 lesser amounts
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 6 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 1.0%, as described
in "How Can You Buy Class C Shares?" below.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class M Shares. If you buy Class M shares, you pay an initial sales charge.
The amount of that sales charge depends on the amount you invest.
Additionally, there is an annual asset-based sales charge.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class N Shares. If you buy Class N shares (available only through certain
retirement plans), 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 18 months of the retirement plan's first purchase of
Class N shares, you may pay a contingent deferred sales charge of 1.0%,
as described in "How Can You Buy Class N 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 or Class M
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, Class C or Class N. For
retirement plans that qualify to purchase Class N shares, Class N
shares will generally be more advantageous than Class B and Class C
shares.

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, Class M 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 or
Class M shares might not be as advantageous as Class A shares. That is
because the annual asset-based sales charge on Class C and Class M
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 or Class M
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, Class M 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, Class M 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, Class M and Class N asset-based sales charge
described below and in the Statement of Additional Information. Share
certificates are only available for Class A shares. 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 Your 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 and Class M 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 C 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 a 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%
------------------------------------------------------------------------------
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$25,000 or more but 5.50% 5.82% 4.75%
less than $50,000
------------------------------------------------------------------------------
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$50,000 or more but 4.75% 4.99% 4.00%
less than $100,000
------------------------------------------------------------------------------
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$100,000 or more but 3.75% 3.90% 3.00%
less than $250,000
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$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
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$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
------------------------------------------------------------------------------

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.

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 that were permitted to purchase such shares
prior to March 1, 2001 ("grandfathered retirement accounts").
Retirement plans are not permitted to make initial purchases of Class A
shares subject to a contingent deferred sales charge. The Distributor
pays dealers of record concessions in an amount equal to 1.0% of
purchases of $1 million or more other than by grandfathered retirement
accounts. For grandfathered retirement accounts, the concession is
0.75% of the first $2.5 million of purchases plus 0.25% of purchases in
excess of $2.5 million. In either case, the concession will not be paid
on purchases of shares by exchange or that were previously subject to a
front-end sales charge and dealer concession.

If you redeem any of those shares within an 18-month "holding period"
measured from the beginning 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:
o 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
o 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.

Purchases by Certain Retirement Plans. There is no initial sales charge on
purchases of Class A shares of any one or more Oppenheimer funds by
retirement plans that have $10 million or more in plan assets and that
have entered into a special agreement with the Distributor and by
retirement plans which are part of a retirement plan product or
platform offered by certain banks, broker-dealers, financial advisors,
insurance companies or recordkeepers which have entered into a special
agreement with the Distributor. The Distributor currently pays dealers
of record concessions in an amount equal to 0.25% of the purchase price
of Class A shares by those retirement plans from its own resources at
the time of sale, subject to certain exceptions as described in the
Statement of Additional Information. There is no contingent deferred
sales charge upon the redemption of such shares.

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 six years from the beginning 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:

-------------------------------------------------------------------------------
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Purchase Order was Accepted Redemptions in That Year
(As % of Amount Subject to Charge)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
0 - 1 5.0%
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1 - 2 4.0%
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2 - 3 3.0%
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3 - 4 3.0%
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4 - 5 2.0%
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5 - 6 1.0%
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More than 6 None
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In the table, a "year" is a 12-month period. In applying the contingent
deferred 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 beginning 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 M SHARES? Class M shares are sold at their offering
price, which is normally net asset value plus an initial sales charge.1 In
other cases, reduced sales charges may be available under the Fund's "Right
of Accumulation" or Letter of Intent, as described under "Can You Reduce
Class A Sales Charges," procedures above. 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 you 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 Distributor does not accept purchases of
Class M shares in amounts of $1 million or more. The current sales charge
rates and concession paid to dealers 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 $250,000 3.25% 3.36% 3.00%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
$250,000 or more
but less than 2.25% 2.30% 2.00%
$500,000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
$500,000 or more
but less than $1 1.25% 1.27% 1.00%
million
---------------------------------------------------------------------------------

HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered for sale to
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 to group
retirement plans (which do not include IRAs and 403(b) plans) that have
assets of $500,000 or more or 100 or more eligible participants. See
"Availability of Class N shares" in the Statement of Additional Information
for other circumstances where Class N shares are available for purchase.

A contingent deferred sales charge of 1.0% will be imposed upon the
redemption of Class N shares, if:
o The group retirement plan 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 IRA 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 buying,
selling, 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.

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.
With respect to Class A shares subject to a Class A contingent deferred
sales charge purchased by grandfathered retirement accounts, the
Distributor pays the 0.25% service fee to dealers in advance for the
first year after the shares are sold by the dealer. After the shares
have been held for a year, the Distributor pays the service fee to
dealers on a quarterly basis. 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, Class M and Class N
Shares. The Fund has adopted Distribution and Service Plans for Class
B, Class C, Class M and Class N shares to pay the Distributor for its
services and costs in distributing Class B, Class C, Class M and Class
N shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares, an asset-based sales charge of 0.50% on Class M shares
and 0.25% on Class N shares. The Distributor also receives a service
fee of 0.25% per year under the Class B, Class C Class M and Class N
plans.

The asset-based sales charge and service fees increase Class B and
Class C expenses by 1.0%, Class M expenses by up to 0.75% and increase
Class N expenses by 0.50% of the net assets per year of the respective
class. Because these fees are paid out of the Fund's assets on an
on-going 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,
Class M or Class N shares. The Distributor pays the 0.25% service fees
to dealers in advance for the first year after the shares are 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
retains the service fees for accounts for which it renders the required
personal services.

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 sale of
Class B shares is therefore 4.00% of the purchase price. The
Distributor retains the Class B asset-based sales charge. Regarding the
Class M Distribution and Service Plan, the Distributor retains the
Class M asset-based sales charge, but may use all or part of it to pay
additional compensation to dealers that sell Class M shares. See the
Statement of Additional Information for exceptions.

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 1.0% 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.
See the Statement of Additional Information for exceptions.

The Distributor currently pays a sales concession of 0.75% of the
purchase price of Class N 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 N shares is therefore 1.0% of the purchase price. The Distributor
retains the asset-based sales charge on Class N shares. See the
Statement of Additional Information for exceptions.

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 1.800.225.5677. 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 and proper documentation 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 who 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 PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1.800.225.5677. 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 1.800.225.5677 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 WEBSITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet website, at
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 website. To perform account
transactions or obtain account information online, you must first obtain a
user I.D. and password on that website. If you do not want to have Internet
account transaction capability for your account, please call the Transfer
Agent at 1.800.225.5677. At times, the website 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, Class B or
Class M shares of the Fund, you have up to six 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
or Class M 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 or
Class N 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 and rollover 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 1.800.225.5677, 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.

Sending Redemption Proceeds by Wire. While the Fund normally sends your money
by check, you can arrange to have the proceeds of shares you sell sent
by Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system.
The minimum redemption you can have sent by wire is $2,500. There is a
$10 fee for each request. To find out how to set up this feature on
your account or to arrange a wire, call the Transfer Agent at
1.800.225.5677.

HOW DO 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 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 or automatically on
PhoneLink, call 1.800.225.5677.
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 seven-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 or by Wire. 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.

If you have requested Federal Funds wire privileges for your account,
the wire of the redemption proceeds will normally be transmitted on the
next bank business day after the shares are redeemed. There is a
possibility that the wire may be delayed up to seven days to enable the
Fund to sell securities to pay the redemption proceeds. No dividends
are accrued or paid on the proceeds of shares that have been redeemed
and are awaiting transmittal by wire.

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 C to the
Statement of Additional Information and you advise the Transfer Agent of your
eligibility for the waiver when you place your redemption request.)

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 C 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 seven days before you can exchange them. After the account is
open seven 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.
Additionally, you can exchange Class M shares of this Fund for Class A shares
of another fund. You cannot exchange shares of other Oppenheimer funds for
Class M shares of this Fund (except for shares of money market funds acquired
by exchange from Class M shares of this 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 1.800.225.5677. That list can change from time to
time.

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 or by using PhoneLink for automated
exchanges by calling 1.800.225.5677. 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 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
Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days.
o The interests of the Fund's long-term shareholders and its ability to
manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market
fluctuations--also known as "market timing." When large dollar amounts
are involved, the Fund may have difficulty implementing long-term
investment strategies, because it cannot predict how much cash it will
have to invest. Market timing also may force the Fund to sell portfolio
securities at disadvantageous times to raise the cash needed to buy a
market timer's Fund shares. These factors may hurt the Fund's
performance and its shareholders. When the Manager believes frequent
trading would have a disruptive effect on the Fund's ability to manage
its investments, the Manager and the Fund may reject purchase orders
and exchanges into the Fund by any person, group or account that the
Manager believes to be a market timer.
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.
A $12 annual fee is assessed on any account valued at less than $500. The fee
is automatically deducted from accounts annually on or about the second
to last business day of September. See the Statement of Additional
Information, or visit the OppenheimerFunds website, to learn how you
can avoid this fee and for circumstances when this fee will not be
assessed.
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. The Fund
will provide you notice whenever it is required to do so by applicable
law. 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 or by Federal Funds wire (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 processing any type of redemption payment as
described under "How to Sell Shares" 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.
Shares may 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
and annual notice of the Fund's privacy policy 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 1.800.225.5677. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses, reports and
privacy notices will be sent to you commencing 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 on each regular business day and to pay
those dividends to shareholders quarterly in March, June, September and
December on a date selected by the Board of Trustees. Daily dividends will
not be declared or paid on newly-purchased shares until Federal Funds are
available to the Fund from the purchase payment for the shares. Dividends and
other distributions paid on Class A shares will generally be higher than
dividends for Class B, Class C, Class M or Class N shares, which normally
have higher expenses than Class A. The Fund cannot guarantee that it will pay
any dividends or other distributions.

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.

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 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

For the fiscal years ended December 31, 2000 through 2002, the information
was audited by KPMG 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. Another auditing firm
audited the information for the previous fiscal years. The financial
highlights for each of the two years in the period ended December 31, 1999,
were audited by other auditors whose report dated January 24, 2000, expressed
an unqualified opinion on this information.

FINANCIAL HIGHLIGHTS

Class A Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period $12.76 $13.85 $16.36
$14.84 $15.32
-------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .57 .48 .72
.70 .70
Net realized and unrealized gain (loss) (1.41) (.94) (1.45)
2.66 (.08)

------------------------------------------------
Total from investment operations (.84) (.46) (.73)
3.36 .62
-------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.63) (.63) (.72)
(.70) (.70)
Distributions from net realized gain -- -- (1.06)
(1.14) (.40)

------------------------------------------------
Total dividends and/or distributions
to shareholders (.63) (.63) (1.78)
(1.84) (1.10)
-------------------------------------------------------------------------------------------
Net asset value, end of period $11.29 $12.76 $13.85
$16.36 $14.84

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (6.59)% (3.30)% (4.81)%
23.37% 4.08%

-------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $202,968 $187,458 $210,903
$220,671 $221,693
-------------------------------------------------------------------------------------------
Average net assets (in thousands) $190,677 $197,514 $225,938
$207,008 $220,423
-------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 4.77% 3.58% 4.42%
4.55% 4.55%
Expenses 0.99% 0.95% 0.90%
0.95% 0.93% 3
-------------------------------------------------------------------------------------------
Portfolio turnover rate 52% 69% 127%
95% 90%

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

See accompanying Notes to Financial Statements.

27 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

FINANCIAL HIGHLIGHTS Continued

Class B Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period $12.79 $13.87 $16.38
$14.87 $15.35
-------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 .38 .59
.59 .58
Net realized and unrealized gain (loss) (1.38) (.93) (1.45)
2.65 (.08)

------------------------------------------------
Total from investment operations (.95) (.55) (.86)
3.24 .50
-------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.54) (.53) (.59)
(.59) (.58)
Distributions from net realized gain -- -- (1.06)
(1.14) (.40)

------------------------------------------------
Total dividends and/or distributions
to shareholders (.54) (.53) (1.65)
(1.73) (.98)
-------------------------------------------------------------------------------------------
Net asset value, end of period $11.30 $12.79 $13.87
$16.38 $14.87

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (7.44)% (3.97)% (5.55)%
22.35% 3.30%

-------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $154,350 $286,829 $373,860
$431,370 $445,544
-------------------------------------------------------------------------------------------
Average net assets (in thousands) $213,259 $330,806 $418,592
$414,611 $441,677
-------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 3.95% 2.75% 3.62%
3.79% 3.79%
Expenses 1.77% 1.71% 1.70%
1.71% 1.69% 3
-------------------------------------------------------------------------------------------
Portfolio turnover rate 52% 69% 127%
95% 90%

See accompanying Notes to Financial Statements.

28 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Class C Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period $12.76 $13.84 $16.35
$14.84 $15.32
-------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .46 .38 .59
.59 .58
Net realized and unrealized gain (loss) (1.40) (.93) (1.45)
2.65 (.08)

-------------------------------------------------
Total from investment operations (.94) (.55) (.86)
3.24 .50
--------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.54) (.53) (.59)
(.59) (.58)
Distributions from net realized gain -- -- (1.06)
(1.14) (.40)

-------------------------------------------------
Total dividends and/or distributions
to shareholders (.54) (.53) (1.65)
(1.73) (.98)
--------------------------------------------------------------------------------------------
Net asset value, end of period $11.28 $12.76 $13.84
$16.35 $14.84

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (7.39)% (3.98)% (5.56)%
22.41% 3.32%

-------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $61,031 $76,846 $91,567
$94,352 $108,339
-------------------------------------------------------------------------------------------
Average net assets (in thousands) $66,391 $85,774 $96,574
$94,329 $105,974
-------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 3.97% 2.80% 3.62%
3.80% 3.81%
Expenses 1.76% 1.71% 1.70%
1.70% 1.68% 3
-------------------------------------------------------------------------------------------
Portfolio turnover rate 52% 69% 127%
95% 90%

See accompanying Notes to Financial Statements.

29 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Class M Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period $12.76 $13.84 $16.35
$14.84 $15.32
-------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .49 .41 .64
.63 .62
Net realized and unrealized gain (loss) (1.40) (.93) (1.45)
2.65 (.08)

------------------------------------------------
Total from investment operations (.91) (.52) (.81)
3.28 .54
-------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.57) (.56) (.64)
(.63) (.62)
Distributions from net realized gain -- -- (1.06)
(1.14) (.40)

------------------------------------------------
Total dividends and/or distributions
to shareholders (.57) (.56) (1.70)
(1.77) (1.02)
-------------------------------------------------------------------------------------------
Net asset value, end of period $11.28 $12.76 $13.84
$16.35 $14.84

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (7.16)% (3.72)% (5.30)%
22.74% 3.58%

-------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $108,426 $144,612 $181,521
$234,023 $263,716
-------------------------------------------------------------------------------------------
Average net assets (in thousands) $122,897 $160,919 $213,617
$235,419 $288,953
-------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 4.24% 3.04% 3.90%
4.06% 4.02%
Expenses 1.51% 1.45% 1.42%
1.45% 1.43% 3
-------------------------------------------------------------------------------------------
Portfolio turnover rate 52% 69% 127%
95% 90%

See accompanying Notes to Financial Statements.

30 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Class N Year Ended December 31,
2002 2001 1
-------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period $12.76
$13.68
-------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income
.55 .42
Net realized and unrealized loss
(1.43) (.84)

-------------------
Total from investment operations
(.88) (.42)
-------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income
(.59) (.50)
Distributions from net realized gain
-- --

-------------------
Total dividends and/or distributions to shareholders
(.59) (.50)
-------------------------------------------------------------------------------------
Net asset value, end of period $11.29
$12.76

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

-------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2 (6.92)%
(3.02)%

-------------------------------------------------------------------------------------
Ratios/Supplemental Data

Net assets, end of period (in thousands)
$388 $36
-------------------------------------------------------------------------------------
Average net assets (in thousands)
$205 $10
-------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income
4.38% 5.45%
Expenses
1.43% 1.22%
Expenses, net of reduction to custodian expenses and/or
voluntary waiver of transfer agent fees
1.38% 1.22%
-------------------------------------------------------------------------------------
Portfolio turnover rate
52% 69%

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

INFORMATION AND SERVICES

For More Information on Oppenheimer Convertible Securities Fund
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, the notice explaining the Fund's privacy policy and
other information about the Fund or your account:

------------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.CALL.OPP (225.5677)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
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: WWW.OPPENHEIMERFUNDS.COM
------------------------
------------------------------------------------------------------------------

Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1.202.942.8090. Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet
website at WWW.SEC.GOV. Copies may be obtained after payment of a duplicating
-----------
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov 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 shares are distributed by: [logo] OppenheimerFunds
Distributor, Inc.
The Fund's SEC File No. 811-4576
PR0345.001.0203
Printed on recycled paper

Appendix to Prospectus of
Oppenheimer Convertible Securities Fund

Graphic material included in the Prospectus of Oppenheimer Convertible
Securities Fund (the "Fund") under the heading: "Annual Total Returns (Class
M)(as of 12/31 each year)":

A bar chart will be included in the Prospectus of the Fund depicting
the annual total returns of a hypothetical investment in Class M shares of
the Fund for each of the ten most recent calendar years, without deducting
sales charges. Set forth below are the relevant data points that will appear
in the bar chart:

---------------------------------------------------------------------------------
Year Ended: Annual Total Return
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/93 21.24%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/94 -1.19%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/95 26.00%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/96 9.58%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/97 18.19%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/98 3.58%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/99 22.74%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/00 -5.30%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/01 -3.72%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12/31/02 -7.16%
---------------------------------------------------------------------------------

--------
1 Accounts holding Class M shares established prior to March 11, 1996, can
purchase additional Class M shares without sales charge, at the offering
price equal to the net asset value per share.

Oppenheimer
Convertible Securities Fund

6803 S. Tucson Way, Centennial, CO 80112
1.800.225.5677

Statement of Additional Information dated February 25, 2003

This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated February 25, 2003. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above or by
downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

Contents
Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks.......2
The Fund's Investment Policies.........................................2
Other Investment Techniques and Strategies.............................6
Investment Restrictions................................................16
How the Fund is Managed.....................................................19
Organization and History...............................................19
Board of Trustees and Oversight Committees.............................21
Trustees and Officers of the Fund.................................................................... 21
The Manager ...........................................................28
Brokerage Policies of the Fund..............................................31
Distribution and Service Plans..............................................33
Performance of the Fund.....................................................38

About Your Account
How to Buy Shares...........................................................44
How to Sell Shares..........................................................55
How to Exchange Shares......................................................60
Dividends, Capital Gains and Taxes..........................................64
Additional Information About the Fund.......................................68

Financial Information About the Fund
Report of Independent Accountants...........................................70
Financial Statements .......................................................71

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

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

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

|X| Convertible Securities. Convertible securities are fixed-income
securities that may be exchanged for or converted into the underlying common
stock of the issuer at the option of the holder during a specified period of
time. Convertible securities may take the form of convertible preferred
stock, convertible bonds or notes, or other fixed-income securities with
stock purchase warrants. They may have a combination of the features of
several of these securities.

Because of the conversion feature, the price of a convertible security
normally will vary in proportion to changes in the price of the underlying
common stock. Convertible securities in general are subject to less price
volatility than the common stocks into which they are convertible because of
their comparatively higher yields. The investment characteristics of each
convertible security vary, and that variety enables the Fund to use
convertible securities in different ways to pursue its investment objective
of high total return. For example, the Fund can invest in:
o convertible securities that provide a relatively high level of income,
with less appreciation potential,
o convertible securities that have high appreciation potential and a
relatively low level of income, and
o convertible securities that provide some combination of both income and
appreciation potential.

Convertible bonds and convertible preferred stocks are fixed-income
securities that retain the investment characteristics of fixed-income
securities until they have been converted. The holder is entitled to receive
the fixed income of a bond or the dividend preference of a preferred stock
until the holder elects to exercise the conversion privilege. Convertible
securities are senior securities and therefore have a claim against the
assets of the issuing corporation that is superior to the claims of holders
of the issuer's common stock upon liquidation of the corporation.
Convertible securities, however, are generally subordinated to similar
non-convertible securities of the same company. The interest income and
dividends from convertible bonds and preferred stocks provide income
potential and yields that are generally higher than common stocks, but which
are generally lower than non-convertible securities of similar credit quality.

As with all fixed-income securities, convertible securities are subject
to changes in value from changes in the level of prevailing interest rates.
However, the conversion feature of convertible securities, giving the owner
the right to exchange them for the issuer's common stock, in general causes
the market value of convertible securities to increase when the value of the
underlying common stock increases, and to fall when the stock price falls.
Since securities prices fluctuate, however, there can be no assurance that
the market value of convertible securities will increase. Convertible
securities generally do not have the same potential for capital appreciation
as the underlying stock. When the value of the underlying common stock is
falling, the value of the convertible security may not experience the same
decline as the underlying common stock. It tends to decline to a level (often
called investment value) approximating the yield-to-maturity basis of
non-convertible debt of similar credit quality.

Many convertible securities sell at a premium over their conversion
values. Conversion value is the number of shares of common stock to be
received upon conversion multiplied by the current market price of the
stock. That premium represents the price investors are willing to pay for
the privilege of purchasing a fixed-income security having capital
appreciation potential because of the conversion privilege. If the Fund buys
a convertible security at a premium, there can be no assurance that the
underlying common stock will appreciate enough for the Fund to recover the
premium on the convertible security.

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

The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security and the
security's price will likely increase when interest rates fall and decrease
when interest rates rise. If the conversion value exceeds the investment
value, the security will behave more like an equity security. In that case
it will likely sell at a premium over its conversion value and its price will
tend to fluctuate directly with the price of the underlying security.

|X| Convertible Preferred Stock. Preferred stock, unlike common stock,
has a stated dividend rate payable from the corporation's earnings.
Preferred stock dividends may be cumulative or non-cumulative, participating,
or auction rate. "Cumulative" dividend provisions require all or a portion
of prior unpaid dividends to be paid before dividends can be paid to the
issuer's common stock. "Participating" preferred stock may be entitled to a
dividend exceeding the stated dividend in certain cases.

If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as provisions
allowing the stock to be called or redeemed prior to its maturity, which can
have a negative impact on the stock's price when interest rates decline.
Preferred stock generally has a preference over common stock on the
distribution of a corporation's assets in the event of liquidation of the
corporation. The rights of preferred stock on distribution of a
corporation's assets in the event of a liquidation are generally subordinate
to the rights associated with a corporation's debt securities.

While preferred stock is an equity security, some convertible preferred
stock has characteristics of both a debt security and a call option. These
securities can be considered derivative securities because of their call
option component, described below. Typically these stocks are convertible to
common stock after a three-year period (although they are callable by the
issuer prior to conversion). They pay a cumulative, fixed dividend that is
senior to, and expected to be in excess of, the dividends paid on the common
stock of the same issuer.

o Mandatory-Conversion Securities. The Fund can also invest in a more
recently-developed variety of convertible securities referred to as
"mandatory-conversion securities." These securities may combine several of
the features of debt securities and equity securities, including both
preferred stock and common stock. Unlike more traditional convertible
securities, however, many of these securities have a mandatory conversion
feature and an adjustable conversion ratio. As a result, many of these
securities offer limited potential for capital appreciation and, in some
instances, are subject to unlimited potential for loss of capital.

These securities are designed and marketed by major investment banking
firms and trade in the marketplace under various acronyms that are
proprietary to the investment banking firm. The Fund may be exposed to
counter-party risk to the extent it invests in synthetic mandatory conversion
securities which are issued by investment banking firms. Those are unsecured
obligations of the issuing firm. Should the firm that issued the security
experience financial difficulty, its ability to perform according to the
terms of the security might become impaired. The mandatory conversion
securities which may be purchased by the Fund include, among others,
"equity-linked debt securities," discussed below, and certain varieties of
convertible preferred stock.

At any time prior to the mandatory conversion date, the issuer can
redeem the preferred stock. At its mandatory conversion date, the preferred
stock is converted into a share (or a fraction of a share) of the issuer's
common stock at the call price that was established at the time the preferred
stock was issued. Generally, the call price is 30% to 45% above the price of
the issuer's common stock at the time the preferred stock is issued and may
be subject to downward adjustment over time. If the share price of the
related common stock on the mandatory conversion date is less than the call
price, the holder of the preferred stock will nonetheless receive only one
share of common stock for each share of preferred stock (plus cash in the
amount of any accrued but unpaid dividends).

The issuer must issue to the holder of the preferred stock the number
of shares of common stock equal to the call price of the preferred stock in
effect on the date of redemption divided by the market value of the common
stock. That market value typically is determined one or two trading days
prior to the date notice of redemption is given. The issuer must also pay
the holder of the preferred stock cash in an amount equal to any accrued but
unpaid dividends on the preferred stock.

Convertible preferred stock is subject to the same market risk as the
common stock of the issuer. However that risk may be mitigated by the higher
dividend paid on the preferred stock. This convertible preferred stock
offers limited opportunity for appreciation, however, because of the call
feature. If the market value of the issuer's common stock increases to the
call price or above the call price of the preferred stock, the issuer can
(and would be expected to) call the preferred stock for redemption at the
call price. This convertible preferred stock is also subject to credit risk
of the issuer as to its ability to pay the dividend. Generally, convertible
preferred stock is less volatile than the related common stock of the issuer,
in part because of the fixed dividend.

o Equity-Linked Debt Securities. The Fund can purchase mandatory
conversion debt securities whose principal amount at maturity depends upon
the performance of a specified equity security. These "equity-linked debt
securities" are a form of derivative security and differ from ordinary debt
securities in that the principal amount received at maturity is not fixed.
Instead, their principal value is based on the price of the linked equity
security at the time the debt security matures. These debt securities
usually mature in three to four years, and during the years to maturity pay
interest at a fixed rate.

Although these debt securities are typically adjusted for events such
as stock splits, stock dividends and certain other events that affect the
market value of the linked equity security, the debt securities are not
adjusted if additional equity securities are issued for cash. An additional
issuance of equity securities of the type to which the debt security is
linked could adversely affect the price of the debt security. In general,
however, these debt securities are less volatile than the equity securities
to which they are linked.

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

While the changes in value of the Fund's portfolio securities after
they are purchased will be reflected in the net asset value of the Fund's
shares, those changes normally do not affect the interest income paid by
those securities (unless the security's interest is paid at a variable rate
pegged to particular interest rate changes). However, those price
fluctuations will be reflected in the valuations of the securities, and
therefore the Fund's net asset values will be affected by those fluctuations.

|X| Credit Risk. Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater
extent than lower-yield, higher-quality bonds.

The Fund's debt investments can include high-yield,
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc. ("Moody's), at least "BBB" by Standard amp; Poor's Rating Services
("Samp;P") or Fitch, Inc. ("Fitch"), or that have comparable ratings by another
nationally-recognized rating organization.

In making investments in debt securities, the Manager may rely to some
extent on the ratings of ratings organizations or it may use its own research
to evaluate a security's credit-worthiness. If securities the Fund buys are
unrated, they are assigned a rating by the Manager of comparable quality to
bonds having similar yield and risk characteristics within a rating category
of a rating organization.

The Fund does not have investment policies establishing specific
maturity ranges for the Fund's investments, and they may be within any
maturity range (short, medium or long) depending on the Manager's evaluation
of investment opportunities available within the debt securities markets.
Generally, however, it is expected that the Fund's average portfolio maturity
will be of a longer average maturity. The Fund may shift its investment
focus to securities of longer maturity as interest rates decline and to
securities of shorter maturity as interest rates rise.

o Special Risks of Lower-Grade Securities. The Fund can invest without
limit in lower-grade debt securities, and the Fund will normally invest its
assets primarily in these securities to seek its objective. Lower-grade
securities tend to offer higher yields than investment-grade securities, but
also are subject to greater risks of default by the issuer in its obligations
to pay interest and/or repay principal on the maturity of the security.

"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than
"BBB" by S amp; P or Fitch, Inc., or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be
of comparable quality to debt securities rated below investment grade, they
are considered part of the Fund's portfolio of lower-grade securities. The
Fund will not invest in securities rated below "C" or which are in default at
the time the Fund buys them.

Some of the special credit risks of lower-grade securities are
discussed below. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of
investment-grade securities. The issuer's low creditworthiness may increase
the potential for its insolvency. An overall decline in values in the
high-yield bond market is also more likely during a period of a general
economic downturn. An economic downturn or an increase in interest rates
could severely disrupt the market for high-yield bonds, adversely affecting
the values of outstanding bonds as well as the ability of issuers to pay
interest or repay principal. In the case of foreign high-yield bonds, these
risks are in addition to the special risk of foreign investing discussed in
the Prospectus and in this Statement of Additional Information.

To the extent they can be converted into stock, convertible securities
may be less subject to some of these risks than non-convertible high-yield
bonds, since stock may be more liquid and less affected by some of these risk
factors.

While securities rated "Baa" by Moody's or "BBB" by Standard amp; Poor's
or Fitch, Inc. are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks and have some speculative
characteristics. Definitions of the debt security ratings categories of the
principal rating organizations are included in Appendix A to this Statement
of Additional Information.

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

|X| Portfolio Turnover. The Fund may engage in short-term trading to
some degree try to achieve its objective. It does not expect to have a
portfolio turnover rate in excess of 150% annually. Portfolio turnover
affects brokerage costs the Fund pays. 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 the Fund's five most recent fiscal years.

|X| Foreign Securities. The Fund can invest up to 15% of its net
assets in foreign securities. These primarily will be fixed-income debt
securities issued or guaranteed by foreign companies. "Foreign securities"
include equity and debt securities of companies organized under the laws of
countries other than the United States. They may be traded on foreign
securities exchanges or in the foreign over-the-counter markets.

The percentage of the Fund's assets that will be allocated to foreign
securities will vary over time depending on a number of factors. Those
factors may include the Manager's analysis of relative yields of foreign and
U.S. securities, the economies of foreign countries, the condition of a
country's financial markets, the interest rate climate of particular foreign
countries and the relationship of particular foreign currencies to the U.S.
dollar. The Manager analyzes fundamental economic criteria (for example,
relative inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and political
data.

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

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

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

o 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, securities exchanges
and brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory
taxation, political, financial or social instability or
adverse diplomatic developments; and
o unfavorable differences between the U.S. economy and foreign
economies.
In the past, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.

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

|X| Warrants. As a fundamental policy, the Fund cannot invest more
than 15% of the value of its net assets in warrants, and not more than 5% of
the Fund's net assets may be invested in warrants that are not listed on The
New York Stock Exchange or The American Stock Exchange. That policy does not
limit the Fund's acquisition of warrants that have been acquired in units or
attached to other securities. This fundamental policy is currently limited
by an operational policy under which the Fund will not invest more than 5% of
the value of its net assets in warrants, and not more than 2% of the Fund's
net assets may be invested in warrants that are not listed on the New York or
American Stock Exchanges. Warrants acquired by the Fund in units or attached
to securities are deemed to be without value for purposes of the limitation
imposed by the operational policy.

A warrant basically is an option to purchase common stock at a specific
price valid for a specific period of time. Usually the price is at a premium
above the market value of the applicable common stock at its issuance.
Warrants may have a life ranging from less than a year to twenty years or may
be perpetual. However, many warrants have expiration dates after which they
are worthless unless the warrants are exercised or sold before they expire.
In addition, if the market price of the common stock does not exceed the
exercise price of the warrant during the life of the warrant, the warrant
will expire worthless. Warrants have no voting rights, pay no dividends and
have no rights with respect to the assets of the corporation issuing them.
The market price of a warrant may increase or decrease more than the market
price of the optioned common stock.

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

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

The majority of these transactions run from day to day. Delivery
pursuant to resale typically will occur 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.

Repurchase agreements, are collateralized by the underlying security.
The Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the collateral's value must equal or
exceed the repurchase price to fully collateralize the repayment obligation.
Additionally, the Manager will monitor the vendor's creditworthiness to
confirm that the vendor is financially sound and will continuously monitor
the collateral's value. 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.

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

|X| Illiquid and Restricted Securities. Under policies established by
the Fund's Board of Trustees, the Manager determines the liquidity of some of
the Fund's securities. The Manager monitors holdings of illiquid and
restricted securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.

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

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

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

|X| Borrowing for Leverage. The Fund has a fundamental policy that
permits it to borrow from banks on an unsecured basis, to invest the borrowed
funds in portfolio securities. This technique is known as "leverage." Under
applicable law, borrowings can be made only to the extent that the value of
the Fund's assets, less its liabilities other than borrowings, is equal to at
least 300% of all borrowings (including the proposed borrowing). If the
value of the Fund's assets fails to meet this 300% asset coverage
requirement, the Fund is required to reduce its bank debt within 3 days to
meet the requirement. To do so, the Fund might have to sell a portion of its
investments at a disadvantageous time.

The Fund will pay interest on these loans, and that interest expense
will raise the overall expenses of the Fund and reduce its returns. If it
does borrow, its expenses will be greater than comparable funds that do not
borrow for leverage. The interest on a loan might be more (or less) than the
yield on the securities purchased with the loan proceeds. Additionally, the
Fund's net asset value per share might fluctuate more than that of funds that
do not borrow.

|X| Loans of Portfolio Securities. To raise cash for liquidity or
income purposes, the Fund can lend its portfolio securities to brokers,
dealers and other types of financial institutions approved by the Fund's
Board of Trustees. These loans are limited to not more than 10% of the value
of the Fund's net assets under guidelines established by the Board of
Trustees. The Fund currently does not intend to lend its securities.

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

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

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

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

|X| Hedging. The Fund can use hedging to attempt to protect against
declines in the market value of its portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities that have appreciated,
or to facilitate selling securities for investment reasons. To do so the
Fund could:
o buy puts on securities, or
o write covered calls on securities. Covered calls can also be written
on debt securities to attempt to increase the Fund's income.

The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The
particular options the Fund can use are described below. The Fund may employ
other hedging instruments and strategies in the future, if those investment
methods are consistent with the Fund's investment objective and fundamental
policies, are permissible under applicable regulations governing the Fund and
are approved by the Fund's Board of Trustees.

The Fund can buy and sell only certain kinds of put options (puts) and
call options (calls). The Fund limits its options trading activity to writing
covered calls on stocks (including the stock underlying a convertible
security the Fund owns), purchasing put options on stocks, and entering into
closing transactions. These strategies are described below.

o Writing Covered Call Options. The Fund can write (that is, sell) call
options on stocks. The Fund's call writing is subject to a number of
restrictions:
(1) Calls the Fund sells must be listed on a national securities exchange.
(2) Each call the Fund writes must be "covered" while it is outstanding.
That means the Fund must own the stock on which the call was
written or must own a security convertible into the stock on
which the option is written.
(3) As a fundamental policy, the Fund cannot write a call that would cause
the value of its securities underlying call options (valued at
the lower of the option price or market value) to exceed 25%
of its net assets.

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

The Fund may buy calls only to close out a call it has written, as
discussed above. Calls the Fund buys must be listed on a securities
exchange. 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 was more or less than the price of the call the Fund purchased
to close out the transaction. A profit may also be realized if the call
lapses unexercised, because the Fund retains the underlying investment and
the premium received. 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.

o Purchasing Puts. The Fund may buy only those puts that relate to
stocks, including stocks underlying the convertible securities that the Fund
owns. The Fund may not sell puts other than puts it has previously
purchased, to close out a position.

When the Fund purchases a put, it pays a premium. The Fund then has
the right to sell the underlying investment to a seller of a corresponding
put on the same investment during the put period at a fixed exercise price.
Buying a put on a stock enables the Fund to protect itself during the put
period against a decline in the value of the underlying investment below the
exercise price. 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 lose its premium payment and the right to sell the underlying
investment. A put may be sold prior to expiration (whether or not at a
profit).

o Risks of Hedging with Options. The use of hedging instruments requires
special skills and knowledge of investment techniques that are different than
what is required for normal portfolio management. If the Manager uses a
hedging instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's returns.

The Fund's option activities could affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund might
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The Fund could pay a brokerage commission each time it buys a
call or put, sells a call, or buys or sells an underlying investment in
connection with the exercise of a call or put. Such commissions might 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. There is no assurance that
a liquid secondary market will exist for a particular option.

o Regulatory Aspects of Hedging Instruments. 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). An exchange may order the liquidation of positions found to be in
violation of those limits and may impose certain other sanctions.

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

o high-quality, (rated in the top two rating categories of
nationally-recognized rating organizations or deemed by the Manager
to be of comparable quality) short-term money market instruments,
including those issued by the U. S. Treasury or other government
agencies,
o commercial paper (rated in the top two rating categories of a
nationally-recognized rating organization) short-term, unsecured,
promissory notes of domestic or foreign companies,
o debt obligations of corporate issuers, rated investment grade (rated at
least Baa by Moody's or at least BBB by Samp;P, or a comparable rating
by another rating organization) or unrated securities judged by the
Manager to be of a quality comparable to rated securities in those
categories,
o certificates of deposit and bankers' acceptances of domestic and
foreign banks and savings and loan associations, and
o repurchase agreements.

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

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

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

Interfund Borrowing and Lending Arrangements. Consistent with its fundamental
policies and pursuant to an exemptive order issued by the Securities and
Exchange Commission ("SEC"), the Fund may engage in borrowing and lending
activities with other funds in the OppenheimerFunds complex. Borrowing money
from affiliated funds may afford the Fund the flexibility to use the most
cost-effective alternative to satisfy its borrowing requirements. Lending
money to an affiliated fund may allow the Fund to obtain a higher rate of
return than it could from interest rates on alternative short-term
investments. Implementation of interfund lending will be accomplished
consistent with applicable regulatory requirements, including the provisions
of the SEC order.

o Interfund Borrowing. The Fund will not borrow from affiliated funds
unless the terms of the borrowing arrangement are at least as favorable as
the terms the Fund could otherwise negotiate with a third party. To assure
that the Fund will not be disadvantaged by borrowing from an affiliated fund,
certain safeguards may be implemented. Examples of these safeguards include
the following:
o the Fund will not borrow money from affiliated funds unless the
interest rate is more favorable than available bank loan
rates;
o the Fund's borrowing from affiliated funds must be consistent with its
investment objective and investment policies;
o the loan rates will be the average of the overnight repurchase
agreement rate available through the OppenheimerFunds joint
repurchase agreement account and a pre-established formula
based on quotations from independent banks to approximate the
lowest interest rate at which bank loans would be available to
the Fund;
o if the Fund has outstanding borrowings from all sources greater than
10% of its total assets, then the Fund must secure each
additional outstanding interfund loan by segregating liquid
assets of the Fund as collateral;
o the Fund cannot borrow from an affiliated fund in excess of 125% of its
total redemptions for the preceding seven days;
o each interfund loan may be repaid on any day by the Fund; and
o the Trustees will be provided with a report of all interfund loans and
the Trustees will monitor all such borrowings to ensure that
the Fund's participation is appropriate.

There is a risk that a borrowing fund could have a loan called on one
day's notice. In that circumstance, the Fund might have to borrow from a
bank at a higher interest cost if money to lend were not available from
another Oppenheimer fund.

o Interfund Lending. To assure that the Fund will not be disadvantaged by
making loans to affiliated funds, certain safeguards will be implemented.
Examples of these safeguards include the following:

o the Fund will not lend money to affiliated funds unless the interest
rate on such loan is determined to be reasonable under the
circumstances;
o the Fund may not make interfund loans in excess of 15% of its net
assets;
o an interfund loan to any one affiliated fund shall not exceed 5% of the
Fund's net assets;
o an interfund loan may not be outstanding for more than seven days;
o each interfund loan may be called on one business day's notice; and
o the Manager will provide the Trustees reports on all interfund loans
demonstrating that the Fund's participation is appropriate and
that the loan is consistent with its investment objectives and
policies.

When the Fund lends assets to another affiliated fund, the Fund is
subject to the credit that the borrowing fund fails to repay the loan.

Investment Restrictions

|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act of 1940 (the "Investment
Company Act"), such 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 not a fundamental policy, but will
not be changed without approval by the Fund's Board of Trustees and prior
notice to shareholders. Other policies described in the Prospectus or this
Statement of Additional Information are "fundamental" only if they are
identified as such. The Fund's Board of Trustees can change non-fundamental
policies without shareholder approval. However, significant changes to
investment policies will be described in supplements or updates to the
Prospectus or this Statement of Additional Information, as appropriate. The
Fund's most significant investment policies are described in the Prospectus.

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

o The Fund may not invest more than 25% of the value of the Fund's total
assets in the securities of any one issuer or any group of issuers in the
same industry. However, this restriction does not prevent the Fund from
investing more than 25% of its total assets in securities of the United
States government, or its agencies or instrumentalities.

o With respect to 50% of its total assets, the Fund must limit its
investments to cash, cash items, U.S. government securities and securities of
issuers in which its investments are limited to not more than 5% of the value
of its total assets in the securities of any one issuer and not more than 10%
of its total assets in the outstanding voting securities of any one issuer.

o The Fund may not purchase securities on margin. However, the Fund can
obtain unsecured loans to purchase securities. The aggregate of all
unsecured loans, however, may not exceed 50% of the Fund's total assets. It
can also borrow amounts equivalent to up to 5% of the Fund's net assets for
temporary, extraordinary or emergency purposes.

o The Fund may not make short sales on securities or maintain a short
position. An exception the Fund can do so if at all times when a short
position is open, the Fund owns an equal amount of the securities sold short
or the Fund owns securities that are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the securities sold
short, without payment of further consideration. Not more than 10% of the
Fund's total assets may be held as collateral for these short sales at any
one time.

o The Fund may not purchase or sell put and call options nor write put or
call options, except as set forth in the Prospectus or this Statement of
Additional Information.

o The Fund may not invest in warrants in amounts in excess of 15% of the
value of its net assets. The valuation of warrants for the purpose of that
limitation shall be determined at the lower of cost or market value.
Warrants acquired by the Fund as part of a unit or attached to securities at
the time of purchase do not count against that percentage limitation. Not
more than 5% of the Fund's net assets may be invested in warrants that are
not listed on The New York Stock Exchange or The American Stock Exchange.

o The Fund may not make loans. However, this policy does not prohibit
the Fund from (1) making loans of its portfolio securities, (2) purchasing
notes, bonds or other evidences of indebtedness, (3) making deposits with
banks and other financial institutions, or (4) entering into repurchase
agreements.

o The Fund may not purchase or sell real estate or real estate mortgage
loans. However, the Fund may invest not more than 5% of its total assets in
marketable securities of real estate investment trusts.

o The Fund may not deal in commodities or commodities contracts.

o The Fund may not purchase or retain securities of any issuer if any of
its officers and trustees, or any of the officers and directors of the
Manager or the Distributor own individually beneficially more than 0.5% of
the outstanding securities of that issuer, or if all of those persons
together own more than 5% of that issuer's securities.

o The Fund may not invest more than 5% of the value of its total assets
in securities of any company (including its predecessors) that has not been
in business for at least three consecutive years.

o The Fund may not issue any securities that are senior to shares of the
Fund.

o The Fund may not underwrite securities of other issuers.

o The Fund may not acquire securities of any other investment company, if
as a result of that acquisition, the Fund would own in the aggregate: (1)
more than 3% of the voting stock of that investment company; (2) securities
of that investment company having an aggregate value in excess of 5% of the
value of the total assets of the Fund; or (3) securities of that investment
company and of any other investment companies (but excluding treasury stock
of those funds) having an aggregate value in excess of 10% of the total
assets of the Fund. However, none of these limitations applies to a security
received as a dividend or as a result of an offer of exchange, a merger or
plan of reorganization.

o With respect to 75% of its total assets, the Fund cannot buy securities
issued or guaranteed by any one issuer if more than 5% of the Fund's total
assets would be invested in securities of that issuer or if the Fund would
then own more than 10% of that issuer's voting securities. That restriction
does not apply to cash or cash items or securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities.

Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund has a
number of other investment restrictions that are not fundamental policies,
which means that they can be changed by the Board of Trustees without
shareholder approval. While these investment policies do not require
shareholder approval to be changed, as a matter of operating policy, the Fund
has agreed not to change these policies without prior notice to its
shareholders. These operating policies provide that the Fund may not do any
of the following:

o The Fund may not invest in any issuer for the purpose of exercising
control or management of that issuer, unless approved by the Fund's Board of
Trustees.

o The Fund may not invest any part of its total assets in interests in
oil, gas, or other mineral exploration or development programs, although it
may invest in securities of companies which invest in or sponsor such
programs. The Fund may not invest in oil, gas or other mineral leases.

o The Fund may not invest more than 5% of the value of its net assets in
warrants, valued at the lower of cost or market value. The Fund can buy
warrants that are not listed on The New York Stock Exchange or The American
Stock Exchange, but they count toward the 5% limit on warrants described
above and may not exceed 2% of the value of the Fund's net assets. Warrants
acquired by the Fund in units or attached to securities are not covered by
this restriction.

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

In carrying out its policy with respect to concentration of
investments, the Fund applies that policy to prohibit the Fund from making an
investment in the securities of any one issuer or group of issuers in the
same industry if that investment would cause 25% or more of the value of the
Fund's total assets to be invested in that industry. In applying its policy
not to concentrate its investments, the Fund has adopted the industry
classifications set forth in Appendix B to this Statement of Additional
Information. This is not a fundamental policy.

In carrying out its policy prohibiting the issuance of senior
securities, the Fund interprets that policy not to prohibit certain
investment activities for which assets of the Fund are designated as
segregated to cover the related obligations. Examples of those activities
include borrowing money, repurchase agreements, and contracts to buy or sell
derivatives.

How the Fund is Managed

Organization and History. The Fund is a series of Bond Fund Series, a
Massachusetts business trust organized in 1986 as an open-end, diversified
management investment company with an unlimited number of authorized shares
of beneficial interest (that trust is referred to in this section as the
"Fund's parent Trust" or the "Trust"). The Trust was originally named
Rochester Convertible Fund and was renamed Rochester Fund Series, which was
its name until it was renamed Bond Fund Series in 1997. The Fund is
currently the only series of the Trust and is a diversified fund. It was
called The Bond Fund for Growth until 1997. In 1997 it was re-named
Oppenheimer Bond Fund for Growth. The Fund's name was changed to Oppenheimer
Convertible Securities Fund in 1998.

The Fund and its parent Trust are 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 (and the Trust's) activities, review its performance, and
review the actions of the Manager.

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

The Fund currently has five classes of shares: Class A, Class B, Class
C, Class M and Class N. All classes invest in the same investment
portfolio. Only retirement plans may purchase Class N shares. Each class of
shares:

o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and
o votes as a class on matters that affect that class alone.

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

| Meetings of Shareholders. As a Massachusetts business trust, the
Fund is not required to hold, and does not plan to hold, regular annual
meetings of shareholders. 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. The Trustees may
also take other action as permitted by the Investment Company Act.

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

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

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

The Board of Trustees has an Audit Committee which is comprised solely
of Independent Trustees. The Audit Committee provides the Board with
recommendations regarding the selection of the Fund's independent auditor.
The Audit Committee also reviews the scope and results of audits and the
audit fees charged, reviews reports from the Fund's independent auditors
concerning the Fund's internal accounting procedures and controls, and
reviews reports of the Manager's internal auditor. The members of the Audit
Committee are Paul Clinton (Chairman), Thomas Courtney, Robert Galli, Lacy
Herrmann and Brian Wruble. The Audit Committee met 5 times during the Fund's
fiscal year ended December 31, 2002.

Trustees and Officers of the Fund. Each of the Trustees is an "Independent
Trustee," as defined in the Investment Company Act. The Fund's Trustees and
officers and their positions held with the Fund and length of service in such
position(s) and their principal occupations and business affiliations during
the past five years are listed in the chart below. The information for the
Trustees also includes the dollar range of shares of the Fund as well as the
aggregate dollar range of shares beneficially owned in any of the Oppenheimer
funds overseen by the Trustees. All of the Trustees are also trustees or
directors of the following Oppenheimer funds (except for Mr. Cannon who is
only a Trustee of Rochester Fund Municipals, Limited-Term New York Municipal
Fund and Convertible Securities Fund) (referred to as "Board III Funds"):

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

In addition to being a trustee or director of the Board III Funds, Mr.
Galli is also a director or trustee of 31 other portfolios in the
OppenheimerFunds complex. Present or former officers, directors, trustees and
employees (and their immediate family members) of the Fund, the Manager and
its affiliates, and retirement plans established by them for their employees
are permitted to purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge. The sales charges
on Class A shares is waived for that group because of the economies of sales
efforts realized by the Distributor.

Messrs. Everett, Murphy, Masterson, Molleur, Vottiero, Wixted and Zack,
and Mses. Bechtolt, Feld and Ives who are officers of the Fund, respectively
hold the same offices of one or more of the other Board III Funds as with the
Fund. As of January 30, 2003, the Trustees and officers of the Fund, as a
group, owned of record or beneficially less than 1% of each class of shares
of the Fund. The foregoing statement does not reflect ownership of shares of
the Fund held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under the plan by the
officers of the Fund listed above. In addition, each Independent Trustee, and
his or her family members, do not own securities of either the Manager or
Distributor of the Board III Funds or any person directly or indirectly
controlling, controlled by or under common control with the Manager or
Distributor.

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

-------------------------------------------------------------------------------------
Independent Trustees
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Beneficially
Owned in
Years; Range of Any of the
Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer
with Fund, Trustee; BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex Owned in Overseen
Age Currently Overseen by Trustee the Fund by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
As of December 31,
2002
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Thomas W. Principal of Courtney Associates, Inc. $10,001-$50$10,001-$50,000
Courtney, (venture capital firm); former General
Chairman of the Partner of Trivest Venture Fund (private
Board of Trustees, venture capital fund); former President
Trustee since 1996 of Investment Counseling Federated
Age: 69 Investors, Inc.; Trustee of Cash Assets
Trust, a money market fund; Director of
OCC Cash Reserves, Inc. and Trustee of
OCC Accumulation Trust, both of which are
open-end investment companies; Trustee of
four funds for Pacific Capital and Tax
Free Trust of Arizona. Oversees 10
portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John Cannon, Director, Neuberger Berman Income $1-$10,000 $1-$10,000
Trustee, since Managers Trust, Neuberger amp; Berman Income
1992 Funds and Neuberger Berman Trust,
Age: 73 (1995-present); Neuberger Berman Equity
Funds (November 2000-present); Trustee,
Neuberger Berman Mutual Funds (October
1994-present); formerly Chairman and
Treasurer, CDC Associates, a registered
investment adviser (December
1993-February 1996); Independent
Consultant; Chief Investment Officer, CDC
Associates (1996-June 2000); Consultant
and director, CDC Associates (December
1993-February 1999). Oversees 3
portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Paul Y. Clinton, Principal of Clinton Management $0 Over
Trustee, since Associates, a financial and venture $100,000
1996 capital consulting firm; Trustee of
Age: 71 Capital Cash Management Trust, a
money-market fund, and Narragansett
Tax-Free Fund, a tax-exempt bond fund;
Director of OCC Cash Reserves, Inc. and
Trustee of OCC Accumulation Trust, both
of which are open-end investment
companies. Formerly: Director, External
Affairs, Kravco Corporation, a national
real estate owner and property management
corporation; President of Essex
Management Corporation, a management
consulting company; a general partner of
Capital Growth Fund, a venture capital
partnership; a general partner of Essex
Limited Partnership, an investment
partnership; President of Geneve Corp., a
venture capital fund; Chairman of
Woodland Capital Corp., a small business
investment company; and Vice President of
W.R. Grace amp; Co. Oversees 10 portfolios
in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Galli, A trustee or director of other $0 Over
Trustee since 1996 Oppenheimer funds. Formerly Vice Chairman $100,000
Age: 69 (October 1995-December 1997) of the
Manager; Trustee (May 2000 to 2002) of
Research Foundation of AIMR (investment
research, non-profit). Oversees 41
portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lacy B. Herrmann, Chairman and Chief Executive Officer of $0 $10,001-$50,000
Trustee since 1996 Aquila Management Corporation, the
Age: 73 sponsoring organization and manager,
administrator and/or sub-adviser to the
following open-end investment companies,
and Chairman of the Board of Trustees and
President of each: Churchill Cash
Reserves Trust, Aquila-Cascadia Equity
Fund, Pacific Capital Cash Assets Trust,
Pacific Capital U.S. Treasuries Cash
Assets Trust, Pacific Capital Tax-Free
Cash Assets Trust, Prime Cash Fund,
Narragansett Insured Tax-Free Income
Fund, Tax-Free Fund For Utah, Churchill
Tax-Free Fund of Kentucky, Tax-Free Fund
of Colorado, Tax-Free Trust of Oregon,
Tax-Free Trust of Arizona, Hawaiian
Tax-Free Trust, and Aquila Rocky Mountain
Equity Fund; Vice President, Director,
Secretary, and formerly Treasurer of
Aquila Distributors, Inc., distributor of
the above funds; President and Chairman
of the Board of Trustees of Capital Cash
Management Trust ("CCMT"), and an Officer
and Trustee/Director of its predecessors;
President and Director of STCM Management
Company, Inc., sponsor and adviser to
CCMT; Chairman, President and a Director
of InCap Management Corporation, formerly
sub-adviser and administrator of Prime
Cash Fund and Short Term Asset Reserves;
Director of OCC Cash Reserves, Inc., and
Trustee of OCC Accumulation Trust, both
of which are open-end investment
companies; Trustee Emeritus of Brown
University. Oversees 10 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Wruble, Special Limited Partner (since January $1-$10,000 Over
Trustee since 2001 1999) of Odyssey Investment Partners, LLC $100,000
Age: 59 (private equity investment); General
Partner (since September 1996) of Odyssey
Partners, L.P. (hedge fund in
distribution since 1/1/97); Board of
Governing Trustees (since August 1990) of
The Jackson Laboratory (non-profit);
Trustee (since May 1992) of Institute for
Advanced Study (educational institute);
Trustee (since May 2000) of Research
Foundation of AIMR (investment research,
non-profit); formerly Governor, Jerome
Levy Economics Institute of Bard College
(economics research) (August
1990-September 2001); Director of Ray amp;
Berendtson, Inc. (executive search firm)
(May 2000-April 2002). Oversees 10
portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------

The address of the Officers in the chart below is as follows: for
Messrs. Everett, Molleur, Murphy and Zack and Ms. Feld, 498 Seventh Avenue,
New York, NY 10018, for Messrs. Masterson, Vottiero and Wixted and Mses.
Bechtolt and Ives, 6803 S. Tucson Way, Centennial, CO 80112-3924. Each
Officer serves for an annual term or until his or her earlier resignation,
death or removal.

-------------------------------------------------------------------------------------
Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund,
Length of Service,
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Edward Everett, Vice Vice President of the Manager (since January 2000); an
President and officer of 1 portfolio in the OppenheimerFunds complex;
Portfolio Manager formerly Assistant Vice President of the Manager (January
since 2002 1996 - January 2000); Portfolio Manager at Fielding
Age: 36 Management Company (July 1993 - January 1996).
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and director (since June
President since 2001 2001) and President (since September 2000) of the Manager;
Age: 53 President and a director or trustee of other Oppenheimer
funds; President and a director (since July 2001) of
Oppenheimer Acquisition Corp. (the Manager's parent holding
company) and of Oppenheimer Partnership Holdings, Inc. (a
holding company subsidiary of the Manager); a director
(since November 2001) of OppenheimerFunds Distributor, Inc.
(a subsidiary of the Manager); Chairman and a director
(since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager); President and a director
(since July 2001) of OppenheimerFunds Legacy Program (a
charitable trust program established by the Manager); a
director of the investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc. and
Centennial Asset Management Corporation (since November
2001), HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001); President
(since November 1, 2001) and a director (since July 2001)
of Oppenheimer Real Asset Management, Inc.; a director
(since November 2001) of Trinity Investment Management
Corp. and Tremont Advisers, Inc. (Investment advisory
affiliates of the Manager); Executive Vice President (since
February 1997) of Massachusetts Mutual Life Insurance
Company (the Manager's parent company); a director (since
June 1995) of DLB Acquisition Corporation (a holding
company that owns the shares of David L. Babson amp; Company,
Inc.); formerly, Chief Operating Officer (September
2000-June 2001) of the Manager; President and trustee
(November 1999-November 2001) of MML Series Investment Fund
and MassMutual Institutional Funds (open-end investment
companies); a director (September 1999-August 2000) of C.M.
Life Insurance Company; President, Chief Executive Officer
and director (September 1999-August 2000) of MML Bay State
Life Insurance Company; a director (June 1989-June 1998) of
Emerald Isle Bancorp and Hibernia Savings Bank (a
wholly-owned subsidiary of Emerald Isle Bancorp). Oversees
69 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of
Treasurer since 1999 the Manager; Treasurer (since March 1999) of HarbourView
Age: 43 Asset Management Corporation, Shareholder Services, Inc.,
Oppenheimer Real Asset Management Corporation, Shareholder
Financial Services, Inc., Oppenheimer Partnership Holdings,
Inc., OFI Private Investments, Inc. (since March 2000),
OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since May 2000) and OFI Institutional
Asset Management, Inc. (since November 2000) (offshore fund
management subsidiaries of the Manager); Treasurer and
Chief Financial Officer (since May 2000) of Oppenheimer
Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer
Acquisition Corp. and OppenheimerFunds Legacy Program
(since April 2000); formerly Principal and Chief Operating
Officer (March 1995-March 1999), Bankers Trust
Company-Mutual Fund Services Division. An officer of 85
portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Connie Bechtolt, Assistant Vice President of the Manager (since September
Assistant Treasurer 1998); formerly Manager/Fund Accounting (September
since 2002 1994-September 1998) of the Manager. An officer of 85
Age: 39 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer 2002); formerly Vice President/Corporate Accounting of the
since 2002 Manager (July 1999-March 2002) prior to which he was Chief
Age: 39 Financial Officer at Sovlink Corporation (April 1996-June
1999). An officer of 85 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack, Senior Vice President (since May 1985) and General Counsel
Secretary since 2001 (since February 2002) of the Manager; General Counsel and a
Age: 54 director (since November 2001) of OppenheimerFunds
Distributor, Inc.; Senior Vice President and General
Counsel (since November 2001) of HarbourView Asset
Management Corporation; Vice President and a director
(since November 2000) of Oppenheimer Partnership Holdings,
Inc.; Senior Vice President, General Counsel and a director
(since November 2001) of Shareholder Services, Inc.,
Shareholder Financial Services, Inc., OFI Private
Investments, Inc., Oppenheimer Trust Company and OFI
Institutional Asset Management, Inc.; General Counsel
(since November 2001) of Centennial Asset Management
Corporation; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Assistant
Secretary and a director (since November 2001) of
OppenheimerFunds International Ltd.; Vice President (since
November 2001) of OppenheimerFunds Legacy Program;
Secretary (since November 2001) of Oppenheimer Acquisition
Corp.; formerly Acting General Counsel (November
2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of
Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November
1989-November 2001); OppenheimerFunds International Ltd.
and Oppenheimer Millennium Funds plc (October 1997-November
2001). An officer of 85 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of the
Assistant Secretary Manager; Vice President (since June 1990) of
since 2001 OppenheimerFunds Distributor, Inc.; Director, Vice
Age: 44 President and Assistant Secretary (since June 1999) of
Centennial Asset Management Corporation; Vice President
(since 1997) of Oppenheimer Real Asset Management, Inc.;
formerly Vice President and Associate Counsel of the
Manager (June 1990-July 1999). An officer of 85 portfolios
in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998) of
Assistant Secretary the Manager; Vice President (since 1999) of
since 2001 OppenheimerFunds Distributor, Inc.; Vice President and
Age: 37 Assistant Secretary (since 1999) of Shareholder Services,
Inc.; Assistant Secretary (since December 2001) of
OppenheimerFunds Legacy Program and Shareholder Financial
Services, Inc.; formerly Assistant Vice President and
Assistant Counsel of the Manager (August 1997-June 1998);
Assistant Counsel of the Manager (August 1994-August 1997).
An officer of 85 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip T. Masterson, Vice President and Assistant Counsel of the Manager (since
Assistant Secretary July 1998); formerly, an associate with Davis, Graham, amp;
since 2002 Stubbs LLP (January 1997-June 1998). An officer of 85
Age: 38 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Denis R. Molleur, Vice President and Senior Counsel of the Manager (since
Assistant Secretary July 1999); formerly a Vice President and Associate Counsel
since 2001 of the Manager (September 1995-July 1999). An officer of 82
Age: 45 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------

|X| Remuneration of Trustees. The officers of the Fund who are affiliated
with the Manager receive no salary or fee from the Fund. The Trustees of the
Fund received the compensation shown below from the Fund with respect to the
Fund's fiscal year ended December 31, 2002. The compensation from all of the
Board III Funds (including the Fund) represents compensation received as a
director, trustee or member of a committee of the boards of those funds
during the calendar year 2002.

---------------------------------------------------------------------------------
Trustee Name and Other Aggregate Retirement Estimated Total
Annual Compensation
Retirement From All
Benefits Oppenheimer
Paid at Funds
Retirement For Which
Benefits from all Individual
Accrued Board III Serves
as Part Funds As
Fund Position(s) (as Compensation of Fund (10 Funds) Trustee/Director
applicable) From Fund1 Expenses 2 (10 Funds)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Thomas W. Courtney $5,397 $2,536 $63,738 $103,959
Chairman of the Board;
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
John Cannon $4,480 $2,255 $16,962 $36,087
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Paul Y. Clinton $5,181 $1,929 $63,738 $99,793
Audit Committee Chairman
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert G. Galli $4,809 $3,651 $55,6782 $198,3863
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Lacy B. Herrmann $4,809 $727 $63,702 $92,626
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Brian Wruble $4,965 $608 $7,606 $95,626
Audit Committee Member
---------------------------------------------------------------------------------
1. Aggregate compensation includes fees and deferred compensation, if any.
2. Estimated annual retirement benefits paid at retirement is based on a
straight life payment plan election. The amount for Mr. Galli includes
$30,689 for serving as a trustee or director of 31 Oppenheimer funds that are
not Board III Funds.
3. Includes $105,760 for Mr. Galli for serving as trustee or director of 31
Oppenheimer funds that are not Board III Funds.

Note: For the Rochester funds, we do not include the compensation for Messrs.
Clinton, Courtney and Ms. Hermann that is included in the Quest compensation
paid by two funds (OCC Cash Reserves, Inc. and OCC Accumulation Trust) for
which the Quest Capital acts as the investment advisor. Therefore, the "Total
Compensation" numbers above do NOT include the compensation for the OCC funds
as provided in the examples for the other Quest funds.

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

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

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

|X| Major Shareholders. As of January 30, 2003, the only people 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:

Michael Shane PA PSP, 19 West Flagler Street, Suite 607, Miami, Florida
33130-4408, which owned 6,345.264 Class N shares (approximately 21.25% of
the Class N shares then outstanding).

Robert G. Easterling IRA, 51 Avenida Del Dol, Cedar Crest, New Mexico
87008-9415, which owned 4,999.963 Class N shares (approximately 16.75% of the
Class N shares then outstanding).

Richard Bates, 24 Santee Road, Brockton, Massachusetts 02301-2853, which
owned 2,110.855 Class N shares (approximately 7.07% of the Class N shares
then outstanding).

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

The portfolio manager of the Fund is principally responsible for the
day-to-day management of the Fund's investment portfolio. Other members of
the Manager's fixed-income portfolio department, provide the Fund's portfolio
manager with research and support in managing the Fund's portfolio.

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

The Code of Ethics is an exhibit to the Fund's registration statement
filed with the Securities and Exchange Commission and can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by
calling the SEC at 202.942.8090. The Code of Ethics can also be viewed as
part of the Fund's registration statement on the SEC's EDGAR database at the
SEC's Internet website at WWW.SEC.GOV. Copies may be obtained, after paying a
-----------
duplicating fee, by electronic request at the following e-mail address:
PUBLICINFO@SEC.GOV., or by writing to the SEC's Public Reference Section,
-------------------
Washington, D.C. 20549-0102.

|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities
for the Fund's portfolio and handles its day-to day business. That agreement
requires the Manager, at its expense, to provide the Fund with adequate
office space, facilities and equipment. It also requires the Manager to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective corporate administration for the
Fund. Those responsibilities include the compilation and maintenance of
records with respect to the Fund's operations, the preparation and filing of
specified reports, and the composition of proxy materials and registration
statements for continuous public sale of shares of the Fund.

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

The investment advisory agreement contains an indemnity of the
Manager. In the absence of willful misfeasance, bad faith, gross negligence
in the performance of its duties, or reckless disregard for its obligations
and duties under the investment advisory agreement, the Manager is not liable
for any loss sustained by reason of good faith errors or omissions in
connection with any matters to which the investment advisory agreement
relates. The agreement permits the Manager to act as investment advisor for
any other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
advisor or general distributor. If the Manager shall no longer act as
investment advisor to the Fund, the Manager may withdraw the Fund's right to
use the name "Oppenheimer" as part of its name.

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

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

The Board reviewed the foregoing information in arriving at its
decision to renew the investment advisory agreement. Among other factors,
the Board considered:

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

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

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

In arriving at a decision, the Board did not single out any one factor
or group of factors as being more important than other factors, but
considered all factors together. The Board judged the terms and conditions
of the Agreement, including the investment advisory fee, in light of all of
the surrounding circumstances.

o Accounting and Record-Keeping Services. The Manager provides accounting
and record-keeping services to the Fund pursuant to an Accounting and
Administration Agreement approved by the Board of Trustees. Under that
agreement, the Manager maintains the general ledger accounts and records
relating to the Fund's business and calculates the daily net asset values of
the Fund's shares. The fee is $12,000 for the first $30 million of the Fund's
net assets and $9,000 for each additional $30 million of net assets.

-------------------------------------------------------------------------------
Fiscal Year Ended Management Fee Paid to Accounting and
Administrative Services
Fee Paid to
12/31 OppenheimerFunds, Inc. OppenheimerFunds, Inc.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2000 $4,428,354 $289,525
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2001 $3,642,672 $235,637
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2002 $2,848,275 $181,165
-------------------------------------------------------------------------------

Brokerage Policies of the Fund

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

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

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

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

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

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

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

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

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

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

-----------------------------------------------------------------------
Fiscal Year Ended Total Brokerage Commissions Paid by the Fund1
12/31:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
2000 $349,7692
-----------------------------------------------------------------------
-----------------------------------------------------------------------
2001 $284,8423
-----------------------------------------------------------------------
-----------------------------------------------------------------------
2002 $273,5584
-----------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions
on a net trade basis.
2. In the fiscal year ended 12/31/00, the amount of transactions directed
to brokers for research services was $7,387,741 and the amount of the
concessions paid to broker-dealers for those services was $14,632.
3. In the fiscal year ended 12/31/01, the amount of transactions directed
to brokers for research services was $3,311,816 and the amount of the
concessions paid to broker-dealers for those services was $4,810.
4. During the fiscal year ended 12/31/02, the amount of transactions
directed to brokers for research services was $10,864,286 and the amount
of the commissions paid to broker-dealers for those services was $16,568.

Distribution and Service Plans

The Distributor. Under its General Distributor's Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's 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.

The sales charges and concessions 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, and the contingent deferred sales charge
retained by the Distributor on the redemption of shares for the most recent
fiscal year below. Class N shares were not publicly offered during the
Fund's fiscal year's depicted and therefore are not included in any of the
charts located in this section of the Statement of Additional Information.

----------------------------------------------------------------
Fiscal Year Aggregate Class A

Aggregate
Front-End Front-End Class M
Front-End Sales Sales Front-End
Sales Charges Charges on Sales
Charges Retained Class M Charges
on Class by Shares Retained by
Ended 12/31: A Shares Distributor1 Distributor1
----------------------------------------------------------------
----------------------------------------------------------------
2000 $580,724 $160,280
$86,526 $12,604

----------------------------------------------------------------
----------------------------------------------------------------
2001 $342,426 $89,216 $48,900 $6,024
----------------------------------------------------------------
----------------------------------------------------------------
2002 $245,040 $62,691 $26,914 $5,185
----------------------------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate of
the parent of the Distributor.

----------------------------------------------------------------------------------
Concessions Concessions Concessions
Concessions Concessions
Fiscal Year on Class A on Class B on Class C on Class M on Class N
Ended 12/31: Shares Shares Shares Shares Shares
Advanced by Advanced by Advanced by Advanced by Advanced by
Distributor1 Distributor1 Distributor1 Distributor1 Distributor1
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
2000 $76,275 $1,524,129 $206,428 $206,428 $206,428
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
2001 $43,302 $625,374 $82,640 $-6 $1232
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
2002 $24,972 $367,794 $48,707 $0 $2,617
----------------------------------------------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate of
the parent of the Distributor.
2. The inception of Class N shares was March 1, 2001.

----------------------------------------------------------------------------------
Fiscal Class A Class B Class C Class M Class N
Contingent
Deferred Contingent Contingent Contingent Contingent
Sales Deferred Deferred Sales Deferred Deferred
Year Charges Sales Charges Charges Sales Charge Sales Charge
Ended Retained by Retained by Retained by Retained by Retained by
12/31: Distributor Distributor Distributor Distributor Distributor
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
2002 $2,677 $878,780 $8,296 $0 $24
----------------------------------------------------------------------------------

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, Class
M and Class N shares under Rule 12b-1 of the Investment Company Act. Under
those plans the Fund pays the Distributor for all or a portion of its costs
incurred in connection with the distribution and/or servicing of the shares
of the particular class.

Each plan has been approved by a vote of the Board of Trustees,
including a majority of the Independent Trustees1, cast in person at a
meeting called for the purpose of voting on that plan.

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

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

The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount
of payments to be made under a plan must be approved by shareholders of the
class affected by the amendment. Because Class B shares of the Fund
automatically convert into Class A shares 72 months after purchase, the Fund
must obtain the approval of both Class A and Class B shareholders for a
proposed material amendment to the Class A 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's parent Trust who are not
"interested persons" of the Trust (or the Fund) is committed to the
discretion of the Independent Trustees. This does not prevent the
involvement of others in the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.

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

|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as
"recipients") for personal services and account maintenance services they
provide for their customers who hold Class A shares. The services include,
among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's
investment plans available and providing other services at the request of the
Fund or the Distributor. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares. While the plan permits the Board to authorize payments to
the Distributor to reimburse itself for services under the plan, the Board
has not yet done so, except in the case of the special arrangement described
below. 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 year ended December 31, 2002 payments under the Class A
Plan totaled $449,951. That included $30,596 paid to an affiliate of the
Distributor's parent company. The amount retained by the Distributor was
$570. Any unreimbursed expenses the Distributor incurs with respect to Class
A shares in any fiscal year cannot be recovered in subsequent years. The
Distributor may not use payments received under the Class A Plan to pay any
of its interest expenses, carrying charges, or other financial costs, or
allocation of overhead.

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

The Class B, Class C and Class N plans permit the Distributor to retain
both the asset-based sales charges and the service fees or to pay recipients
the service fee on a quarterly basis, without payment in advance. However,
the Distributor currently intends to pay the service fee to recipients in
advance for the first year after the shares are purchased. After the first
year shares are outstanding, the Distributor makes service fee payments
quarterly on those shares. The advance payment is based on the net asset
value of shares sold. Shares purchased by exchange do not qualify for the
advance service fee payment. If 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 Distributor retains the asset-based sales charge on Class B and
Class M shares. It may pay dealers who sell Class M shares a portion of the
asset-based sales charge it receives on Class M shares, as additional
compensation. 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 and/or Class C
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 Distributor retains the asset based sales charge on Class N
shares.

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

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

The Distributor's actual expenses in selling Class B, Class C, Class M
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 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.

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

Distribution Fees Paid to the Distributor for the Year Ended 12/31/02
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Unreimbursed
Aggregate Expenses as %
Payments Retained by Unreimbursed of Net Assets
Under Plan1 Distributor Expenses Under Plan of Class
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Plan $2,136,213 $1,626,563 $3,601,847 2.33%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Plan $664,349 $50,647 $1,756,866 2.88%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class M Plan $899,200 $314,268 None N/A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Plan $1,023 $1,005 $5,646 1.46%
--------------------------------------------------------------------------------
1. Includes amounts paid to an affiliate of the Distributor's parent
company: $14,127 (Class B), $15,134 (Class C), $11,293 (Class M) and
$14 (Class N).

All payments under the 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 "standardized
yield," "dividend yield," "average annual total return," "cumulative total
return," "average annual total return at net asset value" and "total return
at net asset value." An explanation of how yields and total returns are
calculated is set forth below. The charts below show the Fund's performance
as of its most recent fiscal year end for its classes of shares that are
currently offered to investors. You can obtain current performance
information by calling the Fund's Transfer Agent at 1.800.525.7048 or by
visiting the OppenheimerFunds Internet website 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). Certain types of yields may also be shown,
provided that they are accompanied by standardized average annual total
returns.

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 Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of
each shareholder's account. Your account's performance will vary from the
model performance data if your dividends are received in cash, or you buy or
sell shares during the period, or you bought your shares at a different time
and price than the shares used in the model.
o The Fund's performance returns do not reflect the effect of taxes on
dividends or capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, and its yields 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 Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future yields or 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 yields and
total returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of those
investments, the types of investments the Fund holds, and its operating
expenses that are allocated to the particular class.

|X| Yields. The Fund uses a variety of different yields to illustrate
its current returns. Each class of shares calculates its yield separately
because of the different expenses that affect each class.

o Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a class of shares for a stated 30-day period.
It is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments for that period. It may
therefore differ from the "dividend yield" for the same class of shares,
described below.

Standardized yield is calculated using the following formula set forth
in rules adopted by the Securities and Exchange Commission, designed to
assure uniformity in the way that all funds calculate their yields:

------------------------------------------------------------------------------
[OBJECT OMITTED]
------------------------------------------------------------------------------
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense assumptions).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day
of the period, adjusted for undistributed net investment income.

The standardized yield for a particular 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized
yield for a 30-day period occurs at a constant rate for a six-month period
and is annualized at the end of the six-month period.
Additionally, because each class of shares is subject to different expenses,
it is likely that the standardized yields of the Fund's classes of shares
will differ for any 30-day period.

o Dividend Yield. The Fund may quote a "dividend yield" for each class
of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and
the sum is multiplied by 12 (to annualize the yield) and divided by the
maximum offering price on the last day of the dividend period. The formula
is shown below:

Dividend Yield = dividends paid x 12/maximum offering price
(payment date)

The maximum offering price for Class A and Class M shares includes the
current maximum initial sales charge. The maximum offering price for Class
B, Class C and Class N shares is the net asset value per share, without
considering the effect of contingent deferred sales charges. The Class A and
Class M dividend yields may also be quoted without deducting the maximum
initial sales charge.

-----------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 12/31/02
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class of Standardized Yield Dividend Yield
Shares
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
(NAV) (MOP) (NAV) (MOP)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class A 4.95% 4.67% 7.31% 6.89%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class B 4.13% N/A 6.45% N/A
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class C 4.16% N/A 6.47% N/A
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class M 4.41% 4.26% 6.65% 6.44%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class N 4.60% N/A 6.70% N/A
-----------------------------------------------------------------------------

|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%, and for Class M, the current maximum initial
sales charge of 3.25% (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 1.0% contingent
deferred sales charge is deducted for returns for the 1-year period. For
Class N shares, the 1% contingent deferred sales charge is deducted for
returns for the one year period. Class N total returns may also be calculated
for the periods prior to 3/1/01 (the inception date for Class N shares),
based on the Fund's Class A returns, adjusted to reflect the higher Class N
12b-1 fees.

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

------------------------------------------------------------------------------
[OBJECT OMITTED]
------------------------------------------------------------------------------

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

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

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

ATVDR - 1= Average Annual Total Return (After Taxes on
-----
1/n Distributions and Redemption)
P
--------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales Charge)
For the Periods Ended 12/31/02
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of
class)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on Distributions -11.87% -1.78%1 4.50%1
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on -6.19% -0.35%1 4.77%1
Distributions and
Redemption of Fund Shares
--------------------------------------------------------------------------
1. Inception date of Class A: 5/1/95

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:

------------------------------------------------------------------------------
[OBJECT OMITTED]
------------------------------------------------------------------------------
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, Class M or
Class N shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment in
that class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends and
capital gains distributions.

---------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 12/31/02
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Shares Returns (10 years
or life of class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5-Years 10-Years
(or life of (or life of
class) class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
(MOP)* (NAV) (MOP) (NAV) (MOP) (NAV) (MOP) (NAV)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A1 57.26% 66.86% -11.96% -6.59% 0.80% 2.00% 6.08%1 6.91%1
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B2 59.51% 59.51% -11.86% -7.44% 0.91% 1.19% 6.28% 6.28%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C3 34.89% 34.89% -8.28% -7.39% 1.21%3 1.21%3 4.50% 4.50%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class M4 103.57% 110.41% -10.17% -7.16% 0.81% 1.48% 7.37% 7.72%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N5 -9.73% -9.73% -7.81% -6.92% -5.43% -5.43% N/A N/A
---------------------------------------------------------------------------------
1. Life-of-class performance is shown from inception of Class A: 5/1/95.
2. Life-of-class performance is shown from inception of Class B: 5/1/95.
3. Life-of-class performance is shown from inception of Class C: 3/11/96.
4. Inception of Class M: 6/3/86.
5. Inception of Class N: 3/1/01.
* The maximum offering price

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

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

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

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

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

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

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

From time to time, the Fund may include in its advertisements and sales
literature the total return performance of a hypothetical investment account
that includes shares of the fund and other Oppenheimer funds. The combined
account may be part of an illustration of an asset allocation model or
similar presentation. The account performance may combine total return
performance of the fund and the total return performance of other Oppenheimer
funds included in the account. Additionally, from time to time, the Fund's
advertisements and sales literature may include, for illustrative or
comparative purposes, statistical data or other information about general or
specific market and economic conditions that may include, for example:

o information about the performance of certain securities or commodities
markets or segments of those markets,
o information about the performance of the economies of particular
countries or regions,
o the earnings of companies included in segments of particular
industries, sectors, securities markets, countries or regions,
o the availability of different types of securities or offerings of
securities,
o information relating to the gross national or gross domestic product of
the United States or other countries or regions,
o comparisons of various market sectors or indices to demonstrate
performance, risk, or other characteristics of the Fund.

ABOUT your account

How to Buy Shares

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

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

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

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

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

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

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

Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
1 - "OSM" stands for Oppenheimer Select Managers

There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds
and Oppenheimer Senior Floating Rate Fund. 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. Letters of
Intent do not consider Class C or Class N shares you purchase or may have
purchased.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C 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 amp; Smith, Inc. ("Merrill Lynch") or an independent
record keeper that has a contract or special arrangement with Merrill Lynch.
If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has less than $3 million in assets (other than
assets invested in money market funds) invested in applicable investments,
then the retirement plan may purchase only Class B shares of the Oppenheimer
funds. Any retirement plans in that category that currently invest in Class B
shares of the Fund will have their Class B shares converted to Class A shares
of the Fund when the plan's applicable investments reach $5 million.
OppenheimerFunds has entered into arrangements with certain record keepers
whereby the Transfer Agent compensates the record keeper for its record
keeping and account servicing functions that it performs on behalf of the
participant level accounts of a retirement plan. While such compensation may
act to reduce the record keeping fees charged by the retirement plan's record
keeper, that compensation arrangement may be terminated at any time,
potentially affecting the record keeping fees charged by the retirement
plan's record keeper.

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

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

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

The Distributor will not accept 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.

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

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

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

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

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

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

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

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

Account Fees. As stated in the Prospectus, a $12 annual fee is assessed on
any account valued at less than $500. This fee will not be assessed on the
following accounts:
o Accounts that have balances below $500 due to the automatic conversion
of shares from Class B to Class A shares;
o Accounts with an active Asset Builder Plan, payroll deduction plan or a
military allotment plan;
o OppenheimerFunds-sponsored group retirement accounts that are making
continuing purchases;
o Certain accounts held by broker-dealers through the National Securities
Clearing Corporation; and
o Accounts that fall below the $500 threshold due solely to market
fluctuations within the 12-month period preceding the date the fee is
deducted.

The fee is automatically deducted from qualifying accounts annually on
or about the second to last business day of September. This annual fee is
waived for any shareholders who elect to access their account documents
through electronic document delivery rather than in paper copy and who elect
to utilize the Internet or PhoneLink as their primary source for their
general servicing needs. To sign up to access account documents
electronically via eDocs Direct, please visit the Service Center on our
website at WWW.OPPENHEIMERFUNDS.COM or call 1.888.470.0862 for instructions.
------------------------

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

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

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

|X| Securities Valuation. The Fund's Board of Trustees has
established procedures for the valuation of the Fund's securities. In general
those procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on Nasdaq(R)
are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which
they are traded or on Nasdaq, 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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

The following funds do not offer Class N shares:
Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester National
Municipals
Oppenheimer Municipal Bond Fund Oppenheimer Senior Floating Rate
Fund
Oppenheimer New Jersey Municipal Fund Limited Term New York Municipal
Fund
Oppenheimer New York Municipal Fund Rochester Fund Municipals

The following funds do not offer Class Y shares:
Oppenheimer California Municipal Fund Oppenheimer Limited Term Municipal
Fund
Oppenheimer Capital Income Fund Oppenheimer Multiple Strategies
Fund
Oppenheimer Cash Reserves Oppenheimer New Jersey Municipal
Fund
Oppenheimer Champion Income Fund Oppenheimer New York Municipal Fund
Oppenheimer Convertible Securities Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Capital Value
Fund, Inc.
Oppenheimer Developing Markets Fund Oppenheimer Quest Global Value
Fund, Inc.
Oppenheimer Gold amp; Special Minerals Oppenheimer Rochester National
Fund Municipals
Oppenheimer International Bond Fund Oppenheimer Senior Floating Rate
Fund
Oppenheimer International Growth Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Small Limited Term New York Municipal
Company Fund Fund

o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
shares of any other fund.
o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
generally available only by exchange from the same class of shares of
other Oppenheimer funds or through OppenheimerFunds-sponsored 401(k)
plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be
exchanged only for Class A shares of other Oppenheimer funds. They may
not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market
Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
shares.
o Class X shares of Limited Term New York Municipal Fund may be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may
be made to Class X shares.
o 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.
o Shares of Oppenheimer Select Managers Mercury Advisors Samp;P Index Fund
and Oppenheimer Select Managers QM Active Balanced Fund are only
available to retirement plans and are available only by exchange from
the same class of shares of other Oppenheimer funds held by retirement
plans.
o Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares
of any money market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered with a sales charge
upon payment of the sales charge. They may also be used to purchase
shares of Oppenheimer funds subject to an early withdrawal charge or
contingent deferred sales charge.
o 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.
o Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of
any of the Oppenheimer funds.

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

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

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

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

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

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

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

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

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

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

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

|X| Limits on Multiple Exchange Orders. The Fund reserves the right
to reject telephone or written exchange requests submitted in bulk by anyone
on behalf of more than one account. 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 have an existing account in the fund to which the exchange
is to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.

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

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

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

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Fund will be required in certain cases to withhold 30% (29% for
payments after December 31, 2003) of ordinary income dividends, capital gains
distributions and the proceeds of the redemption of shares, paid to any
shareholder (1) who has failed to provide a correct taxpayer identification
-------
number or to properly certify that number when required, (2) who is subject
to backup withholding for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to the Fund that
the shareholder is not subject to backup withholding or is an "exempt
recipient" (such as a corporation). All income and any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and is identified in
reports mailed to shareholders in January of each year.

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

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

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

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

If the ordinary income dividends from the Fund are effectively
---
connected with the conduct of a U.S. trade or business, then the foreign
person may claim an exemption from the U.S. tax described above provided the
Fund obtains a properly completed and signed Certificate of Foreign Status.

If the foreign person fails to provide a certification of his/her
foreign status, the Fund will be required to withhold U.S. tax at a rate of
30% (29% for payments after December 31, 2003) on ordinary income dividends,
capital gains distributions and the proceeds of the redemption of shares,
paid to any foreign person. All income and any tax withheld (in this
situation) by the Fund is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in January of each year.

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

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

Additional Information About the Fund

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

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

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

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

INDEPENDENT AUDITORS' REPORT

--------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Oppenheimer Bond Fund Series:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Convertible Securities Fund, a portfolio of the Bond Fund Series,
including the statement of investments, as of December 31, 2002, 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.
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. The
financial highlights for each of the two years in the period ended December
31,
1999, were audited by other auditors whose report dated January 24, 2000,
expressed an unqualified opinion on this information.
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 December 31, 2002, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Convertible Securities Fund as of December 31, 2002, 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, in conformity with
accounting
principles generally accepted in the United States of America.

/s/KPMG LLP
KPMG LLP

Denver, Colorado
January 23, 2003

STATEMENT OF INVESTMENTS December 31, 2002

Principal Market Value

Amount See Note 1
-------------------------------------------------------------------------------------------------------------------

Convertible Corporate Bonds and Notes--52.5%
-------------------------------------------------------------------------------------------------------------------
Consumer Discretionary--12.8%
-------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants amp; Leisure--1.9%
Gtech Holdings Corp., 1.75% Cv. Unsec. Debs.,
12/15/21 $ 2,000,000 $ 2,560,000
-------------------------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 5% Cv. Sub. Nts.,
5/15/06 3,500,000 3,368,750
-------------------------------------------------------------------------------------------------------------------
Royal Carribean Cruises Ltd., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid
Yield Option Nts., 5.30%, 2/2/21
1 10,000,000
3,850,000

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

9,778,750

-------------------------------------------------------------------------------------------------------------------
Internet amp; Catalog Retail--0.6%
Amazon.com, Inc., 4.75% Cv. Sub. Debs., 2/1/09
2 4,000,000 2,955,000
-------------------------------------------------------------------------------------------------------------------
Media--8.1%
America Online, Inc., Zero Coupon Cv. Nts., 4.03%, 12/6/19
1 8,000,000 4,440,000
-------------------------------------------------------------------------------------------------------------------
Cox Communications, Inc., 0.348% Cv. Sr. Nts.,
2/23/21 6,000,000 4,342,500
-------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 4.875% Cv. Nts., 1/1/07
2 5,000,000 4,450,000
-------------------------------------------------------------------------------------------------------------------
Getty Images, Inc., 5% Cv. Sub. Nts., 3/15/07
2 4,000,000 3,715,000
-------------------------------------------------------------------------------------------------------------------
Interpublic Group Cos., 1.80% Cv. Sub. Nts.,
9/16/04 4,000,000 3,505,000
-------------------------------------------------------------------------------------------------------------------
Liberty Media Corp.: 3.25% Exchangeable Sr. Sec. Debs., 3/15/31
(exchangeable for Viacom, Inc., Cl. B common stock)
2 7,000,000 6,597,500
3.25% Exchangeable Sr. Unsec. Debs., 3/15/31 (exchangeable for Viacom,
Inc., Cl. B common stock or cash based on the value
thereof) 1,000,000 942,500
4% Exchangeable Sr. Debs., 11/15/29 [exchangeable for Sprint Corp.
(PCS Group), Series 1 common stock or cash based on the value of that
stock] 10,000,000 5,437,500
-------------------------------------------------------------------------------------------------------------------
News America, Inc., Zero Coupon Cv. Liquid Yield Option Nts., 3.51%, 2/28/21
1,2 10,000,000 5,212,500
-------------------------------------------------------------------------------------------------------------------
Omnicom Group, Inc., Zero Coupon Cv. Sr. Unsec. Nts., 0.07%, 7/31/32
1 4,000,000 4,045,000

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

42,687,500

-------------------------------------------------------------------------------------------------------------------
Specialty Retail--2.2%
Gap, Inc. (The), 5.75% Cv. Sr. Nts., 3/15/09
2 5,000,000 6,262,500
-------------------------------------------------------------------------------------------------------------------
Lowe's Cos., Inc., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid Yield
Option Nts., 2.50%, 2/16/21
1 3,000,000
2,227,500
-------------------------------------------------------------------------------------------------------------------
TJX Cos., Inc. (The), Zero Coupon Cv. Unsec. Sub. Liquid Yield
Option Nts., 1.66%, 2/13/21
1,2 4,000,000
3,285,000

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

11,775,000

-------------------------------------------------------------------------------------------------------------------
Energy--3.7%
-------------------------------------------------------------------------------------------------------------------
Energy Equipment amp; Services--1.3%
Pride International, Inc., Zero Coupon Cv. Sub. Debs., 5.50%, 4/24/18
1 8,000,000 3,890,000
-------------------------------------------------------------------------------------------------------------------
Transocean Sedco Forex, Inc., Zero Coupon Cv. Sr. Unsec. Debs., 3.47%,
5/24/20 1 5,000,000 3,100,000

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

6,990,000

13 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS Continued

Principal Market Value

Amount See Note 1
-------------------------------------------------------------------------------------------------------------------

Oil amp; Gas--2.4%
Devon Energy Corp., 4.95% Cv. Sr. Unsec. Debs., 8/15/08
(cv. into Chevron Corp. common stock)
$ 6,000,000 $ 6,067,500
-------------------------------------------------------------------------------------------------------------------
Kerr-McGee Corp., 5.25% Cv. Unsec. Sub. Nts.,
2/15/10 6,000,000 6,532,500

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

12,600,000

-------------------------------------------------------------------------------------------------------------------
Financials--3.5%
-------------------------------------------------------------------------------------------------------------------
Diversified Financials--0.8%
E*TRADE Group, Inc., 6% Cv. Unsec. Sub. Nts.,
2/1/07 3,000,000 2,246,250
-------------------------------------------------------------------------------------------------------------------
Providian Financial Corp., 3.25% Cv. Sr. Unsec. Nts.,
8/15/05 3,000,000 2,246,250

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

4,492,500

-------------------------------------------------------------------------------------------------------------------
Insurance--1.5%
USFamp;G Corp., Zero Coupon Cv. Sub. Nts., 4.94%, 3/3/09
1 5,000,000 3,893,750
-------------------------------------------------------------------------------------------------------------------
XL Capital Ltd., Zero Coupon Cv. Sr. Unsec. Debs., 3.14%, 5/23/21
1,2 6,000,000 3,825,000

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

7,718,750

-------------------------------------------------------------------------------------------------------------------
Real Estate--1.2%
EOP Operating LP, 7.25% Cv. Sr. Nts., 11/15/08
2 6,000,000 6,277,500
-------------------------------------------------------------------------------------------------------------------
Health Care--7.4%
-------------------------------------------------------------------------------------------------------------------
Biotechnology--2.2%
Affymetrix, Inc., 4.75% Cv. Sub. Nts.,
2/15/07 3,000,000 2,576,250
-------------------------------------------------------------------------------------------------------------------
Genzyme Corp., 3% Cv. Unsec. Sub. Debs.,
5/15/21 4,000,000 3,710,000
-------------------------------------------------------------------------------------------------------------------
ImClone Systems, Inc., 5.50% Cv. Sub. Unsec. Nts.,
3/1/05 2,000,000 1,400,000
-------------------------------------------------------------------------------------------------------------------
Invitrogen Corp., 5.50% Cv. Unsec. Sub. Nts.,
3/1/07 4,000,000 3,710,000

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

11,396,250

-------------------------------------------------------------------------------------------------------------------
Health Care Equipment amp; Supplies--1.0%
Medtronic, Inc., 1.25% Cv. Nts., 9/15/21
2 5,000,000 5,262,500
-------------------------------------------------------------------------------------------------------------------
Health Care Providers amp; Services--0.6%
Quest Diagnostics, Inc., 1.75% Cv. Sr. Unsec. Debs.,
11/30/21 3,000,000 3,150,000
-------------------------------------------------------------------------------------------------------------------
Pharmaceuticals--3.6%
Alza Corp., Zero Coupon Cv. Unsec. Sub. Debs., 2.81%, 7/28/20
1,2 5,000,000 3,912,500
-------------------------------------------------------------------------------------------------------------------
Ivax Corp., 5.50% Cv. Sr. Unsec. Sub. Nts.,
5/15/07 3,500,000 3,128,125
-------------------------------------------------------------------------------------------------------------------
Roche Holdings, Inc., Zero Coupon Cv. Unsec. Unsub. Liquid Yield
Option Nts., 4.78%, 4/20/10
1,2 10,000,000
6,163,000
-------------------------------------------------------------------------------------------------------------------
Sepracor, Inc., 7% Cv. Sub. Debs.,
12/15/05 2,000,000
1,660,000
-------------------------------------------------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd., 1.50% Cv. Nts., 10/15/05
2 4,000,000 4,300,000

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

19,163,625

-------------------------------------------------------------------------------------------------------------------
Industrials--4.5%
-------------------------------------------------------------------------------------------------------------------
Commercial Services amp; Supplies--1.0%
Cendant Corp., Zero Coupon Cv. Sr. Debs., 3%,
5/4/21 2,500,000 2,478,125
-------------------------------------------------------------------------------------------------------------------
CheckFree Corp., 6.50% Cv. Nts.,
12/1/06 3,000,000
2,778,750

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

5,256,875

14 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Principal Market Value

Amount See Note 1
-------------------------------------------------------------------------------------------------------------------

Construction amp; Engineering--0.3%
Shaw Group, Inc. (The), Zero Coupon Cv. Sr. Unsec. Liquid Yield Option
Nts., 0.88%, 5/1/21
1 $
3,000,000 $ 1,732,500
-------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates--1.4%
Tyco International Ltd., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid Yield
Option Nts., 0.60%, 11/17/20
1 10,000,000
7,212,500
-------------------------------------------------------------------------------------------------------------------
Machinery--1.4%
Danaher Corp., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid Yield
Option Nts., 2.42%, 1/22/21
1 8,000,000
5,410,000
-------------------------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc.: 8.25% Cv. Sub. Nts., 12/31/05
2 2,947,809 1,031,733
8.25% Cv. Sub. Nts., 12/31/05
2 2,947,809
1,031,733

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

7,473,466

-------------------------------------------------------------------------------------------------------------------
Road amp; Rail--0.4%
GATX Corp., 7.50% Cv. Sr. Unsec. Nts., 2/1/07
2 2,000,000 2,160,000
-------------------------------------------------------------------------------------------------------------------
Information Technology--16.5%
-------------------------------------------------------------------------------------------------------------------
Communications Equipment--2.5%
Commscope, Inc., 4% Cv. Unsec. Sub. Nts.,
12/15/06 3,500,000 2,852,500
-------------------------------------------------------------------------------------------------------------------
Corning, Inc., 3.50% Cv. Sr. Nts.,
11/1/08 5,000,000
3,475,000
-------------------------------------------------------------------------------------------------------------------
Juniper Networks, Inc., 4.75% Cv. Unsec. Sub. Nts.,
3/15/07 4,500,000 3,510,000
-------------------------------------------------------------------------------------------------------------------
Nortel Networks Corp.:
4.25% Cv. Sr. Nts., 9/1/08
2 5,000,000
2,637,500
4.25% Cv. Sr. Unsec. Nts.,
9/1/08
1,000,000 527,500

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

13,002,500

-------------------------------------------------------------------------------------------------------------------
Computers amp; Peripherals--0.3%
Quantum Corp., 7% Cv. Sub. Nts.,
8/1/04 2,000,000
1,780,000
-------------------------------------------------------------------------------------------------------------------
Electronic Equipment amp; Instruments--4.0%
Agilent Technologies, Inc.:
3% Cv. Sr. Unsec. Nts., 12/1/21
2 3,000,000
2,891,250
3% Cv. Sr. Debs., 12/1/21
4
1,000,000 963,750
-------------------------------------------------------------------------------------------------------------------
Celestica, Inc., Zero Coupon Cv. Nts., 4.29%, 8/1/20
1 10,000,000 4,637,500
-------------------------------------------------------------------------------------------------------------------
Sanmina-SCI Corp., 4.25% Cv. Unsec. Nts.,
5/1/04 2,500,000 2,443,750
-------------------------------------------------------------------------------------------------------------------
Solectron Corp., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid Yield Option Nts.,
4.21% 10/20/20
1
8,000,000 4,100,000
-------------------------------------------------------------------------------------------------------------------
Thermo Electron Corp., 4% Cv. Unsec. Sub. Nts., Series RG,
1/15/05 6,000,000 5,955,000

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

20,991,250

-------------------------------------------------------------------------------------------------------------------
IT Consulting amp; Services--1.0%
Electronic Data Systems Corp., Zero Coupon Cv. Sr. Unsec.
Nts., 1.55%, 10/10/21
1
5,000,000 3,825,000
-------------------------------------------------------------------------------------------------------------------
Safeguard Scientifics, Inc., 5% Cv. Unsec. Sub. Nts.,
6/15/06 2,000,000 1,260,000

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

5,085,000

15 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS Continued

Principal Market Value

Amount See Note 1
-------------------------------------------------------------------------------------------------------------------

Semiconductor Equipment amp; Products--5.7%
Advanced Micro Devices, Inc.: 4.75% Cv. Sr. Unsec. Nts., 2/1/22
2,4 $ 3,000,000 $ 1,882,500
4.75% Cv. Sr. Debs.,
2/1/22
1,000,000 627,500
-------------------------------------------------------------------------------------------------------------------
Agere Systems, Inc., 6.50% Cv. Sub. Nts.,
12/15/09 2,500,000 1,959,375
-------------------------------------------------------------------------------------------------------------------
ASM Lithography Holding NV, 4.25% Cv. Nts., 11/30/04
2 4,000,000 3,510,000
-------------------------------------------------------------------------------------------------------------------
Cypress Semiconductor Corp., 4% Cv. Unsec. Nts.,
2/1/05 2,500,000 2,096,875
-------------------------------------------------------------------------------------------------------------------
International Rectifier Corp., 4.25% Cv. Sub. Nts., 7/15/07
2 4,000,000 3,435,000
-------------------------------------------------------------------------------------------------------------------
Lam Research Corp., 4% Cv. Unsec. Sub. Nts.,
6/1/06 4,000,000 3,500,000
-------------------------------------------------------------------------------------------------------------------
Lattice Semiconductor Corp., 4.75% Cv. Unsec. Sub. Nts.,
11/1/06 3,000,000 2,703,750
-------------------------------------------------------------------------------------------------------------------
LSI Logic Corp.:
4% Cv. Sub. Nts., 11/1/06
2
3,000,000 2,460,000
4% Cv. Unsec. Sub. Nts.,
11/1/06
2,000,000 1,640,000
-------------------------------------------------------------------------------------------------------------------
RF Micro Devices, Inc., 3.75% Cv. Nts.,
8/15/05 4,000,000 3,480,000
-------------------------------------------------------------------------------------------------------------------
Semtech Corp., 4.50% Cv. Sub. Nts.,
2/1/07 3,000,000 2,628,750

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

29,923,750

-------------------------------------------------------------------------------------------------------------------
Software--3.0%
BEA Systems, Inc., 4% Cv. Nts.,
12/15/06 5,000,000
4,550,000
-------------------------------------------------------------------------------------------------------------------
Computer Associates International, Inc., 5% Cv. Sr. Nts., 3/15/07
2 4,000,000 4,075,000
-------------------------------------------------------------------------------------------------------------------
Mentor Graphics Corp., 6.875% Cv. Sub. Nts., 6/15/07
2 2,000,000 1,627,500
-------------------------------------------------------------------------------------------------------------------
Mercury Interactive Corp., 4.75% Cv. Nts., 7/1/07
2 4,000,000 3,610,000
-------------------------------------------------------------------------------------------------------------------
Symantec Corp., 3% Cv. Sub. Nts., 11/1/06
2 1,500,000 2,120,625

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

15,983,125

-------------------------------------------------------------------------------------------------------------------
Materials--1.8%
-------------------------------------------------------------------------------------------------------------------
Metals amp; Mining--1.8%
Freeport-McMoRan Cooper amp; Gold, Inc., 8.25% Cv. Sr. Nts., 1/31/06
2 2,500,000 3,559,375
-------------------------------------------------------------------------------------------------------------------
Inco Ltd., 5.75% Cv. Debs.,
7/1/04 6,000,000
6,052,500

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

9,611,875

-------------------------------------------------------------------------------------------------------------------
Telecommunication Services--1.6%
-------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services--1.6%
Bell Atlantic Financial Services, Inc., 5.75% Cv. Nts.,
4/1/03 3,000,000 3,040,500
-------------------------------------------------------------------------------------------------------------------
Verizon Global Funding Corp., Zero Coupon Cv. Sr. Unsub. Nts., 1.34%,
5/15/21 9,000,000 5,242,500

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

8,283,000

-------------------------------------------------------------------------------------------------------------------
Utilities--0.7%
-------------------------------------------------------------------------------------------------------------------
Electric Utilities--0.2%
Xcel Energy, Inc., 7.50% Cv. Sr. Nts., 11/21/07
2 1,000,000 1,190,000
-------------------------------------------------------------------------------------------------------------------
Gas Utilities--0.5%
El Paso Corp., Zero Coupon Cv. Debs., 6.10%, 2/28/21
1 8,000,000 2,520,000

---------------
Total Convertible Corporate Bonds and Notes (Cost
$285,840,683) 276,453,216

16 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Principal Market Value

Amount See Note 1
-------------------------------------------------------------------------------------------------------------------

Non-Convertible Corporate Bonds and Notes--0.3%
-------------------------------------------------------------------------------------------------------------------
Orbital Sciences Corp., Units (each unit consists of $1,000 principal amount
of 12% sr. nts., 8/15/06 and one warrant to purchase
cl. c common stock at $3.86 per share) 3,5 (Cost
$1,500,000) $ 1,500,000 $ 1,680,000

Shares
-------------------------------------------------------------------------------------------------------------------
Preferred Stocks--32.0%
-------------------------------------------------------------------------------------------------------------------
Consumer Discretionary--4.3%
-------------------------------------------------------------------------------------------------------------------
Automobiles--2.4%
Ford Motor Co. Capital Trust II, 6.50% Cum. Cv. Trust Preferred
Securities,
Non-Vtg.
135,000 5,450,625
-------------------------------------------------------------------------------------------------------------------
General Motors Corp., 4.50% Cv. Sr. Debs., Series
A 300,000 7,329,000

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

12,779,625

-------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants amp; Leisure--0.3%
Six Flags, Inc., 7.25% Cum. Cv. Preferred Income Equity Redeemable
Shares,
Non-Vtg.
100,000 1,625,000
-------------------------------------------------------------------------------------------------------------------
Media--0.9%
Equity Securities Trust I/Cablevision Systems Corp., 6.50% Cv., Series
CVC 120,000 2,415,000
-------------------------------------------------------------------------------------------------------------------
Tribune Co., 2% Cv. Unsec. Participation Hybrid Option Note
Exchangeable Securities (exchangeable for shares of America Online,
Inc.) 30,000 2,250,000

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

4,665,000

-------------------------------------------------------------------------------------------------------------------
Specialty Retail--0.7%
Toys R Us, Inc., 6.25% Cv. Equity Units (each unit has a stated amount of $50
and consists of a contract to purchase Toys R Us, Inc. common stock and
$50 principal amount of Toys R Us, Inc., 6.25% sr. nts., 8/16/07)
5 40,000 1,346,000
-------------------------------------------------------------------------------------------------------------------
United Rentals Trust I, 6.50% Cv. Quarterly Income Preferred
Securities,
Non-Vtg.
70,000 2,030,000

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

3,376,000

-------------------------------------------------------------------------------------------------------------------
Consumer Staples--0.7%
-------------------------------------------------------------------------------------------------------------------
Food Products--0.7%
Dean Foods Capital Trust II/Dean Foods Corp., 5.50% Trust Cv.
Preferred Securities,
Non-Vtg.
75,000 3,965,625
-------------------------------------------------------------------------------------------------------------------
Energy--3.5%
-------------------------------------------------------------------------------------------------------------------
Energy Equipment amp; Services--1.2%
Weatherford International Ltd., 5% Cv. Sub. Preferred Equivalent
Debs. 120,000 6,180,000
-------------------------------------------------------------------------------------------------------------------
Oil amp; Gas--2.3%
Kerr-McGee Corp., 5.50% Cv. Unsec. Debt Exchangeable for Common
Stock of Devon Energy
Corp.
75,000 3,210,000
-------------------------------------------------------------------------------------------------------------------
Newfield Financial Trust I, 6.50% Cum. Cv., Quarterly Income Preferred
Securities, Series
A
70,000 3,946,250
-------------------------------------------------------------------------------------------------------------------
Unocal Capital Trust, 6.25% Cum. Cv.,
Non-Vtg. 100,000 5,137,500

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

12,293,750

17 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS Continued

Market Value

Shares See Note 1
-------------------------------------------------------------------------------------------------------------------

Financials--7.4%
-------------------------------------------------------------------------------------------------------------------
Banks--1.5%
National Australia Bank Ltd., ExCaps (each ExCap consists of $25 principal
amount of 7.875% Perpetual Capital Security and a purchase contract
entitling the holder to exchange ExCaps for ordinary shares of the Bank)
5 80,000 $ 2,604,000
-------------------------------------------------------------------------------------------------------------------
Washington Mutual Capital Trust I, 5.375% Cum. Cv. Units (each unit
consists of one preferred stock and one warrant to purchase Washington
Mutual, Inc.), Non-Vtg.
5
100,000 5,187,500

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

7,791,500

-------------------------------------------------------------------------------------------------------------------
Diversified Financials--0.6%
Capital One Financial Corp., 6.25% Cv. Upper DECS (each upper DECS has a
stated amount of $50 and consists of a forward purchase contract to purchase
Capital One Financial Corp. common stock and $50 principal amount of
Capital One Financial Corp., 6.25% sr. nts., 5/17/07)
5 50,000 1,443,750
-------------------------------------------------------------------------------------------------------------------
Household International, Inc., 8.75% Cv. Adjustable Conversion-Rate Equity
Security Units (each unit has a stated amount of $25 and consists of a
contract
to purchase Household International, Inc. common stock and $25 principal
amount of Household Finance Corp., 8.875% sr. unsec. nts., 2/15/08), Non-Vtg.
5,6 50,000 1,562,500

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

3,006,250

-------------------------------------------------------------------------------------------------------------------
Insurance--3.3%
Hartford Financial Services Group, Inc. (The), 6% Cv. Equity Units [each
equity
unit has a stated amount of $50 and consists of a purchase contract to
purchase $50 principal amount of Hartford Financial Services Group, Inc.
(The), 4.10% sr. nts., 11/16/08 and Hartford Financial Services Group, Inc.
(The) common stock]
5
50,000 2,481,250
-------------------------------------------------------------------------------------------------------------------
MetLife Capital Trust I, 8% Cum. Cv. Equity Security Units (each unit
consists
of a contract to purchase MetLife, Inc. common stock
and a redeemable capital security of MetLife Capital Trust I), Non-Vtg.
5 50,000 4,111,500
-------------------------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 6.75% Cv. Equity Security Units (each unit
consists of
a contract to purchase Prudential Financial, Inc. common stock and a
redeemable capital security of Prudential Financial Capital Trust I),
Non-Vtg. 5 100,000 5,457,000
-------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 4.50% Cv. Jr. Unsec. Sub.
Nts. 250,000 5,587,500

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

17,637,250

-------------------------------------------------------------------------------------------------------------------
Real Estate--2.0%
Equity Residential Properties Trust, 7.25% Cum. Cv., Series
G 150,000 3,660,000
-------------------------------------------------------------------------------------------------------------------
General Growth Properties, Inc., 7.25% Cv. Preferred Income Equity
Redeemable Stock, Series
A
100,000 3,329,000
-------------------------------------------------------------------------------------------------------------------
Host Marriott Financial Trust, 6.75% Cv. Quarterly Income Preferred
Securities 90,000 3,375,000

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

10,364,000

-------------------------------------------------------------------------------------------------------------------
Health Care--2.0%
-------------------------------------------------------------------------------------------------------------------
Health Care Equipment amp; Supplies--0.8%
Baxter International, Inc., 7% Cv. Equity Units (each equity unit has a
stated
value of $50 and consists of a purchase contract to purchase Baxter
International, Inc. common stock and $50 principal amount of Baxter
International, Inc., 3.60% sr. nts., 2/16/08), Non-Vtg.
5,6 85,000 4,258,500

18 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Market Value

Shares See Note 1
-------------------------------------------------------------------------------------------------------------------

Health Care Providers amp; Services--1.2%
Anthem, Inc., 6% Cv. Equity Security Units (each unit has a stated amount
of $50 and consists of a contract to purchase Anthem, Inc. common stock
and $50 principal amount of Anthem, Inc., 5.95% sub. debs.)
5 30,000 $ 2,336,250
-------------------------------------------------------------------------------------------------------------------
McKesson Financing Trust, 5% Cv.,
Non-Vtg. 80,000
3,900,000

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

6,236,250

-------------------------------------------------------------------------------------------------------------------
Industrials--4.6%
-------------------------------------------------------------------------------------------------------------------
Aerospace amp; Defense--2.0%
Coltec Capital Trust, 5.25% Cv. Term Income Deferrable Equity Securities
(cv. into common stock of Coltec Industries,
Inc.) 80,000 2,356,640
-------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.25% Cv. Equity Units (each unit has a stated
amount of $100 and consists of a contract to purchase Northrop Grumman
Corp. common stock and $100 principal amount of Northrop Grumman
Corp., 5.25% sr. unsec. nts.), Non-Vtg.
5 40,000 4,309,600
-------------------------------------------------------------------------------------------------------------------
Raytheon Co./RC Trust I, 8.25% Cum. Cv. Equity Security Units (each unit
consists of a contract to purchase Raytheon Co., Cl. B common stock and
a trust preferred security of RC Trust I), Non-Vtg.
5 75,000 4,095,000

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

10,761,240

-------------------------------------------------------------------------------------------------------------------
Commercial Services amp; Supplies--0.6%
Cendant Corp., 7.75% Cv. Upper DECS (each upper DECS has a stated value
of $50 and consists of a forward purchase contract to purchase Cendant
Corp. common stock and $50 principal amount of Cendant Corp.,
6.75% sr. nts., 8/17/06), Non-Vtg.
5 100,000
3,225,000
-------------------------------------------------------------------------------------------------------------------
Machinery--0.5%
Cummins Capital Trust I, 7% Cum. Cv., Non-Vtg.
2 60,000 2,692,500
-------------------------------------------------------------------------------------------------------------------
Road amp; Rail--1.5%
Union Pacific Capital Trust, 6.25% Cum. Cv. Term Income Deferrable Equity
Securities,
Non-Vtg.
150,000 7,725,000
-------------------------------------------------------------------------------------------------------------------
Information Technology--1.6%
-------------------------------------------------------------------------------------------------------------------
Communications Equipment--1.1%
Lucent Technologies, Inc., 8% Non-Cum. Cv. Redeemable,
Non-Vtg. 5,000 2,487,500
-------------------------------------------------------------------------------------------------------------------
Motorola, Inc., 7% Cv. Equity Security Units (each unit has a stated amount
of
$50 and consists of a contract to purchase Motorola, Inc. common stock and
$50 principal amount of Motorola, Inc., 6.50% sr. unsec. nts., 11/16/07)
5 100,000 3,200,000

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

5,687,500

-------------------------------------------------------------------------------------------------------------------
Office Electronics--0.5%
Xerox Corp., 7.50% Cv.
2
45,000 2,497,500
-------------------------------------------------------------------------------------------------------------------
Materials--2.0%
-------------------------------------------------------------------------------------------------------------------
Containers amp; Packaging--0.6%
Sealed Air Corp., $2.00 Cum. Cv., Series A,
Vtg. 75,000 3,195,000
-------------------------------------------------------------------------------------------------------------------
Paper amp; Forest Products--1.4%
International Paper Capital Trust, 5.25% Cum. Cv., Non-Vtg. (cv. into
International Paper Co. common
stock) 160,000
7,460,000

19 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS Continued

Market Value

Shares See Note 1
-------------------------------------------------------------------------------------------------------------------
Telecommunication Services--1.8%
-------------------------------------------------------------------------------------------------------------------

Diversified Telecommunication Services--1.8%
Alltel Corp., 7.75% Cv. Equity Units (each equity unit consists of units
referred to as corporate units, each with a stated value of $50 and includes
a purchase contract to purchase Alltel Corp. common stock and $50
principal amount of Alltel Corp., 6.25% sr. nts., 5/17/07), Non-Vtg.
5 110,000 $ 5,678,750
-------------------------------------------------------------------------------------------------------------------
CenturyTel, Inc., 6.875% Cv. Equity Units (each unit consists of units
referred
to as corporate units, each with a stated value of $25 and includes a
purchase
contract to purchase CenturyTel, Inc. common stock and $25 principal
amount of CenturyTel, Inc., 6.02% sr. nts., series j, due 2007), Non-Vtg.
5 150,000 3,855,000

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

9,533,750

-------------------------------------------------------------------------------------------------------------------
Utilities--4.1%
-------------------------------------------------------------------------------------------------------------------
Electric Utilities--3.5%
Calpine Capital Trust II, 5.50% Cum. Cv. Remarketable Term Income Deferrable
Equity Securities,
Non-Vtg.
100,000 1,500,000
-------------------------------------------------------------------------------------------------------------------
DTE Energy Co., 8.75% Cv. Equity Security Units (each unit has a stated
value
of $25 and consists of a contract to purchase DTE Energy Co. common stock
and $25 principal amount of DTE Energy Co., 4.15% sr. unsec. nts., 8/16/07)
5 120,000 3,274,800
-------------------------------------------------------------------------------------------------------------------
Duke Energy Corp., 8.25% Cv. Equity Units (each equity unit consists of
units
referred to as corporate units which consist of $25 principal amount of a
5.87% sr. nts., due 2006 and a contract to purchase Duke Energy Corp.
common stock), Non-Vtg.
5
200,000 3,182,000
-------------------------------------------------------------------------------------------------------------------
FPL Group, Inc., 8.50% Cv. Equity Units (each unit consists of corporate
units,
each with a stated amount of $50 and includes a purchase contract to
purchase FPL Group, Inc. common stock and $50 principal amount of FPL
Group Capital, Inc., 4.75% debs., series a, 2/16/07)
5 110,000 6,132,500
-------------------------------------------------------------------------------------------------------------------
Newell Financial Trust I, 5.25% Cum. Cv. Quarterly Income Preferred
Securities,
Non-Vtg.
100,000 4,537,500

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

18,626,800

-------------------------------------------------------------------------------------------------------------------
Gas Utilities--0.6%
Sempra Energy, 8.50% Cv. Equity Units (each equity unit consists of income
equity units, each has a stated value of $25 and consists of a purchase
contract to purchase Sempra Energy common stock and $25 principal
amount of Sempra Energy, 5.60% sr. nts., 5/17/07)
5 135,000 3,246,750

---------------
Total Preferred Stocks (Cost
$168,178,196)
168,829,790

20 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Market Value

Shares See Note 1
-------------------------------------------------------------------------------------------------------------------

Common Stocks--0.8%
-------------------------------------------------------------------------------------------------------------------
Carnival
Corp.
100,000 $ 2,495,000
-------------------------------------------------------------------------------------------------------------------
Danskin, Inc.
6,7
2,610,710 169,696
-------------------------------------------------------------------------------------------------------------------
Danskin, Inc. Restricted Common Shares
3,6,7 2,015,119 75,567
-------------------------------------------------------------------------------------------------------------------
U.S.
Bancorp
75,000 1,591,500

---------------
Total Common Stocks (Cost
$7,303,271)
4,331,763

Units
-------------------------------------------------------------------------------------------------------------------
Rights, Warrants and Certificates--0.0%
-------------------------------------------------------------------------------------------------------------------
Danskin, Inc. Wts., Exp. 10/8/04
3,6,7,8 367,801
14,712
-------------------------------------------------------------------------------------------------------------------
Portion of Danskin, Inc. Promissory Nt. to be used to purchase 53,309 shares
of restricted common stock in rights offering
3,6,7 -- 15,993
-------------------------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc. Wts., Exp. 12/31/05
6 200,000 89,600

---------------
Total Rights, Warrants and Certificates (Cost
$278,080) 120,305

Principal

Amount
-------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations--4.9%
-------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 3.625%, 3/31/04 (Cost
$25,015,891) $25,000,000 25,726,575

-------------------------------------------------------------------------------------------------------------------
Structured Notes--3.6%
Credit Suisse First Boston Corp. (New York Branch), Comcast Corp. Equity
Linked Nts., 8%,
12/23/03
125,000 2,965,625
-------------------------------------------------------------------------------------------------------------------
Merrill Lynch amp; Co., Inc., Capped Appreciation Linked Nts., 6%, 10/7/03
(linked to the performance of the Standard amp; Poor's 500
index) 15,000,000 16,098,630

---------------
Total Structured Notes (Cost
$18,003,750)
19,064,255

-------------------------------------------------------------------------------------------------------------------
Joint Repurchase Agreements--4.9%
-------------------------------------------------------------------------------------------------------------------
Undivided interest of 2.24% in joint repurchase agreement (Market Value
$1,146,610,000) with PaineWebber, Inc., 1.13%, dated 12/31/02, to be
repurchased at $25,678,612 on 1/2/03, collateralized by Federal National
Mortgage Assn., 7%, 5/1/32, with a value of $505,123,311 and Federal Home Loan
Mortgage Corp., 5.50%, 12/1/32-1/1/33, with a value of $665,564,559 (Cost
$25,677,000)
25,677,000 25,677,000

-------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost
$531,796,871) 99.0%
521,882,904
-------------------------------------------------------------------------------------------------------------------
Other Assets Net of
Liabilities
1.0 5,279,671

----------------------------------
Net
Assets
100.0% $527,162,575

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

21 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS Continued

Footnotes to Statement of Investments
1. Zero coupon bond reflects effective yield on the date of purchase.
2. 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 $104,630,216 or 19.85% of the Fund's net
assets as of December 31, 2002.
3. Identifies issues considered to be illiquid or restricted--See Note 5 of
Notes to Financial Statements.
4. Represents the current interest rate for a variable or increasing rate
security.
5. Units may be comprised of several components, such as debt and equity
and/or
warrants to purchase equity at some point in the future. For units, which
represent debt securities, principal amount disclosed represents total
underlying principal.
6. Non-income producing security.
7. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended December 31,
2002.
The aggregate fair value of securities of affiliated companies held by the
Fund
as of December 31, 2002 amounts to $275,968. Transactions during the period in
which the issuer was an affiliate are as follows:

Unrealized
Shares/Units Gross Gross
Shares/Units Appreciation
December 31, 2001 Additions Reductions December
31, 2002 (Depreciation)
-------------------------------------------------------------------------------------------------
Stocks and/or Warrants

Danskin, Inc. 2,610,710 -- --
2,610,710 $(2,916,880)
Danskin, Inc. Restricted
Common Shares 2,015,119 -- --
2,015,119 (452,569)
Danskin, Inc. Wts., Exp. 10/8/04 367,801 -- --
367,801 14,712
Portion of Danskin, Inc.
Promissory Nt. to be used to
purchase 53,309 shares of
restricted common
stock in rights offering -- --
-- -- --

8. Issuer is in default.

See accompanying Notes to Financial Statements.

22 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF ASSETS AND LIABILITIES December 31, 2002

-------------------------------------------------------------------------------
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $528,166,166)
$521,606,936
Affiliated companies (cost $3,630,705) 275,968

-------------
521,882,904
-------------------------------------------------------------------------------
Cash 2,355,745
-------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 3,619,153
Shares of beneficial interest sold 1,299,941
Investments sold 792,017
Other 10,590

-------------
Total assets 529,960,350

-------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Shares of beneficial interest redeemed 2,018,930
Distribution and service plan fees 318,811
Registration and filing fees 152,607
Trustees' compensation 94,683
Shareholder reports 90,900
Transfer and shareholder servicing agent fees 80,624
Other 41,220

-------------
Total liabilities 2,797,775

-------------------------------------------------------------------------------
Net Assets $527,162,575

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

-------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital 700,319,081
-------------------------------------------------------------------------------
Overdistributed net investment income
(1,934,293)
-------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions
(161,308,246)
-------------------------------------------------------------------------------
Net unrealized depreciation on investments
(9,913,967)

-------------
Net Assets $527,162,575

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

23 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF ASSETS AND LIABILITIES Continued

--------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$202,967,769 and 17,984,520 shares of beneficial interest outstanding)
$11.29
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)
$11.98
--------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $154,350,074 and 13,654,959 shares of beneficial
interest outstanding)
$11.30
--------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $61,031,311 and 5,410,729 shares of beneficial interest
outstanding)
$11.28
--------------------------------------------------------------------------------
Class M Shares:
Net asset value and redemption price per share (based on net
assets of $108,425,890 and 9,613,029 shares of beneficial
interest outstanding)
$11.28
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)
$11.97
--------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $387,531 and 34,339 shares of beneficial interest outstanding)
$11.29

See accompanying Notes to Financial Statements.

24 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF OPERATIONS For the Year Ended December 31, 2002

--------------------------------------------------------------------------------
Investment Income
Interest (net of foreign withholding taxes of $1,428) $
21,074,534
--------------------------------------------------------------------------------
Dividends
12,979,553

--------------
Total investment income
34,054,087

--------------------------------------------------------------------------------
Expenses
Management fees
2,848,275
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A
449,951
Class B
2,136,213
Class C
664,349
Class M
899,200
Class N
1,023
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A
319,926
Class B
401,031
Class C
121,790
Class M
240,097
Class N
708
--------------------------------------------------------------------------------
Accounting service fees
181,165
--------------------------------------------------------------------------------
Shareholder reports
94,313
--------------------------------------------------------------------------------
Trustees' compensation
41,347
--------------------------------------------------------------------------------
Custodian fees and expenses
4,431
--------------------------------------------------------------------------------
Other
271,513

--------------
Total expenses
8,675,332
Less reduction to custodian expenses
(4,431)
Less voluntary waiver of transfer and shareholder servicing
agent fees -- Class N
(97)

--------------
Net expenses
8,670,804

--------------------------------------------------------------------------------
Net Investment Income
25,383,283

--------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized loss on investments
(85,635,374)
--------------------------------------------------------------------------------
Net change in unrealized appreciation on investments
12,007,604

--------------
Net realized and unrealized loss
(73,627,770)

--------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations
$(48,244,487)

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

See accompanying Notes to Financial Statements.

25 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF CHANGES IN NET ASSETS

Year Ended December 31, 2002
2001
----------------------------------------------------------------------------------
Operations

Net investment income $ 25,383,283 $
23,473,433
----------------------------------------------------------------------------------
Net realized loss (85,635,374)
(63,947,370)
----------------------------------------------------------------------------------
Net change in unrealized appreciation 12,007,604
8,529,896

---------------------------
Net decrease in net assets resulting from operations (48,244,487)
(31,944,041)

----------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A (10,356,782)
(9,339,475)
Class B (9,416,327)
(12,683,219)
Class C (3,014,487)
(3,332,948)
Class M (5,875,935)
(6,681,751)
Class N (11,341)
(686)

----------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A 38,583,437
(7,090,336)
Class B (103,076,509)
(59,669,722)
Class C (7,317,685)
(7,490,065)
Class M (20,269,990)
(23,874,052)
Class N 381,879
36,556

----------------------------------------------------------------------------------
Net Assets
Total decrease (168,618,227)
(162,069,739)
----------------------------------------------------------------------------------
Beginning of period 695,780,802
857,850,541

---------------------------
End of period [including overdistributed net investment
income of $1,934,293 and $2,959,004, respectively] $527,162,575
$695,780,802

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

See accompanying Notes to Financial Statements.

26 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

FINANCIAL HIGHLIGHTS

Class A Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (6.59)% (3.30)% (4.81)%
23.37% 4.08%

See accompanying Notes to Financial Statements.

27 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

FINANCIAL HIGHLIGHTS Continued

Class B Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (7.44)% (3.97)% (5.55)%
22.35% 3.30%

See accompanying Notes to Financial Statements.

28 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Class C Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (7.39)% (3.98)% (5.56)%
22.41% 3.32%

See accompanying Notes to Financial Statements.

29 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Class M Year Ended December 31, 2002 2001 2000
1999 1998
-------------------------------------------------------------------------------------------
Per Share Operating Data

Net asset value, beginning of period $12.76 $13.84 $16.35
$14.84 $15.32
-------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .49 .41 .64
.63 .62
Net realized and unrealized gain (loss) (1.40) (.93) (1.45)
2.65 (.08)

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

-------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 (7.16)% (3.72)% (5.30)%
22.74% 3.58%

-------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $108,426 $144,612 $181,521
$234,023 $263,716
-------------------------------------------------------------------------------------------
Average net assets (in thousands) $122,897 $160,919 $213,617
$235,419 $288,953
-------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 4.24% 3.04% 3.90%
4.06% 4.02%
Expenses 1.51% 1.45% 1.42%
1.45% 1.43% 3
-------------------------------------------------------------------------------------------
Portfolio turnover rate 52% 69% 127%
95% 90%

See accompanying Notes to Financial Statements.

30 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Class N Year Ended December 31,
2002 2001 1
-------------------------------------------------------------------------------------
Per Share Operating Data

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

-------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2 (6.92)%
(3.02)%

-------------------------------------------------------------------------------------
Ratios/Supplemental Data

See accompanying Notes to Financial Statements.

31 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Convertible Securities Fund (the Fund), a portfolio of the Bond
Fund Series, is registered under the Investment Company Act of 1940, as
amended, as an openend management investment company. The Fund's investment
objective is to seek a high level of total return on its assets through a
combination of current income and capital appreciation. The Fund's investment
advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class M and Class N shares.
Class
A shares are sold at their offering price, which is normally net asset value
plus a front-end sales charge. Class B, Class C and Class N shares are sold
without a front-end sales charge but may be subject to a contingent deferred
sales charge (CDSC). Class M shares are sold with a reduced front-end sales
charge. Class N shares are sold only through retirement plans. Retirement
plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges. Earnings, net assets and
net asset value per share may differ by minor amounts due to each class having
its own expenses directly attributable to that class. Classes A, B, C, M and N
have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
--------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are
valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
--------------------------------------------------------------------------------
Structured Notes. The Fund invests in structured notes whose market values and
redemption prices are linked to the market value of specific securities. The
structured notes are leveraged, which increases the Fund's exposure to changes
in prices of the underlying securities and increases the volatility of each
note's market value relative to the change in the underlying security prices.
Fluctuations in value of these securities are recorded as unrealized gains and
losses in the accompanying financial statements. The Fund records a realized
gain or loss when a structured note is sold or matures. As of December 31,
2002,
the market value of these securities comprised 3.6% of the Fund's net assets,
and resulted in unrealized gains in the current period of $1,060,505.

32 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

--------------------------------------------------------------------------------
Joint Repurchase Agreements. The Fund, along with other affiliated funds of
the
Manager, may transfer uninvested cash balances into one or more joint
repurchase
agreement accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities pledged as
collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal; however,
in the event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
--------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated 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 capital loss carryforwards, if any, to shareholders.
Therefore, no federal income or excise tax provision is required.

As of December 31, 2002, the Fund had available for federal income tax
purposes
unused capital loss carryforwards as follows:

Expiring
----------------------
2009 $ 63,029,288
2010 90,466,996
------------
Total $153,496,284
============

During the fiscal year ended December 31, 2002, the Fund did not utilize any
capital loss carryforward.
As of December 31, 2002, the Fund had approximately $4,670,000 of
post-October losses available to offset future capital gains, if any. Such
losses, if unutilized, will expire in 2011.
--------------------------------------------------------------------------------
Trustees' Compensation. The Fund has adopted a nonfunded retirement plan for
the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
December 31, 2002, the Fund's projected benefit obligations were increased by
$11,706 and payments of $2,372 were made to retired trustees, resulting in an
accumulated liability of $91,115 as of December 31, 2002.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is invested for the Board of
Trustees
in shares of one or more

33 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS Continued

--------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
Oppenheimer funds selected by the trustee. The amount paid to the Board of
Trustees under the plan will be determined based upon the performance of the
selected funds. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share.
--------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
--------------------------------------------------------------------------------
Classification of Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net
realized
gain was recorded by the Fund.
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 December 31, 2002, amounts have been reclassified to reflect a
decrease in overdistributed net investment income of $4,316,300. Accumulated
net realized loss on investments was increased by the same amount. Net assets
of the Fund were unaffected by the reclassifications.

The tax character of distributions paid during the years ended December 31,
2002 and December 31, 2001 was as follows:
Year Ended Year Ended
December 31, 2002 December 31, 2001
------------------------------------------------------
Distributions paid from:
Ordinary income $28,674,872 $32,038,079
Long-term capital gain -- --
Return of capital -- --
-----------------------------
Total $28,674,872 $32,038,079
=============================

As of December 31, 2002, the components of distributable earnings on a tax
basis were as follows:

Overdistributed net
investment income $ (1,934,293)
Accumulated net realized loss (161,308,246)
Net unrealized depreciation (9,913,967)
-------------
Total $(173,156,506)
=============

--------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at

34 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

the fair market value of the securities received. Interest income, which
includes accretion of discount and amortization of premium, is accrued as
earned.
--------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
--------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

--------------------------------------------------------------------------------
2. Shares of Beneficial Interest

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

Year Ended December 31, 2002 Year Ended December
31, 2001 1
Shares Amount
Shares Amount
--------------------------------------------------------------------------------------
Class A

Sold 8,236,543 $ 96,210,339 5,335,346 $
70,645,351
Dividends and/or
distributions reinvested 712,104 8,199,709 592,940
7,659,326
Redeemed (5,651,194) (65,826,611) (6,468,789)
(85,395,013)

------------------------------------------------------------
Net increase (decrease) 3,297,453 $ 38,583,437 (540,503) $
(7,090,336)

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

--------------------------------------------------------------------------------------
Class B
Sold 1,455,217 $ 17,209,549 1,836,929 $
24,546,682
Dividends and/or
distributions reinvested 550,830 6,406,897 645,437
8,359,820
Redeemed (10,784,316) (126,692,955) (6,998,202)
(92,576,224)

------------------------------------------------------------
Net decrease (8,778,269) $(103,076,509) (4,515,836)
$(59,669,722)

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

--------------------------------------------------------------------------------------
Class C
Sold 947,643 $ 10,925,314 953,193 $
12,743,441
Dividends and/or
distributions reinvested 173,843 2,006,345 167,797
2,167,180
Redeemed (1,734,724) (20,249,344) (1,711,747)
(22,400,686)

------------------------------------------------------------
Net decrease (613,238) $ (7,317,685) (590,757) $
(7,490,065)

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

--------------------------------------------------------------------------------------
Class M
Sold 169,391 $ 1,991,974 200,443 $
2,659,283
Dividends and/or
distributions reinvested 344,816 3,977,838 339,715
4,388,937
Redeemed (2,237,918) (26,239,802) (2,317,734)
(30,922,272)

------------------------------------------------------------
Net decrease (1,723,711) $ (20,269,990) (1,777,576) $
(23,874,052)

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

35 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

NOTES TO FINANCIAL STATEMENTS Continued

--------------------------------------------------------------------------------
2. Shares of Beneficial Interest Continued

Year Ended December 31, 2002 Year Ended December
31, 2001 1
Shares Amount
Shares Amount
----------------------------------------------------------------------------------------
Class N

Sold 37,735 $ 451,651 2,808
$ 35,921
Dividends and/or
distributions reinvested 855 9,599
50 648
Redeemed (7,108) (79,371)
(1) (13)

----------------------------------------------------------------
Net increase 31,482 $ 381,879 2,857
$ 36,556

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

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

--------------------------------------------------------------------------------
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 December 31, 2002, were
$272,963,623 and $360,348,026, respectively.
As of December 31, 2002, unrealized appreciation (depreciation) based on
cost of securities for federal income tax purposes of $534,938,736 was
composed
of:

Gross unrealized appreciation $ 26,163,496
Gross unrealized depreciation (39,219,328)
------------
Net unrealized depreciation $(13,055,832)
============

The difference between book-basis and tax-basis unrealized appreciation and
depreciation, if applicable, is attributable primarily to the tax deferral of
losses on wash sales, or return of capital dividends, and the realization for
tax purposes of unrealized gain (loss) on certain futures contracts,
investments in passive foreign investment companies, and forward foreign
currency exchange contracts.

--------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee of
0.625% of the first $50 million of average annual net assets of the Fund,
0.50%
of the next $250 million and 0.4375% of average annual net assets over $300
million.
--------------------------------------------------------------------------------
Accounting Fees. Accounting fees paid to the Manager were in accordance with
the accounting services agreement with the Fund which provides for an annual
fee of $12,000 for the first $30 million of net assets and $9,000 for each
additional $30 million of net assets. During the year ended, the Fund paid
$181,165 to the Manager for accounting and pricing services.
--------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund
pays
OFS a $19.75 per account fee.

36 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

OFS has voluntarily agreed to limit transfer and shareholder servicing
agent
fees for all classes, up to an annual rate of 0.35% of average net assets per
class. This undertaking may be amended or withdrawn at any time.
--------------------------------------------------------------------------------
Distribution and Service Plan (12b-1) Fees. Under its General Distributor's
Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the
Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the different classes of shares of the Fund.

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

Aggregate Aggregate Class A Class
M
Front-End Front-End Front-End
Front-End
Sales Charges Sales Charges Sales Charges Sales
Charges
on Class A on Class M Retained by Retained
by
Year Ended Shares Shares Distributor
Distributor
--------------------------------------------------------------------------------
December 31, 2002 $245,040 $26,914 $62,691
$5,185

Concessions Concessions Concessions
Concessions
on Class A on Class B on Class C
on Class N
Shares Advanced Shares Advanced Shares Advanced
Shares Advanced
Year Ended by Distributor 1 by Distributor 1 by Distributor 1 by
Distributor 1
---------------------------------------------------------------------------------------

December 31, 2002 $24,972 $367,794
$48,707 $2,617

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

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

December 31, 2002 $2,677 $878,780 $8,296
$-- $24

--------------------------------------------------------------------------------
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. For the year ended December 31, 2002, payments
under
the Class A Plan totaled $449,951, all of which were paid by the Distributor
to
recipients, and included $30,596 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.
--------------------------------------------------------------------------------
Distribution and Service Plans for Class B, Class C, Class M and Class N
Shares. The Fund has adopted Distribution and Service Plans for Class B, Class
C, Class M and Class N shares. 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 an annual asset-based sales charge of 0.50%
on
Class M 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 each of the Class B, Class C, Class M and
Class N plans.

37 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

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

--------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates Continued

Distribution fees paid to the Distributor for the year ended December 31,
2002,
were as follows:

Distributor's
Distributor's
Aggregate
Aggregate
Unreimbursed
Unreimbursed Expenses as
%
Total Payments Amount Retained Expenses of Net
Assets
Under Plan by Distributor Under Plan of
Class
--------------------------------------------------------------------------------
Class B Plan $2,136,213 $1,626,563 $3,601,847
2.33%
Class C Plan 664,349 50,647 1,756,866
2.88
Class M Plan 899,200 314,268 --
--
Class N Plan 1,023 1,005 5,646
1.46

--------------------------------------------------------------------------------
5. Illiquid or Restricted Securities
As of December 31, 2002, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may
also
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 15% of its net assets (determined at the time of purchase
and reviewed periodically) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limitation. The aggregate value of illiquid
or restricted securities subject to this limitation as of December 31, 2002
was
$1,786,272, which represents 0.34% of the Fund's net assets, of which $106,272
is considered restricted. Information concerning restricted securities is as
follows:

Unrealized
Acquisition Valuation as
of Appreciation
Security Dates Cost December 31, 2002
(Depreciation)
-------------------------------------------------------------------------------------------
Stocks and/or Warrants
Danskin, Inc. Restricted

Common Shares 8/14/95 $528,136
$75,567 $(452,569)
Danskin, Inc. Wts., Exp. 10/8/04 8/14/95 --
14,712 14,712
Portion of Danskin, Inc. Promissory Nt.
to be used to purchase 53,309 shares
of restricted common stock
in rights offering 8/14/95 15,993
15,993 --

38 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

--------------------------------------------------------------------------------
6. Bank Borrowings
The Fund may borrow up to certain percentage of its total assets from a bank
to
purchase portfolio securities, or for temporary and emergency purposes. The
purchase of securities with borrowed funds creates leverage in the Fund. The
Fund has entered into an agreement which enables it to participate with
certain
other Oppenheimer funds in an unsecured line of credit with a bank, which
permits borrowings up to $350 million, collectively. Interest is charged to
each fund, based on its borrowings, at a rate equal to the Federal Funds Rate
plus 0.625%. 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 0.09% per
annum.
The Fund had no borrowings outstanding for the year ended or at December
31,
2002.

Appendix A

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

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

Moody's Investors Service, Inc.
------------------------------------------------------------------------------

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 risks appear somewhat larger than
those 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 sometime 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 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 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 and 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 and 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.

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 category; the modifier "2"
indicates a mid-range ranking and the modifier "3" indicates a ranking in the
lower end of the category.

Short-Term Ratings - Taxable Debt

These ratings apply to the ability of issuers to repay punctually 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, while sound, may be 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 amp; Poor's Rating Services
------------------------------------------------------------------------------

Long-Term Credit Ratings

AAA: Bonds rated "AAA" have the highest rating assigned by Standard amp; 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 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.

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 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: A bond rated B is more vulnerable to nonpayment than an obligation rated
BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation.

CCC: A bond rated CCC 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. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.

C: The C rating may used where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are being
continued.

D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.

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: 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 issuer's capacity to meet its
financial obligation is very 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: 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: 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: 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: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been filed
or similar actions jeopardize payments on the obligation.

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 rates 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.

B-1
Appendix B

------------------------------------------------------------------------------
Industry Classifications
------------------------------------------------------------------------------

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

C-
Appendix C

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

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

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

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

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

Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
o Applicability of Class A Contingent Deferred Sales Charges in Certain
Cases
------------------------------------------------------------------------------

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

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

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

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

Class A shares purchased by the following investors are not subject to any
Class A sales charges (and no concessions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
relatives by virtue of a remarriage (step-children, step-parents,
etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement
plans for their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and
which are identified as such to the Distributor) or with the
Distributor. The purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients. Those
clients may be charged a transaction fee by their dealer, broker,
bank or advisor for the purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy
shares for their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial
intermediary that has made special arrangements with the
Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have entered
into an agreement for this purpose with the Distributor) who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements .
Each of these investors may be charged a fee by the broker, agent
or financial intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for
those persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this
arrangement) and persons who are directors or trustees of the
company or trust which is the beneficial owner of such accounts.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the
dealer, broker or investment adviser provides administration
services.
|-|

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

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

Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor.
|_| Shares purchased through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's
customers to purchase and pay for shares of Oppenheimer funds
using the proceeds of shares redeemed in the prior 30 days from a
mutual fund (other than a fund managed by the Manager or any of
its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid. This waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money
Market Fund, Inc. that were purchased and paid for in this
manner. This waiver must be requested when the purchase order is
placed for shares of the Fund, and the Distributor may require
evidence of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an
affiliate acts as sponsor.

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

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder. The death
or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration.
|_| The contingent deferred sales charges are generally not waived
following the death or disability of a grantor or trustee for a
trust account. The contingent deferred sales charges will only be
waived in the limited case of the death of the trustee of a
grantor trust or revocable living trust for which the trustee is
also the sole beneficiary. The death or disability must have
occurred after the account was established, and for disability
you must provide evidence of a determination of disability by the
Social Security Administration.
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing
this waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered
into a special arrangement with the Distributor for this purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $500,000 or more
and made more than 12 months after the Retirement Plan's first
purchase of Class C shares, if the redemption proceeds are
invested in Class N shares of one or more Oppenheimer funds.
|_| Distributions9 from Retirement Plans or other employee benefit plans
for any of the following purposes:
1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established in an Oppenheimer fund.
2) To return excess contributions made to a participant's account.
3) To return contributions made due to a mistake of fact.
4) To make hardship withdrawals, as defined in the plan.10
5) To make distributions required under a Qualified Domestic
Relations Order or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
6) To meet the minimum distribution requirements of the Internal
Revenue Code.
7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
8) For loans to participants or beneficiaries.11
9) On account of the participant's separation from service.12
10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) offered as an investment option in a
Retirement Plan if the plan has made special arrangements with
the Distributor.
11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
12) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age 59 1/2,
as long as the aggregate value of the distributions does not
exceed 10% of the account's value, adjusted annually.
13) Redemptions of Class B shares under an Automatic Withdrawal
Plan for an account other than a Retirement Plan, if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value, adjusted annually.
14) For distributions from 401(k) plans sponsored by
broker-dealers that have entered into a special arrangement with
the Distributor allowing this waiver.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if
the aggregate value of the redeemed shares does not exceed 10% of
the account's value annually.

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

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

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

o 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.

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

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

A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class
B or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
o Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
Investment Accounts, Inc.
---------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

Oppenheimer Convertible Securities Fund

Internet Website
WWW.OPPENHEIMERFUNDS.COM
------------------------

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

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

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

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

Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202

Legal Counsel
Mayer, Brown, Rowe amp; Maw
1675 Broadway
New York, New York 10019

1234

PX345.002.0203

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