497

497 1 consec2005.htm 497

OPPENHEIMER CONVERTIBLE SECURITIES FUND
6803 South Tucson Way, Centennial, CO 80112
1.800.225.5677

Statement of Additional Information dated February 24, 2004, revised February
2, 2005

This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated February 24, 2004. 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
Other Investment Restrictions..........................................14
How the Fund is Managed.....................................................17
Organization and History...............................................17
Board of Trustees and Oversight Committees.............................18
Trustees and Officers of the Fund......................................19
The Manager ...........................................................25
Brokerage Policies of the Fund..............................................28
Distribution and Service Plans..............................................30
Performance of the Fund.....................................................35

About Your Account
How to Buy Shares...........................................................41
How to Sell Shares..........................................................51
How to Exchange Shares......................................................56
Dividends, Capital Gains and Taxes..........................................60
Additional Information About the Fund.......................................64

Financial Information About the Fund
Report of Independent Accountants...........................................66
Financial Statements .......................................................67

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

ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

The investment objective 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 may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below in seeking its
objective. 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 credit rating assigned to the security has less impact on the
Manager's investment decision than in the case of non-convertible
fixed-income securities.

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 prevailing interest rates fall and
decrease when prevailing 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 & Poor's Rating Services
("S&P") or Fitch, Inc., 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 creditworthiness. 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 & 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 & 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. "Portfolio turnover" describes the rate at
which the Fund trades its portfolio securities during its fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Fund's portfolio turnover rate will
fluctuate from year to year, and the Fund does not expect to have a portfolio
turnover rate in excess of 150% annually.

Increased portfolio turnover creates higher brokerage and transaction
costs for the Fund, which may reduce its overall performance. Additionally,
the realization of capital gains from selling portfolio securities may result
in distributions of taxable long-term capital gains to shareholders, since
the Fund will normally distribute all of its capital gains realized each
year, to avoid excise taxes under the Internal Revenue Code.

|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 Manager 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, considered "loans" under the Investment Company
Act are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the 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 "SEC"), the Fund, along with other affiliated entities
managed by the Manager, may transfer uninvested cash balances into one or
more joint repurchase accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities that
are pledged as collateral for repurchase agreements are held by a custodian
bank until the agreements mature. Each joint repurchase arrangement requires
that the market value of the collateral be sufficient to cover payments of
interest and principal; however, in the event of default by the other party
to the agreement, retention or sale of the collateral may be subject to legal
proceedings.

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

|X| Temporary Defensive and Interim Investments. When market, economic
or political conditions are unstable, or the Manager believes it is otherwise
appropriate to reduce holdings in stocks, the Fund can invest in a variety of
debt securities for defensive purposes. 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 S&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 of 1940 (the "Investment Company Act") that
apply to those types of investments. For example, the Fund can invest in
Exchange-Traded Funds, which are typically open-end funds or unit investment
trusts, listed on a stock exchange. The Fund might do so as a way of gaining
exposure to the segments of the equity or fixed-income markets represented by
the Exchange-Traded 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.

Other Investment Restrictions

|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, 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 principal investment policies are described in the Prospectus.

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

o The Fund 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.

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

Unless the Prospectus or Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment (except in the case of borrowing and
investments in illiquid securities). 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, but may do so from time to time on important matters or when
required to do so by the Investment Company Act or other applicable law.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Fund, to remove a Trustee or to
take other action described in the Fund's Declaration of Trust.

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

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

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

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

The Board of Trustees has an Audit Committee which is comprised solely
of Independent Trustees. The 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 among other duties as set
forth in the Committee's charter. The members of the Audit Committee are Paul
Clinton (Chairman), Thomas Courtney, Robert Galli, Lacy Herrmann and Brian
Wruble. The Audit Committee met 6 times during the Fund's fiscal year ended
December 31, 2003.

Trustees and Officers of the Fund. Each of the Trustees is an "Independent
Trustee" under the Investment Company Act. The Fund's Trustees and officers
and their positions held with the Fund and length of service in such
position(s) and their principal occupations and business affiliations during
the past five years are listed in the chart below. The information for the
Trustees also includes the dollar range of shares of the Fund as well as the
aggregate dollar range of shares beneficially owned in any of the Oppenheimer
funds overseen by the Trustees. All of the Trustees are also trustees or
directors of the following Oppenheimer funds (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 Capital Value Fund, Bond Fund Series, a series fund having
Inc. one series:
Oppenheimer Quest For Value Funds, a Oppenheimer Convertible
series Securities Fund
fund having the following three Oppenheimer MidCap Fund
series: Rochester Fund Municipals
Oppenheimer Small Cap Value Fund, Rochester Portfolio Series, a series
Oppenheimer Quest Balanced Fund and fund having
Oppenheimer Quest Opportunity one series: Limited-Term New
Value Fund York Municipal
Oppenheimer Quest International Value Fund
Fund, Inc.
Oppenheimer Quest Value Fund, Inc.

In addition to being a trustee or director of the Board III Funds, Mr.
Galli is also a director or trustee of 25 other portfolios in the
OppenheimerFunds complex. Present or former officers, directors, trustees and
employees (and their immediate family members) of the Fund, the Manager and
its affiliates, and retirement plans established by them for their employees
are permitted to purchase Class A shares of the Fund and the other
Oppenheimer funds at net asset value without sales charge. The sales charge
on Class A shares is waived for that group because of the economies of sales
efforts realized by the Distributor.

Messrs. Everett, Murphy, Molleur, Vottiero, Wixted and Zack, and Mses.
Bechtolt 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 28, 2004, 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 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
Other Trusteeships/Directorships Held by Shares Oppenheimer
Position(s) Held Trustee; BeneficiallFunds
with Fund, Length Number of Portfolios in Fund Complex Owned in Overseen
of Service, Age Currently Overseen by Trustee the Fund by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
As of December 31,
2003
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Thomas W. Principal of Courtney Associates, Inc. $10,001-$50$50,001-$100,000
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 1995 of Investment Counseling Federated
Age: 70 Investors, Inc.; Trustee of the following
open-end investment companies: Cash
Assets Trust, Pimco Advisors VIT, Tax
Free Trust of Arizona and 4 funds for the
Hawaiian Tax Free Trust. Oversees 10
portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John Cannon, Director, Neuberger Berman Income $10,001-$50$10,001-$50,000
Trustee, since Managers Trust, Neuberger & Berman Income
1992 Funds and Neuberger Berman Trust,
Age: 74 (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 None Over
Trustee, since Associates, a financial and venture $100,000
1995 capital consulting firm; Trustee of the
Age: 72 following open-end investment companies:
Trustee of Capital Cash Management Trust,
Prime Cash Fund, Pimco Advisors VIT and
Narragansett Insured Tax-Free Income
Fund. Oversees 10 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Galli, A trustee or director of other None Over
Trustee since 1998 Oppenheimer funds. Oversees 35 portfolios $100,000
Age: 70 in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lacy B. Herrmann, Chairman and Chief Executive Officer of None $10,001-$50,000
Trustee since 1995 Aquila Management Corporation, the
Age: 74 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, 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 and Pimco Advisors VIT; 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;
Trustee Emeritus of Brown University.
Oversees 10 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Wruble, Special Limited Partner (since January $10,001-$50Over
Trustee since 2001 1999) of Odyssey Investment Partners, LLC $100,000
Age: 60 (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);
formerly Trustee (May 2000 - 2002) of
Research Foundation of AIMR (investment
research, non-profit); Governor, Jerome
Levy Economics Institute of Bard College
(economics research) (August
1990-September 2001); Director of Ray &
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, Two World Financial Center, 225
Liberty Street, New York, NY 10281-1008, for Messrs. 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 1993 1996 - January 2000).
Age: 37
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and director (since June
President since 2001 2001) and President (since September 2000) of the Manager;
Age: 54 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 & 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
72 portfolios as Trustee/Officer and 10 portfolios as
Officer 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: 44 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 OppenheimerFunds
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 82 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 82 in
Age: 40 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: 40 Financial Officer at Sovlink Corporation (April 1996-June
1999). An officer of 82 in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since 2001 Counsel (since February 2002) of the Manager; General
Age: 55 Counsel and a 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 Senior Vice President (May 1985 - December
2003), Acting General Counsel (November 2001-February 2002)
and Associate General Counsel (May 1981-October 2001) of
the Manager; Assistant Secretary of Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001);
OppenheimerFunds International Ltd. and OppenheimerFunds
plc (October 1997-November 2001). An officer of 82 in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999)
since 2001 of OppenheimerFunds Distributor, Inc.; Vice President and
Age: 38 Assistant Secretary (since 1999) of Shareholder Services,
Inc.; Assistant Secretary (since December 2001) of
OppenheimerFunds Legacy Program and Shareholder Financial
Services, Inc.; formerly an Assistant Counsel (August
1994-October 2003) and Assistant Vice President of the
Manager (August 1997-June 1998). An officer of 82
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 73
Age: 46 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 during the Fund's
fiscal year ended December 31, 2003. The compensation from all 10 of the
Board III Funds (including the Fund) represents compensation received for
serving as a director or trustee and member of a committee (if applicable) of
the boards of those funds during the calendar year ended December 31, 2003.

---------------------------------------------------------------------------------
Trustee Name and Other Fund Aggregate RetirementEstimated Total
Compensation
From All
Oppenheimer
Funds
Benefits Annual For Which
Accrued Retirement Individual
as Part Benefits Serves
Compensationof Fund Paid Upon As
Position(s) (as applicable) From Fund1 Expenses Retirement2Trustee/Director
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Thomas W. Courtney $6,519 $4,000 $72,174 $106,000
Chairman of the Board;
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
John Cannon3 $2,621 $1,712 $21,158 $42,617
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Paul Y. Clinton $6,212 $4,081 $71,108 $101,000
Audit Committee Chairman
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert G. Galli $5,905 $3,277 $67,1044 $213,5365
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Lacy B. Herrmann $5,905 $2,550 $69,561 $96,000
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Brian Wruble $5,9056 $477 $7,527 $96,000
Audit Committee Member
---------------------------------------------------------------------------------
1. Aggregate Compensation From Fund includes fees and deferred compensation,
if any, for a Trustee.
2. Estimated Annual Retirement Benefits to be Paid Upon Retirement is based
on a straight life payment plan election with the assumption that a Trustee
will retire at the age of 75 and is eligible (after 7 years of service) to
receive retirement plan benefits as described below under "Retirement Plan
for Trustees."
3. Compensation for Mr. Cannon was paid by Rochester Fund Municipals, Limited
Term New York Municipal Fund and Oppenheimer Convertible Securities Fund only.
4. Includes $38,050 estimated to be paid to Mr. Galli for serving as a
trustee or director of 25 other Oppenheimer funds (at December 31, 2003)
that are not Board III Funds.
5. Includes $117,536 paid to Mr. Galli for serving as trustee or director of
25 other Oppenheimer funds (at December 31, 2003) that are not Board III
Funds.
6. Includes $5,905 deferred by Mr. Wruble under the Deferred Compensation
Plan described below.

|X| Retirement Plan for Trustees. The Fund has adopted a retirement
plan that provides for payments to retired Trustees. Payments are up to 80%
of the average compensation paid during a Trustee's five years of service in
which the highest compensation was received. A Trustee must serve as Trustee
for any of the 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.

|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 SEC, the Fund may invest in the funds selected by the Trustee under
the plan without shareholder approval for the limited purpose of determining
the value of the Trustee's deferred fee account.

|X| Major Shareholders. As of January 28, 2004, 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:

MLPF&S for the sole benefit of its customers, Attn Fund Admn/#97JRO,
4800 Deer Lake Dr E Fl 3, Jacksonville, FL 32246-6484, which owned
2,432,016.008 Class A shares (approximately 10.19% of the Class A
shares then outstanding).

Citigroup Global Mkts Inc, 109801250, Attn Cindy Tempesta, 7th Fl, 333
West 34th Street, New York, NY 10001-2483, which owned 1,381,774.328
Class A shares (approximately 5.79% of the Class A shares then
outstanding).

Citigroup Global Mkts Inc, 109801250, Attn Cindy Tempesta, 7th Fl, 333
West 34th Street, New York, NY 10001-2483, which owned 507,203.860
Class B shares (approximately 5.29% of the Class B shares then
outstanding).

MLPF&S for the sole benefit of its customers, Attn Fund Admn/#97GF7,
4800 Deer Lake Dr E Fl 3, Jacksonville, FL 32246-6484, which owned
1,750,675.670 Class B shares (approximately 18.28% of the Class B
shares then outstanding).

Citigroup Global Mkts Inc, 109801250, Attn Cindy Tempesta, 7th Fl, 333
West 34th Street, New York, NY 10001-2483, which owned 394,753.919
Class C shares (approximately 6.31% of the Class C shares then
outstanding).

MLPF&S for the sole benefit of its customers, Attn Fund Admn/#97JR1,
4800 Deer Lake Dr E Fl 3, Jacksonville, FL 32246-6484, which owned
1,241,358.562 Class C shares (approximately 19.85% of the Class C
shares then outstanding).

Citigroup Global Mkts Inc, 109801250, Attn Cindy Tempesta, 7th Fl, 333
West 34th Street, New York, NY 10001-2483, which owned 1,312,296.928
Class M shares (approximately 15.42% of the Class M shares then
outstanding).

MLPF&S for the sole benefit of its customers, Attn Fund Admn, 4800 Deer
Lake Dr E Fl 3, Jacksonville, FL 32246-6484, which owned 1,269,676.332
Class M shares (approximately 14.92% of the Class M shares then
outstanding).

LPL Financial Services, AC7160-9422, 9785 Towne Centre Drive, San
Diego, CA 92121-1968, which owned 7,844.849 Class N shares
(approximately 6.92% of the Class N shares then outstanding).

Michael Shane TR Michael Share PA PSP, 19 W Flagler St, Ste 607, Miami,
FL 33130-4408, who owned 6,610.445 Class N shares (approximately 5.83%
of the Class N shares then outstanding).

LPL Financial Services, AC7160-9422, 9683 Towne Centre Drive, San
Diego, CA 92121-1968, which owned 7,844.849 Class N shares
(approximately 6.92% of the Class N shares then outstanding).

RPSS TR Rollover IRA FBO Philip E Bares, 2321 N Lafayette St, Arlington
Heights, IL 60004-290, who owned 8,522.714 Class N shares
(approximately 7.51% of the Class N shares then outstanding).

James Mellon Daniel McCarthy, Mellon & McCarthy PC401K, 2301 W Big
Beaver Rd Ste 500, Troy, MI 48084-3328, who owned 7,510.271 Class N
shares (approximately 6.62% of the Class N shares then outstanding).

The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company, a
global, diversified insurance and financial services organization.

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

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

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

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

The Fund will be required to file new Form N-PX, with its complete
proxy voting record for the 12 months ended June 30th, no later than August
31st of each year. The first such filing is due no later than August 31,
2004, for the twelve months ended June 30, 2004. Once filed, the Fund's Form
N-PX filing will be available (i) without charge, upon request, by calling
the Fund toll-free at 1.800.225.5677 and (ii) on the SEC's website at
www.sec.gov.
-----------

|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities
for the Fund's portfolio and handles its day-to-day business. The portfolio
manager of the Fund is employed by the Manager and is the person who is
principally responsible for the day-to-day management of the Fund's
portfolio.

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

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

o Accounting and Administrative 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. The
accounting and administrative services fees paid by the Fund to the Manager
during its last three fiscal years are listed below.

-------------------------------------------------------------------------------
Fiscal Year Ended Management Fee Paid to Accounting and
Administrative Services
Fee Paid to
12/31 OppenheimerFunds, Inc. OppenheimerFunds, Inc.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2001 $3,642,672 $235,637
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2002 $2,848,275 $181,165
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2003 $2,755,382 $174,795
-------------------------------------------------------------------------------

The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment
advisory agreement, the Manager is not liable for any loss the Fund sustains
for any investment, adoption of any investment policy, or the purchase, sale
or retention of any security.

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

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

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

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

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

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

After careful deliberation, the Board, including the Independent
Trustees, concluded that it was in the best interest of shareholders to
continue the investment advisory agreement for another year and that the fees
charged thereunder are fair and reasonable. In arriving at a decision, the
Board did not single out any one factor or group of factors as being more
important than other factors, but considered all factors together. The Board
judged the terms and conditions of the investment advisory agreement,
including the investment advisory fee, in light of all of the surrounding
circumstances.

Brokerage Policies of the Fund

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

Under the investment advisory agreement, 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 commissions paid to such brokers may be
higher than another qualified broker would charge, if the Manager makes a
good faith determination that the commission is fair and reasonable in
relation to the services provided.

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.

In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, the Manager tries to combine
concurrent orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates. The transactions under
those combined orders are averaged as to price and allocated in accordance
with the purchase or sale orders actually placed for each account.

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

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

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

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

-------------------------------------------------------------------------------
Fiscal Year Ended 12/31: Total Brokerage Commissions Paid by the Fund1
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2001 $284,842
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2002 $273,558
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2003 $200,2482
-------------------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on
a net trade basis.
2. During the fiscal year ended 12/31/03, the amount of transactions directed
to brokers for research services was $400,813 and the amount of the
commissions paid to broker-dealers for those services was $465.

Distribution and Service Plans

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

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

--------------------------------------------------------------------------------
Fiscal Aggregate Class A Aggregate Class M
Front-End Sales Front-End
Year Front-End Sales Charges Front-End Sales Sales Charges
Ended Charges on Retained by Charges on Retained by
12/31: Class A Shares Distributor1 Class M Shares Distributor1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2001 $342,426 $89,216 $48,900 $6,024
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2002 $245,040 $62,691 $26,914 $5,185
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2003 $496,856 $248,513 $33,315 $7,400
--------------------------------------------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate of the
parent of the Distributor.

--------------------------------------------------------------------------------
Fiscal Concessions Concessions Concessions Concessions Concessions
on Class M
on Class A on Class B on Class C Shares on Class N
Shares Shares Shares Advanced Shares
Year Advanced by Advanced by Advanced by by Advanced by
Ended 12/31: Distributor1 Distributor1 Distributor1 Distributor1Distributor1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2001 $43,302 $625,374 $82,640 $-6 $1232
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2002 $24,972 $367,794 $48,707 $0 $2,617
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2003 $32,195 $689,693 $121,293 $108 $7,358
--------------------------------------------------------------------------------
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 Contingent
Deferred Contingent Deferred Contingent Contingent
Sales 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
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
2001 $11,865 $742,690 $13,957 $89 $0
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
2002 $2,677 $878,780 $8,296 $0 $24
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
2003 $6,904 $325,658 $5,278 $0 $889
---------------------------------------------------------------------------------

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

Under the plans, the Manager and the Distributor may make payments to
affiliates 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 Directors and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class.

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

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

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

Under the plans 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. The Board has set the rate at that level. While the plan
permits the Board to authorize payments to the Distributor to reimburse
itself for services under the plan, the Board has not yet done so, except in
the case of the special arrangement described below, regarding grandfathered
retirement accounts. The Distributor makes payments to plan recipients
quarterly at an annual rate not to exceed 0.25% of the average annual net
assets consisting of Class A shares held in the accounts of the recipients or
their customers.

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

For the fiscal year ended December 31, 2003 payments under the Class A
plan totaled $599,232 , of which $4,119 was retained by the Distributor under
the arrangement described above, regarding grandfathered retirement accounts,
and included $23,312 paid to an affiliate of the Distributor's parent
company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
The Distributor may not use payments received 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 normally retains the asset-based sales charge on Class
B and Class N shares. The Distributor retains the asset-based sales charge on
Class C shares during the first year the shares are outstanding. It pays the
asset-based sales charge as an ongoing concession to the recipient on Class C
shares outstanding for a year or more. Although the Class M Plan permits the
Fund to pay the Distributor a 0.50% asset-based sales charge annually, the
Board has set that payment at zero, effective February 11, 2004. If a dealer
has a special agreement with the Distributor, the Distributor will pay the
Class B, Class C and/or Class N service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales concessions and service
fee in advance at the time of purchase.

The asset-based sales charges on Class B, Class C and Class N shares
allow investors to buy shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The Fund pays
the asset-based sales charges to the Distributor for its services rendered in
distributing Class B, Class C and Class N shares. The payments are made to
the Distributor in recognition that the Distributor:
o pays sales concessions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales concessions and/or the advance of the
service fee payment to recipients under the plans, or may provide
such financing from its own resources or from the resources of an
affiliate,
o employs personnel to support distribution of 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 will not
retain any portion of the service fee or asset-based sales charge.

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 12/31/03
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 $1,398,157 $903,688 $3,330,469 2.50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Plan $697,297 $80,340 $2,068,728 2.52%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class M Plan $766,119 $240,624 None None
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Plan $3,698 $2,618 $21,760 1.49%
--------------------------------------------------------------------------------
1. Includes amounts paid to an affiliate of the Distributor's parent company:
$8,940 (Class B), $11,861 (Class C), $8,371 (Class M) and $212 (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 "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how
total returns are calculated is set forth below. The charts below show the
Fund's performance as of the Fund's most recent fiscal year end. You can
obtain current performance information by calling the Fund's Transfer Agent
at 1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

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

Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other
investments:
o 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 and capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, 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 debt
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 SEC, designed to assure uniformity in the way that
all funds calculate their yields:

Standardized Yield = 2[( a - b +1)6 -1 ]
------
cd

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 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 dividend yield may
also be quoted without deducting the maximum initial sales charge.

-------------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 12/31/03
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class of Standardized Yield Dividend Yield
Shares
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Without After Without After
Sales Charge Sales Charge Sales Charge Sales Charge
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class A 3.53% 3.33% 3.63% 3.42%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B 2.74% N/A 2.84% N/A
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C 2.77% N/A 2.88% N/A
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class M 3.06% 2.96% 3.23% 3.14%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class N 3.18% N/A 3.24% 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" in the formula below) (unless the return is shown
without sales charge, as described below). For Class B shares, payment of the
applicable contingent deferred sales charge is applied, depending on the
period for which the return is shown: 5.0% in the first year, 4.0% in the
second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0%
in the sixth year and none thereafter. For Class C shares, the 1.0%
contingent deferred sales charge is deducted for returns for the one-year
period. For Class N shares, the 1.0% contingent deferred sales charge is
deducted for returns for the one-year period, and total returns for the
periods prior to 03/01/01 (the inception date for Class N shares) is based on
the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1 fees.

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

ERV l/n - 1 Average Annual Total
Return
P

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

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

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

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

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

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

o Total Returns at Net Asset Value. From time to time the Fund
may also quote a cumulative or an average annual total return "at net asset
value" (without deducting sales charges) for each class of shares 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 12/31/03
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns (10 years
Shares or life of class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5-Years 10-Years
(or life of
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 A 93.36%1 105.16%1 15.88% 22.95% 4.22% 5.46% 7.90%1 8.65%1
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B 96.13%2 96.13%2 17.07% 22.07% 4.33% 4.63% 8.08%2 8.08%2
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C 64.75%3 64.75%3 21.14% 22.14% 4.66%3 4.66% 6.61%3 6.61%3
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class M 105.84% 112.76% 18.61% 22.59% 4.27% 4.96% 7.49% 7.84%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N 10.54%5 10.54%5 21.45% 22.45% 3.60%5 3.60%5 N/A N/A
---------------------------------------------------------------------------------
1. Inception of Class A: 5/1/95.
2. Inception of Class B: 5/1/95.
3. 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

--------------------------------------------------------------------------------
Average Annual Total Returns for Class M Shares (After Sales Charge)
For the Periods Ended December 31, 2003
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of
class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Taxes on Distributions 16.92% 1.73%1 4.68%1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Taxes on Distributions 12.00% 2.14%1 4.75%1
and Redemption of Fund Shares
--------------------------------------------------------------------------------
1. Inception of Class A: 5/1/95

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

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

|X| Morningstar Ratings. From time to time the Fund may publish the
star rating of the performance of its classes of shares by Morningstar, Inc.,
an independent mutual fund monitoring service. Morningstar rates mutual funds
in their specialized market sector. The Fund is rated among 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 returns on the Fund's share
classes to the return on fixed-income investments available from banks and
thrift institutions. Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or insured by
the FDIC or any other agency and will fluctuate daily, while bank depository
obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is
backed by the full faith and credit of the U.S. government.

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

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

ABOUT YOUR ACCOUNT

How to Buy Shares

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

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

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

|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,
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 AMT-Free Municipals Oppenheimer MidCap Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer Limited Term Municipal Fund
Oppenheimer Balanced Fund Oppenheimer Main Street Fund
Oppenheimer Bond Fund Oppenheimer Main Street Opportunity Fund
Oppenheimer California Municipal Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Preservation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Principal Protected Main
Oppenheimer Capital Income Fund Street Fund
Oppenheimer Principal Protected Main
Oppenheimer Champion Income Fund Street Fund II
Oppenheimer Convertible Securities Fund Oppenheimer Quest Balanced Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Developing Markets Fund Inc.
Oppenheimer Quest International Value
Oppenheimer Disciplined Allocation Fund Fund, Inc.
Oppenheimer Discovery Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Emerging Growth Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Emerging Technologies Fund Oppenheimer Real Asset Fund
Oppenheimer Enterprise Fund Oppenheimer Real Estate Fund
Oppenheimer Rochester National
Oppenheimer Equity Fund, Inc. Municipals
Oppenheimer Global Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Global Opportunities Fund Oppenheimer Small Cap Value Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Strategic Income Fund
Oppenheimer Growth Fund Oppenheimer Total Return Bond 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

And the following money market funds:
Centennial Government Trust
Oppenheimer Cash Reserves Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc. Centennial New York Tax Exempt Trust
Centennial America Fund, L. P. Centennial Tax Exempt Trust
Centennial California Tax Exempt Trust

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

Letters of Intent. Under a Letter of Intent ("Letter"), 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 do not consider Class C or Class N shares you purchase or may
have purchased.

A Letter 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
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
period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms
of Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the application used
for a Letter. If those terms are amended, as they may be from time to time by
the Fund, the investor agrees to be bound by the amended terms and that those
amendments will apply automatically to existing Letters.

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

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

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

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

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

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

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales 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 & 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 $250,000 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, and
o to certain customers of broker-dealers and financial advisors that are
identified in a special agreement between the broker-dealer or
financial advisor and the Distributor for that purpose.

The sales concession and the advance of the service fee, as described
in the Prospectus, will not be paid to dealers of record on sales of Class N
shares on:
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, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. It may also close on other days.

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

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

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

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

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

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

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

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

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

Involuntary Redemptions. The Fund's Board of Trustees has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $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 Class A 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 AMT-Free Municipals Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer AMT-Free New York Oppenheimer Rochester National
Municipals Municipals
Oppenheimer California Municipal Fund Limited Term New York Municipal Fund
Oppenheimer Limited Term Municipal Oppenheimer Senior Floating Rate Fund
Fund
Oppenheimer New Jersey Municipal Fund Rochester Fund Municipals

The following funds do not offer Class Y shares:
Oppenheimer AMT-Free Municipals Oppenheimer International Small Company
Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer Limited Term Municipal Fund
Oppenheimer Balanced Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Principal Protected Main
Street Fund
Oppenheimer Cash Reserves Oppenheimer Principal Protected Main
Street Fund II
Oppenheimer Champion Income Fund Oppenheimer Quest Capital Value Fund,
Inc.
Oppenheimer Convertible Securities Fund Oppenheimer Quest International Value
Fund, Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Rochester National Municipals
Oppenheimer Developing Markets Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Bond Fund Oppenheimer Total Return Bond Fund
Oppenheimer International Growth Fund Limited Term New York Municipal 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 funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares
of any money market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered with a sales charge
upon payment of the sales charge. They may also be used to purchase
shares of Oppenheimer funds subject to an early withdrawal charge or
contingent deferred sales charge.
o Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of
any of the Oppenheimer funds.
o Shares of Oppenheimer Principal Protected Main Street Fund may be
exchanged at net asset value for shares of any of the Oppenheimer
funds. However, shareholders are not permitted to exchange shares of
other Oppenheimer funds for shares of Oppenheimer Principal Protected
Main Street Fund until after the expiration of the warranty period
(8/5/2010).
o Shares of Oppenheimer Principal Protected Main Street Fund II may be
exchanged at net asset value for shares of any of the Oppenheimer
funds. However, shareholders are not permitted to exchange shares of
other Oppenheimer funds for shares of Oppenheimer Principal Protected
Main Street Fund II until after the expiration of the warranty period
(3/3/2011).

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

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

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

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

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

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

o With respect to Class B shares, 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.

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

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

To qualify as a regulated investment company, the Fund must distribute
at least 90% of its investment company taxable income (in brief, net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year. The Fund must also satisfy
certain other requirements of the Internal Revenue Code, some of which are
described below. Distributions by the Fund made during the taxable year or,
under specified circumstances, within 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.

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

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

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

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

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

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

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

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

The Fund will be required in certain cases to withhold 28% of ordinary
income dividends, capital gains distributions and the proceeds of the
redemption of shares, paid to any shareholder (1) who has failed to provide a
correct taxpayer identification number or to properly certify that number
when required, (2) who is subject to backup withholding for failure to report
the receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that the shareholder is not subject to backup withholding
or is an "exempt recipient" (such as a corporation). 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.

|X| 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.

|X| 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 28% on
ordinary income dividends, capital gains distributions and the proceeds of
the redemption of shares, paid to any foreign person. All income and any tax
withheld (in this situation) by the Fund is remitted by the Fund to the U.S.
Treasury and is identified in reports mailed to shareholders in January of
each year.

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, 2003, 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 four 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 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, 2003, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Convertible Securities Fund as of December 31, 2003, 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 four 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, 2004

41 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS DECEMBER 31, 2003
--------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--58.9%
--------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--14.1%
--------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--3.8%
Brinker International, Inc., Zero Coupon Cv. Sr. Unsec. Debs., 10/10/21 1 $ 6,500,000 $ 4,411,875
--------------------------------------------------------------------------------------------------------------------------------
Carnival Corp., 2% Cv. Sr. Unsec. Unsub. Debs., 4/15/21 5,000,000 5,906,250
--------------------------------------------------------------------------------------------------------------------------------
Hilton Hotels Corp.:
3.375% Cv. Sr. Unsec. Unsub. Nts., 4/15/23 2 4,000,000 4,345,000
3.375% Cv. Sr. Unsec. Unsub. Nts., 4/15/23 1,000,000 1,086,250
--------------------------------------------------------------------------------------------------------------------------------
International Game Technology,
Zero Coupon Cv. Sr. Unsec. Unsub. Debs., 1/29/33 1,2 5,000,000 4,006,250
--------------------------------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.,
Zero Coupon Cv. Sr. Unsec. Unsub. Bonds, 5/18/21 1 7,500,000 4,406,250
------------
24,161,875

--------------------------------------------------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.7%
Amazon.com, Inc.:
4.75% Cv. Sub. Debs., 2/1/09 840,000 853,650
4.75% Cv. Unsec. Sub. Debs., 2/1/09 2 3,360,000 3,414,600
------------
4,268,250

--------------------------------------------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.5%
Eastman Kodak Co., 3.375% Cv. Sr. Nts., 10/15/33 2 3,000,000 3,345,000
--------------------------------------------------------------------------------------------------------------------------------
MEDIA--6.8%
Charter Communications, Inc., 5.75% Cv. Sr. Unsec. Nts., 10/15/05 4,000,000 3,800,000
--------------------------------------------------------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. (The):
1.80% Cv. Unsec. Sub. Nts., 9/16/04 2,000,000 1,965,000
4.50% Cv. Sr. Unsec. Nts., 3/15/23 500,000 766,250
4.50% Cv. Sr. Unsec. Nts., 3/15/23 2 3,000,000 4,597,500
--------------------------------------------------------------------------------------------------------------------------------
Liberty Media Corp.:
0.75% Exchangeable Sr. Unsec. Debs., 3/30/23
(exchangeable for Time Warner, Inc. common stock) 2 8,000,000 9,480,000
3.25% Exchangeable Sr. Sec. Debs., 3/15/31
(exchangeable for Viacom, Inc. Cl. B common stock) 2 5,000,000 5,225,000
4% Exchangeable Sr. Unsec. Debs., 11/15/29
(exchangeable for Sprint Corp.
PCS, Series 1 common stock or cash based on the value of that stock) 5,000,000 3,531,250
--------------------------------------------------------------------------------------------------------------------------------
Omnicom Group, Inc., Zero Coupon Cv. Sr. Nts., 6/15/33 1,2 5,000,000 5,106,250
--------------------------------------------------------------------------------------------------------------------------------
Time Warner, Inc., Zero Coupon Cv. Nts., 12/6/19 1 5,000,000 3,156,250
--------------------------------------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 2.125% Cv. Sr. Unsec. Nts., 4/15/23 6,000,000 6,382,500
------------
44,010,000

--------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--2.3%
Gap, Inc. (The), 5.75% Cv. Sr. Unsec. Nts., 3/15/09 2 4,000,000 6,155,000
--------------------------------------------------------------------------------------------------------------------------------
Lowe's Cos., Inc., 0.861% Cv. Sr. Nts., 10/19/21 3 3,500,000 3,736,250
--------------------------------------------------------------------------------------------------------------------------------
TJX Cos., Inc. (The):
Zero Coupon Cv. Unsec. Sub. Liquid Yield Option Nts., 2/13/21 1 2,000,000 1,685,000
Zero Coupon Cv. Unsec. Sub. Liquid Yield Option Nts., 2/13/21 1,2 4,000,000 3,370,000
------------
14,946,250

14 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--0.5%
--------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.5%
Costco Cos., Inc., Zero Coupon Cv. Sub. Nts., 8/19/17 1 $ 4,000,000 $ 3,405,000
--------------------------------------------------------------------------------------------------------------------------------
ENERGY--4.6%
--------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--3.0%
Grey Wolf, Inc.:
3.75% Cv. Contingent Sr. Unsec. Nts., 5/7/23 500,000 473,125
3.75% Cv. Sr. Unsec. Nts, 5/7/23 2 3,500,000 3,311,875
--------------------------------------------------------------------------------------------------------------------------------
Halliburton Co., 3.125% Cv. Sr. Nts., 7/15/23 2 5,000,000 5,206,250
--------------------------------------------------------------------------------------------------------------------------------
Pride International, Inc., 3.25% Cv. Sr. Nts., 5/1/33 2 5,000,000 5,318,750
--------------------------------------------------------------------------------------------------------------------------------
Schlumberger Ltd., 2.125% Cv. Sr. Unsec. Debs., Series B, 6/1/23 2 5,000,000 4,968,750
------------
19,278,750

--------------------------------------------------------------------------------------------------------------------------------
OIL & GAS--1.6%
Devon Energy Corp., 4.95% Cv. Sr. Unsec. Debs., 8/15/08
(cv. into Chevron Corp. common stock) 5,000,000 5,131,250
--------------------------------------------------------------------------------------------------------------------------------
Kerr-McGee Corp., 5.25% Cv. Jr. Unsec. Sub. Debs., 2/15/10 5,000,000 5,293,750
------------
10,425,000

--------------------------------------------------------------------------------------------------------------------------------
FINANCIALS--3.2%
--------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS--2.2%
E*TRADE Group, Inc., 6% Cv. Unsec. Sub. Nts., 2/1/07 6,000,000 6,165,000
--------------------------------------------------------------------------------------------------------------------------------
GATX Corp.:
7.50% Cv. Sr. Unsec. Nts., 2/1/07 2 2,000,000 2,342,500
7.50% Cv. Sr. Unsec. Nts., 2/1/07 1,000,000 1,171,250
--------------------------------------------------------------------------------------------------------------------------------
Providian Financial Corp., 3.25% Cv. Sr. Unsec. Nts., 8/15/05 5,000,000 4,762,500
------------
14,441,250

--------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE--1.0%
EOP Operating LP, 7.25% Cv. Sr. Nts., 11/15/08 2 6,000,000 6,375,000
--------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--9.5%
--------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--4.1%
Amgen, Inc., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid Yield
Option Nts., 3/1/32 1 9,500,000 7,208,125
--------------------------------------------------------------------------------------------------------------------------------
Celgene Corp., 1.75% Cv. Sr. Nts., 6/1/08 2 2,500,000 3,000,000
--------------------------------------------------------------------------------------------------------------------------------
Genzyme Corp., 3% Cv. Unsec. Sub. Debs., 5/15/21 4,000,000 4,070,000
--------------------------------------------------------------------------------------------------------------------------------
Gilead Sciences, Inc., 2% Cv. Sr. Unsec. Nts., 12/15/07 2,500,000 3,425,000
--------------------------------------------------------------------------------------------------------------------------------
Invitrogen Corp., 5.50% Cv. Unsec. Sub. Nts., 3/1/07 5,000,000 5,187,500
--------------------------------------------------------------------------------------------------------------------------------
Sepracor, Inc., 5.75% Cv. Unsec. Sub. Nts., 11/15/06 3,500,000 3,521,875
------------
26,412,500

--------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.8%
Medtronic, Inc., 1.25% Unsec. Debs., 9/15/21 2 5,000,000 5,143,750
--------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--2.1%
Health Management Associates, Inc., 1.50% Cv. Sr. Sub. Nts., 8/1/23 2 5,000,000 5,525,000
--------------------------------------------------------------------------------------------------------------------------------
Quest Diagnostics, Inc., 1.75% Cv. Sr. Unsec. Debs., 11/30/21 4,000,000 4,125,000

15 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS CONTINUED
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
WebMD Corp., 1.75% Cv. Sub. Nts., 6/15/23 2 $ 4,000,000 $ 3,585,000
------------
13,235,000

--------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--2.5%

IVAX Corp., 5.50% Cv. Sr. Unsec. Sub. Nts., 5/15/07 3,500,000 3,644,375
--------------------------------------------------------------------------------------------------------------------------------
Roche Holdings, Inc., Zero Coupon Cv. Nts., 7/25/21 1 5,000,000 3,093,750
--------------------------------------------------------------------------------------------------------------------------------
Teva Pharmaceuticals Finance Netherlands BV,
0.75% Cv. Sr. Unsec. Nts., 8/15/21 3,000,000 4,035,000
--------------------------------------------------------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc., 1.75% Cv. Sr. Unsec. Debs., 3/15/23 2 4,000,000 5,285,000
------------
16,058,125

--------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--4.4%
--------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.8%
Tyco International Group SA:
2.75% Cv. Sr. Unsec. Unsub. Debs., 1/15/18 11,000,000 14,093,750
2.75% Cv. Sr. Unsec. Unsub. Debs., Series A, 1/15/18 2 3,000,000 3,843,750
------------
17,937,500

--------------------------------------------------------------------------------------------------------------------------------
MACHINERY--1.6%
Danaher Corp., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid
Yield Option Nts., 1/22/21 1 5,000,000 3,512,500
--------------------------------------------------------------------------------------------------------------------------------
Navistar Financial Corp., 4.75% Cv. Unsec. Sub. Nts., 4/1/09 4,000,000 4,325,000
--------------------------------------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc.:
8.25% Cv. Sub. Nts., 12/31/05 4 3,084,881 1,079,708
8.25% Cv. Sub. Nts., 12/31/05 4 2,962,671 1,036,935
------------
9,954,143

--------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--17.4%
--------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--3.5%
Commscope, Inc., 4% Cv. Jr. Unsec. Sub. Nts., 12/15/06 4,000,000 3,850,000
--------------------------------------------------------------------------------------------------------------------------------
Comverse Technology, Inc., Zero Coupon Cv. Sr. Unsec. Zero Yield
Puttable Securities, 5/15/23 1 4,500,000 5,310,000
--------------------------------------------------------------------------------------------------------------------------------
Corning, Inc., 3.50% Cv. Sr. Unsec. Debs., 11/1/08 3,000,000 3,731,250
--------------------------------------------------------------------------------------------------------------------------------
Juniper Networks, Inc., 4.75% Cv. Unsec. Sub. Nts., 3/15/07 1,037,000 1,062,925
--------------------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 2.75% Cv. Sr. Unsec. Debs., Series B, 6/15/25 4,000,000 4,745,000
--------------------------------------------------------------------------------------------------------------------------------
Nortel Networks Corp.:
4.25% Cv. Sr. Unsec. Nts., 9/1/08 2 2,000,000 1,902,500
4.25% Cv. Sr. Unsec. Nts., 9/1/08 2,000,000 1,902,500
------------
22,504,175

--------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.6%
Agilent Technologies, Inc.:
3% Cv. Sr. Unsec. Debs., 12/1/21 3 2,500,000 2,743,750
3% Cv. Sr. Unsec. Nts., 12/1/21 2,3 3,000,000 3,292,500
--------------------------------------------------------------------------------------------------------------------------------
Celestica, Inc., Zero Coupon Cv. Liquid Yield Option Nts., 8/1/20 1 8,000,000 4,270,000
--------------------------------------------------------------------------------------------------------------------------------
Flextronics International Ltd., 1% Cv. Unsec. Nts., 8/1/10 2 3,500,000 4,204,375

16 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS Continued
Solectron Corp., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid Yield
Option Nts., 11/20/20 1 $ 7,000,000 $ 4,007,500
--------------------------------------------------------------------------------------------------------------------------------
Vishay Intertechnology, Inc., 3.625% Cv. Sub. Nts., 8/1/23 2 3,000,000 4,245,000
------------
22,763,125

--------------------------------------------------------------------------------------------------------------------------------
IT CONSULTING & SERVICES--1.8%
DST Systems, Inc., 4.125% Cv. Sr. Unsec. Debs., Series A, 8/15/23 2 5,500,000 6,586,250
--------------------------------------------------------------------------------------------------------------------------------
Electronic Data Systems Corp., 3.875% Cv. Sr. Nts., 7/15/23 2 5,000,000 5,243,750
------------
11,830,000

--------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--4.1%
Advanced Micro Devices, Inc., 4.75% Cv. Sr. Unsec. Debs., 2/1/22 3 4,000,000 4,100,000
--------------------------------------------------------------------------------------------------------------------------------
Agere Systems, Inc., 6.50% Cv. Unsec. Unsub. Nts., 12/15/09
(cv. into Agere Systems, Inc., Cl. A common stock) 3,000,000 4,125,000
--------------------------------------------------------------------------------------------------------------------------------
International Rectifier Corp., 4.25% Cv. Sub. Nts., 7/15/07 2 4,000,000 4,020,000
--------------------------------------------------------------------------------------------------------------------------------
Lam Research Corp., 4% Cv. Unsec. Sub. Nts., 6/1/06 4,500,000 4,635,000
--------------------------------------------------------------------------------------------------------------------------------
LSI Logic Corp., 4% Cv. Sub. Nts., 5/15/10 2 5,000,000 5,581,250
--------------------------------------------------------------------------------------------------------------------------------
Micron Technology, Inc., 2.50% Cv. Unsec. Sub. Nts., 2/1/10 2 3,000,000 3,982,500
------------
26,443,750

--------------------------------------------------------------------------------------------------------------------------------
SOFTWARE--4.4%
BEA Systems, Inc., 4% Cv. Unsub. Nts., 12/15/06 4,000,000 4,035,000
--------------------------------------------------------------------------------------------------------------------------------
Computer Associates International, Inc.:
5% Cv. Sr. Nts., 3/15/07 2 4,000,000 5,180,000
5% Cv. Sr. Unsec. Nts., 3/15/07 1,500,000 1,942,500
--------------------------------------------------------------------------------------------------------------------------------
Fair Issac Corp., 1.50% Cv. Sr. Nts., 8/15/23 2 4,500,000 4,663,125
--------------------------------------------------------------------------------------------------------------------------------
Mentor Graphics Corp.:
6.875% Cv. Sub. Nts., 6/15/07 2 2,000,000 2,137,500
6.875% Cv. Unsec. Sub. Nts., 6/15/07 1,000,000 1,068,750
--------------------------------------------------------------------------------------------------------------------------------
Mercury Interactive Corp.:
4.75% Cv. Nts., 7/1/07 2 4,000,000 3,985,000
4.75% Cv. Unsec. Sub. Nts., 7/1/07 1,000,000 996,250
--------------------------------------------------------------------------------------------------------------------------------
Veritas Software Corp., 0.25% Cv. Sub. Nts., 8/1/13 2 4,000,000 4,380,000
------------
28,388,125

--------------------------------------------------------------------------------------------------------------------------------
MATERIALS--2.0%
--------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.8%
Sealed Air Corp., 3% Cv. Nts., 6/30/33 2 5,000,000 5,312,500
--------------------------------------------------------------------------------------------------------------------------------
METALS & MINING--1.2%
Freeport-McMoRan Cooper & Gold, Inc.,
7% Cv. Sr. Unsec. Unsub. Nts., 2/11/11 2,000,000 3,300,000
--------------------------------------------------------------------------------------------------------------------------------
Inco Ltd., 1% Cv. Unsec. Unsub. Debs., 3/14/23 3,000,000 4,181,250
------------
7,481,250

17 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS CONTINUED
-------------------------------------------------------------------------------
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
UTILITIES--3.2%
--------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.2%
Calpine Corp., 4.75% Cv. Sr. Unsec. Nts., 11/15/23 2 $ 4,000,000 $ 4,135,000
--------------------------------------------------------------------------------------------------------------------------------
CenterPoint Energy, Inc., 3.75% Cv. Sr. Nts., 5/15/23 2 5,000,000 5,337,500
--------------------------------------------------------------------------------------------------------------------------------
Duke Energy Corp., 1.75% Cv. Sr. Bonds, 5/15/23 4,500,000 4,668,750
------------
14,141,250

--------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--1.0%
El Paso Corp., Zero Coupon Cv. Debs., 2/28/21 1 13,000,000 6,045,000
------------
Total Convertible Corporate Bonds and Notes (Cost $349,041,628) 378,306,568

SHARES
--------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--30.6%
--------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--4.2%
--------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES--3.0%
Ford Motor Co. Capital Trust II, 6.50% Cum. Cv. Trust
Preferred Securities, Non-Vtg. 165,000 9,215,250
--------------------------------------------------------------------------------------------------------------------------------
General Motors Corp., 5.25% Cv. Sr. Unsec. Debs., Series B 375,000 10,076,250
------------
19,291,500

--------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.5%
Newell Financial Trust I, 5.25% Cum. Cv. Quarterly Income
Preferred Securities, Non-Vtg. 70,000 3,220,000
--------------------------------------------------------------------------------------------------------------------------------
MEDIA--0.7%
Equity Securities Trust I/Cablevision Systems Corp., 6.50% Cv., Series CVC
(exchangeable into Cablevision NY Group, Cl. A common stock) 175,000 4,369,750
--------------------------------------------------------------------------------------------------------------------------------
ENERGY--0.7%
--------------------------------------------------------------------------------------------------------------------------------
OIL & GAS--0.7%
Unocal Corp./Unocal Capital Trust, 6.25% Cum. Cv., Non-Vtg. 80,000 4,340,000
--------------------------------------------------------------------------------------------------------------------------------
FINANCIALS--8.1%
--------------------------------------------------------------------------------------------------------------------------------
BANKS--1.2%
Household International, Inc., 8.875% 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 70,000 3,185,000
--------------------------------------------------------------------------------------------------------------------------------
Washington Mutual Capital Trust I, 5.375% Cum. Cv. Units (each unit
consists of one preferred stock and one warrant to purchase shares of
Washington Mutual, Inc.), Non-Vtg. 2,5 75,000 4,174,500
--------------------------------------------------------------------------------------------------------------------------------
Washington Mutual, Inc., 5.375% Cum. Cv. Units (each unit consists of
one preferred stock and one warrant to purchase shares of
Washington Mutual, Inc.), Non-Vtg. 5 10,000 556,600
------------
7,916,100

--------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS--0.5%
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 70,000 3,355,800

18 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

MARKET VALUE
SHARES SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
INSURANCE--4.9%
Chubb Corp. (The), 7% Cv. Equity Units (each unit consists of one
warrant to purchase Chubb Corp. (The) common stock and $25 principal
amount of Chubb Corp. (The), 4% sr. nts., 11/16/07) 5 170,000 $ 4,855,200
--------------------------------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The), 7% Cv. Equity Units
(each unit has a stated amount of $50 and consists of a purchase contract
to purchase Hartford Financial Services Group, Inc. (The) common stock and
a normal unit which consists of $1,000 principal amount of Hartford Financial
Services Group, Inc. (The), 2.56% sr. nts., 8/16/08) 5 90,000 5,459,400
--------------------------------------------------------------------------------------------------------------------------------
PMI Group, Inc. (The), 5.875% Cv. Hybrid Income Term Security Units
(each unit has a stated value of $25 and consists of a purchase contract
to purchase PMI Group, Inc. (The) common stock and a corporate unit
which consists of PMI Group, Inc. (The), 3% sr. nts., 11/15/08) 5,6 140,000 3,603,600
--------------------------------------------------------------------------------------------------------------------------------
Prudential Financial, Inc./Prudential Financial Capital Trust I, 6.75% Cum. Cv.
Equity Security Units (each unit has a stated amount of $50 and 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 6,510,000
--------------------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 4.50% Cv. Jr. Unsec. Sub. Nts. 300,000 7,350,000
--------------------------------------------------------------------------------------------------------------------------------
UnumProvident Corp., 8.25% Cv. 100,000 3,386,000
------------
31,164,200

--------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE--1.5%
Host Marriott Financial Trust, 6.75% Cv. Quarterly
Income Preferred Securities 100,000 5,200,000
--------------------------------------------------------------------------------------------------------------------------------
Regency Centers Corp., 2% Cv. 120,000 4,612,560
------------
9,812,560

--------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--2.7%
--------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.9%
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. 5 100,000 5,525,000
--------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.8%
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., 11/15/04) 5 25,000 2,205,750
--------------------------------------------------------------------------------------------------------------------------------
McKesson Financing Trust, 5% Cum. Cv., Non-Vtg. 90,000 4,567,500
--------------------------------------------------------------------------------------------------------------------------------
Omnicare, Inc., 4% Cv. 80,000 5,100,000
------------
11,873,250

--------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--3.5%
--------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.8%
Coltec Capital Trust, 5.25% Cv. Term Income Deferrable Equity Securities
(cv. into Goodrich Corp. common stock and EnProIndustries, Inc.
common stock) 80,000 3,188,400
--------------------------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.25% Cv. Equity Security 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., 11/16/04), Non-Vtg. 5 40,000 4,148,000

19 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS CONTINUED
-------------------------------------------------------------------------------
MARKET VALUE
SHARES SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
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 $ 4,071,000
------------
11,407,400

--------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.7%
Allied Waste Industries, Inc., 6.25% Cv. Sr., Non-Vtg. 50,000 3,825,000
--------------------------------------------------------------------------------------------------------------------------------
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., 8/17/07), Non-Vtg. 5 70,000 3,504,200
--------------------------------------------------------------------------------------------------------------------------------
United Rentals Trust I, 6.50% Cv. Quarterly Income Preferred Securities 85,000 3,793,125
------------
11,122,325

--------------------------------------------------------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.9%
Xerox Corp., 6.25% Cv. 45,000 5,838,750
--------------------------------------------------------------------------------------------------------------------------------
MATERIALS--1.9%
--------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.9%
Boise Cascade Corp., 7.50% Adjustable Conversion-Rate Equity
Security Units (each unit consists of a contract to purchase Boise
Cascade Corp. common stock and a preferred security of Boise
Cascade Trust I), Non-Vtg. 5 90,000 4,607,100
--------------------------------------------------------------------------------------------------------------------------------
International Paper Capital Trust, 5.25% Cum. Cv. (cv. into International
Paper Co. common stock), Non-Vtg. 150,000 7,612,500
------------
12,219,600

--------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.8%
--------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.8%
Alltel Corp., 7.75% Cv. Equity Units (each unit consists of 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. 5 100,000 4,970,000
--------------------------------------------------------------------------------------------------------------------------------
CenturyTel, Inc., 6.875% Cv. Equity Units (each unit consists of units referred to
as corporate units, each with a stated amount of $25 and includes a purchase
contract to purchase CenteryTel, Inc. common stock and $25 principal amount
of CenturyTel, Inc., 6.02% sr. nts., series j, due 2007), Non-Vtg. 5 170,000 4,590,000

20 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

MARKET VALUE
SHARES SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES Continued
Sprint Corp., 7.125% Cv. Unsec. Equity Units (each unit consists of units referred
to as corporate units each with a stated amount of $25 and consist of $25
principal amount of Sprint Capital Corp., 6% sr. nts., 8/17/06 and a purchase
contract to purchase Sprint Corp. (PCS Group) common stock) 5 250,000 $ 1,775,000
------------
11,335,000

--------------------------------------------------------------------------------------------------------------------------------
UTILITIES--5.2%
--------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--3.1%
Cinergy Corp., 9.50% Cv. Flexible Equity Linked Exchangeable Preferred
Redeemable Increased Dividend Equity Securities (each feline prides
consists of units referred to as income prides, each with a stated
amount of $50 and includes a purchase contract for Cinergy Corp.
common stock, and a 6.90% preferred trust security, 6.90% due 2007
issued by Cinergy Corp. Funding Trust I) 5 70,000 4,459,000
--------------------------------------------------------------------------------------------------------------------------------
DTE Energy Co., 8.75% Cv. Equity 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) 5 135,000 3,458,700
--------------------------------------------------------------------------------------------------------------------------------
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 5.87% sr. nts., due 2006 and a contract to purchase Duke Energy Corp.
common stock), Non-Vtg. 5 100,000 1,384,000
--------------------------------------------------------------------------------------------------------------------------------
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) 5 120,000 6,927,600
--------------------------------------------------------------------------------------------------------------------------------
TXU Corp., 8.125% Cv. Feline Prides Units (each unit consists of units
referred to as Income Prides with a stated amount of $50, which includes
$50 principal amount of TXU Corp., 5.80% sr. nts., 5/16/08 and a purchase
contract to purchase TXU Corp. common stock with attached preference
stock purchase rights, 5/16/06), Non-Vtg. 5 100,000 3,361,000
------------
19,590,300

--------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.7%
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
mount of Sempra Energy, 5.60% sr. nts., 5/17/07) 5 160,000 4,553,600
--------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES--1.4%
AES Trust III, 6.75% Cv. 60,000 2,595,000
--------------------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The):
5.50% Cv. Jr. Unsec. Sub. Debs. 2 80,000 5,210,000
5.50% Cv. Jr. Unsec. Sub. Debs. 20,000 1,302,500
------------
9,107,500
------------
Total Preferred Stocks (Cost $172,145,006) 196,625,350

21 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF INVESTMENTS CONTINUED
MARKET VALUE
SHARES SEE NOTE 1

--------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--1.1%
--------------------------------------------------------------------------------------------------------------------------------
Danskin, Inc., Restricted Common Shares 4,6,7 2,015,119 $ --
--------------------------------------------------------------------------------------------------------------------------------
Johnson & Johnson 50,000 2,583,000
--------------------------------------------------------------------------------------------------------------------------------
Pfizer, Inc. 120,000 4,239,600
--------------------------------------------------------------------------------------------------------------------------------
SystemOne Technologies, Inc. 6 197,142 49,286
------------
Total Common Stocks (Cost $6,946,526) 6,871,886

UNITS
--------------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
--------------------------------------------------------------------------------------------------------------------------------
Danskin, Inc. Wts., Exp. 10/8/04 4,6,7 367,801 --
--------------------------------------------------------------------------------------------------------------------------------
Portion of Danskin, Inc. Promissory Nt. to be used to purchase 53,309
shares of restricted common stock in rights offering 4,6,7 -- 15,993
------------
Total Rights, Warrants and Certificates (Cost $15,993) 15,993

PRINCIPAL
AMOUNT
--------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.9%
--------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 3.625%, 3/31/04 (Cost $25,003,143) $25,000,000 25,169,925

--------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--2.7%
--------------------------------------------------------------------------------------------------------------------------------
Bank of America Corp., Linked Sr. Nts., Series RTY, 7%, 3/3/04
(redemption linked to the Russell 2000 Index) 6,500,000 7,221,700
--------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Corp. (New York Branch),
6% Equity Linked Nts., 12/23/04 (redemption linked to
Comcast Corp., Cl. A Special common stock) 165,800 5,098,349
--------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Capped Appreciation Linked Nts.,
5%, 12/30/04 (linked to the performance of Wyeth) 2 5,000,000 5,018,500
------------
Total Structured Notes (Cost $16,495,551) 17,338,549

--------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--3.0%
--------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 10% in joint repurchase agreement (Principal
Amount/Market Value $190,001,000, with a maturity value of $190,009,444) with
Banc One Capital Markets, Inc., 0.80%, dated 12/31/03, to be repurchased at
$19,009,845 on 1/2/04, collateralized by U.S. Treasury Bonds, 4.25%, 11/30/13,
with a value of $194,000,862 (Cost $19,009,000) 19,009,000 19,009,000

--------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $588,656,847) 100.2% 643,337,271
--------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2) (1,431,113)
--------------------------
NET ASSETS 100.0% $641,906,158
==========================

22 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Represents a zero coupon bond.
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 $191,541,975 or 29.84% of the Fund's net
assets as of December 31, 2003.
3. Represents the current interest rate for a variable or increasing rate
security.
4. Identifies issues considered to be illiquid or restricted. See Note 6 of
Notes to Financial Statements.
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. Received as the result of issuer reorganization. Currently has minimal market
value.

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, 2003. There were no
affiliate securities held by the Fund as of December 31, 2003. Transactions
during the period in which the issuer was an affiliate are as follows:

SHARES/UNITS SHARES/UNITS
DECEMBER 31, GROSS GROSS DECEMBER 31, REALIZED
2002 ADDITIONS REDUCTIONS 2003 LOSS
---------------------------------------------------------------------------------------------------------------

STOCKS AND/OR WARRANTS
Danskin, Inc. 2,610,710 -- 2,610,710 -- $ 3,047,417
Danskin, Inc. Restricted
Common Shares* 2,015,119 -- -- 2,015,119 --
Danskin, Inc. Wts., Exp. 10/8/04* 367,801 -- -- 367,801 --
Portion of Danskin, Inc.
Promissory Nt. to be used to
purchase 53,309 shares of
restricted common stock
in rights offering* -- -- -- -- --
-----------
$ 3,047,417
===========

*No longer an affiliate as of December 31, 2003.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

23 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2003
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------------------
Investments, at value (cost $588,656,847)--see accompanying statement $ 643,337,271
--------------------------------------------------------------------------------------------
Cash 614,518
--------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 3,447,429
Shares of beneficial interest sold 1,389,451
Investments sold 954,799
Other 27,799
-------------
Total assets 649,771,267

--------------------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 5,763,425
Shares of beneficial interest redeemed 1,444,604
Distribution and service plan fees 378,802
Trustees' compensation 111,692
Transfer and shareholder servicing agent fees 81,654
Shareholder reports 55,328
Other 29,604
-------------
Total liabilities 7,865,109

--------------------------------------------------------------------------------------------
NET ASSETS $ 641,906,158
=============

--------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
--------------------------------------------------------------------------------------------
Paid-in capital $ 721,365,236
--------------------------------------------------------------------------------------------
Accumulated net investment loss (970,782)
--------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (133,168,720)
--------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 54,680,424
-------------
NET ASSETS $ 641,906,158
=============

24 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

--------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
--------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$310,641,497 and 23,401,073 shares of beneficial interest outstanding) $13.27
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price) $14.08
--------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $133,057,612
and 10,008,143 shares of beneficial interest outstanding) $13.29
--------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $82,148,554
and 6,191,814 shares of beneficial interest outstanding) $13.27
--------------------------------------------------------------------------------------------
Class M Shares:
Net asset value and redemption price per share (based on net assets of
$114,600,010 and 8,638,207 shares of beneficial interest outstanding) $13.27
Maximum offering price per share (net asset value plus sales charge of 3.25% of
offering price) $13.72
--------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $1,458,485
and 109,875 shares of beneficial interest outstanding) $13.27

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

25 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------------------
Interest $ 19,024,873
--------------------------------------------------------------------------------------------
Dividends 12,211,024
------------
Total investment income 31,235,897

--------------------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------------------
Management fees 2,755,382
--------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 599,232
Class B 1,398,157
Class C 697,297
Class M 766,119
Class N 3,698
--------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 423,353
Class B 288,769
Class C 121,800
Class M 114,152
Class N 2,492
--------------------------------------------------------------------------------------------
Accounting service fees 174,795
--------------------------------------------------------------------------------------------
Trustees' compensation 49,164
--------------------------------------------------------------------------------------------
Custodian fees and expenses 11,191
--------------------------------------------------------------------------------------------
Other 18,729
------------
Total expenses 7,424,330
Less reduction to custodian expenses (2,914)
Less voluntary waiver of transfer and shareholder servicing agent fees--Class A (1,975)
Less voluntary waiver of transfer and shareholder servicing agent fees--Class B (1,366)
Less voluntary waiver of transfer and shareholder servicing agent fees--Class C (530)
Less voluntary waiver of transfer and shareholder servicing agent fees--Class M (581)
Less voluntary waiver of transfer and shareholder servicing agent fees--Class N (174)
------------
Net expenses 7,416,790

--------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 23,819,107

--------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
--------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments:
Unaffiliated companies 32,229,419
Affiliated companies (3,047,417)
Closing and expiration of option contracts written 96,305
------------
Net realized gain 29,278,307
--------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 64,594,391

--------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $117,691,805
============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

26 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

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

YEAR ENDED DECEMBER 31, 2003 2002
-------------------------------------------------------------------------------------------------
OPERATIONS
-------------------------------------------------------------------------------------------------
Net investment income $ 23,819,107 $ 25,383,283
-------------------------------------------------------------------------------------------------
Net realized gain (loss) 29,278,307 (85,635,374)
-------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 64,594,391 12,007,604
-----------------------------
Net increase (decrease) in net assets resulting from operations 117,691,805 (48,244,487)

-------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (11,367,661) (10,356,782)
Class B (5,345,568) (9,416,327)
Class C (2,624,294) (3,014,487)
Class M (4,627,938) (5,875,935)
Class N (28,916) (11,341)

-------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 66,001,751 38,583,437
Class B (43,825,244) (103,076,509)
Class C 9,713,833 (7,317,685)
Class M (11,782,752) (20,269,990)
Class N 938,567 381,879

-------------------------------------------------------------------------------------------------
NET ASSETS
-------------------------------------------------------------------------------------------------
Total increase (decrease) 114,743,583 (168,618,227)
-------------------------------------------------------------------------------------------------
Beginning of period 527,162,575 695,780,802
-----------------------------
End of period [including accumulated net investment loss of
$970,782 and $1,934,293, respectively] $641,906,158 $ 527,162,575
=============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

27 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
CLASS A YEAR ENDED DECEMBER 31, 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.29 $12.76 $13.85 $16.36 $14.84
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .57 .48 .72 .70
Net realized and unrealized gain (loss) 1.98 (1.41) (.94) (1.45) 2.66
-------------------------------------------------------------------
Total from investment operations 2.54 (.84) (.46) (.73) 3.36
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.56) (.63) (.63) (.72) (.70)
Distributions from net realized gain -- -- -- (1.06) (1.14)
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.56) (.63) (.63) (1.78) (1.84)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.27 $11.29 $12.76 $13.85 $16.36
===================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 22.95% (6.59)% (3.30)% (4.81)% 23.37%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $310,641 $202,968 $187,458 $210,903 $220,671
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $252,347 $190,677 $197,514 $225,938 $207,008
----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 4.48% 4.77% 3.58% 4.42% 4.55%
Total expenses 0.94% 3,4 0.99% 3 0.95% 3 0.90% 3 0.95% 3
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 52% 69% 127% 95%

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. Returns do not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

28 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

CLASS B YEAR ENDED DECEMBER 31, 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.30 $12.79 $13.87 $16.38 $14.87
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 .43 .38 .59 .59
Net realized and unrealized gain (loss) 2.02 (1.38) (.93) (1.45) 2.65
-------------------------------------------------------------------
Total from investment operations 2.45 (.95) (.55) (.86) 3.24
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.46) (.54) (.53) (.59) (.59)
Distributions from net realized gain -- -- -- (1.06) (1.14)
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.46) (.54) (.53) (1.65) (1.73)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.29 $11.30 $12.79 $13.87 $16.38
===================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 22.07% (7.44)% (3.97)% (5.55)% 22.35%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $133,058 $154,350 $286,829 $373,860 $431,370
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $139,757 $213,259 $330,806 $418,592 $414,611
----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 3.79% 3.95% 2.75% 3.62% 3.79%
Total expenses 1.74% 3,4 1.77% 3 1.71% 3 1.70% 3 1.71% 3
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 52% 69% 127% 95%

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

29 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

FINANCIAL HIGHLIGHTS CONTINUED
--------------------------------------------------------------------------------
CLASS C YEAR ENDED DECEMBER 31, 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.28 $12.76 $13.84 $16.35 $14.84
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .46 .46 .38 .59 .59
Net realized and unrealized gain (loss) 1.99 (1.40) (.93) (1.45) 2.65
-------------------------------------------------------------------
Total from investment operations 2.45 (.94) (.55) (.86) 3.24
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.46) (.54) (.53) (.59) (.59)
Distributions from net realized gain -- -- -- (1.06) (1.14)
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.46) (.54) (.53) (1.65) (1.73)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.27 $11.28 $12.76 $13.84 $16.35
===================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 22.14% (7.39)% (3.98)% (5.56)% 22.41%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $82,149 $61,031 $76,846 $91,567 $94,352
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $69,787 $66,391 $85,774 $96,574 $94,329
Ratios to average net assets: 2
Net investment income 3.73% 3.97% 2.80% 3.62% 3.80%
Total expenses 1.70% 3,4 1.76% 3 1.71% 3 1.70% 3 1.70% 3
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 52% 69% 127% 95%

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

30 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

CLASS M YEAR ENDED DECEMBER 31, 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.28 $12.76 $13.84 $16.35 $14.84
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .50 .49 .41 .64 .63
Net realized and unrealized gain (loss) 2.00 (1.40) (.93) (1.45) 2.65
-------------------------------------------------------------------
Total from investment operations 2.50 (.91) (.52) (.81) 3.28
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.51) (.57) (.56) (.64) (.63)
Distributions from net realized gain -- -- -- (1.06) (1.14)
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.51) (.57) (.56) (1.70) (1.77)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.27 $11.28 $12.76 $13.84 $16.35
===================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 22.59% (7.16)% (3.72)% (5.30)% 22.74%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $114,600 $108,426 $144,612 $181,521 $234,023
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $110,337 $122,897 $160,919 $213,617 $235,419
Ratios to average net assets: 2
Net investment income 4.16% 4.24% 3.04% 3.90% 4.06%
Total expenses 1.32% 3,4 1.51% 3 1.45% 3 1.42% 3 1.45% 3
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 52% 69% 127% 95%

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

31 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

FINANCIAL HIGHLIGHTS CONTINUED
--------------------------------------------------------------------------------
CLASS N YEAR ENDED DECEMBER 31, 2003 2002 2001 1
--------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.29 $12.76 $13.68
--------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .49 .55 .42
Net realized and unrealized gain (loss) 2.00 (1.43) (.84)
---------------------------------------
Total from investment operations 2.49 (.88) (.42)
--------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.51) (.59) (.50)
Distributions from net realized gain -- -- --
---------------------------------------
Total dividends and/or distributions to shareholders (.51) (.59) (.50)
--------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.27 $11.29 $12.76
=======================================

--------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 22.45% (6.92)% (3.02)%
--------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,458 $388 $36
--------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 743 $205 $10
--------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.87% 4.38% 5.45%
Total expenses 1.37% 1.43% 1.22%
Expenses after expense reimbursement or fee waiver
and reduction to custodian expenses 1.35% 1.38% N/A 4
--------------------------------------------------------------------------------------------------------
Portfolio turnover rate 61% 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, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

32 | 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 open-end 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 with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ 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. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued.
In the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing bid and asked
prices, and if not, at the closing bid price. 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. Securities whose values have been
materially affected by what the Manager identifies as a significant event
occurring before the Fund's assets are valued but after the close of their
respective foreign exchanges will be fair valued. Fair value is determined in
good faith using consistently applied procedures under the supervision of the
Board of Trustees. Short-term "money market type" debt securities with
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

33 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

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

-------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
Fund records a realized gain or loss when a structured note is sold or matures.
As of December 31, 2003, the market value of these securities comprised 2.7% of
the Fund's net assets, and resulted in unrealized gains of $842,998.

-------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. Secured by U.S. government securities, these
balances are invested in one or more repurchase agreements. Securities pledged
as collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.

-------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.

-------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.

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

NET UNREALIZED
APPRECIATION
BASED ON COST OF
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED SECURITIES AND OTHER
NET INVESTMENT LONG-TERM LOSS INVESTMENTS FOR FEDERAL
INCOME GAIN CARRYFORWARD 1,2 INCOME TAX PURPOSES
---------------------------------------------------------------------------------

$1,184,025 $-- $131,926,100 $51,387,836

1. As of December 31, 2003, the Fund had $131,926,100 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of December 31, 2003,
details of the capital loss carryforwards were as follows:

EXPIRING
----------------------
2009 $ 41,459,104
2010 90,466,996
------------
Total $131,926,100
=============

2. During the fiscal year December 31, 2003, the Fund utilized $21,570,184 of
capital loss carryforward to offset capital gains realized in that fiscal year.
During the fiscal year December 31, 2002, the Fund did not utilize any capital
loss carryforwards.

34 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly,
the following amounts have been reclassified for December 31, 2003. Net assets
of the Fund were unaffected by the reclassifications.

REDUCTION TO INCREASE TO
ACCUMULATED ACCUMULATED NET
NET INVESTMENT REALIZED LOSS ON
LOSS INVESTMENTS
------------------------------------
$1,138,781 $1,138,781

The tax character of distributions paid during the years ended December 31,
2003 and December 31, 2002 was as follows:

YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------------------------------------
Distributions paid from:
Ordinary income $23,994,377 $28,674,872

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments
for federal income tax purposes as of December 31, 2003 are noted below. The
primary difference between book and tax appreciation or depreciation of
securities and other investments, if applicable, is attributable to the tax
deferral of losses or tax realization of financial statement unrealized gain or
loss.

Federal tax cost of securities $591,949,435
============

Gross unrealized appreciation $ 59,480,921
Gross unrealized depreciation (8,093,085)
------------
Net unrealized appreciation $ 51,387,836
============

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for
the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
December 31, 2003, the Fund's projected benefit obligations were increased by
$16,097 and payments of $2,372 were made to retired trustees, resulting in an
accumulated liability of $104,840 as of December 31, 2003.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or
a portion of the annual compensation they are entitled to receive from the
Fund. Under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or are invested in other
Oppenheimer funds selected by the Trustee. Deferral of trustees' fees under the
plan will not affect the net assets of the Fund, and will not materially affect
the Fund's assets, liabilities or net investment income per share. Amounts will
be deferred until distributed in accordance to the Plan.

35 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

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

-------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are
declared and paid quarterly. Capital gain distributions, if any, are declared
and paid annually.

-------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.

-------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

-------------------------------------------------------------------------------
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, 2003 YEAR ENDED DECEMBER 31, 2002
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------

CLASS A
Sold 10,293,699 $125,272,357 8,236,543 $ 96,210,339
Dividends and/or
distributions reinvested 717,012 8,840,852 712,104 8,199,709
Redeemed (5,594,158) (68,111,458) (5,651,194) (65,826,611)
-------------------------------------------------------------
Net increase 5,416,553 $ 66,001,751 3,297,453 $ 38,583,437
=============================================================

------------------------------------------------------------------------------------------
CLASS B
Sold 2,802,713 $ 34,182,973 1,455,217 $ 17,209,549
Dividends and/or
distributions reinvested 300,964 3,678,039 550,830 6,406,897
Redeemed (6,750,493) (81,686,256) (10,784,316) (126,692,955)
-------------------------------------------------------------
Net decrease (3,646,816) $(43,825,244) (8,778,269) $(103,076,509)
=============================================================

36 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

YEAR ENDED DECEMBER 31, 2003 YEAR ENDED DECEMBER 31, 2002
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------

CLASS C
Sold 1,914,058 $ 23,378,006 947,643 $ 10,925,314
Dividends and/or
distributions reinvested 144,706 1,777,170 173,843 2,006,345
Redeemed (1,277,679) (15,441,343) (1,734,724) (20,249,344)
------------------------------------------------------------
Net increase (decrease) 781,085 $ 9,713,833 (613,238) $ (7,317,685)
=============================================================

------------------------------------------------------------------------------------------
CLASS M
Sold 223,208 $ 2,730,862 169,391 $ 1,991,974
Dividends and/or
distributions reinvested 264,332 3,234,301 344,816 3,977,838
Redeemed (1,462,362) (17,747,915) (2,237,918) (26,239,802)
-------------------------------------------------------------
Net decrease (974,822) $(11,782,752) (1,723,711) $(20,269,990)
=============================================================

-------------------------------------------------------------------------------------------
CLASS N
Sold 89,088 $ 1,101,574 37,735 $ 451,651
Dividends and/or
distributions reinvested 2,161 27,095 855 9,599
Redeemed (15,713) (190,102) (7,108) (79,371)
-------------------------------------------------------------
Net increase 75,536 $ 938,567 31,482 $ 381,879
=============================================================

-------------------------------------------------------------------------------
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, 2003, were
$346,402,469 and $299,537,010, respectively.

-------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee at an
annual rate 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
$174,795 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 per account fee. For the year ended December 31, 2003, the Fund
paid $944,910 to OFS for services to the Fund.

37 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

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

-------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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 Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.

-------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class
A shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses the fees it receives
from the Fund to pay brokers, dealers and other financial institutions for
personal services and account maintenance services they provide for their
customers who hold Class A shares. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.

-------------------------------------------------------------------------------
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 compensate the Distributor for its services in
connection with the distribution of these shares and servicing accounts. Under
the plans, the Fund pays the Distributor an annual asset-based sales charge of
0.75% per year on Class B shares and on Class C shares, 0.50% per year on Class
M shares and 0.25% per year on Class N shares. The Distributor also receives a
service fee of up to 0.25% per year under each plan. If either the Class B,
Class C, Class M or Class N plan is terminated by the Fund or by the
shareholders of a class, the Board of Trustees and its independent trustees
must determine whether the Distributor shall be entitled to payment from the
Fund of all or a portion of the service fee and/or asset-based sales charge in
respect to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at December 31,
2003 for Class B, Class C and Class N shares was $3,330,489, $2,068,728 and
$21,760, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.

-------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of fund shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.

38 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

CLASS A CLASS B CLASS C CLASS N
CLASS A CLASS M CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END FRONT-END DEFERRED SALES DEFERRED SALES DEFERRED SALES DEFERRED SALES
SALES CHARGES SALES CHARGES CHARGES CHARGES CHARGES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
---------------------------------------------------------------------------------------------------------------------

December 31, 2003 $248,513 $7,400 $6,904 $325,658 $5,278 $889

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

Written option activity for the year ended December 31, 2003 was as follows:

CALL OPTIONS
-------------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
--------------------------------------------------------------------
Options outstanding as of
December 31, 2002 -- $ --
Options written 1,800 446,093
Options closed or expired (1,800) (446,093)
-------------------------------
Options outstanding as of
December 31, 2003 -- $ --
==============================

39 | OPPENHEIMER CONVERTIBLE SECURITIES FUND

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

-------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of December 31, 2003, investments in securities included issues that are
illiquid or restricted. Restricted securities are 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, 2003 was
$2,132,636, which represents 0.33% of the Fund's net assets, of which $15,993
is considered restricted. Information concerning restricted securities is as
follows:

ACQUISITION VALUATION AS OF UNREALIZED
SECURITY DATES COST DEC. 31, 2003 DEPRECIATION
----------------------------------------------------------------------------------------------

STOCKS AND/OR WARRANTS
Danskin, Inc. Restricted Common Shares 8/14/95 $528,136 $ -- $528,136
Danskin, Inc. Wts., Exp. 10/8/04 8/14/95 -- -- --
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 --

-------------------------------------------------------------------------------
7. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's order requires the Fund's Board of Trustees to adopt operating policies
and procedures to administer interfund borrowing and lending. Under the
arrangement the Fund may lend money to other Oppenheimer funds and may borrow
from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
based upon a recommendation by the Manager. The Fund's borrowings, if any, are
subject to asset coverage requirements under the Investment Company Act and the
provisions of the SEC order and other applicable regulations. If the Fund
borrows money, there is a risk that the loan could be called on one day's
notice, in which case the Fund might have to borrow from a bank at higher rates
if a loan were not available from another Oppenheimer fund. If the Fund lends
money to another fund, it will be subject to the risk that the other fund might
not repay the loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the year
ended or at December 31, 2003.

Appendix A

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

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

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

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

N.R. Not rated.

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

Bond Investment Quality Standards

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

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

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

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

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

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

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

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

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

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

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

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

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

Investment Grade:

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

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

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

Speculative Grade:

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

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

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

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

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

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

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

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.

B-1
Appendix B

Industry Classifications

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

C-11
Appendix C

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

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

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

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

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

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

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

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

There is no initial sales charge on purchases of Class A shares of any of the
Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months (24 months in the case of Oppenheimer Rochester National Municipals
and Rochester Fund Municipals) of the beginning of the calendar month of
their purchase, as described in the Prospectus (unless a waiver described
elsewhere in this Appendix applies to the redemption). Additionally, on
shares purchased under these waivers that are subject to the Class A
contingent deferred sales charge, the Distributor will pay the applicable
concession described in the Prospectus under "Class A Contingent Deferred
Sales Charge."5 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases of Class A shares by a Retirement Plan that was
permitted to purchase such shares at net asset value but subject to
a contingent deferred sales charge prior to March 1, 2001. That
included plans (other than IRA or 403(b)(7) Custodial Plans) that:
1) bought shares costing $500,000 or more, 2) had at the time of
purchase 100 or more eligible employees or total plan assets of
$500,000 or more, or 3) certified to the Distributor that it
projects to have annual plan purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
1) through a broker, dealer, bank or registered investment adviser
that has made special arrangements with the Distributor for those
purchases, or
2) by a direct rollover of a distribution from a qualified
Retirement Plan if the administrator of that Plan has made
special arrangements with the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of
the following record-keeping arrangements:
1) The record keeping is performed by Merrill Lynch Pierce Fenner &
Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Merrill Lynch
Investment Management, L.P. ("MLIM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual
fund's principal underwriter or distributor, and (b) funds
advised or managed by MLIM (the funds described in (a) and (b)
are referred to as "Applicable Investments").
2) The record keeping for the Retirement Plan is performed on a
daily valuation basis by a record keeper whose services are
provided under a contract or arrangement between the Retirement
Plan and Merrill Lynch. On the date the plan sponsor signs the
record keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets (excluding assets
invested in money market funds) invested in Applicable
Investments.
3) The record keeping for a Retirement Plan is handled under a
service agreement with Merrill Lynch and on the date the plan
sponsor signs that agreement, the Plan has 500 or more eligible
employees (as determined by the Merrill Lynch plan conversion

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

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

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

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

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

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.6
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.7
10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) if the plan has made special
arrangements with the Distributor.
11) Plan termination or "in-service distributions," if the
redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
|_| For distributions from 401(k) plans sponsored by broker-dealers
that have entered into a special agreement with the Distributor
allowing this waiver.
|_| For distributions from retirement plans that have $10 million or
more in plan assets and that have entered into a special agreement
with the Distributor.
|_| For distributions from retirement plans which are part of a
retirement plan product or platform offered by certain banks,
broker-dealers, financial advisors, insurance companies or record
keepers which have entered into a special agreement with the
Distributor.

III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds
--------------------------------------------------------------------------------

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," in the applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans following
the death or disability of the last surviving shareholder. The death
or disability must have occurred after the account was established,
and for disability you must provide evidence of a determination of
disability by the Social Security Administration.
|_| The contingent deferred sales charges are generally not waived
following the death or disability of a grantor or trustee for a
trust account. The contingent deferred sales charges will only be
waived in the limited case of the death of the trustee of a grantor
trust or revocable living trust for which the trustee is also the
sole beneficiary. The death or disability must have occurred after
the account was established, and for disability you must provide
evidence of a determination of disability by the Social Security
Administration.
|_| Distributions from accounts for which the broker-dealer of record
has entered into a special agreement with the Distributor allowing
this waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch
or an independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government
Trust from accounts of clients of financial institutions that have
entered into a special arrangement with the Distributor for this
purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of
Class C shares of an Oppenheimer fund in amounts of $1,000,000 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.
|_| Distributions8 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.9
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.10
9) On account of the participant's separation from service.11
10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) offered as an investment option in a
Retirement Plan if the plan has made special arrangements with
the Distributor.
11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
12) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age 59 1/2,
as long as the aggregate value of the distributions does not
exceed 10% of the account's value, adjusted annually.
13) Redemptions of Class B shares under an Automatic Withdrawal
Plan for an account other than a Retirement Plan, if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value, adjusted annually.
14) For distributions from 401(k) plans sponsored by
broker-dealers that have entered into a special arrangement with
the Distributor allowing this waiver.
|_| Redemptions of Class B shares or Class C shares under an
Automatic Withdrawal Plan from an account other than a Retirement
Plan if the aggregate value of the redeemed shares does not exceed
10% of the account's value annually.

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

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

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

These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Income Fund Quest for Value New York
Tax-Exempt Fund
Quest for Value Investment Quality Income Fund Quest for Value
National Tax-Exempt Fund
Quest for Value Global Income Fund Quest for Value California
Tax-Exempt Fund

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not
have any direct or indirect financial interest in the operation of the
distribution plan or any agreement under the plan.
1 Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2 In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent deferred sales
charges mean the Fund's Early Withdrawal Charges and references to
"redemptions" mean "repurchases" of shares.
3 An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class 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.
4 The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase 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.
5 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.
6 This provision does not apply to IRAs.
7 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
8 The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
9 This provision does not apply to IRAs.
10 This provision does not apply to loans from 403(b)(7) custodial plans and
loans from the OppenheimerFunds-sponsored Single K retirement plan.
11 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.

Oppenheimer Convertible Securities Fund

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

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

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

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

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

Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202

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

(OppenheimerFunds logo)

PX0345.001.0205