Oppenheimer Disciplined Allocation Fund

497 1 body.htm BODY Oppenheimer Disciplined Allocation Fund

Oppenheimer Disciplined Allocation Fund
(A series of Oppenheimer Series Fund, Inc.)
6803 S. Tucson Way, Centennial, CO 80112
1.800.225.5567

Statement of Additional Information dated February 28, 2002, Revised October 18, 2002

This Statement of Additional Information is not a prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated February 28, 2002. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217, by calling the Transfer Agent at the
toll-free number shown above, or by downloading it from the OppenheimerFunds Internet 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...........................................................
13

Other Investment Restrictions........................................................................

28
How the Fund is Managed ..................................................................................
31
Organization and History.............................................................................
31

Board of Directors and Oversight Committees..........................................................
31

Directors and Officers...............................................................................
33
The Manager..........................................................................................
39
Brokerage Policies of the Fund............................................................................
42
Distribution and Service Plans............................................................................
44
Performance of the Fund...................................................................................
48

About Your Account
How to Buy Shares.........................................................................................
52
How to Sell Shares........................................................................................
61
How to Exchange Shares....................................................................................
66
Dividends, Capital Gains and Taxes........................................................................
70
Additional Information About the Fund.....................................................................
74

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

Financial Statements......................................................................................

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

ABOUT The FUnd

Additional Information About the Fund's Investment Policies and Risks

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

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

In selecting equity investments for the Fund's portfolio, the portfolio managers currently use
both "value" and "growth" investing styles.

|X| Value Investing. In selecting equity investments for the Fund's portfolio, the portfolio
managers currently use a value investing style coupled with fundamental analysis of issuers. In using a
value approach, the managers look for stocks and other equity securities that appear to be temporarily
undervalued, by various measures, such as price/earnings ratios. Value investing seeks stocks having
prices that are low in relation to their real worth or future prospects, with the expectation that the
Fund will realize appreciation in the value of its holdings when other investors realize the intrinsic
value of the stock.

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

|X| Growth Investing. In using a growth approach, the Funds' portfolio managers look for
high-growth companies. Currently, the portfolio managers, look for:
o Companies that have exceptional revenue growth
o Companies with above-average earnings growth
o Companies that can sustain exceptional revenue and earnings growth
o Companies that are well established as leaders in high growth markets

|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund traded its
portfolio securities during its last fiscal year. For example, if a fund sold all of its securities
during the year, its portfolio turnover rate would have been 100%. The Fund's portfolio turnover rate
will fluctuate from year to year. 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| Investments in Stocks and Other Equity Securities. The Fund does not limit its investments
in equity securities to issuers having a market capitalization of a specified size or range, and
therefore may invest in securities of small-, mid- and large-capitalization issuers. At times, the Fund
may have substantial amounts of its assets invested in securities of issuers in one or more
capitalization ranges, based upon the Manager's use of its investment strategies and its judgment of
where the best market opportunities are to seek the Fund's objective.

At times, the market may favor or disfavor securities of issuers of a particular capitalization
range. Securities of small capitalization issuers may be subject to greater price volatility in general
than securities of larger companies. Therefore, if the Fund has substantial investments in smaller
capitalization companies at times of market volatility, the Fund's share price may fluctuate more than
that of funds focusing on larger capitalization issuers.

At times, the Fund may increase the emphasis of its investments in a particular industry.
Therefore, it may be subject to the risks that economic, political or other events can have a negative
effect on the values of issuers in that particular industry (this is referred to as "industry risk").
Stocks of issuers in a particular industry may be affected by changes in economic conditions that affect
that industry more than others, or changes in government regulations, availability of basic resources or
supplies, or other events. To the extent that the Fund is emphasizing investments in a particular
industry, its share values may fluctuate in response to events affecting that industry.

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

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

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

To determine whether convertible securities should be regarded as "equity equivalents," the
Manager examines the following factors:
(1) whether, at the option of the investor, the convertible security can be exchanged for a fixed
number of shares of common stock of the issuer,
(2) whether the issuer of the convertible securities has restated its earnings per share of common
stock on a fully diluted basis (considering the effect of conversion of the convertible
securities), and
(3) the extent to which the convertible security may be a defensive "equity substitute," providing
the ability to participate in any appreciation in the price of the issuer's common stock.

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

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

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

|X| Investments in Bonds and Other Debt Securities. The Fund can invest in a variety of bonds,
debentures and other debt securities to seek its objective. It will invest at least 25% of its assets in
fixed-income senior securities and could have a larger portion of its assets in debt investments.

The Fund's debt investments can include investment-grade and non-investment-grade bonds
(commonly referred to as "junk bonds"). Investment-grade bonds are bonds rated at least "Baa" by Moody's
Investors Service, Inc., ("Moody's") or at least "BBB" by Standard & Poor's Rating Services ("S&P") or
Fitch, Inc., ("Fitch") or that have comparable ratings by another nationally-recognized rating
organization. In making investments in debt securities, the Manager may rely to some extent on the
ratings of ratings organizations or it may use its own research to evaluate a security's
credit-worthiness. If the securities that the Fund buys are unrated, to be considered part of the Fund's
holdings of investment-grade securities, they must be judged by the Manager to be of comparable quality
to bonds rated as investment grade by a rating organization.
|X| Special Risks of Lower-Grade Securities. It is not anticipated that the Fund will normally
invest a substantial portion of its assets in lower-grade debt securities. Because lower-grade
securities tend to offer higher yields than investment-grade securities, the Fund may invest in lower
grade securities if the Manager is trying to achieve greater income (and, in some cases, the
appreciation possibilities of lower-grade securities might be a reason they are selected for the Fund's
portfolio). High-yield convertible debt securities might be selected as "equity substitutes," as
described above.

"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, or similar ratings by other
nationally recognized 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 included in the
limitation on the percentage of the Fund's assets that can be invested in lower-grade securities, as
stated in the Prospectus. The Fund can invest in securities rated as low as "B" at the time the Fund
buys them.

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

However, the Fund's limitations on buying these investments may reduce the risks to the Fund,
as will the Fund's policy of diversifying its investments. Additionally, to the extent they can be
converted into stock, convertible securities may be less subject to some of these risks than
non-convertible high yield bonds, since stock may be more liquid and less affected by some of these risk
factors.

While securities rated "Baa" by Moody's or "BBB" by S&P or Fitch are investment grade and are
not regarded as junk bonds, those securities may be subject to greater risks than other investment-grade
securities, and have some speculative characteristics. Definitions of the debt security ratings
categories of Moody's, S&P and Fitch are included in Appendix A to this Statement of Additional
Information.

o Interest Rate Risk. Interest rate risk refers to the fluctuations in value of 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.

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

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

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

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

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

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

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

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

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

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

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

The Fund will only enter into "covered" rolls. To assure its future payment of the purchase
price, the Fund will identify on its books liquid assets in an amount equal to the payment obligation
under the roll.

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

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

o U.S. Treasury Obligations. These include Treasury bills (maturities of one year or
less when issued), Treasury notes (maturities of 1 to 10 years), and Treasury bonds (maturities of more
than 10 years). Treasury securities are backed by the full faith and credit of the United States as to
timely payments of interest and repayments of principal. They also can include U. S. Treasury securities
that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described
below, and Treasury Inflation-Protection Securities ("TIPS").

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

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

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

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

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

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

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

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

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

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

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

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

|X| Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon U.S. government
securities. These will typically be U.S. Treasury Notes and Bonds that have been stripped of their
unmatured interest coupons, the coupons themselves, or certificates representing interests in those
stripped debt obligations and coupons.

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

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

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

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

|X| Asset-Backed Securities. Asset-backed securities are fractional interests in pools of
assets, typically accounts receivable or consumer loans. They are issued by trusts or special-purpose
corporations. They are similar to mortgage-backed securities, described above, and are backed by a pool
of assets that consist of obligations of individual borrowers. The income from the pool is passed
through to the holders of participation interest in the pools. The pools may offer a credit enhancement,
such as a bank letter of credit, to try to reduce the risks that the underlying debtors will not pay
their obligations when due. However, the enhancement, if any, might not be for the full par value of the
security. If the enhancement is exhausted and any required payments of interest or repayments of
principal are not made, the Fund could suffer losses on its investment or delays in receiving payment.

The value of an asset-backed security is affected by changes in the market's perception of the
asset backing the security, the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any credit enhancement, and is also
affected if any credit enhancement has been exhausted. The risks of investing in asset-backed securities
are ultimately related to payment of consumer loans by the individual borrowers. As a purchaser of an
asset-backed security, the Fund would generally have no recourse to the entity that originated the loans
in the event of default by a borrower. The underlying loans are subject to prepayments, which may
shorten the weighted average life of asset-backed securities and may lower their return, in the same
manner as in the case of mortgage-backed securities and CMOs, described above. Unlike mortgage-backed
securities, asset-backed securities typically do not have the benefit of a security interest in the
underlying collateral.

|X| Municipal Securities. The Fund can buy municipal bonds and notes, tax-exempt commercial
paper, certificates of participation in municipal leases and other debt obligations. These debt
obligations are issued by the governments of states, as well as their political subdivisions (such as
cities, towns and counties), or by the District of Columbia and their agencies and authorities. The Fund
can also buy securities issued by any commonwealths, territories or possessions of the United States, or
their respective agencies, instrumentalities or authorities. The Fund would invest in municipal
securities because of the income and portfolio diversification they offer rather than for the tax-exempt
nature of the income they pay.

The Fund can buy both long-term and short-term municipal securities. Long-term securities have
a maturity of more than one year. In selecting municipal securities the Fund would normally focus on
longer-term securities, to seek higher income. In general, the values of longer-term bonds are more
affected by changes in interest rates than are short-term bonds.

Municipal securities are issued to raise money for a variety of public or private purposes,
including financing state or local governments, financing specific projects or public facilities. The
Fund can invest in municipal securities that are "general obligations," secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and interest.

The Fund can also buy "revenue obligations," payable only from the revenues derived from a
particular facility or class of facilities, or a specific excise tax or other revenue source. Some of
these revenue obligations are private activity bonds that pay interest that may be a tax preference for
investors subject to alternative minimum tax.

o Municipal Lease Obligations. Municipal leases are used by state and local government
authorities to obtain funds to acquire land, equipment or facilities. The Fund may invest in
certificates of participation that represent a proportionate interest in payments made under municipal
lease obligations. If the government stops making payments or transfers its payment obligations to a
private entity, the obligation could lose value or become taxable.

|X| Money Market Instruments and Short-Term Debt Obligations. The Fund can invest in a variety
of high quality money market instruments and short-term debt obligations, both under normal market
conditions and for defensive purposes. The following is a brief description of the types of money market
securities and short-term debt obligations the Fund can invest in. Those money market securities are
high-quality, short-term debt instruments that are issued by the U.S. government, corporations, banks or
other entities. They may have fixed, variable or floating interest rates. The Fund's investments in
foreign money market instruments and short-term debt obligations are subject to its limits on investing
in foreign securities and the risks of foreign investing, described above.

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

o Bank Obligations. The Fund can buy time deposits, certificates of deposit and bankers'
acceptances. They must be :
o obligations issued or guaranteed by a domestic or foreign bank (including a foreign branch of a
domestic bank) having total assets of at least U.S. $1 billion,
o banker's acceptances (which may or may not be supported by letters of credit) only if
guaranteed by a U.S. commercial bank with total assets of at least U.S. $1
billion.

The Fund can make time deposits. These are non-negotiable deposits in a bank for a specified
period of time. They may be subject to early withdrawal penalties. Time deposits that are subject to
early withdrawal penalties are subject to the Fund's limits on illiquid investments, as described below.
"Banks" include commercial banks, savings banks and savings and loan associations.

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

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

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

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

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

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

|X| Foreign Securities. The Fund can purchase up to 25% of its total assets in certain equity
and debt securities issued or guaranteed by foreign companies or debt securities of foreign governments
or their agencies. "Foreign securities" include equity and debt securities of companies organized under
the laws of countries other than the United States and debt securities of foreign governments and their
agencies and instrumentalities. Those securities may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.

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

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

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

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

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

o 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.

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

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

|X| Floating Rate and Variable Rate Obligations. Some securities the Fund can purchase have
variable or floating interest rates. Variable rates are adjusted at stated periodic intervals. Variable
rate obligations can have a demand feature that allows the Fund to tender the obligation to the issuer
or a third party prior to its maturity. The tender may be at par value plus accrued interest, according
to the terms of the obligations.

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

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

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

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

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

|X| Participation Interests. The Fund may invest in participation interests, subject to the
Fund's limitation on investments in illiquid investments. A participation interest is an undivided
interest in a loan made by the issuing financial institution in the proportion that the buyer's
participation interest bears to the total principal amount of the loan. No more than 5% of the Fund's
net assets can be invested in participation interests of the same borrower. The issuing financial
institution may have no obligation to the Fund other than to pay the Fund the proportionate amount of
the principal and interest payments it receives.
Participation interests are primarily dependent upon the creditworthiness of the borrowing
corporation, which is obligated to make payments of principal and interest on the loan. There is a risk
that a borrower may have difficulty making payments. If a borrower fails to pay scheduled interest or
principal payments, the Fund could experience a reduction in its income. The value of that participation
interest might also decline, which could affect the net asset value of the Fund's shares. If the issuing
financial institution fails to perform its obligations under the participation agreement, the Fund might
incur costs and delays in realizing payment and suffer a loss of principal and/or interest.

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

When such transactions are negotiated, the price (which is generally expressed in yield terms)
is fixed at the time the commitment is made. Delivery and payment for the securities take place at a
later date. The securities are subject to change in value from market fluctuations during the period
until settlement. The value at delivery may be less than the purchase price. For example, changes in
interest rates in a direction other than that expected by the Manager before settlement will affect the
value of such securities and may cause a loss to the Fund. During the period between purchase and
settlement, the Fund makes no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement. There is a risk of loss to the Fund if the
value of the security changes prior to the settlement date, and there is the risk that the other party
may not perform.

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

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

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

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

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

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

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

Repurchase agreements, considered "loans" under the Investment Company Act of 1940 (the
`Investment Company Act"), are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in effect, the value of the
collateral must equal or exceed the repurchase price to fully collateralize the repayment obligation.
However, if the vendor fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in its ability to do so. The
Manager will monitor the vendor's creditworthiness to confirm that the vendor is financially sound and
will continuously monitor the collateral's value.

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

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

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

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

The Fund cannot invest more than 10% of its net assets in illiquid or restricted securities
(including repurchase agreements maturing beyond seven days). Certain restricted securities that are
eligible for resale to qualified institutional purchasers, as described below, may not be subject to
that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to determine
whether to sell any holdings to maintain adequate liquidity.

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

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

Illiquid securities include repurchase agreements maturing in more than seven days and
participation interests that do not have puts exercisable within seven days.

|X| Loans of Portfolio Securities. The Fund can lend its portfolio securities to certain types
of eligible borrowers approved by the Board of Directors. It may do so to try to provide income or to
raise cash for liquidity purposes. These loans are limited to not more than one-third of the value of
the Fund's net assets and are subject to other conditions described below. The Fund presently does not
intend to engage in loans of securities but may do so in the future.

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
finders', custodian and administrative fees in connection with these loans. The terms of the Fund's
loans must meet applicable tests under the Internal Revenue Code and must permit the Fund to reacquire
loaned securities on five days' notice or in time to vote on any important matter.

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

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

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

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

The principal and/or interest payments depend on the performance of one or more other
securities or indices, and the values of these notes will therefore fall or rise in response to the
changes in the values of the underlying security or index. They are subject to both credit and interest
rate risks and therefore the Fund could receive more or less than it originally invested when the notes
mature, or it might receive less interest than the stated coupon payment if the underlying investment or
index does not perform as anticipated. There values may be very volatile and they may have a limited
trading market, making it difficult for the Fund to sell its investment at an acceptable price.
o "Inverse Floaters." Certain types of variable rate bonds known as "inverse floaters"
pay interest at rates that vary as the yields generally available on short-term tax-exempt bonds change.
However, the yields on inverse floaters move in the opposite direction of yields on short-term bonds in
response to market changes. As interest rates rise, inverse floaters produce less current income, and
their market value can become volatile. Inverse floaters are a type of "derivative security." Some have
a "cap," so that if interest rates rise above the "cap," the security pays additional interest income.
If rates do not rise above the "cap," the Fund will have paid an additional amount for a feature that
proves worthless. The Fund will not invest more than 5% of its total assets in inverse floaters.

|X| Hedging. The Fund can use hedging instruments. It is not obligated to use them in seeking
its objective although it can write covered calls to seek high current income if the Manager believes
that it is appropriate to do so. To attempt to protect against declines in the market value of the
Fund's portfolio, to permit the Fund to retain unrealized gains in the value of portfolio securities that
have appreciated, or to facilitate selling securities for investment reasons, the Fund could:
o sell futures contracts, or
o write covered calls on securities or futures. Covered calls may also be used to increase the
Fund's income, but the Manager does not expect to engage extensively in that practice.

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

o Futures. The Fund can buy and sell exchange-traded futures contracts that relate to (1)
broadly-based stock indices ("stock index futures") (2) debt securities (these are referred to as
"interest rate futures"), (3) other broadly-based securities indices (these are referred to as "financial
futures"), (4) foreign currencies (these are referred to as "forward contracts"), or (5) securities.

A broadly-based stock index is used as the basis for trading stock index futures. An index may
in some cases be based on stocks of issuers in a particular industry or group of industries. A stock
index assigns relative values to the common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot be purchased or sold
directly. Financial futures are similar contracts based on the future value of the basket of securities
that comprise the index. These contracts obligate the seller to deliver, and the purchaser to take, cash
to settle the futures transaction. There is no delivery made of the underlying securities to settle the
futures obligation. Either party may also settle the transaction by entering into an offsetting contract.

An interest rate future obligates the seller to deliver (and the purchaser to take) cash or a
specified type of debt security to settle the futures transaction. Either party could also enter into an
offsetting contract to close out the position.

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

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

o Writing Covered Call Options. The Fund is permitted to write (that is, sell) covered calls on
securities, indices, futures and forward contracts. If the Fund sells a call option, it must be covered.
That means the Fund must own the security subject to the call while the call is outstanding, or, for
certain types of calls, the call may be covered by segregating liquid assets to enable the Fund to
satisfy its obligations if the call is exercised. Up to 20% of the Fund's total assets may be subject to
calls the Fund writes.

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

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

The Fund's custodian, or a securities depository acting for the custodian, will act as the
Fund's escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC will release the
securities on the expiration of the option or when the Fund enters into a closing transaction.

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

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

The Fund may also write calls on a futures contract without owning the futures contract or
securities deliverable under the contract. To do so, at the time the call is written, the Fund must
cover the call by identifying on its books an equivalent dollar amount of liquid assets. The Fund will
segregate additional liquid assets if the value of the segregated assets drops below 100% of the current
value of the future. Because of this segregation requirement, in no circumstances would the Fund's
receipt of an exercise notice as to that future require the Fund to deliver a futures contract. It would
simply put the Fund in a short futures position, which is permitted by the Fund's hedging policies.

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

If the Manager anticipates a decline in the dollar value of a foreign currency, the decline in
the dollar value of portfolio securities denominated in that currency might be partially offset by
writing calls on that foreign currency. However, the currency rates could fluctuate in a direction
adverse to the Fund's position.

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

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

o Risks of Hedging with Options and Futures. The Fund could pay a brokerage commission each time
it sells a call, or sells an underlying investment in connection with the exercise of a call. Those
commissions could be higher on a relative basis than the commissions for direct purchases or sales of
the underlying investments. Premiums paid for options are small in relation to the market value of the
underlying investments. Consequently, 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.

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

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

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

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

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

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

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

The Fund could also use forward contracts to lock in the U.S. dollar value of portfolio
positions. This is called a "position hedge." When the Fund believes that foreign currency might suffer
a substantial decline against the U.S. dollar, it could enter into a forward contract to sell an amount
of that foreign currency approximating the value of some or all of the Fund's portfolio securities
denominated in that foreign currency. When the Fund believes that the U.S. dollar might suffer a
substantial decline against a foreign currency, it could enter into a forward contract to buy that
foreign currency for a fixed dollar amount. Alternatively, the Fund could enter into a forward contract
to sell a different foreign currency for a fixed U.S. dollar amount if the Fund believes that the U.S.
dollar value of the foreign currency to be sold pursuant to its forward contract will fall whenever
there is a decline in the U.S. dollar value of the currency in which portfolio securities of the Fund
are denominated. That is referred to as a "cross hedge." Normally, the Fund will not use cross-hedging.
The Fund will cover its short positions in these cases by identifying to its custodian bank
assets having a value equal to the aggregate amount of the Fund's commitment under forward contracts.
The Fund will not enter into forward contracts or maintain a net exposure to such contracts if the
consummation of the contracts would obligate the Fund to deliver an amount of foreign currency in excess
of the value of the Fund's portfolio securities or other assets denominated in that currency or another
currency that is the subject of the hedge.

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

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

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

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

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

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

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

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

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

o Regulatory Aspects of Hedging Instruments. When using futures and options on futures, the Fund
is required to operate within certain guidelines and restrictions with respect to the use of futures as
established by the Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the Fund complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the percentage of the Fund's
assets that may be used for futures margin and related options premiums for a bona fide hedging
position. However, under the Rule, the Fund must limit its aggregate initial futures margin and related
options premiums to not more than 5% of the Fund's net assets for hedging strategies that are not
considered bona fide hedging strategies under the Rule. Under the Rule, the Fund must also use short
futures and options on futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.

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

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

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

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

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

Investment in Other Investment Companies. The Fund can also invest in the securities of other investment
companies, which can include open-end funds, closed-end funds and unit investment trusts, subject to the
limits set forth in the Investment Company Act 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, 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.

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 Directors can change
non-fundamental policies without shareholder approval. However, significant changes to investment
policies will be described in supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's principal investment policies are described in the Prospectus.

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

o The Fund cannot issue senior securities. However, it can make payments or deposits of margin in
connection with options or futures transactions, lend its portfolio securities, enter into repurchase
agreements, borrow money and pledge its assets as permitted by its other fundamental policies. For
purposes of this restriction, the issuance of shares of common stock in multiple classes or series, the
purchase or sale of options, futures contracts and options on futures contracts, forward commitments,
and repurchase agreements entered into in accordance with the Fund's investment policies, and the
pledge, mortgage or hypothecation of the Fund's assets are not deemed to be senior securities.

o The Fund cannot buy securities or other instruments issued or guaranteed by any one issuer if
more than 5% of its total assets towould be invested in securities or other instruments of that issuer
or if it would then own more than 10% of that issuer's voting securities. This limitation applies to
75% of the Fund's total assets. The limit does not apply to securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities or securities of other investment companies.

o The Fund cannot invest 25% or more of its total assets in any one industry. That limit does
not apply to securities issued or guaranteed by the U.S. government or its agencies and
instrumentalities or securities issued by investment companies.

o The Fund cannot invest in physical commodities or commodities contracts. However, the Fund can
invest in hedging instruments permitted by any of its other investment policies, and can buy or sell
options, futures, securities or other instruments backed by, or the investment return from which is
linked to, changes in the price of physical commodities, commodity contracts or currencies.

o The Fund cannotbroker'so invest in real estate or in interests in real estate. However, the
Fund can purchase securities of issuers holding real estate or interests in real estate (including
securities of real estate investment trusts) if permitted by its other investment policies.

theThe Fund cannot underwrite securities of other issuers. A permitted exception is in case it
is deemed to be an underwriter under the Securities Act of 1933 in reselling its portfolio securities.

o The Fund cannot make loans, except to the extent permitted under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom that is applicable to the Fund, as such statute, rules
or regulations may be amended or interpreted from time to time. 1

o The Fund may not borrow money, except to the extent permitted under the 1940 Act, the rules or
regulations thereunder or any exemption therefrom that is applicable to the Fund, as such statute, rules
or regulations may be amended or interpreted from time to time. 2

|X| Does the Fund Have Additional Restrictions That Are Not "Fundamental" Policies?

o The Fund cannot invest in securities of other investment companies, except to the extent
permitted under the 1940 Act, the rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time to time.

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

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

How the Fund is Managed

Organization and History. The Fund is one of two investment portfolios, or "series," of Oppenheimer
Series Fund, Inc. That corporation is an open-end, management investment company organized as a Maryland
corporation in 1981, and was called Connecticut Mutual Investment Accounts, Inc. until March 18, 1996,
when the Manager became the Fund's investment advisor. The Fund is a diversified mutual fund, and until
March 18, 1996 was called Connecticut Mutual Total Return Account.

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

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

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

|X| Meetings of Shareholders. Although the Fund is not required by Maryland law to hold annual
meetings, it may hold shareholder meetings from time to time on important matters. The shareholders of
the Fund's parent corporation have the right to call a meeting to remove a Director or to take certain
other action described in the Articles of Incorporation or under Maryland law.

The Fund will hold meetings when required to do so by the Investment Company Act or other
applicable law. The Fund will hold a meeting when the Directors call a meeting or upon proper request of
shareholders. If the Fund's parent corporation receives a written request of the record holders of at
least 25% of the outstanding shares eligible to be voted at a meeting to call a meeting for a specified
purpose (which might include the removal of a Director), the Directors will call a meeting of
shareholders for that specified purpose. The Fund's parent corporation has undertaken that it will then
either give the applicants access to the Fund's shareholder list or mail the applicants' communication
to all other shareholders at the applicants' expense.

Shareholders of the Fund and of its parent corporation's other series vote together in the
aggregate on certain matters at shareholders' meetings. Those matters include the election of Directors
and ratification of appointment of the independent auditors. Shareholders of a particular series or
class vote separately on proposals that affect that series or class. Shareholders of a series or class
that is not affected by a proposal are not entitled to vote on the proposal. For example, only
shareholders of a particular series vote on any material amendment to the investment advisory agreement
for that series. Only shareholders of a particular class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that class.

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

The Board of Directors has an Audit Committee, a Study Committee and a Proxy Committee. The
members of the Audit Committee are Kenneth Randall (Chairman), Benjamin Lipstein and Edward Regan. The
Audit Committee held four meetings during the Fund's fiscal year ended October 31, 2001. The Audit
Committee provides the Board with recommendations regarding the selection of the Fund's independent
auditor. The Audit Committee also reviews the scope and results of audits and the audit fees charged,
reviews reports from the Fund's independent auditor concerning the Fund's internal accounting
procedures, and controls and reviews reports of the Manager's internal auditor, among other duties as
set forth in the Committee's charter.

The members of the Study Committee are Benjamin Lipstein (Chairman), Robert Galli and Elizabeth
Moynihan. The Study Committee held seven meetings during the Fund's fiscal year ended October 31, 2001.
The Study Committee evaluates and reports to the Board on the Fund's contractual arrangements, including
the Investment Advisory and Distribution Agreements, transfer and shareholder service agreements and
custodian agreements as well as the policies and procedures adopted by the Fund to comply with the
Investment Company Act and other applicable law, among other duties as set forth in the Committee's
charter.

The members of the Proxy Committee are Edward Regan (Chairman), Russell Reynolds and Clayton
Yeutter. The Proxy Committee held one meeting during the fiscal year ended October 31, 2001.The Proxy
Committee provides the Board with recommendations for proxy voting and monitors proxy voting by the Fund.

Directors and Officers of the Fund. Except for Mr. Murphy, each of the Directors is an independent
director of the Fund ("Independent Director"). Mr. Murphy is an "Interested Director," because he is
affiliated with the Manager by virtue of his positions as an officer and director of the Manager, and as
a shareholder of its parent company.

director. The Fund's Directors 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 Directors 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 Directors. All of the Directors are also trustees or directors of
the following publicly offered Oppenheimer funds (referred to as "Board I Funds"):

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

In addition to being a trustee or director of the Board I Funds, Mr. Galli is also a director
or trustee of 10 other portfolios in the OppenheimerFunds complex. Present or former officers,
directors, trustees and employees (and their immediate family members) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees are permitted to purchase Class
A shares of the Fund and the other Oppenheimer funds at net asset value without sales charge. The sales
charges on Class A shares is waived for that group because of the economies of sales efforts realized by
the Distributor.

Messrs. Spiro, Murphy, Bartlett, Leavy, Manioudakis, Molleur, Wixted and Zack and Mses.
Bechtolt, Feld and Ives respectively hold the same offices with one or more of the other Board I Funds
as with the Fund. As of February 1, 2002, the Directors 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 Director, and his family members, do not own securities of either
the Manager or Distributor of the Board I Funds or any person directly or indirectly controlling,
controlled by or under common control with the Manager or Distributor.

|X| Affiliated Transactions and Material Business Relationships. Mr. Reynolds has reported he has a
controlling interest in The Directorship Search Group, Inc. ("The Directorship Search Group"), a
director recruiting firm that provided consulting services to Massachusetts Mutual Life Insurance
Company (which controls the Manager) for fees aggregating $$110,000 from January 1, 2000 through
December 31, 2001, an amount representing less than 5% of the annual revenues of The Directorship Search
Group, Inc. Mr. Reynolds has reported he has a controlling interest inestimates that The Directorship
Search Group, Inc., a director recruiting firm that provided consulting services toGroup will bill
Massachusetts Mutual Life Insurance Company (which controls the Manager) for fees aggregating
for$150,000 for services to be provided during the calendar year 2002.

The Independent Directors have unanimously (except for Mr. Reynolds, who abstained) determined
that the consulting arrangements between The Directorship Search Group, Inc. and Massachusetts Mutual
Life Insurance Company were not material business or professional relationships that would compromise
Mr. Reynolds' status as an Independent Director. Nonetheless, to assure certainty as to determinations
of the Board and the Independent Directors as to matters upon which the Investment Company Act or the
rules thereunder require approval by a majority of Independent Directors, Mr. Reynolds will not be
counted for purposes of determining whether a quorum of Independent Directors was present or whether a
majority of Independent Directors approved the matter.

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

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

Independent Directors

Name, Address, Age, Principal Occupation(s) During Past 5 Years / Other Dollar Range Aggregate Dollar
Range of Shares
Beneficially
of Shares Owned in any of
Position(s) Held with Beneficially the Oppenheimer
Fund and Length of Trusteeships/Directorships Held by Director / Number of Owned in the Funds Overseen by
Service Portfolios in Fund Complex Currently Overseen by Director Fund Director

As of December 31, 2001

Leon Levy, Chairman of General Partner (since 1982) of Odyssey Partners, L.P. None None
the Board of Directors (investment partnership) and Chairman of the Board (since
Director since 1985 1981) of Avatar Holdings, Inc. (real estate development).
Age: 76 Oversees 31 portfolios in the OppenheimerFunds complex.

Robert G. Galli, A trustee or director of other Oppenheimer funds. Formerly None Over $100,000
Director since 1993 Vice Chairman (October 1995-December 1997) of the Manager.
Age: 69 Oversees 41 portfolios in the OppenheimerFunds complex.

Phillip A. Griffiths, The Director (since 1991) of the Institute for Advanced None Over $100,000
Director since 1999 Study, Princeton, N.J., director (since 2001) of GSI
Age: 63 Lumonics and a member of the National Academy of Sciences
(since 1979); formerly (in descending chronological order)
a director of Bankers Trust Corporation, Provost and
Professor of Mathematics at Duke University, a director of
Research Triangle Institute, Raleigh, N.C., and a Professor
of Mathematics at Harvard University. Oversees 31
portfolios in the OppenheimerFunds complex.

Benjamin Lipstein, Professor Emeritus of Marketing, Stern Graduate School of None Over $100,000
Director since 1985 Business Administration, New York University. Oversees 31
Age: 79 portfolios in the OppenheimerFunds complex.

Joel W. Motley, Director (January 2002-present), Columbia Equity Financial
Director since 2002 Corp. (privately-held financial adviser); Managing Director
Age: 50 (January 2002-present), Carmona Motley, Inc.
(privately-held financial adviser); Formerly he held the
following positions: Managing Director (January
1998-December 2001), Carmona Motley Hoffman Inc. $Non
(privately-held financial adviser); Managing Director
(January 1992-December 1997), Carmona Motley & Co. e3 None3
(privately-held financial adviser). Oversees 31 portfolios
in the OppenheimerFunds complex.

Elizabeth B. Moynihan, Author and architectural historian; a trustee of the Freer None $50,001 -
Director since 1992 Gallery of Art and Arthur M. Sackler Gallery (Smithsonian
Age: 72 Institute), Trustees Council of the National Building
Museum; a member of the Trustees Council, Preservation 0
League of New York State. Oversees 31 portfolios in the $100,00
OppenheimerFunds complex.

Kenneth A. Randall, A director of Dominion Resources, Inc. (electric utility None Over $100,000
Director since 1985 holding company) and Prime Retail, Inc. (real estate
Age: 75 investment trust); formerly a director of Dominion Energy,
Inc. (electric power and oil & gas producer), President and
Chief Executive Officer of The Conference Board, Inc.
(international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American
Motorists Insurance Company and American Manufacturers
Mutual Insurance Company. Oversees 31 portfolios in the
OppenheimerFunds complex.

Edward V. Regan, President, Baruch College, CUNY; a director of RBAsset None $50,001 -
Director since 1993 (real estate manager); a director of OffitBank; formerly
Age: 72 Trustee, Financial Accounting Foundation (FASB and GASB),
Senior Fellow of Jerome Levy Economics Institute, Bard
College, Chairman of Municipal Assistance Corporation for
the City of New York, New York State Comptroller and 0
Trustee of New York State and Local Retirement Fund.
Oversees 31 investment companies in the OppenheimerFunds $100,00
complex.

Russell S. Reynolds, Chairman (since 1993) of The Directorship Search Group, None $10,001 -
Jr., Inc. (corporate governance consulting and executive
Director since 1989 recruiting); a life trustee of International House
Age: 70 (non-profit educational organization), and a trustee (since
1996) of the Greenwich Historical Society. Oversees 31 $50,000
portfolios in the OppenheimerFunds complex.

Donald W. Spiro, Vice Chairman Emeritus (since January 1991) of the Manager. None Over $100,000
Chairman of the Board Formerly a director (January 1969-August 1999) of the
of Directors, Manager. Oversees 31 portfolios in the OppenheimerFunds
Director since 1985 complex.
Age: 76

Clayton K. Yeutter, Of Counsel (since 1993), Hogan & Hartson (a law firm). None $50,001 -
Director since 1991 Other directorships: Caterpillar, Inc. (since 1993) and
Age: 71 Weyerhaeuser Co. (since 1999). Oversees 31 portfolios in 0
the OppenheimerFunds complex. $100,00

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

The address of Mr. Murphy in the chart below is 498 Seventh Avenue, New York, NY 10018. Mr.
Murphy serves for an indefinite term, until his resignation, death or removal.

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

Interested Director
and Officer

Name, Address, Age, Principal Occupation(s) During Past 5 Years / Other Dollar Range Aggregate Dollar
Range of Shares
of Shares Beneficially
Position(s) Held with Beneficially Owned in any of
Fund and Length of Trusteeships/Directorships Held by Director / Number of Owned in the the Oppenheimer
Service Portfolios in Fund Complex Currently Overseen by Director Fund Funds

As of December 31, 2001

John V. Murphy, Chairman, Chief Executive Officer and director (since June
President and 2001) and President (since September 2000) of the Manager; None Over $100,000
Director, President and a director or trustee of other Oppenheimer
Director since funds; President and a director (since July 2001) of
October 2001 Oppenheimer Acquisition Corp. (the Manager's parent holding
Age: 53 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 DBL Acquisition Corporation; formerly, Chief
Operating Officer (September 2000-June 2001) of the Manager;
President and trustee (November 1999-November 2001) of MML
Series Investment Fund and MassMutual Institutional Funds
(open-end investment companies); a director (September
1999-August 2000) of C.M. Life Insurance Company; President,
Chief Executive Officer and director (September 1999-August
2000) of MML Bay State Life Insurance Company; a director
(June 1989-June 1998) of Emerald Isle Bancorp and Hibernia
Savings Bank (a wholly-owned subsidiary of Emerald Isle
Bancorp). Oversees 69 portfolios in the OppenheimerFunds
complex.

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

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

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

Officers of the Fund

Name, Address, Age, Position(s) Held Principal Occupation(s) During Past 5 Years
with Fund and Length of Service

------------------------------------------ --------------------------------------------------------------------------------
------------------------------------------- -------------------------------------------------------------------------------
Bruce Bartlett, Vice President and Senior Vice President (since January 1999) of the Manager; an officer and
Portfolio Manager (since November 2000) portfolio manager of other Oppenheimer funds, prior to joining the Manager in
Age: 51 April, 1995, he was a Vice President and Senior Portfolio Manager at First of
America Investment Corp. (September 1986 - April 1995).
------------------------------------------- -------------------------------------------------------------------------------
------------------------------------------- -------------------------------------------------------------------------------
Christopher Leavy, Vice President and Senior Vice President (since September 2000) of the Manager; prior to joining
Portfolio Manager (since November 2000) the Manager in September 2000, he was a portfolio manager of Morgan Stanley
Age: 30 Dean Witter Investment Management (from 1997) prior to which he was a
portfolio manager and equity analyst of Crestar Asset Management (from 1995).
------------------------------------------- -------------------------------------------------------------------------------
------------------------------------------- -------------------------------------------------------------------------------
Angelo Manioudakis, Vice Senior Vice President of the Manager (since April 2002); an officer and
President and Portfolio Manager portfolio manager of other Oppenheimer funds; formerly Executive Director and
(since April 2002) portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan
Age: 35. Stanley Investment Management (August 1993-March 2002).
------------------------------------------- -------------------------------------------------------------------------------
------------------------------------------ --------------------------------------------------------------------------------

Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager;
Treasurer, Principal Financial and Treasurer (since March 1999) of HarbourView Asset Management Corporation,
Accounting Officer (since April 1999) Shareholder Services, Inc., Oppenheimer Real Asset Management
Age: 42 Corporation, Shareholder Financial Services, Inc., Oppenheimer
Partnership Holdings, Inc., OFI Private Investments, Inc. (since March
2000), OppenheimerFunds International Ltd. and Oppenheimer Millennium
Funds plc (since May 2000) and OFI Institutional Asset Management, Inc.
(since November 2000) (offshore fund management subsidiaries of the
Manager); Treasurer and Chief Financial Officer (since May 2000) of
Oppenheimer Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp.
and OppenheimerFunds Legacy Program (since April 2000); formerly
Principal and Chief Operating Officer (March 1995-March 1999), Bankers
Trust Company-Mutual Fund Services Division. An officer of 85 portfolios
in the OppenheimerFunds complex.

Connie Bechtolt, Assistant Vice President of the Manager (since September 1998); formerly
Assistant Treasurer (since October 10,
2002) Manager/Fund Accounting (September 1994-September 1998) of the Manager. An
Age: 39 officer of 72 portfolios in the OppenheimerFunds complex.

Philip Vottiero, Vice President/Fund Accounting of the Manager (since March 2002); formerly
Assistant Treasurer (since August 15, Vice President/Corporate Accounting of the Manager (July 1999-March 2002)
2002) prior to which he was Chief Financial Officer at Sovlink Corporation (April
Age: 39 1996-June 1999). An officer of 72 portfolios in the OppenheimerFunds complex.

Robert G. Zack, Senior Vice President (since May 1985) and General Counsel (since
Secretary (since November 1, 2001) February 2002) of the Manager; General Counsel and a director (since
Age: 54 November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice
President and General Counsel (since November 2001) of HarbourView Asset
Management Corporation; Vice President and a director (since November
2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President,
General Counsel and a director (since November 2001) of Shareholder
Services, Inc., Shareholder Financial Services, Inc., OFI Private
Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset
Management, Inc.; General Counsel (since November 2001) of Centennial
Asset Management Corporation; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a
director (since November 2001) of OppenheimerFunds International Ltd.;
Vice President (since November 2001) of OppenheimerFunds Legacy Program;
Secretary (since November 2001) of Oppenheimer Acquisition Corp.;
formerly Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager;
Assistant Secretary of Shareholder Services, Inc. (May 1985-November
2001), Shareholder Financial Services, Inc. (November 1989-November
2001); OppenheimerFunds International Ltd. and Oppenheimer Millennium
Funds plc (October 1997-November 2001). An officer of 85 portfolios in
the OppenheimerFunds complex.

Philip T. Masterson, Vice President and Assistant Counsel of the Manager (since July 1998);
Assistant Secretary
(since August 15, 2002) formerly, an associate with Davis, Graham, & Stubbs LLP (January 1997-June
Age: 38 1998). An officer of 72 portfolios in the OppenheimerFunds complex.

Denis R. Molleur, Vice President and Senior Counsel of the Manager (since July 1999);
Assistant Secretary formerly a Vice President and Associate Counsel of the Manager (September
(since November 1, 2001) 1995-July 1999). An officer of 82 portfolios in the OppenheimerFunds
Age: 44 complex.

Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of the Manager; Vice
Assistant Secretary President (since June 1990) of OppenheimerFunds Distributor, Inc.;
(since November 1, 2001) Director, Vice President and Assistant Secretary (since June 1999) of
Age: 44 Centennial Asset Management Corporation; Vice President (since 1997) of
Oppenheimer Real Asset Management, Inc.; formerly Vice President and
Associate Counsel of the Manager (June 1990-July 1999). An officer of 85
portfolios in the OppenheimerFunds complex.

Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998) of the Manager;
Assistant Secretary Vice President (since 1999) of OppenheimerFunds Distributor, Inc.; Vice
(since November 1, 2001) President and Assistant Secretary (since 1999) of Shareholder Services,
Age: 36 Inc.; Assistant Secretary (since December 2001) of OppenheimerFunds
Legacy Program and Shareholder Financial Services, Inc.; formerly
Assistant Vice President and Assistant Counsel of the Manager (August
1997-June 1998); Assistant Counsel of the Manager (August 1994-August
1997). An officer of 85 portfolios in the OppenheimerFunds complex.

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

|X| Remuneration of Directors. The officers of the Fund and one of the Directors of the Fund
(Mr. Murphy) who are affiliated with the Manager receive no salary or fee from the Fund. The remaining
Directors of the Fund received the compensation shown below from the Fund with respect to the Fund's
fiscal year ended October 31, 2001. The compensation from all of the Board I Funds (including the Fund)
represents compensation received as a director, trustee or member of a committee of the boards of those
funds during the calendar year 2001.

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

Director's Name Aggregate Retirement Total Compensation From
Benefits All Oppenheimer Funds For
Compensation Accrued as Part Which Individual Serves As
and Position from Fund1 of Fund Trustee/Director
Expenses (33 Funds)2

Robert G. Galli $266 $0 $202,8863
Study Committee Member

Phillip Griffiths $2664 $0 $54,889

Joel W. Motley5 $0 $0 $0

---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Elizabeth B. Moynihan $391 $0 $105,760
Study Committee Member
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Kenneth A. Randall $359 $0 $97,012
Audit Committee Chairman
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Edward V. Regan $237 $0 $95,960
Proxy Committee Chairman, Audit
Committee Member
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Russell S. Reynolds, Jr. $355 $0 $71,792
Proxy Committee Member
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Donald Spiro $391 $0 $64,080
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- -----------------------------------------------------------------------------

Clayton K. Yeutter $2036 $0 $71,792
Proxy Committee Member

---------------------------------------- -----------------------------------------------------------------------------
1. Aggregate compensation includes fees, deferred compensation, if any, and retirement plan
benefits accrued for a Director.
2. For the 2001 calendar year.

3. Total Compensation for the 2001 calendar year includes compensation received for serving as a
Trustee or Director of 10 other Oppenheimer funds.
4. Includes $266 deferred under Deferred Compensation Plan described below
5. Elected to the Board on October 10, 2002 and therefore did not receive any compensation.
6. Includes $51 deferred under Deferred Compensation Plan described below.

|X| Retirement Plan for Directors. The Fund and its parent corporation have adopted a retirement
plan that provides for payments to retired Directors. Payments are up to 80% of the average compensation
paid during a Director's five years of service in which the highest compensation was received. A
Director must serve as director or trustee for any of the Board I Funds for at least 15 years to be
eligible for the maximum payment. Each Director's retirement benefits will depend on the amount of the
Director's future compensation and length of service. Therefore the amount of those benefits cannot be
determined at this time, nor can we estimate the number of years of credited service that will be used
to determine those benefits.

|X| Deferred Compensation Plan. The Board of Directors has adopted a Deferred Compensation Plan
for disinterested directors 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
Director is periodically adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds selected by the Director. The amount paid to the Director under the plan will be
determined based upon the performance of the selected funds.

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

|X| Major Shareholders. As of February 1, 2002, the only persons who owned of record or were
known by the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares were:

RPSS TR Country Hills Health Care Inc, 401K Plan, Attn: Sandi Steers, 580 Broadway, El
Cajon, CA 92021-5124, which owned 2,255.090 Class N shares (48.84% of the Class N shares
then outstanding).

R J FLETCHER & PEARSON SPAGHT TR, Fletcher Spaght PSP & Trust BDA FBO Lisa Granick, 222
Berkeley St., Boston, MA 02116-3748, which owned 1,747.957 Class N shares (37.85% of the
Class N shares then outstanding).

RPSS TR ROLLOVER IRA FBO Bruce L. Frank, 16 Meer Dr., Langhorne, PA 19053-1516 which owned
233.033 Class N shares (5.04% 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.

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

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

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

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 Directors, legal and audit expenses, custodian and
transfer agent expenses, share issuance costs, certain printing and registration costs and non-recurring
expenses, including litigation costs. The management fees paid by the Fund to the Manager are calculated
at the rates described in the Prospectus, which are applied to the assets of the Fund as a whole. The
fees are allocated to each class of shares based upon the relative proportion of the Fund's net assets
represented by that class.

------------------------------------- ---------------------------------------------------------------------------
Fiscal Year ended 10/31: Management Fees Paid to OppenheimerFunds, Inc.
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
1999 $1,994,511
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
2000 $1,230,427
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
2001 $927,181
------------------------------------- ---------------------------------------------------------------------------

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

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

|X| Annual Approval of Investment Advisory Agreement. Each year, the Board of Directors,
including a majority of the Independent Directors, is required to approve the renewal of the investment
advisory agreement. The Investment Company Act requires that the Board request and evaluate and the
Manager provide such information as may be reasonably necessary to evaluate the terms of the investment
advisory 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 Directors, meeting separately from the
full Board with experienced Counsel to the Fund who assisted the Board in its deliberations. The Fund's
Counsel is independent of the Manager within the meaning and intent of the SEC Rules regarding the
independence of counsel.

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 Directors.
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. Subject to those considerations,
as a factor in selecting brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager or an affiliate serves
as investment advisor.

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

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

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

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

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

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

The research services provided by brokers 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 10/31: Total Brokerage Commissions Paid by the Fund1
--------------------------------------- ----------------------------------------------------------------------------
--------------------------------------- ----------------------------------------------------------------------------
1999 $717,642
--------------------------------------- ----------------------------------------------------------------------------
--------------------------------------- ----------------------------------------------------------------------------
2000 $224,949
--------------------------------------- ----------------------------------------------------------------------------
--------------------------------------- ----------------------------------------------------------------------------
2001 $390,8442
--------------------------------------- ----------------------------------------------------------------------------

1. Amounts do not include spreads or commissions on principal transactions on a net trade basis.
2. In the fiscal year ended 10/31/01, the amount of transactions directed to brokers for research

services was $51,064,622 and the amount of the commissions paid to broker-dealers for those
services was $74,023.

Distribution and Service Plans

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

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

--------------- ----------------------- -----------------------
Fiscal Year Aggregate Front-End Class A Front-End
Sales Charges
Ended 10/31: Sales Charges on Retained by
Class A Shares Distributor1
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
1999 $400,298 $295,333
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2000 $155,566 $112,021
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2001 $109,771 $72,391
--------------- ----------------------- -----------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the
Distributor.

------------ ------------------------ ------------------------ ------------------------ ------------------------
Fiscal Concessions on Class A Concessions on Class B Concessions on Class C Concessions on Class N
Year Ended Shares Advanced by Shares Advanced by Shares Advanced by Shares Advanced by
10/31: Distributor1 Distributor1 Distributor1 Distributor1
------------ ------------------------ ------------------------ ------------------------ ------------------------
------------ ------------------------ ------------------------ ------------------------ ------------------------
1999 $46,607 $250,032 $25,954 N/A
------------ ------------------------ ------------------------ ------------------------ ------------------------
------------ ------------------------ ------------------------ ------------------------ ------------------------
2000 $9,827 $98,076 $11,259 N/A
------------ ------------------------ ------------------------ ------------------------ ------------------------
------------ ------------------------ ------------------------ ------------------------ ------------------------
2001 $10,575 $88,402 $5,518 $72
------------ ------------------------ ------------------------ ------------------------ ------------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and
for sales of Class B, Class C and Class N shares from its own resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.

------------ ------------------------- ----------------------- ------------------------ ------------------------
Fiscal Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Deferred Sales
Year Ended Deferred Sales Charges Charges Retained by Deferred Sales Charges Deferred Sales Charges
10/31 Retained by Distributor Distributor Retained by Distributor Retained by Distributor
------------ ------------------------- ----------------------- ------------------------ ------------------------
------------ ------------------------- ----------------------- ------------------------ ------------------------
2001 $925 $53,529 $975 $0
------------ ------------------------- ----------------------- ------------------------ ------------------------

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 Directors, including a majority of the
Independent Directors4, cast in person at a meeting called for the purpose of voting on that plan.

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

While the plans are in effect, the Treasurer of the Fund shall provide separate written
reports on the plans to the Board of Directors 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 Directors.

Each plan states that while it is in effect, the selection and nomination of those Directors of
the Fund's parent corporation who are not "interested persons" of the corporation (or the Fund) is
committed to the discretion of the Independent Directors. 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 Directors.

Under the plan for a class, no payment will be made to any recipient in any quarter in which
the aggregate net asset value of all Fund shares of that class held by the recipient for itself and its
customers does not exceed a minimum amount, if any, that may be set from time to time by a majority of
the Independent Directors. The Board of Directors 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. 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. After the first year shares are outstanding, the Distributor
makes service fee payments to Recipients quarterly on those shares. The advance payment is based on the
net asset value of shares sold. Shares purchased by exchange do not qualify for the advance service fee
payment. If Class A shares purchased by grandfathered retirement accounts are redeemed during the first
year after their purchase, the Recipient of the service fees on those shares will be obligated to repay
the Distributor a pro rata portion of the advance payment of the service fee made on those shares.

For the fiscal year ended October 31, 2001 payments under the Class A plan totaled $319,036, of
which $81,671 was retained by the Distributor and included $210,913, all of which was 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 and Class N Service and Distribution Plan Fees. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of shares in the
respective class, determined as of the close of each regular business day during the period. Each plan
provides for the Distributor to be compensated at a flat rate, whether the Distributor's distribution
expenses are more or less than the amounts paid by the Fund under the plan during the period for which
the fee is paid. The types of services that recipients provide are similar to the services provided
under the Class A service plan, described above.

Each Plan permits the Distributor to retain both the asset-based sales charges and the service
fees or to pay recipients the service fee on a quarterly basis, without payment in advance. However,
the Distributor currently intends to pay the service fee to recipients in advance for the first year
after Class B, Class C and Class N shares are purchased. After the first year Class B, Class C or Class
N shares are outstanding, after their purchase, the Distributor makes service fee payments quarterly on
those shares. The advance payment is based on the net asset value of shares sold. Shares purchased by
exchange do not qualify for the advance service fee payment. If Class B, Class C or Class N shares are
redeemed during the first year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance payment of the service fee
made on those shares. In cases where the Distributor is the broker of record for Class B, Class C and
Class N shares, i.e. shareholders without the services of a broker directly invest in the Fund, the
Distributor will retain the asset-based sales charge and service fee for Class B, Class C and Class N
shares.

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

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

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

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

---------------------------------------------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 10/31/01
---------------------------------------------------------------------------------------------------------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class: Total Payments Under Amount Retained by Distributor's Distributor's
Aggregate Unreimbursed Expenses
Unreimbursed Expenses as % of Net Assets of
Plan Distributor Under Plan Class
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class B Plan $165,687 $129,5071 $563,721 3.82%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class C Plan $32,808 $6,5692 $75,238 2.60%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class N Plan $5 $3 N/A N/A
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
1. Includes $13,904 paid to an affiliate of the Distributor's parent company.
2. Includes $5,715 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate its investment
performance. Those terms include "cumulative total return," "average annual total return," "average
annual total return at net asset value" and "total return at net asset value." An explanation of how
total returns are calculated is set forth below. The charts below show the Fund's performance as of the
Fund's most recent fiscal year end. You can obtain current performance information by calling the Fund's
Transfer Agent at 1.800.225.5567 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 Securities and Exchange Commission. Those rules describe the types of performance data that may be
used and how it is to be calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares of the Fund. Those
returns must be shown for the 1-, 5- and 10-year periods (or the life of the class, if less) ending as
of the most recently ended calendar quarter prior to the publication of the advertisement (or its
submission for publication).

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

o An investment in the Fund is not insured by the FDIC or any other government agency.
o The principal value of the Fund's shares, and total returns are not guaranteed and normally
will fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be worth more or less than their original
cost.
o Total returns for any given past period represent historical performance information and are
not, and should not be considered, a prediction of future returns.

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

|X| Total Return Information. There are different types of "total returns" to measure the
Fund's performance. Total return is the change in value of a hypothetical investment in the Fund over a
given period, assuming that all dividends and capital gains distributions are reinvested in additional
shares and that the investment is redeemed at the end of the period. Because of differences in expenses
for each class of shares, the total returns for each class are separately measured. The cumulative total
return measures the change in value over the entire period (for example, 10 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.

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

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

o Total Returns at Net Asset Value. From time to time the Fund may also quote a cumulative or an
average annual total return "at net asset value" (without deducting sales charges) for Class A, Class B,
Class C and Class N shares. Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into consideration the
reinvestment of dividends and capital gains distributions.

--------------------------------------------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 10/31/01
--------------------------------------------------------------------------------------------------------------------
--------------- ----------------------- ----------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns (10 years
Shares or life of Class)
--------------- ----------------------- ----------------------------------------------------------------------------
--------------- ----------------------- ------------------------- ------------------------- ------------------------
1-Year 5-Year 10-Year
(or life of class) (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
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
Class A1 103.36% 115.76% -15.29% -10.12% 3.45% 4.68% 7.36% 7.99%
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
Class B 34.07%2 34.07%2 -15.20% -10.79% 3.62% 3.89% 4.94%2 4.94%2
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
Class C 25.96%3 25.96%3 -11.64% -10.76% 3.89%3 3.89%3 4.29%3 4.29%3
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
Class N -8.81%4 -7.90%4 N/A N/A N/A N/A N/A N/A
--------------- ---------- ------------ ------------ ------------ ------------ ------------ ---------- -------------
1. Inception of Class A: 9/16/85
2. Inception of Class B: 10/2/95
3. Inception of Class C: 5/1/96
4. Inception of Class N: 3/1/01

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 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 Rankings. From time to time the Fund may publish the star ranking of the
performance of its classes of shares by Morningstar, Inc., an independent mutual fund monitoring
service. Morningstar ranks mutual funds in their specialized market sector. The Fund is included in the
domestic stock funds category.

Morningstar proprietary star rankings reflect historical risk-adjusted total investment return.
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating(TM)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 10-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 $25.
Effective November 1, 2002, for any new Asset Builder Plan, each purchase through AccountLink must be at
least $50 and shareholders must invest at least $500 before an Asset Builder Plan can be established on
---
a new account. Accounts established prior to November 1, 2001 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 normally closes at 4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares will be purchased and dividends
will begin to accrue on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund three days after the transfers are initiated. If the proceeds of the ACH transfer
are not received on a timely basis, the Distributor reserves the right to cancel the purchase order. The
Distributor and the Fund are not responsible for any delays in purchasing shares resulting from delays
in ACH transmissions.

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

|X| Right of Accumulation. To qualify for the lower sales charge rates that apply to larger
purchases of Class A shares, you and your spouse can add together:
o Class A and Class B shares you purchase for your individual accounts (including IRAs and 403(b)
plans), or for your joint accounts, or for trust or custodial accounts on behalf of
your children who are minors, and
o Current purchases of Class A and Class B shares of the Fund and other Oppenheimer funds to
reduce the sales charge rate that applies to current purchases of Class A shares, and
o Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial
or contingent deferred sales charge to reduce the sales charge rate for current
purchases of Class A shares, provided that you still hold your investment in one of
the Oppenheimer funds.

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

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

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

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

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

Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or Class A and Class B
shares of the Fund and other Oppenheimer funds during a 13-month period, you can reduce the sales charge
rate that applies to your purchases of Class A shares. The total amount of your intended purchases of
both Class A and Class B shares will determine the reduced sales charge rate for the Class A shares
purchased during that period. You can include purchases made up to 90 days before the date of the
Letter. Letters of Intent do not consider Class C or Class N shares you purchase or may have purchased.

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

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

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

If the total eligible purchases made during the Letter of Intent period do not equal or exceed
the intended purchase amount, the concessions previously paid to the dealer of record for the account
and the amount of sales charge retained by the Distributor will be adjusted to the rates applicable to
actual total purchases. If total eligible purchases during the Letter of Intent period exceed the
intended purchase amount and exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the Prospectus, the sales charges paid will be adjusted to the lower rate. That
adjustment will be made only if and when the dealer returns to the Distributor the excess of the amount
of concessions allowed or paid to the dealer over the amount of concessions that apply to the actual
amount of purchases. The excess concessions returned to the Distributor will be used to purchase
additional shares for the investor's account at the net asset value per share in effect on the date of
such purchase, promptly after the Distributor's receipt thereof.
The Transfer Agent will not hold shares in escrow for purchases of shares of the Fund and other
Oppenheimer funds by OppenheimerFunds prototype 401(k) plans under a Letter of Intent. If the intended
purchase amount under a Letter of Intent entered into by an OppenheimerFunds prototype 401(k) plan is
not purchased by the plan by the end of the Letter of Intent period, there will be no adjustment of
concessions paid to the broker-dealer or financial institution of record for accounts held in the name
of that plan.

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

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

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

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

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

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

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

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

Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly from a bank account, you
must enclose a check (the minimum is $25) for the initial purchase with your application. Currently, the
minimum investment is $25 to establish an Asset Builder Plan, and will remain at $25 for those accounts
established prior to November 1, 2002. However, as described above under "AccountLink," for Asset
Builder Plans established on or after November 1, 2002, the minimum investment for new Asset Builder
Plans will increase to $50, each purchase must be at least $50 and shareholders must invest at least
---
$500 before an Asset Builder Plan can be established. 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 $500,000 or more for Class B shares
or $1 million or more for Class C shares on behalf of a single investor (not including dealer "street
name" or omnibus accounts). That is because generally it will be more advantageous for that investor to
purchase Class A shares of the Fund.

|X| Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases of Class A shares
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 after six years is not
treated as a taxable event for the shareholder. If those laws or the IRS interpretation of those laws
should change, the automatic conversion feature may be suspended. In that event, no further conversions
of Class B shares would occur while that suspension remained in effect. Although Class B shares could
then be exchanged for Class A shares on the basis of relative net asset value of the two classes,
without the imposition of a sales charge or fee, such exchange could constitute a taxable event for the
shareholder, and absent such exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.

o to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),
o to all rollover contributions made to Individual 401(k) plans, Profit-Sharing Plans and Money
Purchase Pension Plans,

o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and Ascender retirement plans,
o to all trustee-to-trustee IRA transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix C to this Statement of Additional
Information) which have entered into a special agreement with the Distributor for that
purpose,
o to Retirement Plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, the
recordkeeper or the plan sponsor for which has entered into a special agreement with
the Distributor,
o to Retirement Plans of a plan sponsor where the aggregate assets of all such plans invested in
the Oppenheimer funds is $500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the purchase with the
redemption proceeds of Class A shares of one or more Oppenheimer funds.
o to certain customers of broker-dealers and financial advisors that are identified in a special
agreement between the broker-dealer or financial advisor and the Distributor for that
purpose.

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

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

|X| Allocation of Expenses. The Fund pays expenses related to its daily operations, such as
custodian fees, Directors' 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 Directors,
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, effective September 27, 2002, a $12 annual fee is charged on
any account valued at less than $500. This fee will not be charged for:
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 charged annually on or about the second to last business day of September. This
annual fee will be 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 New York Stock Exchange ("the Exchange") on
each day that the Exchange is open. The calculation is done by dividing the value of the Fund's net
assets attributable to a class by the number of shares of that class that are outstanding. The Exchange
normally closes at 4:00 P.M., Eastern time, but may close earlier on some other days (for example, in
case of weather emergencies or on days falling before a U.S. holiday). All references to time in this
Statement of Additional Information mean "Eastern time." The Exchange's most recent annual announcement
(which is subject to change) states that it will close on New Year's Day, Presidents' Day, Martin Luther
King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. It may also close on other days.

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

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

(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 Directors, 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 Directors 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 Directors 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 Directors. 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
Directors 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 Directors 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 Directors has the right to cause the involuntary redemption
of the shares held in any account if the account holds fewer than 100 shares. 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 ay not
directly request redemption of their accounts. The plan administrator or fiduciary must sign the
request.

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

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

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

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

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

The Fund cannot guarantee receipt of a payment on the date requested. The Fund reserves the
right to amend, suspend or discontinue offering these plans at any time without prior notice. Because of
the sales charge assessed on Class A share purchases, shareholders should not make regular additional
Class A share purchases while participating in an Automatic Withdrawal Plan. Class B, Class C and Class
N shareholders should not establish automatic withdrawal plans, because of the 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 $25. Effective November 1, 2002, the
minimum amount that may be exchanged to each other fund account became $50. Instructions should be
provided on the OppenheimerFunds Application or signature-guaranteed instructions. Exchanges made under
these plans are subject to the restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional Information.

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

The following funds do not offer Class N shares:

Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester National Municipals
Oppenheimer Municipal Bond Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer New Jersey Municipal Fund Limited Term New York Municipal Fund
Oppenheimer New York Municipal Fund Rochester Fund Municipals
The following funds do not offer Class Y shares:
Oppenheimer California Municipal Fund Oppenheimer Limited Term Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Cash Reserves Oppenheimer New York Municipal Fund
Oppenheimer Champion Income Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Convertible Securities Fund Oppenheimer Rochester National Municipals
Oppenheimer Disciplined Allocation Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Small Company 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 Senior Floating Rate Fund are not available by exchange of shares
of Oppenheimer Money Market Fund or Class A shares of Oppenheimer Cash Reserves.
o Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund and Oppenheimer Select
Managers QM Active Balanced Fund are only available to retirement plans and are available only
by exchange from the same class of shares of other Oppenheimer funds held by retirement plans.
o Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of any money
market fund offered by the Distributor. Shares of any money market fund purchased without a
sales charge may be exchanged for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge. They may also be used to purchase shares of Oppenheimer funds
subject to an early withdrawal charge or contingent deferred sales charge.
o Shares of Oppenheimer Money Market Fund, Inc. purchased with the redemption proceeds of shares
of other mutual funds (other than funds managed by the Manager or its subsidiaries) redeemed
within the 30 days prior to that purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial sales charge or contingent deferred sales
charge. To qualify for that privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of Oppenheimer Money
Market Fund, Inc. are purchased. If requested, they must supply proof of entitlement to this
privilege.

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

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

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

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

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

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

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

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.

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.

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

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

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

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

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

|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.

|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 30% (29% for payments after December 31, 2003) on
ordinar7y 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 Directors and Shareholders of
Oppenheimer Disciplined Allocation Fund:

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

KPMG LLP

Denver, Colorado
November 21, 2001

34 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

STATEMENT OF INVESTMENTS October 31, 2001

Market Value
Shares See Note 1
================================================================================
Common Stocks--57.1%
--------------------------------------------------------------------------------
Basic Materials--1.3%
--------------------------------------------------------------------------------
Metals--0.6%
Alcoa, Inc. 24,600 $ 793,842
--------------------------------------------------------------------------------
Paper--0.7%
Sappi Ltd., Sponsored ADR 94,100 897,714
--------------------------------------------------------------------------------
Capital Goods--9.7%
--------------------------------------------------------------------------------
Aerospace/Defense--3.2%
Boeing Co. 17,300 563,980
--------------------------------------------------------------------------------
Lockheed Martin Corp. 42,200 2,058,094
--------------------------------------------------------------------------------
Raytheon Co. 49,300 1,589,925
----------
4,211,999

--------------------------------------------------------------------------------
Electrical Equipment--0.1%
Emerson Electric Co. 3,732 182,943
-------------------------------------------------------------------------------
Industrial Services--0.9%
Republic Services, Inc./1/ 70,000 1,146,600
--------------------------------------------------------------------------------
Manufacturing--5.5%
Caterpillar, Inc. 24,500 1,095,640
--------------------------------------------------------------------------------
Titan Corp. (The)/1/ 76,800 2,006,784
--------------------------------------------------------------------------------
Tyco International Ltd. 84,000 4,127,760
----------
7,230,184

--------------------------------------------------------------------------------
Communication Services--2.1%
--------------------------------------------------------------------------------
Telecommunications: Long Distance--1.8%
AT&T Corp. 111,600 1,701,900
--------------------------------------------------------------------------------
Qwest Communications International, Inc. 51,500 666,925
----------
2,368,825

--------------------------------------------------------------------------------
Telecommunications: Wireless--0.3%
Geotek Communications, Inc., Series B (Escrowed)/1,2/ 100 300
--------------------------------------------------------------------------------
Leap Wireless International, Inc.1 26,100 388,107
----------
388,407

--------------------------------------------------------------------------------
Consumer Cyclicals--4.6%
--------------------------------------------------------------------------------
Consumer Services--0.7%
IMS Health, Inc. 42,800 914,636
--------------------------------------------------------------------------------
Retail: General--1.2%
Kohl's Corp./1/ 28,800 1,601,568
--------------------------------------------------------------------------------
Retail: Specialty--2.7%
Bed Bath & Beyond, Inc./1/ 22,000 551,320
--------------------------------------------------------------------------------
BJ's Wholesale Club, Inc./1/ 15,000 761,550
--------------------------------------------------------------------------------
Target Corp. 73,000 2,273,950
----------
3,586,820

12 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

Market Value
Shares See Note 1
--------------------------------------------------------------------------------
Consumer Staples--2.4%
--------------------------------------------------------------------------------
Broadcasting--1.1%
Comcast Corp., Cl. A Special/1/ 14,700 $ 526,848
--------------------------------------------------------------------------------
Fox Entertainment Group, Inc., A Shares/1/ 41,200 906,812
-----------
1,433,660

--------------------------------------------------------------------------------
Entertainment--0.8%
News Corp. Ltd. (The), Sponsored ADR, Preference 41,800 994,840
--------------------------------------------------------------------------------
Tobacco--0.5%
Philip Morris Cos., Inc. 14,000 655,200
--------------------------------------------------------------------------------
Energy--3.0%
--------------------------------------------------------------------------------
Energy Services--0.8%
Noble Drilling Corp./1/ 34,300 1,047,865
--------------------------------------------------------------------------------
Oil: Domestic--2.2%
Anadarko Petroleum Corp. 5,300 302,365
--------------------------------------------------------------------------------
Exxon Mobil Corp. 63,756 2,515,174
-----------
2,817,539

--------------------------------------------------------------------------------
Financial--16.4%
--------------------------------------------------------------------------------
Diversified Financial--11.6%
AMBAC Financial Group, Inc. 6,000 288,000
--------------------------------------------------------------------------------
Citigroup Inc. 60,666 2,761,516
Concord EFS, Inc./1/ 32,000 875,840
--------------------------------------------------------------------------------
Franklin Resources, Inc. 17,300 555,330
--------------------------------------------------------------------------------
Freddie Mac 63,000 4,272,660
--------------------------------------------------------------------------------
Household International, Inc. 39,600 2,071,080
--------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 11,800 515,778
--------------------------------------------------------------------------------
USA Education, Inc. 46,600 3,800,696
-----------
15,140,900

--------------------------------------------------------------------------------
Insurance--4.8%
Aetna, Inc./1/ 51,300 1,417,932
--------------------------------------------------------------------------------
Allstate Corp. 35,100 1,101,438
--------------------------------------------------------------------------------
American International Group, Inc. 10,512 826,243
--------------------------------------------------------------------------------
MBIA, Inc. 19,000 875,140
--------------------------------------------------------------------------------
XL Capital Ltd., Cl. A 24,200 2,102,012
-----------
6,322,765

--------------------------------------------------------------------------------
Healthcare--8.8%
--------------------------------------------------------------------------------
Healthcare/Drugs--3.3%
American Home Products Corp. 18,000 1,004,940
--------------------------------------------------------------------------------
Johnson & Johnson 31,000 1,795,210
--------------------------------------------------------------------------------
Pharmacia Corp. 35,900 1,454,668
-----------
4,254,818

13 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

STATEMENT OF INVESTMENTS Continued

Market Value
Shares See Note 1
--------------------------------------------------------------------------------
Healthcare/Supplies & Services--5.5%
Baxter International, Inc. 14,500 $ 701,365
--------------------------------------------------------------------------------
Biomet, Inc. 52,500 1,601,250
--------------------------------------------------------------------------------
Cardinal Health, Inc. 45,000 3,019,950
--------------------------------------------------------------------------------
Lincare Holdings, Inc./1/ 12,000 308,400
--------------------------------------------------------------------------------
Stryker Corp. 26,900 1,512,856
------------
7,143,821

--------------------------------------------------------------------------------
Technology--6.9%
--------------------------------------------------------------------------------
Computer Hardware--1.4%
Lexmark International, Inc., Cl. A/1/ 26,800 1,199,300
--------------------------------------------------------------------------------
SanDisk Corp./1/ 56,200 614,828
------------
1,814,128

--------------------------------------------------------------------------------
Computer Services--1.1%
First Data Corp. 21,000 1,418,970
--------------------------------------------------------------------------------
Computer Software--1.2%
Microsoft Corp./1/ 24,500 1,424,675
--------------------------------------------------------------------------------
Veritas Software Corp./1/ 5,000 141,900
------------
1,566,575

--------------------------------------------------------------------------------
Communications Equipment--1.0%
Lucent Technologies, Inc. 192,300 1,288,410
--------------------------------------------------------------------------------
Electronics--2.2%
Micron Technology, Inc./1/ 85,000 1,934,600
--------------------------------------------------------------------------------
Motorola, Inc. 58,400 956,008
------------
2,890,608
--------------------------------------------------------------------------------
Utilities--1.9%
--------------------------------------------------------------------------------
Electric Utilities--1.4%
Dominion Resources, Inc. 25,000 1,528,000
--------------------------------------------------------------------------------
Duke Energy Corp. 7,900 303,439
------------
1,831,439

--------------------------------------------------------------------------------
Gas Utilities--0.5%
El Paso Corp. 10,000 490,600
--------------------------------------------------------------------------------
Enron Corp. 9,862 137,082
------------
627,682
------------
Total Common Stocks (Cost $77,273,027) 74,572,758

14 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

Market Value
Units See Note 1
=========================================================================================================
Rights, Warrants and Certificates--0.0%
Concentric Network Corp. Wts., Exp. 12/15/07/1/, /2/ 100 $ 60
---------------------------------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. Wts., Exp. 12/12/01/1/,/2/ 666 10
---------------------------------------------------------------------------------------------------------
McCaw International Ltd. Wts., Exp. 4/15/07/1/, /2/ 100 13
---------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/1/06/1/, /3/ 500 1,544
---------------------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp. 8/1/07/1/, /2/ 516 25,284
---------------------------------------------------------------------------------------------------------
Signature Brands USA, Inc. Wts., Exp. 8/15/02/1/, /2/ 100 --
----------
Total Rights, Warrants and Certificates (Cost $7,063) 26,911
Principal
Amount
=========================================================================================================
Asset-Backed Securities--0.8%
Litigation Settlement Monetized Fee Trust, Asset-Backed Certificates,
Series 2001-1A, Cl. A1, 8.33%, 4/25/31/2/ (Cost $961,189) $961,556 1,023,908
=========================================================================================================
Mortgage-Backed Obligations--4.8%
Asset Securitization Corp.,
Commercial Mtg. Pass-Through Certificates,
Series 1996-D2, Cl. A3, 7.39%, 2/14/29/4/ 700,000 729,094
---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
7% Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Trust 1992-15, Cl. KZ, 2/25/22 981,721 1,033,871
---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 3/1/26 403,229 416,274
7.50%, 1/1/08-6/1/08 227,650 241,391
---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Interest-Only Stripped Mtg.-Backed Security,
Trust 1993-223, Cl. PM, 7.056%, 10/25/23/2/,/5/ 578,829 67,405
---------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Collateralized Mtg. Obligations,
Series 1999-2, Cl. A3, 6.50%, 4/25/29 500,000 512,185
---------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
7%, 4/15/09-2/15/24 673,256 710,292
7.50%, 3/15/09 264,698 281,081
8%, 5/15/17 214,559 230,755
---------------------------------------------------------------------------------------------------------
Norwest Asset Securities Corp., Multiclass Mtg. Pass-Through Certificates:
Series 1999-16, Cl. A3, 6%, 6/25/29 500,000 518,125
Series 1999-18, Cl. A2, 6%, 7/25/29 1,000,000 1,036,250
Series 1996-CFL, Cl. G, 7.75%, 2/25/28 500,000 519,922
----------
Total Mortgage-Backed Obligations (Cost $5,905,192) 6,296,645

15 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

STATEMENT OF INVESTMENTS Continued

Principal Market Value
Amount See Note 1
=========================================================================================================
U.S. Government Obligations--11.4%
U.S. Treasury Bonds:
6%, 2/15/26 $5,450,000 $ 6,125,293
6.25%, 5/15/30 1,570,000 1,871,858
7.50%, 11/15/16 2,000,000 2,547,814
8.75%, 5/15/17 1,250,000 1,768,652
---------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5%, 8/15/11 1,040,000 1,100,735
5.75%, 11/15/05 1,350,000 1,469,814
----------
Total U.S. Government Obligations (Cost $13,273,161) 14,884,166

=========================================================================================================
Non-Convertible Corporate Bonds and Notes--18.4%
---------------------------------------------------------------------------------------------------------
Capital Goods--1.8%
---------------------------------------------------------------------------------------------------------
Industrial Services--0.8%
Norse CBO Ltd., 6.515% Collateralized Bond Obligations,
Series 1A, Cl. A3, 8/13/10/2/ 1,000,000 1,002,500
---------------------------------------------------------------------------------------------------------
Manufacturing--1.0%
Owens-Illinois, Inc., 7.15% Sr. Nts., 5/15/05 1,000,000 855,000
---------------------------------------------------------------------------------------------------------
Scotia Pacific Co. LLC, 7.71% Sec. Nts., Series B, Cl. A-3, 1/20/14 500,000 410,445
----------
1,265,445
---------------------------------------------------------------------------------------------------------
Communication Services--2.8%
---------------------------------------------------------------------------------------------------------
Telecommunications-Long Distance--1.3%
Calpoint Receivable Strip Trust 2001, 7.44% Bonds, 12/10/06/2/ 1,000,000 1,020,600
---------------------------------------------------------------------------------------------------------
Qwest Capital Funding, Inc., 7.625% Bonds, 8/3/21/3/ 500,000 492,419
---------------------------------------------------------------------------------------------------------
WorldCom, Inc., 8.25% Bonds, 5/15/31 200,000 205,365
----------
1,718,384
---------------------------------------------------------------------------------------------------------
Telecommunications-Wireless--0.9%
VoiceStream Wireless Corp., 10.375% Sr. Unsec. Nts., 11/15/09 1,000,000 1,145,000
---------------------------------------------------------------------------------------------------------
Telephone Utilities--0.6%
Qwest Corp., 6.875% Unsec. Debs., 9/15/33 500,000 445,552
---------------------------------------------------------------------------------------------------------
Telefonica de Argentina SA, 9.125% Nts., Series 1, 5/7/08 500,000 400,000
----------
845,552

---------------------------------------------------------------------------------------------------------
Consumer Cyclicals--2.5%
---------------------------------------------------------------------------------------------------------
Autos & Housing--1.8%
CPG Partners LP, 8.25% Unsec. Unsub. Nts., 2/1/11 500,000 541,562
---------------------------------------------------------------------------------------------------------
Lear Corp., 7.96% Sr. Unsec. Nts., Series B, 5/15/05 500,000 501,349
---------------------------------------------------------------------------------------------------------
Pulte Corp., 8.125% Sr. Unsec. Nts., 3/1/11 500,000 512,011
---------------------------------------------------------------------------------------------------------
Shurgard Storage Centers, Inc., 7.50% Sr. Unsec. Nts., 4/25/04 700,000 743,960
----------
2,298,882

---------------------------------------------------------------------------------------------------------
Consumer Services--0.4%
PHH Corp., 8.125% Nts., 2/3/03 500,000 509,552

16 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

Principal Market Value
Amount See Note 1
---------------------------------------------------------------------------------------------------------
Media--0.3%
Reed Elsevier, Inc., 6.625% Nts., 10/15/23/3/ $ 400,000 $ 379,892
---------------------------------------------------------------------------------------------------------
Consumer Staples--3.0%
---------------------------------------------------------------------------------------------------------
Broadcasting--1.0%
British Sky Broadcasting Group plc, 8.20% Sr. Unsec. Nts., 7/15/09 400,000 412,850
---------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Debs., 7/15/18 1,000,000 939,515
----------
1,352,365

---------------------------------------------------------------------------------------------------------
Entertainment--0.8%
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts., 5/15/05 1,000,000 1,015,000
---------------------------------------------------------------------------------------------------------
Food--0.4%
CPC International, Inc., 6.15% Unsec. Nts., Series C, 1/15/06 500,000 528,395
---------------------------------------------------------------------------------------------------------
Household Goods--0.8%
Fort James Corp., 6.875% Sr. Nts., 9/15/07 1,000,000 999,477
---------------------------------------------------------------------------------------------------------
Energy--2.7%
---------------------------------------------------------------------------------------------------------
Energy Services--1.3%
Columbia Gas System, Inc., 6.80% Nts., Series C, 11/28/05 500,000 533,522
---------------------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 6.875% Nts., 7/1/033 500,000 524,164
---------------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs., 1/1/21 500,000 643,852
----------
1,701,538

---------------------------------------------------------------------------------------------------------
Oil: Domestic--1.4%
Devon Financing Corp., 7.875% Debs., 9/30/31/3/ 1,000,000 1,011,941
---------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP, 6.75% Sr. Unsec. Nts., 3/15/11 750,000 783,855
----------
1,795,796

---------------------------------------------------------------------------------------------------------
Financial--3.0%
---------------------------------------------------------------------------------------------------------
Banks--1.0%
Colonial Bank, 9.375% Sub. Nts., 6/1/11 250,000 270,955
---------------------------------------------------------------------------------------------------------
Oversea-Chinese Banking Corp. Ltd., 7.75% Unsec. Sub. Nts., 9/6/11 1,000,000 1,053,993
----------
1,324,948

---------------------------------------------------------------------------------------------------------
Diversified Financial--1.2%
BT Institutional Cap Trust A, 8.09% Bonds, 12/1/26/3/ 500,000 532,370
---------------------------------------------------------------------------------------------------------
Dime Capital Trust I, 9.33% Capital Securities, Series A, 5/6/27 500,000 558,746
---------------------------------------------------------------------------------------------------------
Finova Group, Inc. (The), 7.50% Nts., 11/15/09 223,000 83,625
---------------------------------------------------------------------------------------------------------
Osprey Trust/Osprey I, Inc., 8.31% Sr. Sec. Nts., 1/15/03/3/ 500,000 368,117
----------
1,542,858

---------------------------------------------------------------------------------------------------------
Insurance--0.8%
Nationwide CSN Trust, 9.875% Sec. Nts., 2/15/25/3/ 1,000,000 1,056,872
---------------------------------------------------------------------------------------------------------
Technology--0.4%
---------------------------------------------------------------------------------------------------------
Computer Software--0.4%
AOL Time Warner, Inc., 7.625% Bonds, 4/15/31 500,000 526,184

17 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

STATEMENT OF INVESTMENTS Continued

Principal Market Value
Amount See Note 1
---------------------------------------------------------------------------------------------------------
Transportation--0.4%
---------------------------------------------------------------------------------------------------------
Railroads & Truckers--0.4%
Union Pacific Corp., 7.60% Unsec. Nts., 5/1/05 $ 500,000 $ 547,979
---------------------------------------------------------------------------------------------------------
Utilities--1.8%
---------------------------------------------------------------------------------------------------------
Electric Utilities--1.4%
El Paso Electric Co., 8.25% First Mtg. Bonds, Series C, 2/1/03 500,000 524,805
---------------------------------------------------------------------------------------------------------
PSEG Energy Holdings, Inc., 8.625% Sr. Nts., 2/15/08/3/ 200,000 211,039
---------------------------------------------------------------------------------------------------------
PSEG Power LLC, 8.625% Sr. Nts., 4/15/31/3/ 500,000 581,843
---------------------------------------------------------------------------------------------------------
Teco Energy, Inc., 7.20% Unsec. Unsub. Nts., 5/1/11 500,000 541,327
----------
1,859,014
---------------------------------------------------------------------------------------------------------
Gas Utilities--0.4%
AGL Capital Corp., 7.125% Sr. Unsec. Nts., 1/14/11 500,000 524,407
----------
Total Non-Convertible Corporate Bonds and Notes (Cost $23,638,605) 23,940,040

=========================================================================================================
Convertible Corporate Bonds and Notes--2.1%
CIENA Corp., 3.75% Cv. Sr. Unsec. Nts., 2/1/08 2,000,000 1,275,000
---------------------------------------------------------------------------------------------------------
Tyco International Ltd., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid
Yield Option Nts., 1.28%, 11/17/20/6/ 2,000,000 1,520,000
----------
Total Convertible Corporate Bonds and Notes (Cost $3,570,909) 2,795,000

=========================================================================================================
Repurchase Agreements--3.8%
Repurchase agreement with Zion First National Bank, 2.54%,
dated 10/31/01, to be repurchased at $4,907,346 on 11/1/01,
collateralized by U.S. Treasury Nts., 4.75%--7%, 12/31/01--2/15/10,
with a value of $4,523,247 and U.S. Treasury Bills, 4/25/02,
with a value of $485,728 (Cost $4,907,000) 4,907,000 4,907,000
---------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $129,536,146) 98.4% 128,446,428
---------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.6 2,097,006
--------------------------
Net Assets 100.0% $130,543,434
==========================

Footnotes to Statement of Investments

1. Non-income-producing security.
2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
3. 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
Directors. These securities amount to $5,160,201 or 3.95% of the Fund's net
assets as of October 31, 2001.
4. Represents the current interest rate for a variable or increasing rate
security.
5. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
6. Zero-coupon bond reflects the effective yield on the date of purchase.

See accompanying Notes to Financial Statements.

18 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

STATEMENT OF ASSETS AND LIABILITIES October 31, 2001

=========================================================================================================
Assets
Investments, at value (cost $129,536,146)--see accompanying statement $128,446,428
---------------------------------------------------------------------------------------------------------
Cash 41,841
---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 1,756,064
Interest and dividends 804,805
Shares of capital stock sold 17,841
Amounts due from OFI 15,336
Other 1,351
------------
Total assets 131,083,666

=========================================================================================================
Liabilities
Payables and other liabilities:
Shares of capital stock redeemed 297,989
Shareholder reports 87,570
Investments purchased 64,505
Directors' compensation 32,596
Distribution and service plan fees 26,427
Legal, auditing and other professional fees 24,160
Transfer and shareholder servicing agent fees 551
Other 6,434
------------
Total liabilities 540,232

=========================================================================================================
Net Assets $130,543,434
============
=========================================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 10,396
---------------------------------------------------------------------------------------------------------
Additional paid-in capital 145,121,312
---------------------------------------------------------------------------------------------------------
Undistributed (overdistributed) net investment income 685,142
---------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investment transactions (14,183,537)
---------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments and translation
of assets and liabilities denominated in foreign currencies (1,089,879)
------------
Net Assets $130,543,434
============
=========================================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $112,878,905 and 9,001,150 shares of capital stock outstanding) $12.54
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $13.31
---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $14,769,748 and 1,161,072 shares of capital stock outstanding) $12.72
---------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $2,893,141 and 233,209 shares of capital stock outstanding) $12.41
---------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $1,640 and 131 shares of capital stock outstanding) $12.52

See accompanying Notes to Financial Statements.

19 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

STATEMENT OF OPERATIONS For the Year Ended October 31, 2001

================================================================================
Investment Income
Interest $ 3,646,124
--------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,826) 918,421
------------
Total income 4,564,545

================================================================================
Expenses
Management fees 927,181
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 319,036
Class B 165,687
Class C 32,808
Class N 5
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees 296,066
--------------------------------------------------------------------------------
Shareholder reports 57,772
--------------------------------------------------------------------------------
Legal, auditing and other professional fees 29,378
--------------------------------------------------------------------------------
Custodian fees and expenses 25,508
--------------------------------------------------------------------------------
Accounting service fees 15,000
--------------------------------------------------------------------------------
Registration and filing fees 5,757
--------------------------------------------------------------------------------
Other 44,503
------------
Total expenses 1,918,701
Less reduction to custodian expenses (8,535)
------------
Net expenses 1,910,166

================================================================================
Net Investment Income 2,654,379

================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (12,930,844)
Closing of futures contracts (245,883)
------------
Net realized gain (loss) (13,176,727)
--------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (5,224,980)
Translation of assets and liabilities denominated in foreign
currencies 146
------------
Net change (5,224,834)
------------
Net realized and unrealized gain (loss) (18,401,561)

================================================================================
Net Decrease in Net Assets Resulting from Operations $(15,747,182)
============

See accompanying Notes to Financial Statements.

20 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended October 31, 2001 2000
======================================================================================================================
Operations
Net investment income (loss) $ 2,654,379 $ 5,482,851
----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (13,176,727) 876,388
----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (5,224,834) 7,315,758
------------------------------
Net increase (decrease) in net assets resulting from operations (15,747,182) 13,674,997
======================================================================================================================
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A (2,498,703) (5,346,316)
Class B (195,117) (433,607)
Class C (40,745) (95,557)
Class N (10) --
----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (24,684,807)
Class B -- (2,228,825)
Class C -- (532,698)
Class N -- --
======================================================================================================================
Capital Stock Transactions
Net increase (decrease) in net assets resulting from capital stock transactions:
Class A (15,345,653) (95,971,778)
Class B (1,061,078) (4,269,245)
Class C (637,673) (1,444,164)
Class N 1,730 --
======================================================================================================================
Net Assets
Total decrease (35,524,431) (121,332,000)
----------------------------------------------------------------------------------------------------------------------
Beginning of period 166,067,865 287,399,865
------------------------------
End of period [including undistributed (overdistributed) net investment
income of $685,142 and $340,901, respectively] $130,543,434 $166,067,865
==============================
See accompanying Notes to Financial Statements.

21 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

FINANCIAL HIGHLIGHTS

Class A Year Ended October 31, 2001 2000 1999 1998 1997
=============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $14.23 $15.03 $15.45 $16.81 $16.00
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .26/1/ .44 .44 .45 .51/2/
Net realized and unrealized gain (loss) (1.69)/1/ .68 (.01) .45 2.25/2/
--------------------------------------------------------------------------
Total income (loss) from
investment operations (1.43) 1.12 .43 .90 2.76
-----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.26) (.44) (.44) (.45) (.56)
Distributions from net realized gain -- (1.48) (.41) (1.81) (1.39)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.26) (1.92) (.85) (2.26) (1.95)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.54 $14.23 $15.03 $15.45 $16.81
==========================================================================
=============================================================================================================================
Total Return, at Net Asset Value/3/ (10.12)% 8.27 2.62% 5.93% 18.82%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $112,864 $144,244 $258,159 $298,558 $243,267
-----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $128,477 $172,514 $293,677 $268,715 $238,821
-----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/4/
Net investment income 1.88%/1/ 2.88% 2.72% 2.96% 3.17%
Expenses 1.19% 1.11% 1.04% 1.04%/5/ 1.11%/5/
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 164% 34% 122% 97% 98%

1. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:
Net investment income Change less than $0.005
Net realized and unrealized gain (loss) Change less than $0.005
Net investment income ratio 1.92%
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period with all dividends and distributions
reinvested in 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.
4. Annualized for periods of less than one full year.
5. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

22 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

Class B Year Ended October 31, 2001 2000 1999 1998 1997
=============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $14.43 $15.20 $15.62 $16.99 $16.16
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .15/1/ .30 .31 .36 .40/2/
Net realized and unrealized gain (loss) (1.70)/1/ .73 -- .43 2.27/2/
--------------------------------------------------------------------------
Total income (loss) from
investment operations (1.55) 1.03 .31 .79 2.67
-----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.16) (.32) (.32) (.35) (.45)
Distributions from net realized gain -- (1.48) (.41) (1.81) (1.39)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.16) (1.80) (.73) (2.16) (1.84)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.72 $14.43 $15.20 $15.62 $16.99
==========================================================================
=============================================================================================================================
Total Return, at Net Asset Value/3/ (10.79)% 7.48% 1.84% 5.10% 17.96%
=============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $14,770 $17,892 $23,522 $21,754 $8,720
-----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $16,569 $19,643 $24,648 $14,235 $6,183
Ratios to average net assets:/4/
Net investment income 1.14%/1/ 2.12% 1.97% 2.19% 2.32%
Expenses 1.94% 1.87% 1.80% 1.80%/5/ 1.89%/5/
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 164% 34% 122% 97% 98%

1. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:
Net investment income $ 0.16
Net realized and unrealized gain (loss) $(1.71)
Net investment income ratio 1.18%
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period with all dividends and distributions
reinvested in 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.
4. Annualized for periods of less than one full year.
5. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

23 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

FINANCIAL HIGHLIGHTS Continued

Class C Year Ended October 31, 2001 2000 1999 1998 1997
=============================================================================================================================
Per Share Operating Data
Net asset value, beginning of period $14.08 $14.88 $15.31 $16.70 $15.93
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .13/1/ .28 .32 .37 .44/2/
Net realized and unrealized gain (loss) (1.64)/1/ .72 (.01) .40 2.19/2/
--------------------------------------------------------------------------
Total income (loss) from
investment operations (1.51) 1.00 .31 .77 2.63
-----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.16) (.32) (.33) (.35) (.47)
Distributions from net realized gain -- (1.48) (.41) (1.81) (1.39)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.16) (1.80) (.74) (2.16) (1.86)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.41 $14.08 $14.88 $15.31 $16.70
==========================================================================
=============================================================================================================================
Total Return, at Net Asset Value/3/ (10.76)% 7.44% 1.84% 5.10% 17.93%
=============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $2,893 $3,931 $5,719 $4,824 $1,473
-----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $3,280 $4,255 $5,876 $2,861 $ 805
-----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/4/
Net investment income 1.14%/1/ 2.13% 1.97% 2.18% 2.18%
Expenses 1.94% 1.86% 1.80% 1.80%/5/ 1.92%/5/
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 164% 34% 122% 97% 98%

1. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:
Net investment income $ 0.14
Net realized and unrealized gain (loss) $(1.65)
Net investment income ratio 1.18%
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
4. Annualized for periods of less than one full year.
5. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

See accompanying Notes to Financial Statements.

24 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

Class N Period Ended October 31, 2001/1/
================================================================================
Per Share Operating Data
Net asset value, beginning of period $13.74
--------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .12/2/
Net realized and unrealized gain (loss) (1.20)/2/
Total income (loss) from
investment operations (1.08)
--------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.14)
Distributions from net realized gain --
----------
Total dividends and/or distributions
to shareholders (.14)
--------------------------------------------------------------------------------
Net asset value, end of period $12.52
==========

================================================================================
Total Return, at Net Asset Value/3/ (7.90)%

================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $2
--------------------------------------------------------------------------------
Average net assets (in thousands) $1
--------------------------------------------------------------------------------
Ratios to average net assets:/4/
Net investment income 1.04%/2/
Expenses 1.68%
--------------------------------------------------------------------------------
Portfolio turnover rate 164%

1. For the period from March 1, 2001 (inception of offering) to October 31,
2001.
2. Without the adoption of the change in amortization method as discussed in
Note 1 in the Notes to Financial Statements, these amounts would have been:
Net investment income Change less than $0.005
Net realized and unrealized gain (loss) Change less than $0.005
Net investment income ratio 1.08%
3. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year. 4.
Annualized for periods of less than one full year.

See accompanying Notes to Financial Statements.

25 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

NOTES TO FINANCIAL STATEMENTS

================================================================================
1. Significant Accounting Policies
Oppenheimer Disciplined Allocation Fund (the Fund), a series of Oppenheimer
Series Fund, Inc. (the Company), 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 to maximize total investment return (including
capital appreciation and income) principally by allocating its assets among
stocks, corporate bonds, U.S. Government securities and money market
instruments, according to changing market conditions. The Fund's investment
advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights to earnings, assets and voting privileges, except
that each class has its own expenses directly attributable to that class and
exclusive voting rights with respect to matters affecting that class. Classes A,
B, C and N have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
--------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Directors, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Directors. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
--------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.

26 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

--------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires its custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
--------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
--------------------------------------------------------------------------------
Directors' Compensation. The Fund has adopted an unfunded retirement plan for
the Fund's independent Board of Directors. Benefits are based on years of
service and fees paid to each director during the years of service. During the
year ended October 31, 2001, the Fund's projected benefit obligations were
decreased by $22,335 and payments of $4,678 were made to retired directors,
resulting in an accumulated liability of $31,916 as of October 31, 2001.
The Board of Directors has adopted a deferred compensation plan for
independent directors that enables directors to elect to defer receipt of all or
a portion of annual compensation they are entitled to receive from the Fund.
Under the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Board of Directors in shares of one
or more Oppenheimer funds selected by the director. The amount paid to the Board
of Directors under the plan will be determined based upon the performance of the
selected funds. Deferral of directors' 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.
--------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
As of October 31, 2001, the Fund had available for federal income tax
purposes unused capital loss carryovers as follows:

Expiring
---------------------------------------
2008 $ 167,496
2009 13,696,976
-----------
Total $13,864,472
===========

--------------------------------------------------------------------------------
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.

27 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

NOTES TO FINANCIAL STATEMENTS Continued

================================================================================
1.Significant Accounting Policies Continued
Classification of Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended October 31, 2001, amounts have been reclassified to reflect a
decrease in additional paid-in capital of $63,958, an increase in undistributed
net investment income of $424,437, and an increase in accumulated net realized
loss on investments of $360,479. Net assets of the Fund were unaffected by the
reclassifications.
--------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
--------------------------------------------------------------------------------
Security Transactions. Security transactions are accounted for as of trade date.
Gains and losses on securities sold are determined on the basis of identified
cost.
--------------------------------------------------------------------------------
Other. The Fund adopted the provisions of the AICPA Audit and Accounting Guide
for Investment Companies, as revised, effective for fiscal years beginning after
December 15, 2000. The Fund elected to begin amortizing premiums on debt
securities effective January 1, 2001. Prior to this date, the Fund did not
amortize premiums on debt securities. The cumulative effect of this accounting
change had no impact on the total net assets of the Fund, but resulted in a
$334,874 decrease to cost of securities and a corresponding $334,874 decrease in
net unrealized depreciation, based on securities held as of December 31, 2000.
For the year ended October 31, 2001, interest income decreased by $60,788, net
realized loss on investments increased by $149,747, and the change in net
unrealized depreciation on investments decreased by $210,535.
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.

28 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

================================================================================
2. Shares of Capital Stock
The Fund has authorized 550 million shares of $0.001 par value capital stock.
Transactions in shares of capital stock were as follows:

Year Ended October 31, 2001/1/ Year Ended October 31, 2000
Shares Amount Shares Amount
-------------------------------------------------------------------------------------------------------
Class A
Sold 453,469 $ 6,078,435 473,867 $ 6,576,278
Dividends and/or
distributions reinvested 182,218 2,404,510 1,778,259 24,217,286
Redeemed (1,772,576) (23,828,598) (9,290,842) (126,765,342)
---------------------------------------------------------------------
Net increase (decrease) (1,136,889) $(15,345,653) (7,038,716) $ (95,971,778)
=====================================================================
-------------------------------------------------------------------------------------------------------
Class B
Sold 229,496 $ 3,127,331 236,370 $ 3,332,225
Dividends and/or
distributions reinvested 13,741 184,308 187,074 2,584,174
Redeemed (322,213) (4,372,717) (730,656) (10,185,644)
---------------------------------------------------------------------
Net increase (decrease) (78,976) $ (1,061,078) (307,212) $ (4,269,245)
=====================================================================
-------------------------------------------------------------------------------------------------------
Class C
Sold 63,616 $ 848,633 88,178 $ 1,218,700
Dividends and/or
distributions reinvested 3,008 39,397 43,934 592,281
Redeemed (112,706) (1,525,703) (237,266) (3,255,145)
---------------------------------------------------------------------
Net increase (decrease) (46,082) $ (637,673) (105,154) $ (1,444,164)
=====================================================================
-------------------------------------------------------------------------------------------------------
Class N
Sold 131 $ 1,730 -- $ --
Dividends and/or
distributions reinvested -- -- -- --
Redeemed -- -- -- --
---------------------------------------------------------------------
Net increase (decrease) 131 $ 1,730 -- $ --
=====================================================================

1. For the year ended October 31, 2001, for Class A, B and C shares and for the
period from March 1, 2001 (inception of offering) to October 31, 2001, for Class
N shares.
================================================================================
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended October 31, 2001, were
$224,097,528 and $234,095,437, respectively.

As of October 31, 2001, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $129,855,212 was:

Gross unrealized appreciation $ 7,658,098
Gross unrealized depreciation (9,066,882)
-----------
Net unrealized appreciation (depreciation) $(1,408,784)
===========

29 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

NOTES TO FINANCIAL STATEMENTS Continued

================================================================================
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager are in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.625%
of the first $300 million of average annual net assets of the Fund, 0.50% of the
next $100 million and 0.45% of average annual net assets in excess of $400
million. The Fund's management fee for the year ended October 31, 2001, was an
annualized rate of 0.625%.
--------------------------------------------------------------------------------
Accounting Fees. The Manager acts as the accounting agent for the Fund at an
annual fee of $15,000, plus out-of-pocket costs and expenses reasonably
incurred.
--------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS an agreed-upon per account fee. OFS has voluntarily undertaken to waive a
portion of its transfer agent fee for Classes A, B, C and N shares. This
voluntary waiver of expenses limits transfer agent fees to 0.35% of average net
assets for Classes A, B, C and N shares effective October 1, 2001.
--------------------------------------------------------------------------------
Distribution and Service Plan Fees. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.

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

Aggregate Class A Commissions Commissions Commissions Commissions
Front-End Front-End on Class A on Class B on Class C on Class N
Sales Charges Sales Charges Shares Shares Shares Shares
on Class A Retained by Advanced by Advanced by Advanced by Advanced by
Year Ended Shares Distributor Distributor/1/ Distributor/1/ Distributor/1/ Distributor/1/
-----------------------------------------------------------------------------------------------------------------------------
October 31, 2001 $109,771 $72,391 $10,575 $88,402 $5,518 $7

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

Class A Class B Class C Class N
Contingent Deferred Contingent Deferred Contingent Deferred Contingent Deferred
Sales Charges Sales Charges Sales Charges Sales Charges
Retained Retained Retained Retained
Year Ended by Distributor by Distributor by Distributor by Distributor
---------------------------------------------------------------------------------------------------------------
October 31, 2001 $925 $53,529 $975 $-

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.

30 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

--------------------------------------------------------------------------------
Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to a specified percent of average annual net
assets of Class A shares purchased. The Distributor makes payments to plan
recipients quarterly at an annual rate not to exceed a specified percent of the
average annual net assets consisting of Class A shares of the Fund. For the year
ended October 31, 2001, payments under the Class A plan totaled $319,036, all of
which were paid by the Distributor to recipients, and included $210,913 paid to
an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs
with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years.
--------------------------------------------------------------------------------
Class B, Class C and Class N Distribution and Service Plan Fees. Under each
plan, service fees and distribution fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close of
each regular business day during the period. The Class B, Class C and Class N
plans provide for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid by
the Fund under the plan during the period for which the fee is paid.

The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The Distributor retains the asset-based
sales charge on Class N shares. The asset-based sales charges on Class B, Class
C and Class N shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.

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

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

Distributor's Distributor's
Aggregate Aggregate
Unreimbursed Unreimbursed
Total Payments Amount Retained Expenses Expenses as % of
Under Plan by Distributor Under Plan Net Assets of Class
-------------------------------------------------------------------------------------
Class B Plan $165,687 $129,507 $563,721 3.82%
Class C Plan 32,808 6,569 75,238 2.60
Class N Plan 5 3 -- --

31 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

NOTES TO FINANCIAL STATEMENTS Continued

================================================================================
5.Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a particular price on a stipulated future
date at a negotiated price. Futures contracts are traded on a commodity
exchange. The Fund may buy and sell futures contracts that relate to broadly
based securities indices "financial futures" or debt securities "interest rate
futures" in order to gain exposure to or to seek to protect against changes in
market value of stock and bonds or interest rates. The Fund may also buy or
write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying fixed income
securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin. Realized gains
and losses are reported on the Statement of Operations as closing and expiration
of futures contracts.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.

32 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

================================================================================
6. Illiquid or Restricted Securities
As of October 31, 2001, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Directors 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 10% 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 October 31, 2001, was $3,140,080,
which represents 2.41% of the Fund's net assets, of which $300 is considered
restricted. Information concerning restricted securities is as follows:

Unrealized
Acquisition Valuation as of Appreciation
Security Date Cost October 31, 2001 (Depreciation)
-------------------------------------------------------------------------------------------------
Stocks and/or Warrants
Geotek Communications, Inc.,
Series B (Escrowed) 1/4/01 $400 $300 $(100)
=================================================================================================

7. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended or at October
31, 2001. Effective November 13, 2001, the Fund will no longer participate in
this agreement.

33 | OPPENHEIMER DISCIPLINED ALLOCATION FUND

A-1
Appendix A

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

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

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

Long-Term (Taxable) Bond Ratings

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

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

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

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

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

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

Caa: Bonds rated "Caa" are of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.

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

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

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

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

Short-Term Ratings - Taxable Debt

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

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

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

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

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

Standard & Poor's Rating Services
----------------------------------------------------------------------------------------------------------

Long-Term Credit Ratings

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

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

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

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

BB, B, CCC, CC, and C

Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having significant speculative
characteristics. "BB" indicates the least degree of speculation, and "C" the highest. While such
obligations will likely have some quality and protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse conditions.
BB: Bonds rated "BB" are less vulnerable to nonpayment than other speculative issues. However, these
face major ongoing uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

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

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

CC: Bonds rated "CC" are currently highly vulnerable to nonpayment.

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

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

The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standing within the major rating categories. The "r" symbol is attached to the ratings of
instruments with significant noncredit risks.

Short-Term Issue Credit Ratings

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

A-2: Obligation is somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.

A-3: Obligation exhibits adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.

B: Obligation is regarded as having significant speculative characteristics. The obligor currently has
the capacity to meet its financial commitment on the obligation. However, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on
the obligation.

C: Obligation is currently vulnerable to nonpayment and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial commitment on the obligation.
D: Obligation is in payment default. Payments on the obligation have not been made on the due date even
if the applicable grace period has not expired, unless Standard and Poor's believes that such payments
will be made during such grace period. The "D" rating will also be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are jeopardized.

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

International Long-Term Credit Ratings

Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of credit risk. They are
assigned only in the case of exceptionally strong capacity for timely payment of financial commitments.
This capacity is highly unlikely to be adversely affected by foreseeable events.

AA: Very High Credit Quality. "AA" ratings denote a very low expectation of credit risk. They indicate a
very strong capacity for timely payment of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.

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

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

Speculative Grade:

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

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

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

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

Entities rated in this category have defaulted on some or all of their obligations. Entities rated "DDD"
have the highest prospect for resumption of performance or continued operation with or without a formal
reorganization process. Entities rated "DD" and "D" are generally undergoing a formal reorganization or
liquidation process; those rated "DD" are likely to satisfy a higher portion of their outstanding
obligations, while entities rated "D" have a poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status within the
major rating categories. Plus and minus signs are not added to the "AAA" category or to categories
below "CCC," nor to short-term ratings other than "F1" (see below).

International Short-Term Credit Ratings

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.
(i)

B-1
Appendix B
Industry Classification
-----------------------

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

C-1
Appendix C

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

In certain cases, the initial sales charge that applies to purchases of Class A shares5 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.6 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 plans7
4) Group Retirement Plans8
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."9 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases of Class A shares by a Retirement Plan that was permitted to purchase such shares at
net asset value but subject to a contingent deferred sales charge prior to March 1, 2001. That
included plans (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares costing
$500,000 or more, 2) had at the time of purchase 100 or more eligible employees or total plan
assets of $500,000 or more, or 3) certified to the Distributor that it projects to have annual
plan purchases of $200,000 or more.

|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases are made:
1) through a broker, dealer, bank or registered investment adviser that has made special

arrangements with the Distributor for those purchases, or
2) by a direct rollover of a distribution from a qualified Retirement Plan if the
administrator of that Plan has made special arrangements with the Distributor for
those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the following record-keeping
arrangements:
1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill
Lynch") on a daily valuation basis for the Retirement Plan. On the date the plan
sponsor signs the record-keeping service agreement with Merrill Lynch, the Plan must
have $3 million or more of its assets invested in (a) mutual funds, other than those
advised or managed by Merrill Lynch Investment Management, L.P. ("MLIM"), that are
made available under a Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or managed by MLIM (the
funds described in (a) and (b) are referred to as "Applicable Investments").
2) The record keeping for the Retirement Plan is performed on a daily valuation basis by
a record keeper whose services are provided under a contract or arrangement between
the Retirement Plan and Merrill Lynch. On the date the plan sponsor signs the record
keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of
its assets (excluding assets invested in money market funds) invested in Applicable
Investments.
3) The record keeping for a Retirement Plan is handled under a service agreement with
Merrill Lynch and on the date the plan sponsor signs that agreement, the Plan has 500
or more eligible employees (as determined by the Merrill Lynch plan conversion
manager).
II.

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

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

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

|_| A unit investment trust that has entered into an appropriate agreement with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have entered into an agreement
with the Distributor to sell shares to defined contribution employee retirement plans for which
the dealer, broker or investment adviser provides administration services.

|-|

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

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

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

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

The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to
the contingent deferred sales charge are redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the
account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary redemptions of small
accounts (please refer to "Shareholder Account Rules and Policies," in the applicable fund
Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or other employee benefit
plans for any of the following purposes:
1) Following the death or disability (as defined in the Internal Revenue Code) of the
participant or beneficiary. The death or disability must occur after the participant's
account was established.
2) To return excess contributions.
3) To return contributions made due to a mistake of fact.
4) Hardship withdrawals, as defined in the plan.10
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.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) 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.

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of
shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," in the
applicable Prospectus.

|_| Redemptions from accounts other than Retirement Plans following the death or disability of the
last surviving shareholder. The death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of disability by
the Social Security Administration.
The contingent deferred sales charges are generally not waived following the death or disability of
a grantor or trustee for a trust account. The contingent deferred sales charges will only be
waived in the limited case of the death of the trustee of a grantor trust or revocable living
trust for which the trustee is also the sole beneficiary. The death or disability must have
occurred after the account was established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration.

|_| Distributions from accounts for which the broker-dealer of record has entered into a special
agreement with the Distributor allowing this waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records are maintained on a daily
valuation basis by Merrill Lynch or an independent record keeper under a contract with Merrill
Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of clients of
financial institutions that have entered into a special arrangement with the Distributor for
this purpose.
Redemptions requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer
fund in amounts of $500,000 or more and made more than 12 months after the Retirement Plan's
first purchase of Class C shares, if the redemption proceeds are invested in Class N shares of
one or more Oppenheimer funds.
|_| Distributions12 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.13
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.14
9) On account of the participant's separation from service.15
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.

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

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

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

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

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;
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.

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

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

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.
|X|

Oppenheimer Disciplined Allocation Fund

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

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

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

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

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

Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202

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

1234

PX205.003.Rev.1002

--------

1 Currently, the 1940 Act permits (a) lending of securities, (b) purchasing debt securities or similar
evidences of indebtedness, (c) repurchase agreements and (d) inter-fund lending if the appropriate
approval is obtained by the Fund from the Securities and Exchange Commission. The Fund will not engage
in inter-fund lending until such approval has been granted. The Fund does not currently anticipate
making loans of money.
2 Currently, the 1940 Act permits a mutual fund to borrow from banks and/or affiliated investment
companies up to one-third of its total assets (including the amount borrowed). A fund may borrow up to
5% of its total assets for temporary purposes from any person. Inter-fund borrowing must be approved by
the Securities and Exchange Commission. The Fund will not engage in inter-fund borrowing until such
approval has been granted.

3 Mr. Motley was elected as Trustee to the Board I Funds effective October 10, 2002.
4 The address of each Officer is 498 Seventh Avenue, New York, NY 10018 except for Mr. Wixted and Ms.
Ives, whose address is 6803 S. Tucson Way, Englewood, CO 80112-3924.
4 Each Officer serves for an annual term or until his or her resignation, death or removal.
4 In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent Directors" in this
Statement of Additional Information refers to those Directors who are not "interested persons" of the
Fund (or its parent corporation) and who do not have any direct or indirect financial interest in the
operation of the distribution plan or any agreement under the plan.

5 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
6 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.
7 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.
8 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.
9 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.
10 This provision does not apply to IRAs.
11 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55,
nor to IRAs.
12 The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer
funds as an investment option under the Plan.
13 This provision does not apply to IRAs.

14 This provision does not apply to loans from 403(b)(7) custodial plans and loans from the
OppenheimerFunds-sponsored Single K retirement plan.
15 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55,
nor to IRAs.

OPPENHEIMER DISCIPLINED ALLOCATION FUND
Supplement dated October 18, 2002 to the
Prospectus dated February 28, 2002

The Prospectus is changed as follows:

1. The supplement dated July 24, 2002 is withdrawn and the supplement dated July 1, 2002 is
replaced with this supplement.

2. The last sentence of the second paragraph under the "The Fund's Principal Investment Policies"
on page 9 is revised by deleting the words "or the securities of any one foreign government."

3. The following subsection is added at the bottom of page 11 following the subsection captioned
"Mortgage-Related U.S. Government Securities."

During the period between the sale and the repurchase, the Fund will not be
entitled to receive interest and principal payments on the securities that have
been sold. It is possible that the market value of the securities the Fund sells
may decline below the price at which the Fund is obligated to repurchase
securities, or that the counterparty might default in its obligation. A
substantial portion of the Fund's assets may be subject to forward roll
transactions at any given time.

4. The first paragraph and ensuing three bullets under "Foreign Securities" on page 13 are
replaced with the following paragraph:

Foreign Securities. The Fund can invest up to 25% of its total assets in foreign
securities. These include equity or debt securities of companies and debt
securities of governments in any country, developed or underdeveloped.

(over please)
5. The section captioned "How the Fund is Managed - Portfolio Managers" on page 15 is deleted in
its entirety and replaced with the following:

Portfolio Managers. The Fund is managed by a team of portfolio managers consisting of
Bruce Bartlett (since November 2000), Christopher Leavy (since November 2000) and
Angelo Manioudakis (since April 2002). Messrs. Bartlett, Leavy and Manioudakis are
Senior Vice Presidents of the Manager, Vice Presidents of the Fund and each serve
as an officer and portfolio manager of other Oppenheimer funds.

Mr. Bartlett has been employed by the Manager since April 1995. Prior to joining
the Manager in September 2000, Mr. Leavy was a portfolio manager of Morgan Stanley
Dean Witter Investment Management (from 1997), prior to which he was a portfolio
manager and equity analyst of Crestar Asset Management (from 1995). Prior to
joining the Manager in April 2002, Mr. Manioudakis was an Executive Director and
portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (August 1993-March 2002).

6. The commission payments to broker-dealers on purchases of Class A shares subject to a
contingent deferred sales charge by grandfathered retirement accounts has changed. Therefore, the
fourth sentence of the first paragraph under "How Can You Buy Class A Shares? - Class A Contingent
Deferred Sales Charge" on page 21 is deleted and replaced with the following sentence:

"For grandfathered retirement accounts, the concession is 0.75% of the first $2.5
million of purchases plus 0.25% of purchases in excess of $2.5 million."

7. The section captioned "Distribution and Service (12b-1) Plans - Service Plan for Class A
Shares" on page 23 is revised by adding the following after the third sentence in that paragraph:

"With respect to Class A shares subject to a Class A contingent deferred sales
charge purchased by grandfathered retirement accounts, the Distributor pays the
0.25% service fee to dealers in advance for the first year after the shares are
sold by the dealer. After the shares have been held for a year, the Distributor
pays the service fee to dealers on a quarterly basis."

October 18, 2002 PS0205.025

Oppenheimer Value Fund
(A series of Oppenheimer Series Fund, Inc.)
6803 S. Tucson Way, Centennial, CO 80112
1.800.225.5567

Statement of Additional Information dated February 28, 2002, Revised October 18, 2002

This Statement of Additional Information is not a prospectus. This document contains
additional information about the Fund and supplements information in the Prospectus dated
February 28, 2002. It should be read together with the Prospectus, which may be obtained
by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270,
Denver, Colorado 80217, by calling the Transfer Agent at the toll-free number shown above,
or by downloading it from the OppenheimerFunds Internet 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...........................................................
5

Other Investment Restrictions........................................................................

How the Fund is Managed...................................................................................
26

Organization and History.............................................................................

26
Directors and Officers of the Fund...................................................................
28

The Manager..........................................................................................

Brokerage Policies of the Fund............................................................................
38
Distribution and Service Plans............................................................................
40
Performance of the Fund...................................................................................
44

About Your Account

How To Buy Shares.........................................................................................

How To Sell Shares........................................................................................

How To Exchange Shares....................................................................................
63

Dividends, Capital Gains and Taxes........................................................................

Additional Information About the Fund.....................................................................

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

72
Financial Statements .....................................................................................
73

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

ABOUT The FUnd

Additional Information About the Fund's Investment Policies and Risks

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

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

|X| Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio manager currently uses a value investing style coupled with
fundamental analysis of issuers. In using a value approach, the manager looks for
stocks and other equity securities that appear to be temporarily undervalued, by
various measures, such as price/earnings ratios. Value investing seeks stocks having
prices that are low in relation to their real worth or future prospects, with the
expectation that the Fund will realize appreciation in the value of its holdings when
other investors realize the intrinsic value of the stock.

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

|X| Investments in Equity Securities. The Fund does not limit its investments
in equity securities to issuers having a market capitalization of a specified size or
range, and therefore may invest in securities of small-, mid- and large-capitalization
issuers. At times, the Fund may have substantial amounts of its assets invested in
securities of issuers in one or more capitalization ranges, based upon the Manager's
use of its investment strategies and its judgment of where the best market
opportunities are to seek the Fund's objective.

At times, the market may favor or disfavor securities of issuers of a
particular capitalization range. Securities of small capitalization issuers may be
subject to greater price volatility in general than securities of larger companies.
Therefore, if the Fund has substantial investments in smaller capitalization companies
at times of market volatility, the Fund's share price may fluctuate more than that of
funds focusing on larger capitalization issuers.

|X| Rights and Warrants. The Fund can invest up to 5% of its total assets in
warrants or rights. That limit does not apply to warrants and rights that the Fund has
acquired as part of units of securities or that are attached to other securities. No
more than 2% of the Fund's total assets may be invested in warrants that are not
listed on either The New York Stock Exchange or The American Stock Exchange.

Warrants basically are options to purchase equity securities at specific
prices valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to warrants,
but normally have a short duration and are distributed directly by the issuer to its
shareholders. Rights and warrants have no voting rights, receive no dividends and have
no rights with respect to the assets of the issuer.

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

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

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

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

|X| Foreign Securities. The Fund can purchase up to 25% of its total assets
in certain equity and debt securities issued or guaranteed by foreign companies or of
foreign governments or their agencies. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the United
States and debt securities of foreign governments and their agencies and
instrumentalities. Those securities may be traded on foreign securities exchanges or
in the foreign over-the-counter markets.foreign

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

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

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

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

possibilities in some countries of expropriation,
nationalization, confiscatory taxation, political, financial
or social instability or adverse diplomatic developments;
and
o unfavorable differences between the U.S. economy and foreign economies.

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

o 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| Portfolio Turnover. "Portfolio turnover" describes the rate at which the
Fund traded its portfolio securities during its last fiscal year. For example, if a
fund sold all of its securities during the year, its portfolio turnover rate would
have been 100%. The Fund's portfolio turnover rate will fluctuate from year to year,
depending on market conditions. Increased portfolio turnover creates higher brokerage
and transaction costs for the Fund, which may reduce its overall performance.
Additionally, the realization of capital gains from selling portfolio securities may
result in distributions of taxable long-term capital gains to shareholders, since the
Fund will normally distribute all of its capital gains realized each year, to avoid
excise taxes under the Internal Revenue Code.

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

|X| Investments in Bonds and Other Debt Securities. The Fund can invest in
bonds, debentures and other debt securities under normal market conditions. Because
the Fund currently emphasizes investments in equity securities, such as stocks, it is
not anticipated that significant amounts of the Fund's assets will be invested in debt
securities. However, if market conditions suggest that debt securities may offer
better growth opportunities than stocks, or if the Manager determines to seek a higher
income for liquidity purposes, the Manager might shift up to 10% of the Fund's net
assets into debt securities.

|X| Special Risks of Lower-Grade Securities. It is not anticipated that the
Fund will invest a substantial portion of its assets in lower-grade debt securities.
Because lower-grade securities tend to offer higher yields than investment-grade
securities, the Fund may invest in lower grade securities if the Manager is trying to
achieve greater income (and, in some cases, the appreciation possibilities of
lower-grade securities might be a reason they are selected for the Fund's portfolio).
High-yield convertible debt securities might be selected as "equity substitutes," as
described above but are subject to the Fund's limitation on its investment in debt
securities as stated in the Prospectus.

"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 or similar ratings by other nationally recognized 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 included in the limitation on the
percentage of the Fund's assets that can be invested in lower-grade securities. The
Fund can invest in securities rated as low as "B" at the time the Fund buys them.

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

However, the Fund's limitations on buying these investments may reduce the
risks to the Fund, as will the Fund's policy of diversifying its investments.
Additionally, to the extent they can be converted into stock, convertible securities
may be less subject to some of these risks than non-convertible high yield bonds,
since stock may be more liquid and less affected by some of these risk factors.

While securities rated "Baa" by Moody's or "BBB" by S&P or Fitch are
investment grade and are not regarded as junk bonds, those securities may be subject
to greater risks than other investment-grade securities, and have some speculative
characteristics. Definitions of the debt security ratings categories of Moody's, S&P
and Fitch are included in Appendix A to this Statement of Additional Information.

o Interest Rate Risk. Interest rate risk refers to the fluctuations in value of
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.

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

|X| Floating Rate and Variable Rate Obligations. Some securities the Fund
can purchase have variable or floating interest rates. Variable rates are adjusted at
stated periodic intervals. Variable rate obligations can have a demand feature that
allows the Fund to tender the obligation to the issuer or a third party prior to its
maturity. The tender may be at par value plus accrued interest, according to the terms
of the obligations.

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

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

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

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

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

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

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

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

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

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

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

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

o U.S. Treasury Obligations. These include Treasury bills (maturities of one
year or less when issued), Treasury notes (maturities of one to 10 years), and
Treasury bonds (maturities of more than 10 years). Treasury securities are backed by
the full faith and credit of the United States as to timely payments of interest and
repayments of principal. They also can include U. S. Treasury securities that have
been "stripped" by a Federal Reserve Bank, zero-coupon U.S. Treasury securities
described below, and Treasury Inflation-Protection Securities ("TIPS").

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

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

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

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

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

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

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

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

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

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

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

|X| Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon U.S.
government securities. These will typically be U.S. Treasury Notes and Bonds that have
been stripped of their unmatured interest coupons, the coupons themselves, or
certificates representing interests in those stripped debt obligations and coupons.

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

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

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

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

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

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

|X| Money Market Instruments and Short-Term Debt Obligations. The Fund can
invest in a variety of high quality money market instruments and short-term debt
obligations, both under normal market conditions and for defensive purposes. The
following is a brief description of the types of money market securities and
short-term debt obligations the Fund can invest in. Those money market securities are
high-quality, short-term debt instruments that are issued by the U.S. government,
corporations, banks or other entities. They may have fixed, variable or floating
interest rates. The Fund's investments in foreign money market instruments and
short-term debt obligations are subject to its limits on investing in foreign
securities and the risks of foreign investing, described above.

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

o Bank Obligations. The Fund can buy time deposits, certificates of deposit and
bankers' acceptances. They must be :
o obligations issued or guaranteed by a domestic or foreign bank (including a
foreign branch of a domestic bank) having total assets of at
least $1 billion,
o banker's acceptances (which may or may not be supported by letters of credit)
only if guaranteed by a U.S. commercial bank with total
assets of at least U.S. $1 billion.

The Fund can make time deposits. These are non-negotiable deposits in a bank
for a specified period of time. They may be subject to early withdrawal penalties.
Time deposits that are subject to early withdrawal penalties are subject to the Fund's
limits on illiquid investments, as described below. "Banks" include commercial banks,
savings banks and savings and loan associations.

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

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

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

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

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

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

When such transactions are negotiated, the price (which is generally expressed
in yield terms) is fixed at the time the commitment is made. Delivery and payment for
the securities take place at a later date. The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest rates
in a direction other than that expected by the Manager before settlement will affect
the value of such securities and may cause a loss to the Fund. During the period
between purchase and settlement, the Fund makes no payment to the issuer and no
interest accrues to the Fund from the investment until it receives the security at
settlement. There is a risk of loss to the Fund if the value of the security changes
prior to the settlement date, and there is the risk that the other party may not
perform.

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

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

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

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

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

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

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

Repurchase agreements, considered "loans" under the Investment Company Act of
1940 (the `Investment Company Act"), are collateralized by the underlying security.
The Fund's repurchase agreements require that at all times while the repurchase
agreement is in effect, the value of the collateral must equal or exceed the
repurchase price to fully collateralize the repayment obligation. However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in its
ability to do so. The Manager will monitor the vendor's creditworthiness to confirm
that the vendor is financially sound and will continuously monitor the collateral's
value.

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

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

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

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

The Fund cannot invest more than 10% of its net assets in illiquid or
restricted securities (including repurchase agreements maturing beyond seven days).
Certain restricted securities that are eligible for resale to qualified institutional
purchasers, as described below, may not be subject to that limit. The Manager monitors
holdings of illiquid securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.

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

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

Illiquid securities include repurchase agreements maturing in more than seven
days and participation interests that do not have puts exercisable within seven days.

|X| Loans of Portfolio Securities. The Fund can lend its portfolio securities
to certain types of eligible borrowers approved by the Board of Directors. It may do
so to try to provide income or to raise cash for liquidity purposes. These loans are
limited to not more than one-third of the value of the Fund's net assets and are
subject to other conditions described below. The Fund presently does not intend to
engage in loans of securities but may do so in the future.

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 finders',
custodian and administrative fees in connection with these loans. The terms of the
Fund's loans must meet applicable tests under the Internal Revenue Code and must
permit the Fund to reacquire loaned securities on five days' notice or in time to vote
on any important matter.

|X| Hedging. The Fund can use hedging instruments. It is not obligated to
use them in seeking its objective although it can write covered calls to seek high
current income if the Manager believes that it is appropriate to do so. To attempt to
protect against declines in the market value of the Fund's portfolio, to permit the
Fund to retain unrealized gains in the value of portfolio securities that have
appreciated, or to facilitate selling securities for investment reasons, the Fund
could:
o sell futures contracts, or
o write covered calls on securities or futures. Covered calls may also be used
to increase the Fund's income, but the Manager does not expect to
engage extensively in that practice.

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

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 Fund's
strategy of hedging with futures and options on futures will be incidental to the
Fund's activities in the underlying cash market. The particular hedging instruments
the Fund can use are described below. The Fund may employ new hedging instruments and
strategies when they are developed, if those investment methods are consistent with
the Fund's investment objective and are permissible under applicable regulations
governing the Fund.
o Futures. The Fund can buy and sell exchange-traded futures contracts that
relate to (1) broadly-based stock indices ("stock index futures") (2) debt securities
(these are referred to as "interest rate futures"), (3) other broadly-based securities
indices (these are referred to as "financial futures"), (4) foreign currencies (these
are referred to as "forward contracts"), or (5) securities.

A broadly-based stock index is used as the basis for trading stock index
futures. An index may in some cases be based on stocks of issuers in a particular
industry or group of industries. A stock index assigns relative values to the common
stocks included in the index and its value fluctuates in response to the changes in
value of the underlying stocks. A stock index cannot be purchased or sold directly.
Financial futures are similar contracts based on the future value of the basket of
securities that comprise the index. These contracts obligate the seller to deliver,
and the purchaser to take, cash to settle the futures transaction. There is no
delivery made of the underlying securities to settle the futures obligation. Either
party may also settle the transaction by entering into an offsetting contract.

An interest rate future obligates the seller to deliver (and the purchaser to
take) cash or a specified type of debt security to settle the futures transaction.
Either party could also enter into an offsetting contract to close out the position.

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

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

o Writing Covered Call Options. The Fund is permitted to write (that is, sell)
covered calls on securities, indices, futures and forward contracts. If the Fund sells
a call option, it must be covered. That means the Fund must own the security subject
to the call while the call is outstanding, or, for calls on futures and indices, the
call may be covered by segregating liquid assets to enable the Fund to satisfy its
obligations if the call is exercised. Up to 20% of the Fund's total assets may be
subject to calls the Fund writes.

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

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

The Fund's custodian, or a securities depository acting for the custodian,
will act as the Fund's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written calls traded
on exchanges or as to other acceptable escrow securities. In that way, no margin will
be required for such transactions. OCC will release the securities on the expiration
of the option or when the Fund enters into a closing transaction.

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

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

The Fund may also write calls on a futures contract without owning the futures
contract or securities deliverable under the contract. To do so, at the time the call
is written, the Fund must cover the call by identifying on its books an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid assets if
the value of the segregated assets drops below 100% of the current value of the
future. Because of this segregation requirement, in no circumstances would the Fund's
receipt of an exercise notice as to that future require the Fund to deliver a futures
contract. It would simply put the Fund in a short futures position, which is permitted
by the Fund's hedging policies.

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

If the Manager anticipates a decline in the dollar value of a foreign
currency, the decline in the dollar value of portfolio securities denominated in that
currency might be partially offset by writing calls on that foreign currency. However,
the currency rates could fluctuate in a direction adverse to the Fund's position.

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

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

o Risks of Hedging with Options and Futures. The use of hedging instruments
requires special skills and knowledge of investment techniques that are different than
what is required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly, hedging
strategies may reduce the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated with its other
investments.

The Fund could pay a brokerage commission each time it sells a call, or sells
an underlying investment in connection with the exercise of a call. Those commissions
could be higher on a relative basis than the commissions for direct purchases or sales
of the underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, 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.

There is a risk in using short hedging by selling futures to attempt to
protect against declines in the value of the Fund's portfolio securities. The risk is
that the prices of the futures will correlate imperfectly with the behavior of the
cash prices of the Fund's securities. For example, it is possible that while the Fund
has used hedging instruments in a short hedge, the market might advance and the value
of the securities held in the Fund's portfolio might decline. If that occurred, the
Fund would lose money on the hedging instruments and also experience a decline in the
value of its portfolio securities. However, while this could occur for a very brief
period or to a very small degree, over time the value of a diversified portfolio of
securities will tend to move in the same direction as the indices upon which the
hedging instruments are based.
The risk of imperfect correlation increases as the composition of the Fund's
portfolio diverges from the securities included in the applicable index. To compensate
for the imperfect correlation of movements in the price of the portfolio securities
being hedged and movements in the price of the hedging instruments, the Fund might use
hedging instruments in a greater dollar amount than the dollar amount of portfolio
securities being hedged. It might do so if the historical volatility of the prices of
the portfolio securities being hedged is more than the historical volatility of the
applicable index.

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

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

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

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

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

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

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

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

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

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

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

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

o Interest Rate Swap Transactions. The Fund can enter into interest rate swap
agreements. In an interest rate swap, the Fund and another party exchange their right
to receive or their obligation to pay interest on a security. For example, they might
swap the right to receive floating rate payments for fixed rate payments. The Fund can
enter into swaps only on securities that it owns. Also, the Fund will identify on its
books liquid assets (such as cash or U.S. government securities) to cover any amounts
it could owe under swaps that exceed the amounts it is entitled to receive, and it
will adjust that amount daily, as needed.

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

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

o Regulatory Aspects of Hedging Instruments. When using futures and options on
futures, the Fund is required to operate within certain guidelines and restrictions
with respect to the use of futures as established by the Commodities Futures Trading
Commission (the "CFTC"). In particular, the Fund is exempted from registration with
the CFTC as a "commodity pool operator" if the Fund complies with the requirements of
Rule 4.5 adopted by the CFTC. The Rule does not limit the percentage of the Fund's
assets that may be used for futures margin and related options premiums for a bona
fide hedging position. However, under the Rule, the Fund must limit its aggregate
initial futures margin and related options premiums to not more than 5% of the Fund's
net assets for hedging strategies that are not considered bona fide hedging strategies
under the Rule. Under the Rule, the Fund must also use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions of the Commodity Exchange Act.

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

Under the Investment Company Act, when the Fund purchases a future, it must
maintain cash or readily marketable short-term debt instruments in an amount equal to
the market value of the securities underlying the future, less the margin deposit
applicable to it.

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

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

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

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

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

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

Other Investment Restrictions

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.

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
Directors can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or updates
to the Prospectus or this Statement of Additional Information, as appropriate. The
Fund's principal investment policies are described in the Prospectus.

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

o The Fund cannot issue senior securities. However, it can make payments or
deposits of margin in connection with options or futures transactions, lend its
portfolio securities, enter into repurchase agreements, borrow money and pledge its
assets as permitted by its other fundamental policies. For purposes of this
restriction, the issuance of shares of common stock in multiple classes or series, the
purchase or sale of options, futures contracts and options on futures contracts,
forward commitments, and repurchase agreements entered into in accordance with the
Fund's investment policies, and the pledge, mortgage or hypothecation of the Fund's
assets are not deemed to be senior securities.

o The Fund cannot buy securities or other instruments issued or guaranteed by
any one issuer if more than 5% of its total assets towould be invested in securities
or other instruments of that issuer or if it would then own more than 10% of that
issuer's voting securities. This limitation applies to 75% of the Fund's total
assets. The limit does not apply to securities issued or guaranteed by the U.S.
government orits any of its agencies orthato instrumentalities or securities
of other investment companies.

o The Fund cannot invest 25% or more of its total assets in any one industry.
That limit does not apply to securities issued or guaranteed by the U.S. government or
its agencies and instrumentalities or securities issued by investment companies.

o The Fund cannot ofinvest in physical commodities or commodities contracts.
However, the Fund can invest in hedging instruments permitted by any of its other
investment policies, and can buy or sell options, futures, securities or other
instruments backed by, or the investment return from which is linked to, changes in o
assets.the price of physical commodities, commodity contracts or currencies.

o The Fund cannot o agreements).invest in real estate or in interests in real
estate. However, the Fund can purchase securities of issuers holding real estate or
interests in real estate (including securities of real estate investment trusts) if
permitted by its other investment policies.

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

o The Fund cannot o options.make loans, except to the extent permitted under the
1940 Act, the rules or regulations thereunder or any exemption therefrom that is
applicable to the Fund, as such statute, rules or regulations may be amended or
interpreted from time to time. 1

o The Fund o Exchange.may not borrow money, except to the extent permitted
under the 1940 Act, the rules or regulations thereunder or any exemption therefrom
that is applicable to the Fund, as such statute, rules or regulations may be amended
or interpreted from time to time. 2

|X| Does the Fund Have Additional Restrictions That Are Not "Fundamental" Policies?

o The Fund cannot invest o assets.in securities of other investment companies,
except to the extent permitted under the 1940 Act, the rules or regulations thereunder
or any exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.

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

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

How the Fund is Managed

Organization and History. The Fund is one of two investment portfolios, or "series,"
of Oppenheimer Series Fund, Inc. That corporation is an open-end, management
investment company organized as a Maryland corporation in 1981, and was called
Connecticut Mutual Investment Accounts, Inc. until March 18, 1996, when the Manager
became the Fund's investment advisor. The Fund is a diversified mutual fund. On March
18, 1996 the Fund changed its name from Connecticut Mutual Growth Account to
Oppenheimer Disciplined Value Fund and effective March 1, 2001 subsequently changed
its name to Oppenheimer Value Fund.

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

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

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

|X| Meetings of Shareholders. Although the Fund is not required by Maryland
law to hold annual meetings, it may hold shareholder meetings from time to time on
important matters. The shareholders of the Fund's parent corporation have the right to
call a meeting to remove a Director or to take certain other action described in the
Articles of Incorporation or under Maryland law.

The Fund will hold meetings when required to do so by the Investment Company
Act or other applicable law. The Fund will hold a meeting when the Directors call a
meeting or upon proper request of shareholders. If the Fund's parent corporation
receives a written request of the record holders of at least 25% of the outstanding
shares eligible to be voted at a meeting to call a meeting for a specified purpose
(which might include the removal of a Director), the Directors will call a meeting of
shareholders for that specified purpose. The Fund's parent corporation has undertaken
that it will then either give the applicants access to the Fund's shareholder list or
mail the applicants' communication to all other shareholders at the applicants'
expense.

Shareholders of the Fund and of its parent corporation's other series vote
together in the aggregate on certain matters at shareholders' meetings. Those matters
include the election of Directors and ratification of appointment of the independent
auditors. Shareholders of a particular series or class vote separately on proposals
that affect that series or class. Shareholders of a series or class that is not
affected by a proposal are not entitled to vote on the proposal. For example, only
shareholders of a particular series vote on any material amendment to the investment
advisory agreement for that series. Only shareholders of a particular class of a
series vote on certain amendments to the Distribution and/or Service Plans if the
amendments affect only that class.

Board ofDirectors

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

The Board of Directors has an Audit Committee, a Study Committee and a Proxy
Committee. The members of the Audit Committee are Kenneth Randall (Chairman),
Benjamin Lipstein and Edward Regan. The Audit Committee held four meetings during the
Fund's fiscal year ended October 31, 2001. The Audit Committee provides the Board
with recommendations regarding the selection of the Fund's independent auditor. The
Audit Committee also reviews the scope and results of audits and the audit fees
charged, reviews reports from the Fund's independent auditor concerning the Fund's
internal accounting procedures, and controls and reviews reports of the Manager's
internal auditor, among other duties as set forth in the Committee's charter.

The members of the Study Committee are Benjamin Lipstein (Chairman), Robert
Galli and Elizabeth Moynihan. The Study Committee held seven meetings during the
Fund's fiscal year ended October 31, 2001. The Study Committee evaluates and reports
to the Board on the Fund's contractual arrangements, including the Investment Advisory
and Distribution Agreements, transfer and shareholder service agreements and custodian
agreements as well as the policies and procedures adopted by the Fund to comply with
the Investment Company Act and other applicable law, among other duties as set forth
in the Committee's charter.

The members of the Proxy Committee are Edward Regan (Chairman), Russell
Reynolds and Clayton Yeutter. The Proxy Committee held one meeting during the fiscal
year ended October 31, 2001.The Proxy Committee provides the Board with
recommendations for proxy voting and monitors proxy voting by the Fund.

Directors and Officers of the Fund. EachExcept for Mr. Murphy, each of the
Directorsexcept is an independent director of the Fund ("Independent Director"). Mr.
Murphy is an "Interested Director," because he is affiliated with the Manager by
virtue of his positions as an officer and director of the Manager, and as a
shareholder of its parent company.

The Fund's Directors 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 Directors 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 Directors. All of the Directors are Directorsalso trustees or
directors of the following publicly offered Oppenheimer funds (referred to as "Board I
Funds"):

|X| In addition to being a trustee or director of the Board I Funds, Mr.
Galli is also a director or trustee of 10 other portfolios in the OppenheimerFunds
complex. Present or former officers, directors, trustees and employees (and their
immediate family members) of the Fund, the Manager and its affiliates, and retirement
plans established by them for their employees are permitted to purchase Class A shares
of the Fund and the other Oppenheimer funds at net asset value without sales charge.
The sales charges on Class A shares is waived for that group because of the economies
of sales efforts realized by the Distributor.

Messrs. Spiro, Murphy, Leavy, Molleur, Wixted and Zack and Mses. Bechtolt,
Feld and Ives respectively hold the same offices with one or more of the other Board I
Funds as with the Fund. As of February 1, 2002, the Directors 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 Director, and his family members, do not own securities of
either the Manager or Distributor of the Board I Funds or any person directly or
indirectly controlling, controlled by or under common control with the Manager or
Distributor.

|X| Affiliated Transactions and Material Business Relationships. Mr. Reynolds has
reported he has a controlling interest in The Directorship Search Group, Inc. ("The
Directorship Search Group"), a director recruiting firm that provided consulting
services to Massachusetts Mutual Life Insurance Company (which controls the Manager)
for fees aggregating $$110,000 from January 1, 2000 through December 31, 2001, an
amount representing less than 5% of the annual revenues of The Directorship Search
Group, Inc. Mr. Reynolds has reported that he has a controlling interest inestimates
that The Directorship Search Group, Inc., a director recruiting firm that provided
consulting services toGroup will bill Massachusetts Mutual Life Insurance Company
(which controls the for$150,000 for services to be provided during the calendar year
2002.

The Independent Directors have unanimously (except for Mr. Reynolds, who
abstained) determined that the consulting arrangements between The Directorship Search
Group, Inc. and Massachusetts Mutual Life Insurance Company were not material business
or professional relationships that would compromise Mr. Reynolds' status as an
Independent Director. Nonetheless, to assure certainty as to determinations of the
Board and the Independent Directors as to matters upon which the Investment Company
Act or the rules thereunder require approval by a majority of Independent Directors,
Mr. Reynolds will not be counted for purposes of determining whether a quorum of
Independent Directors was present or whether a majority of Independent Directors
approved the matter.

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

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

Independent Directors

Name, Address, Age, Principal Occupation(s) During Past 5 Years / Other Dollar Aggregate
Dollar Range of
Shares
Range of Beneficially
Shares Owned in any of
Beneficially the Oppenheimer
Position(s) Held with Fund Trusteeships/Directorships Held by Director / Number of Owned in Funds Overseen
and Length of Service Portfolios in Fund Complex Currently Overseen by Director the Fund by Director

As of December 31, 2001

Leon Levy, Chairman of the General Partner (since 1982) of Odyssey Partners, L.P. None None
Board of Directors (investment partnership) and Chairman of the Board (since
Director since 1985 1981) of Avatar Holdings, Inc. (real estate development).
Age: 76 Oversees 31 portfolios in the OppenheimerFunds complex.

Robert G. Galli, A trustee or director of other Oppenheimer funds. Formerly $50,001- Over $100,000
Director since 1993 Vice Chairman (October 1995-December 1997) of the Manager. $100,000
Age: 69 Oversees 41 portfolios in the OppenheimerFunds complex.

Phillip A. Griffiths, The Director (since 1991) of the Institute for Advanced None Over $100,000
Director since 1999 Study, Princeton, N.J., director (since 2001) of GSI Lumonics
Age: 63 and a member of the National Academy of Sciences (since
1979); formerly (in descending chronological order) a
director of Bankers Trust Corporation, Provost and Professor
of Mathematics at Duke University, a director of Research
Triangle Institute, Raleigh, N.C., and a Professor of
Mathematics at Harvard University. Oversees 31 portfolios in
the OppenheimerFunds complex.

Joel W. Motley, Director (January 2002-present), Columbia Equity Financial $None3 None3
Director since 2002 Corp. (privately-held financial adviser); Managing Director
Age: 50 (January 2002-present), Carmona Motley, Inc. (privately-held
financial adviser); Formerly he held the following positions:
Managing Director (January 1998-December 2001), Carmona
Motley Hoffman Inc. (privately-held financial adviser);
Managing Director (January 1992-December 1997), Carmona
Motley & Co. (privately-held financial adviser). Oversees 31
portfolios in the OppenheimerFunds complex.

Elizabeth B. Moynihan, Author and architectural historian; a trustee of the Freer None $50,001-$100,000
Director since 1992 Gallery of Art and Arthur M. Sackler Gallery (Smithsonian
Age: 72 Institute), Trustees Council of the National Building Museum;
a member of the Trustees Council, Preservation League of New
York State. Oversees 31 portfolios in the OppenheimerFunds
complex.

Kenneth A. Randall, A director of Dominion Resources, Inc. (electric utility $1- $10,000 Over $100,000
Director since 1985 holding company) and Prime Retail, Inc. (real estate
Age: 75 investment trust); formerly a director of Dominion Energy,
Inc. (electric power and oil & gas producer), President and
Chief Executive Officer of The Conference Board, Inc.
(international economic and business research) and a director
of Lumbermens Mutual Casualty Company, American Motorists
Insurance Company and American Manufacturers Mutual Insurance
Company. Oversees 31 portfolios in the OppenheimerFunds
complex.

Edward V. Regan, President, Baruch College, CUNY; a director of RBAsset (real $1- $10,000 $50,001-$100,000
Director since 1993 estate manager); a director of OffitBank; formerly Trustee,
Age: 72 Financial Accounting Foundation (FASB and GASB), Senior
Fellow of Jerome Levy Economics Institute, Bard College,
Chairman of Municipal Assistance Corporation for the City of
New York, New York State Comptroller and Trustee of New York
State and Local Retirement Fund. Oversees 31 investment
companies in the OppenheimerFunds complex.

Russell S. Reynolds, Jr., Chairman (since 1993) of The Directorship Search Group, Inc. None $10,001-$50,000
Director since 1989 (corporate governance consulting and executive recruiting); a
Age: 70 life trustee of International House (non-profit educational
organization), and a trustee (since 1996) of the Greenwich
Historical Society. Oversees 31 portfolios in the
OppenheimerFunds complex.

Donald W. Spiro, Vice Chairman Emeritus (since January 1991) of the Manager. None Over $100,000
Chairman of the Board of e
Directors, Formerly a director (January 1969-August 1999) of ths
Director since 1985 Manager. Oversees 31 portfolios in the OppenheimerFund
Age: 76 complex.

Clayton K. Yeutter, Of Counsel (since 1993), Hogan & Hartson (a law firm). Other None $50,001-$100,000
Director since 1991 directorships: Caterpillar, Inc. (since 1993) and
Age: 71 Weyerhaeuser Co. (since 1999). Oversees 31 portfolios in the
OppenheimerFunds complex.

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

The address of Mr. Murphy in the chart below is 498 Seventh Avenue, New York,
NY 10018. Mr. Murphy serves for an indefinite term, until his resignation, death or
removal.

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

Interested Director and Officer

Name, Address, Age, Principal Occupation(s) During Past 5 Years / Other Dollar Aggregate
Dollar Range of
Range of Shares
Shares Beneficially
Beneficially Owned in any of
Position(s) Held with Fund Trusteeships/Directorships Held by Director / Number of Owned in the Oppenheimer
and Length of Service Portfolios in Fund Complex Currently Overseen by Director the Fund Funds

As of December 31, 2001

John V. Murphy, President Chairman, Chief Executive Officer and director (since June
and Director, 2001) and President (since September 2000) of the Manager; None Over $100,000
Director since October 2001 President and a director or trustee of other Oppenheimer
Age: 53 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 DBL Acquisition Corporation; formerly, Chief
Operating Officer (September 2000-June 2001) of the Manager;
President and trustee (November 1999-November 2001) of MML
Series Investment Fund and MassMutual Institutional Funds
(open-end investment companies); a director (September
1999-August 2000) of C.M. Life Insurance Company; President,
Chief Executive Officer and director (September 1999-August
2000) of MML Bay State Life Insurance Company; a director
(June 1989-June 1998) of Emerald Isle Bancorp and Hibernia
Savings Bank (a wholly-owned subsidiary of Emerald Isle
Bancorp). Oversees 69 portfolios in the OppenheimerFunds
complex.

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

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

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

Officers of the Fund

Name, Address, Age, Position(s) Held with Principal Occupation(s) During Past 5 Years
Fund and Length of Service

Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager;
Treasurer, Principal Financial and Treasurer (since March 1999) of HarbourView Asset Management
Accounting Officer (since April 1999) Corporation, Shareholder Services, Inc., Oppenheimer Real Asset
Age: 42 Management Corporation, Shareholder Financial Services, Inc.,
Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc.
(since March 2000), OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since May 2000) and OFI
Institutional Asset Management, Inc. (since November 2000) (offshore
fund management subsidiaries of the Manager); Treasurer and Chief
Financial Officer (since May 2000) of Oppenheimer Trust Company (a
trust company subsidiary of the Manager); Assistant Treasurer (since
March 1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds
Legacy Program (since April 2000); formerly Principal and Chief
Operating Officer (March 1995-March 1999), Bankers Trust
Company-Mutual Fund Services Division. An officer of 85 portfolios in
the OppenheimerFunds complex.

Connie Bechtolt, Assistant Vice President of the Manager (since September 1998); formerly Manager/Fund
Assistant Treasurer (since
October 10, 2002) Accounting (September 1994-September 1998) of the Manager. An officer of 72 portfolios
Age: 39 in the OppenheimerFunds complex.

Philip Vottiero, Vice President/Fund Accounting of the Manager (since March 2002); formerly Vice
Assistant Treasurer (since President/Corporate Accounting of the Manager (July 1999-March 2002) prior to which he
August 15, 2002) was Chief Financial Officer at Sovlink Corporation (April 1996-June 1999). An officer
Age: 39 of 72 portfolios in the OppenheimerFunds complex.

Robert G. Zack, Senior Vice President (since May 1985) and General Counsel (since
Secretary (since November 1, 2001) February 2002) of the Manager; General Counsel and a director (since
Age: 54 November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice
President and General Counsel (since November 2001) of HarbourView
Asset Management Corporation; Vice President and a director (since
November 2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice
President, General Counsel and a director (since November 2001) of
Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI
Private Investments, Inc., Oppenheimer Trust Company and OFI
Institutional Asset Management, Inc.; General Counsel (since November
2001) of Centennial Asset Management Corporation; a director (since
November 2001) of Oppenheimer Real Asset Management, Inc.; Assistant
Secretary and a director (since November 2001) of OppenheimerFunds
International Ltd.; Vice President (since November 2001) of
OppenheimerFunds Legacy Program; Secretary (since November 2001) of
Oppenheimer Acquisition Corp.; formerly Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of Shareholder
Services, Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001); OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (October
1997-November 2001). An officer of 85 portfolios in the
OppenheimerFunds complex.

Philip T. Masterson, Vice President and Assistant Counsel of the Manager (since July 1998); formerly, an
Assistant Secretary
(since August 15, 2002) associate with Davis, Graham, & Stubbs LLP (January 1997-June 1998). An officer of 72
Age: 38 portfolios in the OppenheimerFunds complex.

Denis R. Molleur, Vice President and Senior Counsel of the Manager (since July 1999);
Assistant Secretary formerly a Vice President and Associate Counsel of the Manager
(since November 1, 2001) (September 1995-July 1999). An officer of 82 portfolios in the
Age: 44 OppenheimerFunds complex.

Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of the Manager;
Assistant Secretary Vice President (since June 1990) of OppenheimerFunds Distributor,
(since November 1, 2001) Inc.; Director, Vice President and Assistant Secretary (since June
Age: 44 1999) of Centennial Asset Management Corporation; Vice President
(since 1997) of Oppenheimer Real Asset Management, Inc.; formerly Vice
President and Associate Counsel of the Manager (June 1990-July 1999).
An officer of 85 portfolios in the OppenheimerFunds complex.

Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998) of the Manager;
Assistant Secretary Vice President (since 1999) of OppenheimerFunds Distributor, Inc.;
(since November 1, 2001) Vice President and Assistant Secretary (since 1999) of Shareholder
Age: 36 Services, Inc.; Assistant Secretary (since December 2001) of
OppenheimerFunds Legacy Program and Shareholder Financial Services,
Inc.; formerly Assistant Vice President and Assistant Counsel of the
Manager (August 1997-June 1998); Assistant Counsel of the Manager
(August 1994-August 1997). An officer of 85 portfolios in the
OppenheimerFunds complex.

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

|X| Remuneration of Directors. The officers of the Fund and one of the
Directors of the Fund (Mr. Murphy) who are affiliated with the Manager receive no
salary or fee from the Fund. The remaining Directors of the Fund received the
compensation shown below from the Fund with respect to the Fund's fiscal year ended
October 31, 2001. The compensation from all of the Board I Funds (including the Fund)
represents compensation received as a director, trustee or member of a committee of
the boards of those funds during the calendar year 2001.

---------------------------------------- ------------------------ ------------------------- -------------------------
Director's Name Aggregate Compensation Retirement Total Compensation From
All Oppenheimer Funds
Benefits For Which Individual
Accrued as Part Serves As
of Fund Trustee/Director
and Position from Fund1 Expenses (33 Funds)2
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Leon Levy $1,229 $240 $173,700
Chairman
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------

Robert G. Galli $202,8863
Study Committee Member $669 $67

Phillip Griffiths $3314 $18 $54,889

Joel W. Motley5 $0 $0 $0

---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Elizabeth B. Moynihan $753 $151 $105,760
Study Committee Member
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Kenneth A. Randall $97,012
Audit Committee Chairman $671 $119
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Edward V. Regan $840 $293 $95,960
Proxy Committee Chairman, Audit
Committee Member
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Russell S. Reynolds, Jr. $492 $83 $71,792
Proxy Committee Member
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------
Donald Spiro $386 $21 $64,080
---------------------------------------- ------------------------ ------------------------- -------------------------
---------------------------------------- ------------------------ ------------------------- -------------------------

Clayton K. Yeutter $6276 $218 $71,792
Proxy Committee Member

---------------------------------------- ------------------------ ------------------------- -------------------------
1. Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a Director.
2. For the 2001 calendar year.
3. Total Compensation for the 2001 calendar year includes compensation received
for serving as a Trustee or Director of 10 other Oppenheimer funds.

4. Includes $313 deferred under the Deferred Compensation Plan as described below.
5. Elected to the Board on October 10, 2002 and therefore did not receive any
compensation.

6. Includes $102 deferred under the Deferred Compensation Plan as described below.

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

|X| Deferred Compensation Plan. The Board of Directors has adopted a Deferred
Compensation Plan for disinterested directors 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 Director is periodically adjusted
as though an equivalent amount had been invested in shares of one or more Oppenheimer
funds selected by the Director. The amount paid to the Director under the plan will be
determined based upon the performance of the selected funds.

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

|X| Major Shareholders. As of February 1, 2002, the only persons who owned of
record or were known by the Fund to own beneficially 5% or more of any class of the
Fund's outstanding shares were:

RPSS TR Gussco Manufacturing Inc., 401K Plan, Attn: Robert Sharp, 5112
2nd Ave., Brooklyn, NY 11232-4309, which owned 6,673.998 Class N shares
(53.78% of the Class N shares then outstanding).

RPSS TR IRA FBO George J. Ferguson, 635 Sunnyslope Rd., Elm Grove, WI
53122-2463, which owned 3,766.304 Class N shares (30.35% of the Class N
shares then outstanding).

Persumma Financial Services Mass Mutual Financial Group, 1295 State St.
#N328, Springfield, MA 01111-0001 which owned 45,762.571 Class Y shares
(99.87% of the Class Y shares then outstanding).

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

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

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

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

The agreement requires the Manager, at its expense, to provide the Fund with
adequate office space, facilities and equipment. It also requires the Manager to
provide and supervise the activities of all administrative and clerical personnel
required to provide effective administration for the Fund. Those responsibilities
include the compilation and maintenance of records with respect to its operations, the
preparation and filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the Manager under the advisory
agreement. The advisory agreement lists examples of expenses paid by the Fund. The
major categories relate to interest, taxes, brokerage commissions, fees to certain
Directors, legal and audit expenses, custodian and transfer agent expenses, share
issuance costs, certain printing and registration costs and non-recurring expenses,
including litigation costs. The management fees paid by the Fund to the Manager are
calculated at the rates described in the Prospectus, which are applied to the assets
of the Fund as a whole. The fees are allocated to each class of shares based upon the
relative proportion of the Fund's net assets represented by that class.

------------------------------------- ---------------------------------------------------------------------------
Fiscal Year ended 10/31: Management Fees Paid to OppenheimerFunds, Inc.
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
1999 $3,663,867
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
2000 $2,235,663
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
2001 $1,612,092
------------------------------------- ---------------------------------------------------------------------------

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

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

|X| Annual Approval of Investment Advisory Agreement. Each year, the
Board of Directors, including a majority of the Independent Directors, is required to
approve the renewal of the investment advisory agreement. The Investment Company Act
requires that the Board request and evaluate and the Manager provide such information
as may be reasonably necessary to evaluate the terms of the investment advisory
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 Directors, meeting
separately from the full Board with experienced Counsel to the Fund who assisted the
Board in its deliberations. The Fund's Counsel is independent of the Manager within
the meaning and intent of the SEC Rules regarding the independence of counsel.

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

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. Subject to
those considerations, as a factor in selecting brokers for the Fund's portfolio
transactions, the Manager may also consider sales of shares of the Fund and other
investment companies for which the Manager or an affiliate serves as investment
advisor.

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

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

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

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

The investment advisory agreement permits the Manager to allocate brokerage
for research services. The investment 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 Directors 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 Directors
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 10/31: Total Brokerage Commissions Paid by the Fund1

1. Amounts do not include spreads or commissions on principal transactions on a
net trade basis.
2. In the fiscal year ended 10/31/01, the amount of transactions directed to
brokers for research services was $230,613,144 and the amount of the commissions
paid to broker-dealers for those services was $352,837.

Distribution and Service Plans

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

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

--------------- ----------------------- -----------------------
Fiscal Year Aggregate Front-End Class A Front-End
Sales Charges
Ended 10/31: Sales Charges on Retained by
Class A Shares Distributor1
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
1999 $715,853 $384,487
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2000 $370,966 $174,293
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2001 $317,775 $140,878
--------------- ----------------------- -----------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent
of the Distributor.

--------------- ---------------------- ----------------------- ------------------------ ------------------------
Fiscal Year Concessions on Class Concessions on Class Concessions on Class C Concessions on Class N
Ended 10/31: A Shares Advanced by B Shares Advanced by Shares Advanced by Shares Advanced by
Distributor1 Distributor1 Distributor1 Distributor1
--------------- ---------------------- ----------------------- ------------------------ ------------------------
--------------- ---------------------- ----------------------- ------------------------ ------------------------
1999 $59,831 $688,909 $35,094 N/A
--------------- ---------------------- ----------------------- ------------------------ ------------------------
--------------- ---------------------- ----------------------- ------------------------ ------------------------
2000 $54,817 $372,763 $28,351 N/A
--------------- ---------------------- ----------------------- ------------------------ ------------------------
--------------- ---------------------- ----------------------- ------------------------ ------------------------
2001 $46,553 $289,729 $26,187 $1182
--------------- ---------------------- ----------------------- ------------------------ ------------------------
1. The Distributor advances concession payments to dealers for certain sales of
Class A shares and for sales of Class B, Class C and Class N shares from its own
resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.

-------------- ------------------------ ----------------------- ------------------------ -------------------------
Fiscal Year Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Deferred Sales
Ended 10/31 Deferred Sales Charges Charges Retained by Deferred Sales Charges Deferred Sales Charges
Retained by Distributor Distributor Retained by Distributor Retained by Distributor
-------------- ------------------------ ----------------------- ------------------------ -------------------------
-------------- ------------------------ ----------------------- ------------------------ -------------------------
2001 $4,991 $151,152 $2,314 $0
-------------- ------------------------ ----------------------- ------------------------ -------------------------

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 Directors, including a
majority of the Independent Directors4, cast in person at a meeting called for the
purpose of voting on that plan.

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

While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Directors 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 Directors.

Each plan states that while it is in effect, the selection and nomination of
those Directors of the Fund's parent corporation who are not "interested persons" of
the corporation (or the Fund) is committed to the discretion of the Independent
Directors. 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 Directors.

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

Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and other
financial institutions (they are referred to as "recipients") for personal services
and account maintenance services they provide for their customers who hold Class A
shares. The services include, among others, answering customer inquiries about the
Fund, assisting in establishing and maintaining accounts in the Fund, making the
Fund's investment plans available and providing other services at the request of the
Fund or the Distributor. 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. 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. After the first year shares are outstanding, the Distributor makes service
fee payments to Recipients quarterly on those shares. The advance payment is based on
the net asset value of shares sold. Shares purchased by exchange do not qualify for
the advance service fee payment. If Class A shares purchased by grandfathered
retirement accounts are redeemed during the first year after their purchase, the
Recipient of the service fees on those shares will be obligated to repay the
Distributor a pro rata portion of the advance payment of the service fee made on those
shares.

For the fiscal year ended October 31, 2001 payments under the Class A Plan
totaled $444,087, all of which was paid by the Distributor to recipients. That
included $189,704 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.

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

Each Plan permits the Distributor to retain both the asset-based sales charges
and the service fees or to pay recipients the service fee on a quarterly basis,
without payment in advance. However, the Distributor currently intends to pay the
service fee to recipients in advance for the first year after Class B, Class C and
Class theN shares are purchased. After the first year Class B, Class C or Class N
shares are outstanding, after their purchase, the Distributor makes service fee
payments quarterly on those shares. The advance payment is based on the net asset
value of shares sold. Shares purchased by exchange do not qualify for the advance
service fee payment. If Class B, Class C or Class N shares are redeemed during the
first year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance payment
of the service fee made on those shares. In cases where the Distributor is the broker
of record for Class B, Class C and Class N shares, i.e. shareholders without the
services of a broker directly invest in the Fund, the Distributor will retain the
asset-based sales charge and service fee for Class B, Class C and Class N shares.

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

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

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

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

---------------------------------------------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 10/31/01
---------------------------------------------------------------------------------------------------------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class: Total Payments Under Amount Retained by Distributor's Distributor's
Aggregate Unreimbursed Expenses
Unreimbursed Expenses as % of Net Assets of
Plan Distributor Under Plan Class
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class B Plan $651,050 $507,1311 $2,298,966 3.99%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class C Plan $110,817 $21,1052 $265,441 2.53%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class N Plan $18 $132 N/A N/A
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
1. Includes $31,553 paid to an affiliate of the Distributor's parent company.
2. Includes $8,478 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate
its investment performance. Those terms include "cumulative total return," "average
annual total return," "average annual total return at net asset value" and "total
return at net asset value." An explanation of how total returns are calculated is set
forth below. The charts below show the Fund's performance as of the Fund's most recent
fiscal year end. You can obtain current performance information by calling the Fund's
Transfer Agent at 1.800.225.5567 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 Securities and Exchange Commission. Those rules describe the types
of performance data that may be used and how it is to be calculated. In general, any
advertisement by the Fund of its performance data must include the average annual
total returns for the advertised class of shares of the Fund. Those returns must be
shown for the 1-, 5- and 10-year periods (or the life of the class, if less) ending as
of the most recently ended calendar quarter prior to the publication of the
advertisement (or its submission for publication).

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

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

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

|X| Total Return Information. There are different types of "total returns" to
measure the Fund's performance. Total return is the change in value of a hypothetical
investment in the Fund over a given period, assuming that all dividends and capital
gains distributions are reinvested in additional shares and that the investment is
redeemed at the end of the period. Because of differences in expenses for each class
of shares, the total returns for each class are separately measured. The cumulative
total return measures the change in value over the entire period (for example, 10
years). An average annual total return shows the average rate of return for each year
in a period that would produce the cumulative total return over the entire period.
However, average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the SEC.
The methodology is discussed below.

In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the initial
investment ("P") (unless the return is shown without sales charge, as described
below). For Class B shares, payment of the applicable contingent deferred sales charge
is applied, depending on the period for which the return is shown: 5.0% in the first
year, 4.0% in the second year, 3.0% in the third and fourth years, 2.0% in the fifth
year, 1.0% in the sixth year and none thereafter. For Class C shares, the 1.0%
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 03/01/02 (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. There is no sales charge on Class Y shares.
o Average Annual Total Return. The "average annual total return" of each class
is an average annual compounded rate of return for each year in a specified number of
years. It is the rate of return based on the change in value of a hypothetical initial
investment of $1,000 ("P" in the formula below) held for a number of years ("n" in the
formula) to achieve an Ending Redeemable Value ("ERV" in the formula) of that
investment, according to the following formula:

ERV l/n - 1 Average Annual Total Return
--------------
P

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

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

o Total Returns at Net Asset Value. From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without deducting
sales charges) for Class A, Class B, Class C and Class N shares. Each is based on the
difference in net asset value per share at the beginning and the end of the period for
a hypothetical investment in that class of shares (without considering front-end or
contingent deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions.

---------------------------------------------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 10/31/01
---------------------------------------------------------------------------------------------------------------------
--------------- ----------------------- -----------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Shares Returns (10 years
or life of Class)
--------------- ----------------------- -----------------------------------------------------------------------------
--------------- ----------------------- ------------------------- ------------------------- -------------------------
1-Year 5-Year 10-Year
(or life of class) (or life of class) (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
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
Class A1 150.93% 166.24% -11.03% -5.60% 3.21% 4.44% 9.64% 10.29%
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
Class B 42.80%2 42.80%2 -11.01% -6.34% 3.37% 3.65% 6.03%2 6.03%2
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
Class C 26.05%3 26.05%3 -7.31% -6.38% 3.65%3 3.65%3 4.30%3 4.30%3
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
Class N -12.94%4 -12.06%4 N/A N/A N/A N/A N/A N/A
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
Class Y N/A 21.96%5 N/A -5.10%5 N/A 4.16%5 N/A N/A
--------------- ----------- ----------- ------------ ------------ ------------ ------------ ------------ ------------
1. Inception of Class A: 9/16/85.
2. Inception of Class B: 10/2/95.
3. Inception of Class C: 5/1/96.
4. Inception of Class N: 3/1/01.
5. Inception of Class Y: 12/16/96.

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 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 Rankings. From time to time the Fund may publish the star ranking
of the performance of its classes of shares by Morningstar, Inc., an independent
mutual fund monitoring service. Morningstar ranks mutual funds in their specialized
market sector. The Fund is included in the domestic stock funds category.

Morningstar proprietary star rankings reflect historical risk-adjusted total
investment return. For each fund with at least a three-year history, Morningstar
calculates a Morningstar Rating(TM)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 10-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 $25. Effective November 1, 2002, for any new Asset Builder Plan, each purchase
through AccountLink must be at least $50 and shareholders must invest at least $500
---
before an Asset Builder Plan can be established on a new account. Accounts established
prior to November 1, 2001 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 normally closes at 4:00 P.M., but may
close earlier on certain days. If Federal Funds are received on a business day after
the close of the Exchange, the shares will be purchased and dividends will begin to
accrue on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund three days after the transfers are initiated. If the proceeds of
the ACH transfer are not received on a timely basis, the Distributor reserves the
right to cancel the purchase order. The Distributor and the Fund are not responsible
for any delays in purchasing shares resulting from delays in ACH transmissions.

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

|X| Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add together:
o Class A and Class B shares you purchase for your individual accounts
(including IRAs and 403(b) plans), or for your joint accounts, or for
trust or custodial accounts on behalf of your children who are
minors, and
o Current purchases of Class A and Class B shares of the Fund and other
Oppenheimer funds to reduce the sales charge rate that applies to
current purchases of Class A shares, and
o Class A and Class B shares of Oppenheimer funds you previously purchased
subject to an initial or contingent deferred sales charge to reduce
the sales charge rate for current purchases of Class A shares,
provided that you still hold your investment in one of the
Oppenheimer funds.

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

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

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

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, if you purchase Class A shares or Class
A and Class B shares of the Fund and other Oppenheimer funds during a 13-month period,
you can reduce the sales charge rate that applies to your purchases of Class A
shares. The total amount of your intended purchases of both Class A and Class B
shares will determine the reduced sales charge rate for the Class A shares purchased
during that period. You can include purchases made up to 90 days before the date of
the Letter. Letters of Intent do not consider Class C or Class N shares you purchase
or may have purchased.

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

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

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

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

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

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

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

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

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

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

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

Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly from a
bank account, you must enclose a check (the minimum is $25) for the initial purchase
with your application. Currently, the minimum investment is $25 to establish an Asset
Builder Plan, and will remain at $25 for those accounts established prior to November
1, 2002. However, as described above under "AccountLink," for Asset Builder Plans
established on or after November 1, 2002, the minimum investment for new Asset Builder
Plans will increase to $50, each purchase must be at least $50 and shareholders must
---
invest at least $500 before an Asset Builder Plan can be established. 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 $500,000 or more
for Class B shares or $1 million or more for Class C shares on behalf of a single
investor (not including dealer "street name" or omnibus accounts). That is because
generally it will be more advantageous for that investor to purchase Class A shares of
the Fund.

|X| Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases of
Class A shares 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 after six years is not treated as a taxable event for the shareholder.
If those laws or the IRS interpretation of those laws should change, the automatic
conversion feature may be suspended. In that event, no further conversions of Class B
shares would occur while that suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative net asset value of
the two classes, without the imposition of a sales charge or fee, such exchange could
constitute a taxable event for the shareholder, and absent such exchange, Class B
shares might continue to be subject to the asset-based sales charge for longer than
six years.

|X| Availability of Class N Shares. In addition to the description of the
types of retirement plans which may purchase Class N shares contained in the
prospectus, Class N shares also are offered to the following:
o to all rollover IRAs (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,

to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
purchase with the redemption proceeds of Class A shares of one or
more Oppenheimer funds.
o to certain customers of broker-dealers and financial advisors that are
identified in a special agreement between the broker-dealer or
financial advisor and the Distributor for that purpose.

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

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

|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Directors' 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 Directors, 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, effective September 27, 2002, a $12 annual
fee is charged on any account valued at less than $500. This fee will not be charged
for:
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 charged annually on or about the second to last business day of
September. This annual fee will be 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 New York
Stock Exchange ("the Exchange") on each day that the Exchange is open. The calculation
is done by dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Exchange normally closes at
4:00 P.M., Eastern time, but may close earlier on some other days (for example, in
case of weather emergencies or on days falling before a U.S. holiday). All references
to time in this Statement of Additional Information mean "Eastern time." The
Exchange's most recent annual announcement (which is subject to change) states that it
will close on New Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. It may also close on other days.

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

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

|X| Securities Valuation. The Fund's Board of Directors 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 Directors, 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 Directors 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 Directors 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
Directors. 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 Directors 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, Class N or Class Y shares. The
Fund may amend, suspend or cease offering this reinvestment privilege at any time as
to shares redeemed after the date of such amendment, suspension or cessation.

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

Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, under certain circumstances, the Board
of Directors 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 Directors has the right to cause the
involuntary redemption of the shares held in any account if the account holds fewer
than 100 shares. 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 New York Stock Exchange on a regular business
day, it will be processed at that day's net asset value if the order was received by
the dealer or broker from its customers prior to the time the Exchange closes.
Normally, the Exchange closes at 4:00 P.M., but may do so earlier on some days.
Additionally, the order must have been transmitted to and received by the Distributor
prior to its close of business that day (normally 5:00 P.M.).

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

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

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

The Fund cannot guarantee receipt of a payment on the date requested. The Fund
reserves the right to amend, suspend or discontinue offering these plans at any time
without prior notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while
participating in an Automatic Withdrawal Plan. Class B, Class C and Class N
shareholders should not establish automatic withdrawal plans, because of the 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 $25. Effective November 1, 2002, the minimum
amount that may be exchanged to each other fund account is $50. Instructions should be
provided on the OppenheimerFunds Application or signature-guaranteed instructions.
Exchanges made under these plans are subject to the restrictions that apply to
exchanges as set forth in "How to Exchange Shares" in the Prospectus and below in this
Statement of Additional Information.

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

The following funds only offer Class A shares:

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

The following funds do not offer Class N shares:

The following funds do not offer Class Y shares:

Oppenheimer California Municipal Fund Oppenheimer Limited Term Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Cash Reserves Oppenheimer New York Municipal Fund
Oppenheimer Champion Income Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Convertible Securities Fund Oppenheimer Rochester National Municipals
Oppenheimer Disciplined Allocation Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Small Company 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 Senior Floating Rate Fund are not available by
exchange of shares of Oppenheimer Money Market Fund or Class A shares of
Oppenheimer Cash Reserves.
o Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund and
Oppenheimer Select Managers QM Active Balanced Fund are only available to
retirement plans and are available only by exchange from the same class of
shares of other Oppenheimer funds held by retirement plans.
o Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for shares
of Oppenheimer funds offered with a sales charge upon payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject
to an early withdrawal charge or contingent deferred sales charge.
o Shares of Oppenheimer Money Market Fund, Inc. purchased with the redemption
proceeds of shares of other mutual funds (other than funds managed by the
Manager or its subsidiaries) redeemed within the 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. To qualify for that privilege, the investor or the investor's dealer
must notify the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased. If requested,
they must supply proof of entitlement to this privilege.
o Shares of the Fund acquired by reinvestment of dividends or distributions from
any of the other Oppenheimer funds or from any unit investment trust for which
reinvestment arrangements have been made with the Distributor may be exchanged
at net asset value for shares of any of the Oppenheimer funds.

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

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

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

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

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

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

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.

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 and Class Y shares. That is because of the effect of the
asset-based sales charge on Class B, Class C and Class N shares. Those dividends will
also differ in amount as a consequence of any difference in the net asset values of
the different classes of shares.

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

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

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

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

|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 30% (29% for
payments after December 31, 2003) on ordinary income dividends, capital gains
distributions and the proceeds of the redemption of shares, paid to any foreign
person. All income and any tax withheld (in this situation) by the Fund is remitted by
the Fund to the U.S. Treasury and is identified in reports mailed to shareholders in
January of each year.

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

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

Additional Information About the Fund

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

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

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

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


INDEPENDENT AUDITORS' REPORT

================================================================================
 The Board of Directors and Shareholders of Oppenheimer Value Fund:

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






 KPMG LLP

 Denver, Colorado
 November 21, 2001




                           33 | OPPENHEIMER VALUE FUND


 STATEMENT OF INVESTMENTS  October 31, 2001



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

 Common Stocks--87.5%
-----------------------------------------------------------------------------------
 Basic Materials--3.6%
-----------------------------------------------------------------------------------
 Metals--0.6%
 Alcoa, Inc.                                                 42,000    $ 1,355,340
-----------------------------------------------------------------------------------
 Paper--3.0%
 Sappi Ltd., Sponsored ADR                                  743,800      7,095,852
-----------------------------------------------------------------------------------
 Capital Goods--18.1%
-----------------------------------------------------------------------------------
 Aerospace/Defense--10.1%
 Boeing Co.                                                 100,700      3,282,820
-----------------------------------------------------------------------------------
 Lockheed Martin Corp.                                      183,200      8,934,664
-----------------------------------------------------------------------------------
 Raytheon Co.                                               356,200     11,487,450
                                                                       ------------
                                                                        23,704,934

-----------------------------------------------------------------------------------
 Manufacturing--8.0%
 Caterpillar, Inc.                                          167,500      7,490,600
-----------------------------------------------------------------------------------
 Titan Corp. (The)(1)                                       243,200      6,354,816
-----------------------------------------------------------------------------------
 Tyco International Ltd.                                     99,700      4,899,258
                                                                       ------------
                                                                        18,744,674

-----------------------------------------------------------------------------------
 Communication Services--5.6%
-----------------------------------------------------------------------------------
 Telecommunications: Long Distance--4.2%
 AT&T Corp.(2)                                              369,300      5,631,825
-----------------------------------------------------------------------------------
 Qwest Communications International, Inc.                   322,000      4,169,900
                                                                       ------------
                                                                         9,801,725

-----------------------------------------------------------------------------------
 Telecommunications: Wireless--1.4%
 Leap Wireless International, Inc.(1)                       227,500      3,382,925
-----------------------------------------------------------------------------------
 Consumer Cyclicals--3.2%
-----------------------------------------------------------------------------------
 Consumer Services--3.2%
 Cendant Corp.(1)                                           572,200      7,415,712
-----------------------------------------------------------------------------------
 Consumer Staples--5.9%
-----------------------------------------------------------------------------------
 Broadcasting--0.3%
 Comcast Corp., Cl. A Special(1)                             17,000        609,280
-----------------------------------------------------------------------------------
 Entertainment--3.8%
 News Corp. Ltd. (The), Sponsored ADR, Preference           375,300      8,932,140
-----------------------------------------------------------------------------------
 Tobacco--1.8%
 Philip Morris Cos., Inc.                                    90,000      4,212,000
-----------------------------------------------------------------------------------
 Energy--8.6%
-----------------------------------------------------------------------------------
 Energy Services--2.4%
 Noble Drilling Corp.(1)                                    184,200      5,627,310
-----------------------------------------------------------------------------------
 Oil: Domestic--6.2%
 Anadarko Petroleum Corp.                                    25,900      1,477,595
-----------------------------------------------------------------------------------
 ChevronTexaco Corp.                                        149,000     13,193,950
                                                                       ------------
                                                                        14,671,545

13 | OPPENHEIMER VALUE FUND STATEMENT OF INVESTMENTS Continued


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

 Financial--26.9%
-----------------------------------------------------------------------------------
 Banks--3.4%
 Bank One Corp.                                             243,000   $  8,065,170
-----------------------------------------------------------------------------------
 Diversified Financial--14.5%
 Citigroup Inc.                                              93,966      4,277,332
-----------------------------------------------------------------------------------
 Fannie Mae                                                  49,000      3,967,040
-----------------------------------------------------------------------------------
 Franklin Resources, Inc.                                   155,000      4,975,500
-----------------------------------------------------------------------------------
 Freddie Mac                                                202,000     13,699,640
-----------------------------------------------------------------------------------
 Merrill Lynch & Co., Inc.                                   61,600      2,692,536
-----------------------------------------------------------------------------------
 USA Education, Inc.                                         55,800      4,551,048
                                                                      -------------
                                                                        34,163,096

-----------------------------------------------------------------------------------
 Insurance--9.0%
 Aetna, Inc.(1)                                             142,000      3,924,880
-----------------------------------------------------------------------------------
 Allstate Corp.                                             243,700      7,647,306
-----------------------------------------------------------------------------------
 Hartford Financial Services Group, Inc.                    176,000      9,504,000
                                                                      -------------
                                                                        21,076,186

-----------------------------------------------------------------------------------
 Healthcare--1.4%
-----------------------------------------------------------------------------------
 Healthcare/Drugs--1.4%
 Pharmacia Corp.                                             79,100      3,205,132
-----------------------------------------------------------------------------------
 Technology--10.0%
-----------------------------------------------------------------------------------
 Computer Hardware--3.3%
 Lexmark International, Inc., Cl. A(1)                       67,300      3,011,675
-----------------------------------------------------------------------------------
 SanDisk Corp.(1)                                           432,200      4,728,268
                                                                      -------------
                                                                         7,739,943

-----------------------------------------------------------------------------------
 Communications Equipment--2.8%
 Lucent Technologies, Inc.(2)                               902,700      6,048,090
-----------------------------------------------------------------------------------
 Metawave Communications Corp.(1)                           260,000        520,000
                                                                      -------------
                                                                         6,568,090

-----------------------------------------------------------------------------------
 Electronics--3.9%
 Micron Technology, Inc.(1)                                 407,000      9,263,320
-----------------------------------------------------------------------------------
 Utilities--4.2%
-----------------------------------------------------------------------------------
 Electric Utilities--4.2%
 Dominion Resources, Inc.                                   140,000      8,556,800
-----------------------------------------------------------------------------------
 Duke Energy Corp                                            37,200      1,428,852
-----------------------------------------------------------------------------------
                                                                         9,985,652
                                                                      -------------
 Total Common Stocks (Cost $213,104,234)                               205,620,026

14 | OPPENHEIMER VALUE FUND


                                                                         Principal      Market Value
                                                                            Amount        See Note 1
=====================================================================================================

 Short-Term Notes--1.5%

 Federal Home Loan Bank, 2.46%, 11/1/01 (Cost $3,500,000)               $ 3,500,000     $  3,500,000
=====================================================================================================
 Repurchase Agreements--4.4%

 Repurchase agreement with Zion First National Bank, 2.54%,
 dated 10/31/01, to be repurchased at $10,351,730 on 11/1/01,
 collateralized by U.S. Treasury Nts., 4.75%-7%, 12/31/01-2/15/10,
 with a value of $9,541,498 and U.S. Treasury Bills, 4/25/02,
 with a value of $1,024,612 (Cost $10,351,000)                           10,351,000       10,351,000
-----------------------------------------------------------------------------------------------------
 Total Investments, at Value (Cost $226,955,234)                               93.4%     219,471,026
-----------------------------------------------------------------------------------------------------
 Other Assets Net of Liabilities                                                6.6       15,541,953
                                                                        -----------------------------
 Net Assets                                                                   100.0%    $235,012,979
                                                                        =============================

Footnotes to Statement of Investments 1. Non-income-producing security.

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


                                  Contracts      Expiration     Exercise         Premium        Market Value
                            Subject to Call           Dates        Price        Received          See Note 1
-------------------------------------------------------------------------------------------------------------

 AT&T Corp.                           1,200         1/21/02       $22.50        $164,394             $12,000
 Lucent Technologies, Inc.            1,400         1/21/02         7.50         103,597              63,000
                                                                                -----------------------------
                                                                                $267,991             $75,000
                                                                                =============================

See accompanying Notes to Financial Statements. 15 | OPPENHEIMER VALUE FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2001

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

 Assets

 Investments, at value (cost $226,955,234)--
 see accompanying statement                                           $219,471,026
-----------------------------------------------------------------------------------
 Cash                                                                       97,868
-----------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold                                                       17,329,217
 Shares of capital stock sold                                              275,846
 Interest and dividends                                                    130,250
 Other                                                                       1,793
                                                                      -------------
 Total assets                                                          237,306,000

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

 Options written, at value (premiums received $267,991)--
 see accompanying statement                                                 75,000
-----------------------------------------------------------------------------------
 Payables and other liabilities:
 Shares of capital stock redeemed                                        1,003,602
 Investments purchased                                                     885,215
 Shareholder reports                                                       173,707
 Distribution and service plan fees                                         51,136
 Directors' compensation                                                    45,216
 Transfer and shareholder servicing agent fees                                 647
 Other                                                                      58,498
                                                                      -------------
 Total liabilities                                                       2,293,021

===================================================================================
 Net Assets                                                           $235,012,979
                                                                      =============

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

 Par value of shares of capital stock                                 $     14,771
-----------------------------------------------------------------------------------
 Additional paid-in capital                                            259,860,326
-----------------------------------------------------------------------------------
 Undistributed (overdistributed) net investment income                     (44,695)
-----------------------------------------------------------------------------------
 Accumulated net realized gain (loss) on investments and
 foreign currency transactions                                         (17,526,206)
-----------------------------------------------------------------------------------
 Net unrealized appreciation (depreciation) on investments and
 translation of assets and liabilities denominated in foreign
 currencies                                                             (7,291,217)
                                                                      -------------
 Net Assets                                                           $235,012,979
                                                                      =============

16 | OPPENHEIMER VALUE FUND

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

 Net Asset Value Per Share

 Class A Shares:
 Net asset value and redemption price per share (based on net assets of
 $166,285,323 and 10,437,937 shares of capital stock outstanding)                          $15.93

 Maximum offering price per share (net asset value plus sales charge
 of 5.75% of offering price)                                                               $16.90
--------------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $57,583,942
 and 3,623,680 shares of capital stock outstanding)                                        $15.89
--------------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $10,493,922
 and 669,494 shares of capital stock outstanding)                                          $15.67
--------------------------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $12,129
 and 763 shares of capital stock outstanding)                                              $15.90
--------------------------------------------------------------------------------------------------
 Class Y Shares:
 Net asset value, redemption price and offering price per share (based on
 net assets of $637,663 and 39,366 shares of capital stock outstanding)                    $16.20

See accompanying Notes to Financial Statements. 17 | OPPENHEIMER VALUE FUND STATEMENT OF OPERATIONS For the Year Ended October 31, 2001

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

 Investment Income

 Dividends (net of foreign withholding taxes of $4,543)               $  2,675,276
-----------------------------------------------------------------------------------
 Interest                                                                1,058,461
                                                                      -------------
 Total income                                                            3,733,737

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

 Management fees                                                         1,612,092
-----------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                   444,087
 Class B                                                                   651,050
 Class C                                                                   110,817
 Class N                                                                        18
-----------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                   445,103
 Class B                                                                   159,197
 Class C                                                                    26,663
 Class N                                                                        10
 Class Y                                                                       667
-----------------------------------------------------------------------------------
 Shareholder reports                                                       168,103
-----------------------------------------------------------------------------------
 Legal, auditing and other professional fees                               134,598
-----------------------------------------------------------------------------------
 Accounting service fees                                                    15,000
-----------------------------------------------------------------------------------
 Directors' compensation                                                     6,852
-----------------------------------------------------------------------------------
 Custodian fees and expenses                                                 5,286
-----------------------------------------------------------------------------------
 Other                                                                      51,537
                                                                      -------------
 Total expenses                                                          3,831,080
 Less reduction to custodian expenses                                       (5,286)
 Less voluntary waiver of transfer and shareholder
 servicing agent fees--Class Y                                                (578)
                                                                      -------------
 Net expenses                                                            3,825,216


===================================================================================
 Net Investment Loss                                                       (91,479)

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

 Net realized gain (loss) on:
 Investments                                                            (8,169,397)
 Closing and expiration of option contracts written                        535,734
 Foreign currency transactions                                            (208,257)
                                                                      -------------
 Net realized gain (loss)                                               (7,841,920)

-----------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on:
 Investments                                                            (7,972,149)
 Translation of assets and liabilities denominated in
 foreign currencies                                                        159,977
                                                                      -------------
 Net change                                                             (7,812,172)
                                                                      -------------
 Net realized and unrealized gain (loss)                               (15,654,092)

===================================================================================
 Net Decrease in Net Assets Resulting from Operations                 $(15,745,571)
                                                                      =============

 See accompanying Notes to Financial Statements.

18 | OPPENHEIMER VALUE FUND STATEMENTS OF CHANGES IN NET ASSETS


 Year Ended October 31,                                        2001           2000
===================================================================================

 Operations

 Net investment income (loss)                          $    (91,479)  $  1,939,388
-----------------------------------------------------------------------------------
 Net realized gain (loss)                                (7,841,920)    (7,463,634)
-----------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation)    (7,812,172)    (5,479,690)
                                                       ----------------------------
 Net increase (decrease) in net assets resulting
 from operations                                        (15,745,571)   (11,003,936)

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

 Dividends from net investment income:
 Class A                                                 (1,847,746)    (2,996,645)
 Class B                                                    (87,334)            --
 Class C                                                    (18,346)            --
 Class N                                                         --             --
 Class Y                                                         --       (789,687)
-----------------------------------------------------------------------------------
 Distributions from net realized gain:
 Class A                                                         --    (55,606,463)
 Class B                                                         --    (14,307,425)
 Class C                                                         --     (2,028,859)
 Class N                                                         --             --
 Class Y                                                         --    (11,069,300)

===================================================================================
 Capital Stock Transactions

 Net increase (decrease) in net assets resulting from
 capital stock transactions:
 Class A                                                 (3,267,773)  (142,579,205)
 Class B                                                 (2,239,487)   (21,169,838)
 Class C                                                  1,787,816     (2,279,249)
 Class N                                                     13,360             --
 Class Y                                                    716,127    (66,839,216)

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

 Total decrease                                         (20,688,954)  (330,669,823)
-----------------------------------------------------------------------------------
 Beginning of period                                    255,701,933    586,371,756
                                                       ----------------------------
 End of period [including undistributed
 (overdistributed) net investment income of
 $(44,695) and $1,774,733, respectively]               $235,012,979   $255,701,933
                                                       ============================

See accompanying Notes to Financial Statements. 19 | OPPENHEIMER VALUE FUND FINANCIAL HIGHLIGHTS


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

 Per Share Operating Data

 Net asset value, beginning of period             $17.06       $20.69          $20.91          $23.31          $19.65
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                               .03          .16             .17             .16             .23(1)
 Net realized and unrealized gain (loss)            (.98)        (.65)            .64             .32            4.91(1)
                                                  -----------------------------------------------------------------------
 Total income (loss) from
 investment operations                              (.95)        (.49)            .81             .48            5.14
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income               (.18)        (.16)           (.17)           (.12)           (.07)
 Distributions from net realized gain                 --        (2.98)           (.86)          (2.76)          (1.41)
                                                  -----------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                    (.18)       (3.14)          (1.03)          (2.88)          (1.48)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                   $15.93       $17.06          $20.69          $20.91          $23.31
                                                  =======================================================================

=========================================================================================================================
 Total Return, at Net Asset Value(2)               (5.60)%      (2.60)%          3.60%           2.24%          27.60%

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

 Net assets, end of period (in thousands)       $166,285     $181,566        $392,483        $456,264        $371,810
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)              $181,631     $234,840        $448,884        $442,138        $234,314
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                              0.19%        0.66%           0.68%           0.84%           1.05%
 Expenses                                           1.26%        1.17%           1.02%           0.98%(4)        1.07%(4)
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                             336%          86%            135%            106%            103%

1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in 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.


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

 Per Share Operating Data

 Net asset value, beginning of period             $16.99       $20.58          $20.83          $23.32          $19.77
------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                       (.11)        (.05)           (.03)            .02             .09(1)
 Net realized and unrealized gain (loss)            (.97)        (.56)            .66             .30            4.91(1)
                                                  ----------------------------------------------------------------------
 Total income (loss) from
 investment operations                             (1.08)        (.61)            .63             .32            5.00
------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income               (.02)          --            (.02)           (.05)           (.04)
 Distributions from net realized gain                 --        (2.98)           (.86)          (2.76)          (1.41)
                                                  ----------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                    (.02)       (2.98)           (.88)          (2.81)          (1.45)
------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                   $15.89       $16.99          $20.58          $20.83          $23.32
                                                  ======================================================================

========================================================================================================================
 Total Return, at Net Asset Value(2)               (6.34)%      (3.28)%          2.79%           1.47%          26.61%

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

 Net assets, end of period (in thousands)        $57,584      $64,287        $102,736        $123,260         $83,291
------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)               $65,115      $79,239        $123,616        $110,240         $30,019
------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income (loss)                      (0.57)%      (0.14)%         (0.08)%          0.08%           0.22%
 Expenses                                           2.01%        1.93%           1.77%           1.73%(4)        1.84%(4)
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                             336%          86%            135%            106%            103%


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

 Per Share Operating Data

 Net asset value, beginning of period             $16.77       $20.35          $20.60          $23.07          $19.57
------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                       (.08)        (.04)           (.02)            .01             .10(1)
 Net realized and unrealized gain (loss)            (.99)        (.56)            .65             .31            4.85(1)
                                                  ----------------------------------------------------------------------
 Total income (loss) from
 investment operations                             (1.07)        (.60)            .63             .32            4.95
------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income               (.03)          --            (.02)           (.03)           (.04)
 Distributions from net realized gain                 --        (2.98)           (.86)          (2.76)          (1.41)
                                                  ----------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                    (.03)       (2.98)           (.88)          (2.79)          (1.45)
------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                   $15.67       $16.77          $20.35          $20.60          $23.07
                                                  ======================================================================

========================================================================================================================
 Total Return, at Net Asset Value(2)               (6.38)%      (3.27)%          2.82%           1.47%          26.64%

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

 Net assets, end of period (in thousands)        $10,494      $ 9,849         $14,582         $18,204         $10,243
------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)               $11,088      $11,975         $17,746         $15,355         $ 4,477
------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income (loss)                      (0.56)%      (0.14)%         (0.07)%          0.06%           0.17%
 Expenses                                           2.01%        1.93%           1.77%           1.73%(4)        1.86%(4)
------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                             336%          86%            135%            106%            103%

3. Annualized for periods of less than one full year. 4. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 22 | OPPENHEIMER VALUE FUND Period Ended Class N October 31, 2001(1) ========================================================================== Per Share Operating Data Net asset value, beginning of period $ 18.08 -------------------------------------------------------------------------- Income (loss) from investment operations: Net investment loss (.02) Net realized and unrealized income (loss) (2.16) --------- Total income (loss) from investment operations (2.18) -------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- Distributions from net realized gain -- --------- Total dividends and/or distributions to shareholders -- -------------------------------------------------------------------------- Net asset value, end of period $15.90 ======== ========================================================================== Total Return at Net Asset Value(2) (12.06)% ========================================================================== Ratios/Supplemental Data Net assets, end of period (in thousands) $12 -------------------------------------------------------------------------- Average net assets (in thousands) $ 5 -------------------------------------------------------------------------- Ratios to average net assets:(3) Net investment loss (0.45)% Expenses 1.61% -------------------------------------------------------------------------- Portfolio turnover rate 336%

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

See accompanying Notes to Financial Statements. 23 | OPPENHEIMER VALUE FUND FINANCIAL HIGHLIGHTS Continued


 Class Y        Year Ended October 31,              2001         2000            1999            1998          1997(1)
========================================================================================================================

 Per Share Operating Data

 Net asset value, beginning of period             $17.07       $20.72          $20.97          $23.34          $20.31
------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                               .10(2)       .17(2)          .22             .22             .31(2)
 Net realized and unrealized gain (loss)            (.97)(2)     (.63)(2)         .64             .34            4.20(2)
                                                  ----------------------------------------------------------------------
 Total income (loss) from
 investment operations                              (.87)        (.46)            .86             .56            4.51
------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                 --         (.21)           (.25)           (.17)           (.07)
 Distributions from net realized gain                 --        (2.98)           (.86)          (2.76)          (1.41)
                                                  ----------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                      --        (3.19)          (1.11)          (2.93)          (1.48)
------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                   $16.20       $17.07          $20.72          $20.97          $23.34
                                                  ======================================================================

========================================================================================================================
 Total Return, at Net Asset Value(3)               (5.10)%      (2.42)%          3.81%           2.63%          23.62%

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

 Net assets, end of period (in thousands)           $638      $     1         $76,571        $136,729         $90,994
------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                  $155      $48,714         $95,765        $118,010         $51,775
------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(4)
 Net investment income                              0.62%        1.06%           0.90%           1.19%           1.21%
 Expenses                                           1.20%        0.97%           0.76%           0.62%(5)        0.78%(5)
 Expenses, net of voluntary waiver of
 transfer agent fees                                0.83%         N/A             N/A             N/A             N/A
------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                             336%          86%            135%            106%            103%

1. For the period from December 16, 1996 (inception of offering) to October 31, 1997. 2. Per share amounts calculated based on the average shares outstanding during the period.

3. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 4. Annualized for periods of less than one full year.

5. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER VALUE FUND NOTES TO FINANCIAL STATEMENTS ================================================================================ 1. Significant Accounting Policies

Oppenheimer Value Fund (the Fund), a series of Oppenheimer Series Fund, Inc. (the Company), which operated under the name of Oppenheimer Disciplined Value Fund through February 28, 2001, is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Funds investment objective is to seek long-term growth of capital by investing primarily in common stocks with low price/earnings ratios and better-than-anticipated earnings. The Funds investment advisor is OppenheimerFunds, Inc. (the Manager).

The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are sold to certain institutional investors without either a front-end sales charge or a CDSC. All classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own expenses directly attributable to that class and exclusive voting rights with respect to matters affecting that class. Classes A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund.

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

Securities Valuation. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Funds 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 Directors, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Directors. Short-term money market type debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value).

-------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions.

The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Funds Statement of Operations.

25 | OPPENHEIMER VALUE FUND NOTES TO FINANCIAL STATEMENTS Continued ================================================================================ 1. Significant Accounting Policies Continued

Repurchase Agreements. The Fund requires its custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodians vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited.

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

Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

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

Directors Compensation. The Fund has adopted an unfunded retirement plan for the Funds independent Board of Directors. Benefits are based on years of service and fees paid to each director during the years of service. During the year ended October 31, 2001, the Funds projected benefit obligations were increased by $1,210 and payments of $3,892 were made to retired directors, resulting in an accumulated liability of $44,695 as of October 31, 2001.

The Board of Directors has adopted a deferred compensation plan for independent directors that enables directors to elect to defer receipt of all or a portion of annual compensation they are entitled to receive from the Fund. Under the plan, the compensation deferred is periodically adjusted as though an equivalent amount had been invested for the Board of Directors in shares of one or more Oppenheimer funds selected by the director. The amount paid to the Board of Directors under the plan will be determined based upon the performance of the selected funds. Deferral of directors fees under the plan will not affect the net assets of the Fund, and will not materially affect the Funds assets, liabilities or net investment income per share.

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

Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income or excise tax provision is required.

        As of October 31, 2001, the Fund had available for federal income tax purposes unused capital loss carryovers as follows:

Expiring -------------------------------------- 2008 $ 9,239,162 2009 5,386,519 ----------- Total $14,625,681 =========== 26 | OPPENHEIMER VALUE FUND --------------------------------------------------------------------------------

Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date.

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

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

The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended October 31, 2001, amounts have been reclassified to reflect a decrease in paid-in capital of $263,383, a decrease in undistributed net investment loss of $225,477, and a decrease in accumulated net realized loss on investments of $37,906. Net assets of the Fund were unaffected by the reclassifications.

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

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

-------------------------------------------------------------------------------- Security Transactions. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. --------------------------------------------------------------------------------

Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

27 | OPPENHEIMER VALUE FUND NOTES TO FINANCIAL STATEMENTS Continued ================================================================================ 2. Shares of Capital Stock

The Fund has authorized 600 million shares of $0.001 par value capital stock. Transactions in shares of capital stock were as follows:


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

 Class A
 Sold                        2,495,305  $ 43,546,414      2,615,441  $  46,627,592
 Dividends and/or
 distributions reinvested      110,601     1,770,750      2,212,164     38,403,153
 Redeemed                   (2,809,551)  (48,584,937)   (13,157,255)  (227,609,950)
                            -------------------------------------------------------
 Net increase (decrease)      (203,645) $ (3,267,773)    (8,329,650) $(142,579,205)
                            =======================================================

-----------------------------------------------------------------------------------
 Class B
 Sold                        1,321,460  $ 23,155,557        917,803  $  16,207,594
 Dividends and/or
 distributions reinvested        5,009        80,552        782,867     13,622,443
 Redeemed                   (1,487,290)  (25,475,596)    (2,907,576)   (50,999,875)
                            -------------------------------------------------------
 Net increase (decrease)      (160,821) $ (2,239,487)    (1,206,906) $ (21,169,838)
                            =======================================================

-----------------------------------------------------------------------------------
 Class C
 Sold                          535,330  $  9,404,405        360,348  $   6,294,284
 Dividends and/or
 distributions reinvested        1,085        17,218        110,349      1,894,720
 Redeemed                     (454,363)   (7,633,807)      (599,882)   (10,468,253)
                            -------------------------------------------------------
 Net increase (decrease)        82,052  $  1,787,816       (129,185) $  (2,279,249)
                            =======================================================

-----------------------------------------------------------------------------------
 Class N
 Sold                              763  $     13,364             --  $          --
 Dividends and/or
 distributions reinvested           --            --             --             --
 Redeemed                           --            (4)            --             --
                            -------------------------------------------------------
 Net increase (decrease)           763  $     13,360             --  $          --
                            =======================================================

-----------------------------------------------------------------------------------
 Class Y
 Sold                           42,200  $    765,652      1,046,725  $  17,938,175
 Dividends and/or
 distributions reinvested           --            --        683,909     11,858,987
 Redeemed                       (2,892)      (49,525)    (5,426,667)   (96,636,378)
                            -------------------------------------------------------
 Net increase (decrease)        39,308  $    716,127     (3,696,033) $ (66,839,216)
                            =======================================================

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

================================================================================ 3. Purchases and Sales of Securities

The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended October 31, 2001, were $792,712,099 and $801,637,028, respectively.

28 | OPPENHEIMER VALUE FUND

As of October 31, 2001, unrealized appreciation (depreciation) based on cost of securities for federal income tax purposes of $229,855,757 was:

Gross unrealized appreciation $ 12,234,399 Gross unrealized depreciation (22,619,130) ------------ Net unrealized appreciation (depreciation) $(10,384,731) ============ ================================================================================ 4. Fees and Other Transactions with Affiliates

Management Fees. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee of 0.625% of the first $300 million of average annual net assets of the Fund, 0.50% of the next $100 million and 0.45% of average annual net assets in excess of $400 million. The Funds management fee for the year ended October 31, 2001, was an annualized rate of 0.625%.

-------------------------------------------------------------------------------- Accounting Fees. The Manager acts as the accounting agent for the Fund at an annual fee of $15,000, plus out-of-pocket costs and expenses reasonably incurred. --------------------------------------------------------------------------------

Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS an agreed-upon per account fee. OFS has voluntarily undertaken to waive a portion of its transfer agent fee for Classes A, B, C, N and Y shares. This voluntary waiver of expenses limits transfer agent fees to 0.35% of average net assets for Classes A, B, C and N shares effective October 1, 2001, and 0.25% of average net assets for Class Y shares effective January 1, 2001.

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

Distribution and Service Plan Fees. Under its General Distributors Agreement with the Manager, the Distributor acts as the Funds principal underwriter in the continuous public offering of the different classes of shares of the Fund.

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


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

 October 31, 2001       $317,775           $140,878          $46,553          $289,729         $26,187            $118

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


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

 October 31, 2001            $4,991          $151,152             $2,314                $--

29 | OPPENHEIMER VALUE FUND NOTES TO FINANCIAL STATEMENTS Continued ================================================================================

4. Fees and Other Transactions with Affiliates Continued The Fund has adopted a Service Plan for Class A shares and Distribution and Service Plans for Class B, Class C and Class N shares under Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the Distributor for all or a portion of its costs incurred in connection with the distribution and/or servicing of the shares of the particular class.

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Class A Service Plan Fees. Under the Class A service plan, the Distributor currently uses the fees it receives from the Fund to pay brokers, dealers and other financial institutions. The Class A service plan permits reimbursements to the Distributor at a rate of up to a specified percent of average annual net assets of Class A shares purchased. The Distributor makes payments to plan recipients quarterly at an annual rate not to exceed a specified percent of the average annual net assets consisting of Class A shares of the Fund. For the year ended October 31, 2001, payments under the Class A plan totaled $444,087, all of which were paid by the Distributor to recipients, and included $189,704 paid to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years.

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Class B, Class C and Class N Distribution and Service Plan Fees. Under each plan, service fees and distribution fees are computed on the average of the net asset value of shares in the respective class, determined as of the close of each regular business day during the period. The Class B, Class C and Class N plans provide for the Distributor to be compensated at a flat rate, whether the Distributors distribution expenses are more or less than the amounts paid by the Fund under the plan during the period for which the fee is paid.

The Distributor retains the asset-based sales charge on Class B shares. The Distributor retains the asset-based sales charge on Class C shares during the first year the shares are outstanding. The Distributor retains the asset-based sales charge on Class N shares. The asset-based sales charges on Class B, Class C and Class N shares allow investors to buy shares without a front-end sales charge while allowing the Distributor to compensate dealers that sell those shares.

The Distributors actual expenses in selling Class B, Class C and Class N shares may be more than the payments it receives from the contingent deferred sales charges collected on redeemed shares and asset-based sales charges from the Fund under the plans. If any plan is terminated by the Fund, the Board of Directors may allow the Fund to continue payments of the asset-based sales charge to the Distributor for distributing shares before the plan was terminated. The plans allow for the carryforward of distribution expenses, to be recovered from asset-based sales charges in subsequent fiscal periods.

30 | OPPENHEIMER VALUE FUND Distribution fees paid to the Distributor for the year ended October 31, 2001, were as follows:


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

 Class B Plan                 $651,050            $507,131     $2,298,966                3.99%
 Class C Plan                  110,817              21,105        265,441                2.53
 Class N Plan                       18                  13             --                  --

================================================================================ 5. Foreign Currency Contracts

A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract.

The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation.

The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations.

================================================================================ 6. 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.

31 | OPPENHEIMER VALUE FUND NOTES TO FINANCIAL STATEMENTS Continued ================================================================================ 6. Option Activity Continued

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 October 31, 2001, was as follows:

Call Options ------------------------------ Number of Amount of Contracts Premiums -------------------------------------------------------------------------------- Options outstanding as of October 31, 2000 -- $ -- Options written 10,150 1,910,336 Options closed or expired (7,550) (1,642,345) ------------------------------ Options outstanding as of October 31, 2001 2,600 $ 267,991 ============================== ================================================================================ 7. Bank Borrowings

The Fund may borrow from a bank for temporary or emergency purposes including, without limitation, funding of shareholder redemptions provided asset coverage for borrowings exceeds 300%. The Fund has entered into an agreement which enables it to participate with other Oppenheimer funds in an unsecured line of credit with a bank, which permits borrowings up to $400 million, collectively. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the average unutilized amount of the credit facility at a rate of 0.08% per annum.

The Fund had no borrowings outstanding during the year ended or at October 31, 2001. Effective November 13, 2001, the Fund will no longer participate in this agreement.

32 | OPPENHEIMER VALUE FUND A-2 Appendix A RATINGS DEFINITIONS ------------------- Below are summaries of the rating definitions used by the nationally-recognized rating agencies listed below. Those ratings represent the opinion of the agency as to the credit quality of issues that they rate. The summaries below are based upon publicly-available information provided by the rating organizations. Moody's Investors Service, Inc. ---------------------------------------------------------------------------------------- Long-Term (Taxable) Bond Ratings Aaa: Bonds rated "Aaa" are judged to be the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, the changes that can be expected are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as with "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than that of "Aaa" securities. A: Bonds rated "A" possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa: Bonds rated "Baa" are considered medium-grade obligations; that is, they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and have speculative characteristics as well. Ba: Bonds rated "Ba" are judged to have speculative elements. Their future cannot be considered well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds rated "B" generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds rated "Caa" are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca: Bonds rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C: Bonds rated "C" are the lowest class of rated bonds and can be regarded as having extremely poor prospects of ever attaining any real investment standing. Con. (...): Bonds for which the security depends on the completion of some act or the fulfillment of some condition are rated conditionally. These bonds are secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in operating experience, (c) rentals that begin when facilities are completed, or (d) payments to which some other limiting condition attaches. The parenthetical rating denotes probable credit stature upon completion of construction or elimination of the basis of the condition. Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa" through "Caa." The modifier "1" indicates that the obligation ranks in the higher end of its generic rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a ranking in the lower end of that generic rating category. Advanced refunded issues that are secured by certain assets are identified with a # symbol. Short-Term Ratings - Taxable Debt These ratings apply to the ability of issuers to honor senior debt obligations having an original maturity not exceeding one year: Prime-1: Issuer has a superior ability for repayment of senior short-term debt obligations. Prime-2: Issuer has a strong ability for repayment of senior short-term debt obligations. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Prime-3: Issuer has an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Not Prime: Issuer does not fall within any Prime rating category. Standard & Poor's Rating Services ---------------------------------------------------------------------------------------- Long-Term Credit Ratings AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA: Bonds rated "AA" differ from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A: Bonds rated "A" are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB: Bonds rated "BBB" exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. BB, B, CCC, CC, and C Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having significant speculative characteristics. "BB" indicates the least degree of speculation, and "C" the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB: Bonds rated "BB" are less vulnerable to nonpayment than other speculative issues. However, these face major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B: Bonds rated "B" are more vulnerable to nonpayment than obligations rated "BB", but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC: Bonds rated "CCC" are currently vulnerable to nonpayment, and are dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. toCC: Bonds rated "CC" are currently highly vulnerable to nonpayment. C: A subordinated debt or preferred stock obligation rated "C" is currently highly vulnerable to C:nonpayment. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued. A "C" also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying. D: Bonds rated "D" are in default. Payments on the obligation are not being made on the date due even if the applicable grace period has not expired, unless Standard and Poor's believes that such payments will be made during such grace period. The "D" rating will also be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The "r" symbol is attached to the ratings of instruments with significant noncredit risks. Short-Term Issue Credit Ratings A-1: Obligation is rated in the highest category. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, a plus (+) sign designation indicates the obligor's capacity to meet its financial obligation is extremely strong. A-2: Obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. A-3: Obligation exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. B: Obligation is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation. However, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. C: Obligation is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. D: Obligation is in payment default. Payments on the obligation have not been made on the due date even if the applicable grace period has not expired, unless Standard and Poor's believes that such payments will be made during such grace period. The "D" rating will also be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized. Fitch, Inc. ---------------------------------------------------------------------------------------- International Long-Term Credit Ratings Investment Grade: AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of credit risk. They are assigned only in the case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA: Very High Credit Quality. "AA" ratings denote a very low expectation of credit risk. They indicate a very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. Speculative Grade: BB: Speculative. "BB" ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time. However, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade. B: Highly Speculative. "B" ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met. However, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. CCC, CC C: High Default Risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A "CC" rating indicates that default of some kind appears probable. "C" ratings signal imminent default. DDD, DD, and D: Default. The ratings of obligations in this category are based on their prospects for achieving partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery values are highly speculative and cannot be estimated with any precision, the following serve as general guidelines. "DDD" obligations have the highest potential for recovery, around 90%-100% of outstanding amounts and accrued interest. "DD" indicates potential recoveries in the range of 50%-90%, and "D" the lowest recovery potential, i.e., below 50%. Entities rated in this category have defaulted on some or all of their obligations. Entities rated "DDD" have the highest prospect for resumption of performance or continued operation with or without a formal reorganization process. Entities rated "DD" and "D" are generally undergoing a formal reorganization or liquidation process; those rated "DD" are likely to satisfy a higher portion of their outstanding obligations, while entities rated "D" have a poor prospect for repaying all obligations. Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status within the major rating categories. Plus and minus signs are not added to the "AAA" category or to categories below "CCC," nor to short-term ratings other than "F1" (see below). International Short-Term Credit Ratings F1: Highest credit quality. Strongest capacity for timely payment of financial commitments. May have an added "+" to denote any exceptionally strong credit feature. F2: Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of higher ratings. F3: Fair credit quality. Capacity for timely payment of financial commitments is adequate. However, near-term adverse changes could result in a reduction to non-investment grade. B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. D: Default. Denotes actual or imminent payment default. (i) B-1 Appendix B Industry Classification ----------------------- Aerospace & Defense Household Durables Air Freight & Couriers Household Products Airlines Industrial Conglomerates Auto Components Insurance Automobiles Internet & Catalog Retail Banks Internet Software & Services Beverages Information Technology Consulting & Services Biotechnology Leisure Equipment & Products Building Products Machinery Chemicals Marine Commercial Services & Supplies Media Communications Equipment Metals & Mining Computers & Peripherals Multiline Retail Construction & Engineering Multi-Utilities Construction Materials Office Electronics Containers & Packaging Oil & Gas Distributors Paper & Forest Products Diversified Financials Personal Products Diversified Telecommunication Services Pharmaceuticals Electric Utilities Real Estate Electrical Equipment Road & Rail Electronic Equipment & Instruments Semiconductor Equipment & Products Energy Equipment & Services Software Food & Drug Retailing Specialty Retail Food Products Textiles & Apparel Gas Utilities Tobacco Health Care Equipment & Supplies Trading Companies & Distributors Health Care Providers & Services Transportation Infrastructure Hotels Restaurants & Leisure Water Utilities Wireless Telecommunication Services C-1 Appendix C OppenheimerFunds Special Sales Charge Arrangements and Waivers -------------------------------------------------------------- In certain cases, the initial sales charge that applies to purchases of Class A shares5 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.6 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 plans7 4) Group Retirement Plans8 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."9 This waiver provision applies to: |_| Purchases of Class A shares aggregating $1 million or more. |_| Purchases of Class A shares by a Retirement Plan that was permitted to purchase such shares at net asset value but subject to a contingent deferred sales charge prior to March 1, 2001. That included plans (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares costing $500,000 or more, 2) had at the time of purchase 100 or more eligible employees or total plan assets of $500,000 or more, or 3) certified to the Distributor that it projects to have annual plan purchases of $200,000 or more. |_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases are made: 1) through a broker, dealer, bank or registered investment adviser that has made special arrangements with the Distributor for those purchases, or 2) by a direct rollover of a distribution from a qualified Retirement Plan if the administrator of that Plan has made special arrangements with the Distributor for those purchases. |_| Purchases of Class A shares by Retirement Plans that have any of the following record-keeping arrangements: 1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On the date the plan sponsor signs the record-keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of its assets invested in (a) mutual funds, other than those advised or managed by Merrill Lynch Investment Management, L.P. ("MLIM"), that are made available under a Service Agreement between Merrill Lynch and the mutual fund's principal underwriter or distributor, and (b) funds advised or managed by MLIM (the funds described in (a) and (b) are referred to as "Applicable Investments"). 2) The record keeping for the Retirement Plan is performed on a daily valuation basis by a record keeper whose services are provided under a contract or arrangement between the Retirement Plan and Merrill Lynch. On the date the plan sponsor signs the record keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of its assets (excluding assets invested in money market funds) invested in Applicable Investments. 3) The record keeping for a Retirement Plan is handled under a service agreement with Merrill Lynch and on the date the plan sponsor signs that agreement, the Plan has 500 or more eligible employees (as determined by the Merrill Lynch plan conversion manager). II. Waivers of Class A Sales Charges of Oppenheimer Funds ---------------------------------------------------------------------------------------- A. Waivers of Initial and Contingent Deferred Sales Charges for Certain Purchasers. Class A shares purchased by the following investors are not subject to any Class A sales charges (and no concessions are paid by the Distributor on such purchases): |_| The Manager or its affiliates. |_| Present or former officers, directors, trustees and employees (and their "immediate families") of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees. The term "immediate family" refers to one's spouse, children, grandchildren, grandparents, parents, parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by virtue of a remarriage (step-children, step-parents, etc.) are included. |_| Registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose. |_| Dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees. |_| Employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and which are identified as such to the Distributor) or with the Distributor. The purchaser must certify to the Distributor at the time of purchase that the purchase is for the purchaser's own account (or for the benefit of such employee's spouse or minor children). |_| Dealers, brokers, banks or registered investment advisors that have entered into an agreement with the Distributor providing specifically for the use of shares of the Fund in particular investment products made available to their clients. Those clients may be charged a transaction fee by their dealer, broker, bank or advisor for the purchase or sale of Fund shares. |_| Investment advisors and financial planners who have entered into an agreement for this purpose with the Distributor and who charge an advisory, consulting or other fee for their services and buy shares for their own accounts or the accounts of their clients. |_| "Rabbi trusts" that buy shares for their own accounts, if the purchases are made through a broker or agent or other financial intermediary that has made special arrangements with the Distributor for those purchases. |_| Clients of investment advisors or financial planners (that have entered into an agreement for this purpose with the Distributor) who buy shares for their own accounts may also purchase shares without sales charge but only if their accounts are linked to a master account of their investment advisor or financial planner on the books and records of the broker, agent or financial intermediary with which the Distributor has made such special arrangements . Each of these investors may be charged a fee by the broker, agent or financial intermediary for purchasing shares. |_| Directors, trustees, officers or full-time employees of OpCap Advisors or its affiliates, their relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns shares for those persons. |_| Accounts for which Oppenheimer Capital (or its successor) is the investment advisor (the Distributor must be advised of this arrangement) and persons who are directors or trustees of the company or trust which is the beneficial owner of such accounts. |_| A unit investment trust that has entered into an appropriate agreement with the Distributor. |_| Dealers, brokers, banks, or registered investment advisers that have entered into an agreement with the Distributor to sell shares to defined contribution employee retirement plans for which the dealer, broker or investment adviser provides administration services. |-| Retirement Plans and deferred compensation plans and trusts used to fund those plans (including, for example, plans qualified or created under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in each case if those purchases are made through a broker, agent or other financial intermediary that has made special arrangements with the Distributor for those purchases. |_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of the Class B and Class C TRAC-2000 program on November 24, 1995. |_| A qualified Retirement Plan that had agreed with the former Quest for Value Advisors to purchase shares of any of the Former Quest for Value Funds at net asset value, with such shares to be held through DCXchange, a sub-transfer agency mutual fund clearinghouse, if that arrangement was consummated and share purchases commenced by December 31, 1996. B. Waivers of Initial and Contingent Deferred Sales Charges in Certain Transactions. Class A shares issued or purchased in the following transactions are not subject to sales charges (and no concessions are paid by the Distributor on such purchases): |_| Shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party. |_| Shares purchased by the reinvestment of dividends or other distributions reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment arrangements have been made with the Distributor. |_| Shares purchased through a broker-dealer that has entered into a special agreement with the Distributor to allow the broker's customers to purchase and pay for shares of Oppenheimer funds using the proceeds of shares redeemed in the prior 30 days from a mutual fund (other than a fund managed by the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid. This waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner. This waiver must be requested when the purchase order is placed for shares of the Fund, and the Distributor may require evidence of qualification for this waiver. |_| Shares purchased with the proceeds of maturing principal units of any Qualified Unit Investment Liquid Trust Series. |_| Shares purchased by the reinvestment of loan repayments by a participant in a Retirement Plan for which the Manager or an affiliate acts as sponsor. C. Waivers of the Class A Contingent Deferred Sales Charge for Certain Redemptions. The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the contingent deferred sales charge are redeemed in the following cases: |_| To make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the account value adjusted annually. |_| Involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (please refer to "Shareholder Account Rules and Policies," in the applicable fund Prospectus). |_| For distributions from Retirement Plans, deferred compensation plans or other employee benefit plans for any of the following purposes: 1) Following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary. The death or disability must occur after the participant's account was established. 2) To return excess contributions. 3) To return contributions made due to a mistake of fact. 4) Hardship withdrawals, as defined in the plan.10 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.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) 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. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds ------------------------------------------------------------------------------------------ The Class B, Class C and Class N contingent deferred sales charges will not be applied to shares purchased in certain types of transactions or redeemed in certain circumstances described below. A. Waivers for Redemptions in Certain Cases. The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of shares in the following cases: |_| Shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," in the applicable Prospectus. |_| Redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder. The death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration. The contingent deferred sales charges are generally not waived following the death or disability of a grantor or trustee for a trust account. The contingent deferred sales charges will only be waived in the limited case of the death of the trustee of a grantor trust or revocable living trust for which the trustee is also the sole beneficiary. The death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration. |_| Distributions from accounts for which the broker-dealer of record has entered into a special agreement with the Distributor allowing this waiver. |_| Redemptions of Class B shares held by Retirement Plans whose records are maintained on a daily valuation basis by Merrill Lynch or an independent record keeper under a contract with Merrill Lynch. |_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of clients of financial institutions that have entered into a special arrangement with the Distributor for this purpose. Redemptions requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer fund in amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first purchase of Class C shares, if the redemption proceeds are invested in Class N shares of one or more Oppenheimer funds. |_| Distributions12 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.13 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.14 9) On account of the participant's separation from service.15 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. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds ---------------------------------------------------------------------------------------- The initial and contingent deferred sales charge rates and waivers for Class A, Class B and Class C shares described in the Prospectus or Statement of Additional Information of the Oppenheimer funds are modified as described below for certain persons who were shareholders of the former Quest for Value Funds. To be eligible, those persons must have been shareholders on November 24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those former Quest for Value Funds. Those funds include: Oppenheimer Quest Value Fund, Inc. Oppenheimer Small Cap Value Fund Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Quest Opportunity Value Fund These arrangements also apply to shareholders of the following funds when they merged (were reorganized) into various Oppenheimer funds on November 24, 1995: Quest for Value U.S. Government Income Fund Quest for Value New York Tax-Exempt Fund Quest for Value Investment Quality Income Fund Quest for Value National Tax-Exempt Fund Quest for Value Global Income Fund Quest for Value California Tax-Exempt Fund All of the funds listed above are referred to in this Appendix as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of an Oppenheimer fund that are either: |_| acquired by such shareholder pursuant to an exchange of shares of an Oppenheimer fund that was one of the Former Quest for Value Funds, or |_| purchased by such shareholder by exchange of shares of another Oppenheimer fund that were acquired pursuant to the merger of any of the Former Quest for Value Funds into that other Oppenheimer fund on November 24, 1995. A. Reductions or Waivers of Class A Sales Charges. |X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for Value Funds Shareholders. Purchases by Groups and Associations. The following table sets forth the initial sales charge rates for Class A shares purchased by members of "Associations" formed for any purpose other than the purchase of securities. The rates in the table apply if that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. -------------------------------- ---------------------------- --------------------------------- --------------------- Number of Eligible Employees Initial Sales Charge as a Initial Sales Charge as a % of Concession as % of or Members % of Offering Price Net Amount Invested Offering Price -------------------------------- ---------------------------- --------------------------------- --------------------- -------------------------------- ---------------------------- --------------------------------- --------------------- 9 or Fewer 2.50% 2.56% 2.00% -------------------------------- ---------------------------- --------------------------------- --------------------- -------------------------------- ---------------------------- --------------------------------- --------------------- At least 10 but not more than 2.00% 2.04% 1.60% 49 -------------------------------- ---------------------------- --------------------------------- --------------------- ---------------------------------------------------------------------------------------- For purchases by Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described in the applicable fund's Prospectus. Purchases made under this arrangement qualify for the lower of either the sales charge rate in the table based on the number of members of an Association, or the sales charge rate that applies under the Right of Accumulation described in the applicable fund's Prospectus and Statement of Additional Information. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Distributor. |X| Waiver of Class A Sales Charges for Certain Shareholders. Class A shares purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: o Shareholders who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. o Shareholders who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. |X| Waiver of Class A Contingent Deferred Sales Charge in Certain Transactions. The Class A contingent deferred sales charge will not apply to redemptions of Class A shares purchased by the following investors who were shareholders of any Former Quest for Value Fund: Investors who purchased Class A shares from a dealer that is or was not permitted to receive a sales load or redemption fee imposed on a shareholder with whom that dealer has a fiduciary relationship, under the Employee Retirement Income Security Act of 1974 and regulations adopted under that law. B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers. |X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The shares must have been acquired by the merger of a Former Quest for Value Fund into the fund or by exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into which such fund merged. Those shares must have been purchased prior to March 6, 1995 in connection with: o withdrawals under an automatic withdrawal plan holding only either Class B or Class C shares if the annual withdrawal does not exceed 10% of the initial value of the account value, adjusted annually, and o liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum value of such accounts. |X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but Prior to November 24, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The shares must have been acquired by the merger of a Former Quest for Value Fund into the fund or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into which such Former Quest for Value Fund merged. Those shares must have been purchased on or after March 6, 1995, but prior to November 24, 1995: o redemptions following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the U.S. Social Security Administration); o withdrawals under an automatic withdrawal plan (but only for Class B or Class C shares) where the annual withdrawals do not exceed 10% of the initial value of the account value; adjusted annually, and o liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum account value. A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A, Class B or Class C shares of the Oppenheimer fund described in this section if the proceeds are invested in the same Class of shares in that fund or another Oppenheimer fund within 90 days after redemption. 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; 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. Special Reduced Sales Charge for Former Shareholders of Advance America Funds, Inc. ---------------------------------------------------------------------------------------- Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund who acquired (and still hold) shares of those funds as a result of the reorganization of series of Advance America Funds, Inc. into those Oppenheimer funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a maximum sales charge rate of 4.50%. 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. |X| Oppenheimer Value Fund Internet Website: WWW.OPPENHEIMERFUNDS.COM ------------------------ Investment Advisor OppenheimerFunds, Inc. 498 Seventh Avenue New York, New York 10018 Distributor OppenheimerFunds Distributor, Inc. 498 Seventh Avenue New York, New York 10018 Transfer Agent P.O.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 1675 Broadway New York, New York 10019 1234 PX375.003.0202 (Rev. 1002)

--------

1 Currently, the 1940 Act permits (a) lending of securities, (b) purchasing debt
securities or similar evidences of indebtedness, (c) repurchase agreements and (d)
inter-fund lending if the appropriate approval is obtained by the Fund from the
Securities and Exchange Commission.  The Fund will not engage in inter-fund lending
until such approval has been granted.  The Fund does not currently anticipate making
loans of money.
2 Currently, the 1940 Act permits a mutual fund to borrow from banks and/or affiliated
investment companies up to one-third of its total assets (including the amount
borrowed).  A fund may borrow up to 5% of its total assets for temporary purposes from
any person.  Inter-fund borrowing must be approved by the Securities and Exchange
Commission.  The Fund will not engage in inter-fund borrowing until such approval has
been granted.

3 Mr. Motley was elected as Trustee to the Board I Funds effective October 10, 2002.

4. In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent
Directors" in this Statement of Additional Information refers to those Directors who
are not "interested persons" of the Fund (or its parent corporation) and who do not
have any direct or indirect financial interest in the operation of the distribution
plan or any agreement under the plan.
5 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities
Fund.
6 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.
7 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.
8 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.
9 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.
10 This provision does not apply to IRAs.
11 This provision does not apply to 403(b)(7) custodial plans if the participant is
less than age 55, nor to IRAs.
12 The distribution must be requested prior to Plan termination or the elimination of
the Oppenheimer funds as an investment option under the Plan.
13 This provision does not apply to IRAs.

14 This provision does not apply to loans from 403(b)(7) custodial plans and loans
from the OppenheimerFunds-sponsored Single K retirement plan.
15 This provision does not apply to 403(b)(7) custodial plans if the participant is
less than age 55, nor to IRAs.

OPPENHEIMER VALUE FUND
Supplement dated October 18, 2002 to the
Prospectus dated February 28, 2002

The Prospectus is changed as follows:

1. The supplement dated July 24, 2002 is withdrawn and the supplement dated July 1, 2002 is replaced with
this supplement.

2. The last sentence of the second paragraph under the "The Fund's Principal Investment Policies" on page 8
is revised by deleting the words "or the securities of any one foreign government."

3. The first paragraph and ensuing three bullets under "Foreign Securities" on pages 10 and 11 are replaced
with the following paragraph:

Foreign Securities. The Fund can invest up to 25% of its total assets in foreign securities.
These include equity or debt securities of companies and debt securities of governments in
any country, developed or underdeveloped.

4. The commission payments to broker-dealers on purchases of Class A shares subject to a contingent
deferred sales charge by grandfathered retirement accounts has changed. Therefore, the fourth sentence of the
first paragraph under "How Can You Buy Class A Shares? - Class A Contingent Deferred Sales Charge" on page 18 is
deleted and replaced with the following sentence:

"For grandfathered retirement accounts, the concession is 0.75% of the first $2.5 million of
purchases plus 0.25% of purchases in excess of $2.5 million."

5. The section captioned "Distribution and Service (12b-1) Plans - Service Plan for Class A Shares" on page
20 is revised by adding the following after the third sentence in that paragraph:

"With respect to Class A shares subject to a Class A contingent deferred sales charge
purchased by grandfathered retirement accounts, the Distributor pays the 0.25% service fee
to dealers in advance for the first year after the shares are sold by the dealer. After
the shares have been held for a year, the Distributor pays the service fee to dealers on a
quarterly basis."

October 18, 2002 PS0375.023