497

497 1 hy2005.htm HIGH YIELD 497

Oppenheimer High Yield Fund

6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.225.5677

Statement of Additional Information dated August 27, 2004,
revised February 2, 2005

This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated August 27, 2004, revised February 2, 2005. It should be
read together with the Prospectus. You can obtain the Prospectus by writing to
the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217, or by calling the Transfer Agent at the toll-free number shown
above, or by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.

Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies.................................... 2
Other Investment Techniques and Strategies........................ 9
Investment Restrictions........................................... 31
How the Fund is Managed ............................................... 32
Organization and History.......................................... 32
Board of Trustees and Oversight Committees........................ 34
Trustees and Officers of the Fund................................. 35
The Manager....................................................... 44
Brokerage Policies of the Fund......................................... 47
Distribution and Service Plans......................................... 50
Performance of the Fund................................................ 54

About Your Account
How To Buy Shares...................................................... 60
How To Sell Shares..................................................... 71
How To Exchange Shares................................................. 77
Dividends, Capital Gains and Taxes..................................... 81
Additional Information About the Fund.................................. 86

Financial Information About the Fund
Independent Registered Public Accounting Firm's Report................. 87
Financial Statements................................................... 88

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

ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

The investment objectives, 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 objectives.

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

In selecting securities for the Fund's portfolio, the Manager evaluates the
merits of particular securities primarily through the exercise of its own
investment analysis. That process may include, among other things, evaluation of
the issuer's historical operations, prospects for the industry of which the
issuer is part, the issuer's financial condition, its pending product
developments and business (and those of competitors), the effect of general
market and economic conditions on the issuer's business, and legislative
proposals that might affect the issuer.

Additionally, in analyzing a particular issuer, the Manager may consider
the trading activity in the issuer's securities, present and anticipated cash
flow, estimated current value of its assets in relation to their historical
cost, the issuer's experience and managerial expertise, responsiveness to
changes in interest rates and business conditions, debt maturity schedules,
current and future borrowing requirements, and any change in the financial
condition of an issuer and the issuer's continuing ability to meet its future
obligations. The Manager also may consider anticipated changes in business
conditions, levels of interest rates of bonds as contrasted with levels of cash
dividends, industry and regional prospects, the availability of new investment
opportunities and the general economic, legislative and monetary outlook for
specific industries, the nation and the world.

|X| Debt Securities. The Fund can invest in a variety of debt securities to seek
its objective. Foreign debt securities are subject to the risks of foreign
securities described below. In general, debt securities are also subject to two
additional types of risk: credit risk and interest rate risk.

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

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

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

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

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

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

o Special Risks of Lower-Grade Securities. The Fund can invest without limit in
lower-grade debt securities, and the Fund will normally invest at least 80% of
its total assets in these securities to seek the Fund's main objective.
Lower-grade securities tend to offer higher yields than investment grade
securities, but also are subject to greater risks of default by the issuer in
its obligations to pay interest and/or repay principal on the maturity of the
security.

"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Fitch, Inc., or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
considered part of the Fund's portfolio of lower-grade securities. The Fund can
invest in securities rated as low as "C" or "D" or which may be in default at
the time the Fund buys them.

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

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

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

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

The Fund can invest up to 100% of its assets in foreign securities. While
it currently limits investment in foreign securities to 25% of its net assets,
the Fund expects from time to time to have substantial investments in foreign
securities. These primarily will be debt securities issued or guaranteed by
foreign companies or governments, including supra-national entities. "Foreign
securities" include equity and debt securities of companies organized under the
laws of countries other than the United States and debt securities issued or
guaranteed by governments other than the U.S. government or by foreign
supra-national entities. They 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, because they are not subject to many of
the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.

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

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

o 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 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.

The Fund can invest in U.S. dollar-denominated "Brady Bonds." These foreign
debt obligations may be fixed-rate par bonds or floating-rate discount bonds.
They are generally collateralized in full as to repayment of principal at
maturity by U.S. Treasury zero-coupon obligations that have the same maturity as
the Brady Bonds. Brady Bonds can be viewed as having three or four valuation
components: (i) the collateralized repayment of principal at final maturity;
(ii) the collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity.
Those uncollateralized amounts constitute what is called the "residual risk."

If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero coupon U.S.
Treasury securities held as collateral for the payment of principal will not be
distributed to investors, nor will those obligations be sold to distribute the
proceeds. The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds. The defaulted bonds will continue to
remain outstanding, and the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. Because of the residual risk of Brady Bonds and the history of
defaults with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, Brady Bonds are considered speculative
investments.

o Risks of Foreign Investing. Investments in foreign securities may offer
special opportunities for investing but also present special additional risks
and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:

o reduction of income by foreign taxes;

o fluctuation in value of foreign investments due to changes in currency rates
or currency control regulations (for example, currency blockage);

o transaction charges for currency exchange;

o lack of public information about foreign issuers;

o lack of uniform accounting, auditing and financial reporting standards in
foreign countries comparable to those applicable to domestic issuers;

o less volume on foreign exchanges than on U.S. exchanges;

o greater volatility and less liquidity on foreign markets than in the U.S.;

o less governmental regulation of foreign issuers, stock exchanges and brokers
than in the U.S.;

o greater difficulties in commencing lawsuits;

o higher brokerage commission rates than in the U.S.;

o increased risks of delays in settlement of portfolio transactions or loss of
certificates for portfolio securities;

o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic developments;
and

o unfavorable differences between the U.S. economy and foreign economies.

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

o Special Risks of Emerging Markets. Emerging and developing markets abroad may
also offer special opportunities for 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 objectives.

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

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

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

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

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

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

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

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

The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Certificates
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the Ginnie 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 Macs on account of the mortgages
backing the Certificates 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 held by the Fund. All of the mortgages in the pools relating to the
Ginnie Maes in the Fund are subject to prepayment without any significant
premium or penalty, at the option of the mortgagors. While the mortgages on
1-to-4-family dwellings underlying certain Ginnie Maes have a stated maturity of
up to thirty (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| Preferred Stocks. If interest rates rise, the fixed dividend on preferred
stocks may be less attractive, causing the price of preferred stocks to decline.
Preferred stock may have mandatory sinking fund provisions, as well as
provisions allowing calls or redemptions prior to maturity, which also can have
a negative impact on prices when interest rates decline. The rights of preferred
stock on distribution of a corporation's assets in the event of a liquidation
are generally subordinate to the rights associated with the 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 liquidation of the
corporation.

Other Investment Techniques and Strategies. In seeking its objectives, 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| 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-related securities, described below, 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 below. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security interest
in the underlying collateral.

|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 entities or by private issuers. These
securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real-estate
related securities.

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

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

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

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

During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
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 reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.

o 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.

o Floating Rate and Variable Rate Obligations. 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
ninety-one (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 demand note is also based on a stated
prevailing market rate but is adjusted automatically at specified intervals.
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 (1) year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one (1) year and upon no more than thirty (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| Participation Interests. The Fund can invest in participation interests,
subject to the Fund's limitation on investments in illiquid investments. A
participation interest is an undivided interest in a loan made by the issuing
financial institution in the proportion that the buyers participation interest
bears to the total principal amount of the loan. Not 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| 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, and the Fund may have a portfolio turnover rate of more than
100% annually.

Increased portfolio turnover creates higher brokerage and transaction costs
for the Fund (and may reduce 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| "When-Issued" and "Delayed-Delivery" Transactions. The Fund may invest in
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" (or "forward-commitment") basis. When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery.

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

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

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

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

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

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

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

The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to be subject
to repurchase agreements having a maturity beyond seven (7) 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 (7) 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 "SEC"), the Fund, along with other affiliated entities managed
by the Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities 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 of the collateral may be subject to legal proceedings.

|X| Illiquid and Restricted Securities. Under the policies and procedures
established by the Fund's Board of Trustees, 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 may also acquire restricted securities through private placements.
Those securities have contractual restrictions on their public resale. Those
restrictions might limit the Fund's ability to dispose of the securities and
might lower the amount the Fund could realize upon the sale.

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

Illiquid securities include repurchase agreements maturing in more than
seven (7) days and participation interests that do not have puts exercisable
within seven (7) days.

|X| Investments in Other Equity Securities. The Fund can invest limited amounts
of its assets in securities other than debt securities, including certain types
of equity securities of both foreign and U.S. companies. Those equity securities
include preferred stocks (described above), common stocks, rights and warrants,
and securities convertible into common stock. Certain equity securities may be
selected because they may provide dividend income.

o Convertible Securities. While some 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 with respect to them 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 in "Debt
Securities."

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

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 Rights and Warrants. 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. The Fund does not expect that it will have significant
investments in warrants and rights.

|X| Investment in Other Investment Companies. The Fund can also invest in the
securities of other investment companies, which can include open-end funds,
closed-end funds and unit investment trusts, subject to the limits set forth in
the Investment Company Act that apply to those types of investments, and the
following additional limitation: the Fund cannot invest in the securities of
other registered investment companies or registered unit investment trusts in
reliance on sub-paragraph (F) or (G) of section 12(d)(1) of the Investment
Company Act. 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.

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

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

Among the derivative investments the Fund can invest in are "index-linked"
or "currency-linked" notes. Principal and/or interest payments on index-linked
notes depend on the performance of an underlying index. Currency-indexed
securities are typically 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.

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

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

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

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

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

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

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

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

|X| Hedging. Although the Fund does not anticipate the extensive use of hedging
instruments, the Fund can use hedging instruments. It is not obligated to use
them in seeking its objective. To attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain unrealized
gains in the value of portfolio securities that have appreciated, or to
facilitate selling securities for investment reasons, the Fund could:

o sell futures contracts,

o buy puts on such futures or on securities, or

o write covered calls on securities or futures. Covered calls may also be used
to increase the Fund's income, but the 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:

o buy futures, or
o buy calls on such futures or on securities.

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

o Futures. The Fund can buy and sell an individual stock ("single stock
futures"), futures contracts that relate to debt securities (these are referred
to as "interest rate futures"), broadly-based securities indices (stock index
futures and bond index futures), foreign currencies, and commodities. 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.

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

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

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

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

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

o Put and Call Options. The Fund can buy and sell exchange-traded and
over-the-counter put options ("puts") and call options ("calls"), including
index options, securities options, currency options, commodities options and
options on futures.

o Writing Covered Call Options. The Fund may write (that is, sell) covered calls
on equity and debt securities, interest rate futures and foreign currencies. 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 must be covered by segregating liquid assets to
enable the Fund to satisfy its obligations if the call is exercised. There is no
limit on the amount of the Fund's total assets that may be subject to covered
calls the Fund writes.

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

When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by a specific 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 bank, or a securities depository acting for the
custodian, will act as the Fund's escrow agent, through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or when the Fund
enters into a closing transaction.

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

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

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

o Writing Put Options. The Fund can sell put options on debt securities,
broadly-based securities indices, futures, or foreign currency options. A put
option on securities gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period. A put written on debt securities must be covered by segregated
liquid assets and the Fund cannot write puts if, as a result, more than 50% of
the Fund's net assets would be required to be segregated to cover such put
options.

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

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

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

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

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

o Purchasing Puts and Calls. The Fund can purchase puts and calls on debt
securities, foreign currencies or futures. When the Fund buys a call (other than
in a closing purchase transaction), it pays a premium. The Fund then has the
right to buy the underlying investment from a seller of a corresponding call on
the same investment during the call period at a fixed exercise price.

The Fund benefits only if it sells the call at a profit or if, during the
call period, the market price of the underlying investment is above the sum of
the call price plus the transaction costs and the premium paid for the call and
the Fund exercises the call. If the Fund does not exercise the call or sell it
(whether or not at a profit), the call will become worthless at its expiration
date. In that case the Fund will have paid the premium but lost the right to
purchase the underlying investment.

The Fund can buy puts whether or not it owns the underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts on
indices, has the right to sell the underlying investment to a seller of a put on
a corresponding investment during the put period at a fixed exercise price.

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

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

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

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

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

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

A call the Fund writes on a foreign currency is "covered" if the Fund owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration 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 maintaining cash, U.S. government
securities or other liquid, high grade debt securities in an amount equal to the
exercise price of the option, in a segregated account with the Fund's custodian
bank.

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

The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.

The Fund could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investment.

If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.

An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.

There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market may
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.

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

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

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

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 can use 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 can also
use "cross-hedging" where the Fund hedges against changes in currencies other
than the currency in which a security it holds is denominated.

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

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

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

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

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

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

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

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

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

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

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

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 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 Swaption Transactions. The Fund may enter into a swaption transaction, which
is a contract that grants the holder, in return for payment of the purchase
price (the "premium") of the option, the right, but not the obligation, to enter
into an interest rate swap at a preset rate within a specified period of time,
with the writer of the contract. The writer of the contract receives the premium
and bears the risk of unfavorable changes in the preset rate on the underlying
interest rate swap. Unrealized gains/losses on swaptions are reflected in
investment assets and investment liabilities in the Fund's statement of
financial condition.

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

Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more accounts
or through one or more different exchanges or through one or more brokers. Thus,
the number of options that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same adviser as the Fund (or an adviser that is an affiliate of the Fund's
adviser). 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 mark-to-market treatment.

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

Under the Internal Revenue Code, the following gains or losses are treated as
ordinary income or loss:

(1) gains or losses attributable to fluctuations in exchange rates that occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities, and

(2) gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security denominated in a
foreign currency or foreign currency forward contracts and the date of
disposition.

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

|X| Temporary Defensive and Interim Investments. When market conditions are
unstable, or the Manager believes it is otherwise appropriate to reduce holdings
in stocks, the Fund can invest in a variety of debt securities for defensive
purposes. The Fund can also purchase these securities for liquidity purposes to
meet cash needs due to the redemption of Fund shares, or to hold while waiting
to reinvest cash received from the sale of other portfolio securities. The
Fund's temporary defensive investments can include the following short-term
(maturing in one (1) year or less) dollar-denominated debt obligations:

o obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,

o commercial paper (short-term, unsecured promissory notes) rated in the highest
rating category by an established rating organization,

o debt obligations of domestic or foreign corporate issuers rated "Baa" or
higher by Moody's or "BBB" or higher by Standard & Poor's,

o certificates of deposit and bankers' acceptances and other bank obligations,
and

o repurchase agreements.

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

Investment Restrictions

|X| What Are "Fundamental Policies?" Fundamental policies are those policies
that the Fund has adopted to govern its investments that can be changed only by
the vote of a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, a "majority" vote is defined as the vote of the holders
of the lesser of:

o 67% or more of the shares present or represented by proxy at a shareholder
meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or

o more than 50% of the outstanding shares.

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

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

o The Fund cannot buy securities issued or guaranteed by any one issuer if more
than 5% of its total assets would be invested in securities of that issuer or if
it would then own more than 10% of that issuer's voting securities. That
restriction applies to 75% of the Fund's total assets. The limit does not apply
to securities issued 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. Under this policy, utilities
are divided into "industries" according to the services they provide (for
example, gas, gas transmission, electric and telephone utilities will be
considered to be in separate industries).

o The Fund cannot borrow money in excess of 33-1/3% of the value of its total
assets. The Fund may only borrow from banks and/or affiliated investment
companies. The Fund cannot make any investment at a time during which its
borrowings exceed 5% of the value of its assets. With respect to this
fundamental policy, the Fund can borrow only if it maintains a 300% ratio of
assets to borrowings at all times in the manner set forth in the Investment
Company Act.

o The Fund cannot make loans except (a) through lending of securities, (b)
through the purchase of debt instruments or similar evidences of indebtedness,
(c) through an inter-fund lending program with other affiliated funds, and (d)
through repurchase agreements.

o The Fund cannot invest in real estate. However, the Fund can purchase debt
securities secured by real estate or interests in real estate, or issued by
companies, including real estate investment trusts, that invest in real estate
or interests in real estate.

o The Fund cannot invest in commodities or commodity contracts. However, the
Fund may buy and sell any of the hedging instruments permitted by its other
investment policies, whether or not the hedging instrument is considered a
commodity or commodity contract.

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

o The Fund cannot issue "senior securities", but this does not prohibit certain
investment activities for which assets of the Fund are designated as segregated,
or margin, collateral or escrow arrangements are established, to cover the
related obligations. Examples of those activities include borrowing money,
delayed-delivery and when-issued arrangements for portfolio securities
transactions, and contracts to buy or sell derivatives, hedging instruments,
options or futures.

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

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was originally incorporated in Maryland in 1978 but was
reorganized as a Massachusetts business trust in 1986.

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

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

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

o has its own dividends and distributions,

o pays certain expenses which may be different for the different classes,

o may have a different net asset value,

o may have separate voting rights on matters in which interests of one class are
different from interests of another class, and

o votes as a class on matters that affect that class alone.

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

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

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

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

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

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

The Board of Trustees has an Audit Committee, a Review Committee and a
Governance Committee. The Audit Committee is comprised solely of Independent
Trustees. The members of the Audit Committee are Edward L. Cameron (Chairman),
George C. Bowen, Robert J. Malone and F. William Marshall, Jr. The Audit
Committee held six meetings during the fiscal year ended June 30, 2004. The
Audit Committee furnishes the Board with recommendations regarding the selection
of the Fund's independent auditors. Other main functions of the Audit Committee
include, but are not limited to: (i) reviewing the scope and results of
financial statement audits and the audit fees charged; (ii) reviewing reports
from the Fund's independent auditors regarding the Fund's internal accounting
procedures and controls; (iii) review reports from the Manager's Internal Audit
Department; (iv) maintaining a separate line of communication between the Fund's
independent auditors and its Independent Trustees; and (v) exercise all other
functions outlined in the Audit Committee Charter, including but not limited to
reviewing the independence of the Fund's independent auditors and the
pre-approval of the performance by the Fund's independent auditors of any
non-audit service, including tax service, for the Fund and the Manager and
certain affiliates of the Manager that is not prohibited by the Sarbanes-Oxley
Act.

The members of the Review Committee are Jon S. Fossel (Chairman), Robert G.
Avis, Sam Freedman, and Beverly Hamilton. The Review Committee held six meetings
during the fiscal year ended June 30, 2004. Among other functions, the Review
Committee reviews reports and makes recommendations to the Board concerning the
fees paid to the Fund's transfer agent and the Manager and the services provided
to the Fund by the transfer agent and the Manager. The Review Committee also
reviews the Fund's investment performance and policies and procedures adopted by
the Fund to comply with Investment Company Act and other applicable law.

The members of the Governance Committee are Robert Malone (Chairman),
William Armstrong, Beverly Hamilton and F. William Marshall, Jr. Each member of
the Committee is independent, meaning each person is not an "interested person"
as defined in the Investment Company Act. The Governance Committee was
established in August 2004 and did not hold any meetings during the Fund's
fiscal year ended June 30, 2004. The Governance Committee is expected to
consider general governance matters, including a formal process for shareholders
to send communications to the Board and the qualifications of candidates for
board positions including consideration of any candidate recommended by
shareholders.

The Governance Committee has not yet adopted a charter, but anticipates
that it will do so by the end of this calendar year. The Committee has
temporarily adopted the process previously adopted by the Audit Committee
regarding shareholder submission of nominees for board positions. Shareholders
may submit names of individuals, accompanied by complete and properly supported
resumes, for the Governance Committee's consideration by mailing such
information to the Committee in care of the Fund. The Committee may consider
such persons at such time as it meets to consider possible nominees. The
Committee, however, reserves solo discretion to determine the candidates for
trustees and independent trustees to recommend to the Board and/or shareholders
and may identify candidates other than those submitted by Shareholders. The
Committee may, but need not, consider the advice and recommendation of the
Manager and its affiliates in selecting nominees. The full Board elects new
trustees except for those instances when a shareholder vote is required.

Shareholders who desire to communicate with the Board should address
correspondence to the Board as an individual Board member and may submit their
correspondence electronically at www.opppenheimerfunds.com under the caption
"contact us" or by mail to the Fund at the address above. The Governance
Committee will consider if a different process should be recommended to the
Board.

Trustees and Officers of the Fund. Except for Mr. Murphy, each of the Trustees
are "Independent Trustees" under the Investment Company Act. Mr. Murphy is an
"Interested Trustee," 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. Mr. Murphy was elected as a Trustee of the Fund with the
understanding that in the event he ceases to be the chief executive officer of
the Manager, he will resign as a trustee of the Fund and the other Board II
Funds (defined below) for which he is a trustee or director.

The Fund's Trustees and officers and their positions held with the Fund and
length of service in such position(s) and their principal occupations and
business affiliations during the past five years are listed in the chart below.
The information for the Trustees also includes the dollar range of shares of the
Fund as well as the aggregate dollar range of shares beneficially owned in any
of the Oppenheimer funds overseen by the Trustees. All of the Trustees are also
trustees or directors of the following Oppenheimer funds (except for Ms.
Hamilton and Mr. Malone, who are not Trustees of Oppenheimer Senior Floating
Rate Fund) (referred to as "Board II Funds"):

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

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. Gillespie, Miao, Murphy, Kourkoulakos, Petersen, Vandehey,
Vottiero, Wixted and Zack, and Mses. Bloomberg and Ives , who are officers of
the Fund, respectively hold the same offices with one or more of the other Board
II Funds as with the Fund. As of July 30, 2004 the Trustees and officers of the
Fund, as a group, owned of record or beneficially less than 1% of each class of
shares of the Fund. The foregoing statement does not reflect ownership of shares
held of record by an employee benefit plan for employees of the Manager, other
than the shares beneficially owned under that plan by the officers of the Fund
listed above. In addition, each Independent Trustee (and their immediate family
members) do not own securities of either the Manager or Distributor of the Board
II Funds or any person directly or indirectly controlling, controlled by or
under common control with the Manager or Distributor.

---------------------------------------------------------------------------------------------------------------------------
Independent Trustees
---------------------------------------------------------------------------------------------------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Name, Principal Occupation(s) During Past 5 Years; Dollar Range Aggregate
Dollar Range
Of Shares
Beneficially
Owned in Any
of Shares of the
Position(s) Held with Fund, Other Trusteeships/Directorships Held by Trustee ; Beneficially Oppenheimer
Length of Service, Number of Portfolios in Fund Complex Currently Overseen Owned in the Funds Overseen
Age by Trustee Fund by Trustee
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------------------------
As of December 31, 2003
------------------------------ ----------------------------------------------------------- --------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
William L. Armstrong, Chairman of the following private mortgage banking $0 Over $100,000
Chairman of the Board since companies: Cherry Creek Mortgage Company (since 1991),
2003 and Trustee since 1999 Centennial State Mortgage Company (since 1994), The El
Age: 67 Paso Mortgage Company (since 1993), Transland Financial
Services, Inc. (since 1997); Chairman of the following
private companies: Great Frontier Insurance (insurance
agency) (since 1995), Ambassador Media Corporation and
Broadway Ventures (since 1984); a director of the
following public companies: Helmerich & Payne, Inc. (oil
and gas drilling/production company) (since 1992) and
UNUMProvident (insurance company) (since 1991). Mr.
Armstrong is also a Director/Trustee of Campus Crusade
for Christ and the Bradley Foundation. Formerly a
director of the following: Storage Technology Corporation
(a publicly-held computer equipment company)
(1991-February 2003), and International Family
Entertainment (television channel) (1992-1997), Frontier
Real Estate, Inc. (residential real estate brokerage)
(1994-1999), and Frontier Title (title insurance agency)
(1995-June 1999); a U.S. Senator (January 1979-January
1991). Oversees 38 portfolios in the OppenheimerFunds
complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Robert G. Avis, Formerly, Director and President of A.G. Edwards Capital, $0 Over $100,000
Trustee since 1990 Inc. (General Partner of private equity funds) (until
Age: 73 February 2001); Chairman, President and Chief Executive
Officer of A.G. Edwards Capital, Inc. (until March 2000);
Vice Chairman and Director of A.G. Edwards, Inc. and Vice
Chairman of A.G. Edwards & Sons, Inc. (its brokerage
company subsidiary) (until March 1999); Chairman of A.G.
Edwards Trust Company and A.G.E. Asset Management
(investment advisor) (until March 1999); and a Director
(until March 2000) of A.G. Edwards & Sons and A.G.
Edwards Trust Company. Oversees 38 portfolios in the
OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
George C. Bowen, Formerly Assistant Secretary and a director (December $10,001 - Over $100,000
Trustee since 1998 1991-April 1999) of Centennial Asset Management $50,000
Age: 68 Corporation; President, Treasurer and a director (June
1989-April 1999) of Centennial Capital Corporation; Chief
Executive Officer and a director of MultiSource Services,
Inc. (March 1996-April 1999). Until April 1999 Mr. Bowen
held several positions in subsidiary or affiliated
companies of the Manager. Oversees 38 portfolios in the
OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Edward L. Cameron, A member of The Life Guard of Mount Vernon, George $10,001 - $50,001 -
Trustee since 2000 Washington's home (since June 2000). Formerly Director $50,000 $100,000
Age: 66 (March 2001-May 2002) of Genetic ID, Inc. and its
subsidiaries (a privately held biotech company); a
partner (July 1974-June 1999) with PricewaterhouseCoopers
LLP (an accounting firm); and Chairman (July 1994-June
1998) of Price Waterhouse LLP Global Investment
Management Industry Services Group. Oversees 38
portfolios in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Jon S. Fossel, Director (since February 1998) of Rocky Mountain Elk $0 Over $100,000
Trustee since 1990 Foundation (a not-for-profit foundation); a director
Age: 62 (since 1997) of Putnam Lovell Finance (finance company);
a director (since June 2002) of UNUMProvident (an
insurance company). Formerly a director (October
1999-October 2003) of P.R. Pharmaceuticals (a privately
held company); Chairman and a director (until October
1996) and President and Chief Executive Officer (until
October 1995) of the Manager; President, Chief Executive
Officer and a director (until October 1995) of
Oppenheimer Acquisition Corp., Shareholders Services Inc.
and Shareholder Financial Services, Inc. Oversees 38
portfolios in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Sam Freedman, Director of Colorado Uplift (a non-profit charity) (since $50,001 - Over $100,000
Trustee since 1996 September 1984). Formerly (until October 1994) Mr. $100,000
Age: 64 Freedman held several positions in subsidiary or
affiliated companies of the Manager. Oversees 38
portfolios in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Beverly L. Hamilton, Trustee of Monterey International Studies (an educational $0 $50,001 -
Trustee since 2002 organization) (since February 2000); a director of The $100,000
Age: 58 California Endowment (a philanthropic organization)
(since April 2002) and of Community Hospital of Monterey
Peninsula (educational organization) (since February
2002); a director of America Funds Emerging Markets
Growth Fund (since October 1991) (an investment company);
an advisor to Credit Suisse First Boston's Sprout venture
capital unit. Mrs. Hamilton also is a member of the
investment committees of the Rockefeller Foundation and
of the University of Michigan. Formerly, Trustee of
MassMutual Institutional Funds (open-end investment
company) (1996-May 2004); a director of MML Series
Investment Fund (April 1989-May 2004) and MML Services
(April 1987-May 2004) (investment companies); member of
the investment committee (2000-2003) of Hartford
Hospital; an advisor (2000-2003) to Unilever (Holland)'s
pension fund; and President (February 1991-April 2000) of
ARCO Investment Management Company. Oversees 37
portfolios in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Robert J. Malone, Chairman, Chief Executive Officer and Director of Steele $0 Over $100,000
Trustee since 2002 Street State Bank (a commercial banking entity) (since
Age: 60 August 2003); director of Colorado UpLIFT (a non-profit
organization) (since 1986); trustee (since 2000) of the
Gallagher Family Foundation (non-profit organization).
Formerly, Chairman of U.S. Bank-Colorado (a subsidiary of
U.S. Bancorp and formerly Colorado National Bank,) (July
1996-April 1, 1999), a director of: Commercial Assets,
Inc. (a REIT) (1993-2000), Jones Knowledge, Inc. (a
privately held company) (2001-July 2004) and U.S.
Exploration, Inc. (oil and gas exploration)
(1997-February 2004). Oversees 37 portfolios in the
OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
F. William Marshall, Jr., Trustee of MassMutual Institutional Funds (since 1996) $0 Over $100,000
Trustee since 2000 and MML Series Investment Fund (since 1987) (both
Age: 62 open-end investment companies) and the Springfield
Library and Museum Association (since 1995) (museums) and
the Community Music School of Springfield (music school)
(since 1996); Trustee (since 1987), Chairman of the Board
(since 2003) and Chairman of the investment committee
(since 1994) for the Worcester Polytech Institute
(private university); and President and Treasurer (since
January 1999) of the SIS Fund (a private not for profit
charitable fund). Formerly, member of the investment
committee of the Community Foundation of Western
Massachusetts (1998 - 2003); Chairman (January 1999-July
1999) of SIS & Family Bank, F.S.B. (formerly SIS Bank)
(commercial bank); and Executive Vice President (January
1999-July 1999) of Peoples Heritage Financial Group, Inc.
(commercial bank). Oversees 38 portfolios in the
OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------

The address of Mr. Murphy in the chart below is Two World Financial Center, 225 Liberty Street, 11th
Floor, New York, NY 10281-1008. Mr. Murphy serves for an indefinite term, until his resignation, death or removal.

---------------------------------------------------------------------------------------------------------------------------
Interested Trustee and Officer
---------------------------------------------------------------------------------------------------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Name, Principal Occupation(s) During Past 5 Years; Dollar Range Aggregate
Dollar Range
Of Shares
Beneficially
Owned in
of Shares Any of the
Position(s) Held with Fund, Other Trusteeships/Directorships Held by Trustee; Beneficially Oppenheimer
Length of Service, Number of Portfolios in Fund Complex Currently Overseen Owned in the Funds Overseen
Age by Trustee Fund by Trustee
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------------------------
As of December 31, 2003
------------------------------ ----------------------------------------------------------- --------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
John V. Murphy, Chairman, Chief Executive Officer and director (since $0 Over $100,000
President and Trustee since June 2001) and President (since September 2000) of the
2001 Manager; President and a director or trustee of other
Age: 55 Oppenheimer funds; President and a director (since July
2001) of Oppenheimer Acquisition Corp. (the Manager's
parent holding company) and of Oppenheimer Partnership
Holdings, Inc. (a holding company subsidiary of the
Manager); a director (since November 2001) of
OppenheimerFunds Distributor, Inc. (a subsidiary of the
Manager); Chairman and a director (since July 2001) of
Shareholder Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries of the
Manager); President and a director (since July 2001) of
OppenheimerFunds Legacy Program (a charitable trust
program established by the Manager); a director of the
following investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc.,
Centennial Asset Management Corporation, Trinity
Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset
Management Corporation and OFI Private Investments, Inc.
(since July 2001); President (since November 1, 2001) and
a director (since July 2001) of Oppenheimer Real Asset
Management, Inc.; Executive Vice President (since
February 1997) of Massachusetts Mutual Life Insurance
Company (the Manager's parent company); a director (since
June 1995) of DLB Acquisition Corporation (a holding
company that owns the shares of Babson Capital Management
LLC); a member of the Investment Company Institute's
Board of Governors (elected to serve from October 3, 2003
through September 30, 2006). Formerly, Chief Operating
Officer (September 2000-June 2001) of the Manager;
President and trustee (November 1999-November 2001) of
MML Series Investment Fund and MassMutual Institutional
Funds (open-end investment companies); a director
(September 1999-August 2000) of C.M. Life Insurance
Company; President, Chief Executive Officer and director
(September 1999-August 2000) of MML Bay State Life
Insurance Company; a director (June 1989-June 1998) of
Emerald Isle Bancorp and Hibernia Savings Bank (a
wholly-owned subsidiary of Emerald Isle Bancorp).
Oversees 48 portfolios as Trustee/Director and 35
additional portfolios as Officer in the OppenheimerFunds
complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------

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

---------------------------------------------------------------------------------------------------------------------------
Officers of the Fund
---------------------------------------------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Years
Position(s) Held with Fund
Length of Service,
Age
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Dimitrios Kourkoulakos, Vice Vice President of the Manager since December 2001; an officer of 3 portfolios in
President and Portfolio Manager the OppenheimerFunds complex; formerly a High Yield Analyst (1998 - 2001) and a
since 2003 Securities Analyst (1995 - 1998) of the Manager.
Age: 38
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Mark S. Vandehey, Chief Compliance Officer (since March 2004) of the Manager; Vice President (since
Vice President and Chief Compliance June 1983) of OppenheimerFunds Distributor, Inc., Centennial Asset Management
Officer since 2004 Corporation and Shareholder Services, Inc. Formerly (until February 2004) Vice
Age: 54 President and Director of Internal Audit of the Manager. An officer of 83
portfolios in the Oppenheimer funds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
Treasurer since 1999 of HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Age: 45 Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private
Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd. and
OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management, Inc.
(since November 2000), and of OppenheimerFunds Legacy Program (a Colorado
non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer
(since May 2000) of OFI Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. Formerly
Assistant Treasurer of Centennial Asset Management Corporation (March 1999-October
2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and
Chief Operating Officer (March 1995-March 1999) at Bankers Trust Company-Mutual
Fund Services Division. An officer of 83 portfolios in the OppenheimerFunds
complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager since August 2002; formerly
Assistant Treasurer since 2004 Manager/Financial Product Accounting (November 1998-July 2002) of the Manager. An
Age: 34 officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager since March 2002. Formerly Vice
Assistant Treasurer since 2002 President/Corporate Accounting of the Manager (July 1999-March 2002) prior to
Age: 41 which he was Chief Financial Officer at Sovlink Corporation (April 1996-June
1999). An officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General Counsel (since February
Vice President & Secretary 2002) of the Manager; General Counsel and a director (since November 2001) of the
since 2001 Distributor; General Counsel (since November 2001) of Centennial Asset Management
Age: 56 Corporation; Senior Vice President and General Counsel (since November 2001) of
HarbourView Asset Management Corporation; Secretary and General Counsel (since
November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a
director (since October 1997) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and a director (since November 2001) of
Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Senior Vice President, General Counsel
and a director (since November 2001) of Shareholder Financial Services, Inc.,
Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company;
Vice President (since November 2001) of OppenheimerFunds Legacy Program; Senior
Vice President and General Counsel (since November 2001) of OFI Institutional
Asset Management, Inc.; a director (since June 2003) of OppenheimerFunds (Asia)
Limited. Formerly Senior Vice President (May 1985-December 2003), Acting General
Counsel (November 2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November
1989-November 2001); and OppenheimerFunds International Ltd. (October
1997-November 2001). An officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary since 2001 October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
Age: 39 (since October 2003) of the Distributor; Assistant Secretary (since October 2003)
of Centennial Asset Management Corporation; Vice President and Assistant Secretary
(since 1999) of Shareholder Services, Inc.; Assistant Secretary (since December
2001) of OppenheimerFunds Legacy Program and of Shareholder Financial Services,
Inc.. Formerly an Assistant Counsel (August 1994-October 2003) and Assistant Vice
President of the Manager (August 1997-June 1998). An officer of 83 portfolios in
the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager since May 2004; formerly First
Assistant Secretary since 2004 Vice President and Associate General Counsel of UBS Financial Services Inc.
Age: 37 (formerly, PaineWebber Incorporated) (May 1999 - April 2004) prior to which she
was an Associate at Skaden, Arps, Slate, Meagher & Flom, LLP (September 1996 -
April 1999). An officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the Manager since September
Assistant Secretary since 2004 2004. Formerly Mr. Gillespie held the following positions at Merrill Lynch
Age: 40 Investment Management: First Vice President (2001-September 2004); Director (from
2000) and Vice President (1998-2000). An officer of 83 portfolios in the
OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Wayne Miao, Assistant Vice President and Assistant Counsel of the Manager since June 2004.
Assistant Secretary since 2004 Formerly an Associate with Sidley Austin Brown & Wood LLP (September 1999 - May
Age: 32 2004). An officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------

|X| Remuneration of Trustees. The officers of the Fund and Mr. Murphy (who is an
officer and Trustee of the Fund) are affiliated with the Manager and receive no
salary or fee from the Fund. The remaining Trustees of the Fund received the
compensation shown below from the Fund with respect to the Fund's fiscal year
ended June 30, 2004. The compensation from all 38 of the Board II Funds
(including the Fund) represents compensation received for serving as a director
or trustee and member of a committee (if applicable) of the boards of those
funds during the calendar year ended December 31, 2003.

-------------------------------------------------- -------------------------------- -------------------------------
Trustee Name and Other Fund Position(s) (as Aggregate Compensation from Total Compensation From Fund
and Fund Complex Paid to
applicable) Fund1 Trustees*
-------------------------------------------------- -------------------------------- -------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
William L. Armstrong $6,376 $118,649
Chairman of the Board
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Robert G. Avis $4,470 $101,499
Review Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
George C. Bowen $4,470 $101,499
Audit Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Edward L. Cameron $5,112 $115,503
Audit Committee Chairman
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Jon S. Fossel $5,112 $115,503
Review Committee Chairman
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Sam Freedman $4,470 $101,499
Review Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Beverly Hamilton $4,4072 $150,5423,4
Review Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Robert J. Malone $4,4075 $100,1793
Audit Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
F. William Marshall, Jr. $4,470 $149,4996
Audit Committee Member
-------------------------------------------------- --------------------------------- ------------------------------

As of December 15, 2003, James C. Swain, retired as Trustee from the Board II
Funds. For the fiscal year ended June 30, 2004, Mr. Swain received $3,617
aggregate compensation from the Trust. For the calendar year ended December 31,
2003, Mr. Swain received $178,000, in total compensation from all of the
Oppenheimer funds for which he served as Trustee.

1. Aggregate Compensation from Fund includes fees and deferred compensation, if
any, for a Trustee.

2. Includes $4,407 deferred under Deferred Compensation Plan described below.

3. Total compensation for Mrs. Hamilton and Mr. Malone was paid by all the Board
II Funds, with the exception of Oppenheimer Senior Floating Rate Fund for which
they currently do not serve as Trustees (total of 37 Oppenheimer funds at
December 31, 2003).

4. Includes $50,363 compensation (of which 100% was deferred under a deferred
compensation plan) paid to Mrs. Hamilton for serving as a trustee by two
open-end investment companies (MassMutual Institutional Funds and MML Series
Investment Fund) the investment adviser for which is the indirect parent company
of the Fund's Manager. The Manager also serves as the Sub-Advisor to the
MassMutual International Equity Fund, a series of MassMutual Institutional
Funds.

5. Includes $4,407 deferred under Deferred Compensation Plan described below.

6. Includes $48,000 compensation paid to Mr. Marshall for serving as a trustee
by two open-end investment companies (MassMutual Institutional Funds and MML
Series Investment Fund) the investment adviser for which is the indirect parent
company of the Fund's Manager. The Manager also serves as the Sub-Advisor to the
MassMutual International Equity Fund, a series of MassMutual Institutional
Funds.

* For purposes of this section only, "Fund Complex" includes the Oppenheimer
funds, MassMutual Institutional Funds and MML Series Investment Fund in
accordance with the instructions for Form N-1A. The Manager does not consider
MassMutual Institutional Funds and MML Series Investment Fund to be part of the
OppenheimerFunds "Fund Complex" as that term may be otherwise interpreted.

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

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

|X| Major Shareholders. As of July 30, 2004 the only persons who owned of record
or was known by the Fund to own of record 5% or more of any class of the Fund's
outstanding shares were:

Citigroup Global Markets Inc., 333 West 34th Street, New York, NY 10001-2483,
which owned 1,646,961.062 Class B shares (representing approximately 5.01% of
the Fund's then outstanding Class B shares) and 940,231.144 Class C shares
(representing approximately 5.93% of the Fund's then outstanding Class C
shares).

Massachusetts Mutual Life Insurance Company (the Manager's ultimate parent),
1295 State Street, Springfield, MA 01111-0001 which owned 5,872,774.640 Class Y
shares (representing approximately 95.34% of the Fund's then outstanding Class Y
shares).

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

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

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

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

o The Fund votes with the recommendation of the issuer's management on routine
matters, including election of directors nominated by management and
ratification of auditors, unless circumstances indicate otherwise.

o In general, the Fund opposes anti-takeover proposals and supports elimination
of anti-takeover proposals, absent unusual circumstances.

o The Fund supports shareholder proposals to reduce a super-majority vote
requirement, and opposes management proposals to add a super-majority vote
requirement.

o The Fund opposes proposals to classify the board of directors.

o The Fund supports proposals to eliminate cumulative voting.

o The Fund opposes re-pricing of stock options.

o The Fund generally considers executive compensation questions such as stock
option plans and bonus plans to be ordinary business activity. The Fund analyzes
stock option plans, paying particular attention to their dilutive effect. While
the Fund generally supports management proposals, the Fund opposes plans it
considers to be excessive.

The Fund is required to file Form N-PX, with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each
year. The Fund's Form N-PX is available (i) without charge, upon request, by
calling the Fund toll-free at 1.800.525.7048 and (ii) on the SEC's website at
www.sec.gov.

|X| The Investment Advisory Agreement. The Manager provides investment advisory
and management services to the Fund under an investment advisory agreement
between the Manager and the Fund. The Manager selects securities for the Fund's
portfolio and handles its day-to-day business. The portfolio manager of the Fund
is employed by the Manager and is the person who is principally responsible for
the day-to-day management of the Fund's portfolio. Other members of the
Manager's Fixed Income Portfolio Team provide the portfolio managers 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 Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. The management fees paid by
the Fund to the Manager are calculated at the rates described in the Prospectus,
which are applied to the assets of the Fund as a whole. The fees are allocated
to each class of shares based upon the relative proportion of the Fund's net
assets represented by that class. The management fees paid by the Fund to the
Manager during its last three fiscal years were:

--------------------------------------- -----------------------------------------------------------------------------
Fiscal Year ended 6/30 Management Fees Paid to OppenheimerFunds, Inc.
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2002 $9,168,198
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2003 $8,956,614
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2004 $10,492,559
--------------------------------------- -----------------------------------------------------------------------------

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

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

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

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

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

o The nature, cost, and quality of the services provided to the Fund and its
shareholders;

o The profitability of the Fund to the Manager;

o The investment performance of the Fund in comparison to regular market
indices;

o Economies of scale that may be available to the Fund from the Manager;

o Fees paid by other mutual funds for similar services;

o The value and quality of any other benefits or services received by the
Fund from its relationship with the Manager, and

o The direct and indirect benefits the Manager received from its
relationship with the Fund. These included services provided by the
Distributor and the Transfer Agent, and brokerage and soft dollar
arrangements permissible under Section 28(e) of the Securities Exchange
Act.

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

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

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

Brokerage Policies of the Fund

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

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

Subject to those considerations, as a factor in selecting brokers for the
Fund's portfolio transactions, the investment advisory agreement also permits
the Manager to consider sales of shares of the Fund and other investment
companies for which the Manager or an affiliate serves as investment adviser.
Notwithstanding that authority, and with the concurrence of the Fund's Board,
the Manager has determined not to consider sales of shares of the Fund and other
investment companies for which the Manager or an affiliate serves as investment
adviser as a factor in selecting brokers for the Fund's portfolio transactions.
Rule 12b-1 under the Investment Company Act prohibits (effective December 13,
2004) any fund from compensating a broker or dealer for promoting or selling the
fund's shares by (1) directing to that broker or dealer any of the fund's
portfolio transactions, or (2) directing any other remuneration to that broker
or dealer, such as commissions, mark-ups, mark downs or other fees from the
fund's portfolio transactions, that were effected by another broker or dealer
(these latter arrangements are considered to be a type of "step-out"
transaction). In other words, a fund and its investment advisor cannot use the
fund's brokerage for the purpose of rewarding broker-dealers for selling the
fund's shares. However, the Rule permits funds to effect brokerage transactions
through firms that also sell fund shares, provided that certain procedures are
adopted to prevent a quid pro quo with respect to portfolio brokerage
allocations. As permitted by the Rule, the Manager has adopted procedures (and
the Fund's Board of Trustees has approved those procedures) that permit the Fund
to direct portfolio securities transactions to brokers or dealers that also
promote or sell shares of the Fund, subject to the "best execution"
considerations discussed above. Those procedures are designed to prevent: (1)
the Manager's personnel who effect the Fund's portfolio transactions from taking
into account a broker's or dealer's promotion or sales of the Fund shares when
allocating the Fund's portfolio transactions, and (2) the Fund, the Manager and
the Distributor from entering into agreements or understandings under which the
Manager directs or is expected to direct the Fund's brokerage directly, or
through a "step-out" arrangement, to any broker or dealer in consideration of
that broker's or dealer's promotion or sale of the Fund's shares or the shares
of any of the other Oppenheimer funds.

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

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

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

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

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

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

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

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

---------------------------------- -----------------------------------------------------------------
Fiscal Year Ended 6/30: Total Brokerage Commissions Paid by the Fund1
---------------------------------- -----------------------------------------------------------------
---------------------------------- -----------------------------------------------------------------
2002 $56,141
---------------------------------- -----------------------------------------------------------------
---------------------------------- -----------------------------------------------------------------
2003 $22,536
---------------------------------- -----------------------------------------------------------------
---------------------------------- -----------------------------------------------------------------
2004 $33,7822
---------------------------------- -----------------------------------------------------------------

1. Amounts do not include spreads or commissions on principal transactions
on a net trade basis.

2. In the fiscal year ended 6/30/04, there were no transactions directed to
brokers for research services.

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 and the contingent deferred sales charges retained by
the Distributor on the redemption of shares during the Fund's three most recent
fiscal years are shown in the tables below.

--------------- ----------------------- -----------------------
Fiscal Year Aggregate Front-End Class A Front-End
Sales Charges
Ended 6/30: Sales Charges on Retained by
Class A Shares Distributor1
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2002 $1,987,927 $577,531
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2003 $2,298,314 $365,916
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2004 $2,133,450 $568,298
--------------- ----------------------- -----------------------
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 6/30: A Shares Advanced by B Shares Advanced by Shares Advanced by Shares Advanced by
Distributor1 Distributor1 Distributor1 Distributor1
--------------- ----------------------- ---------------------- ------------------------ ------------------------
--------------- ----------------------- ---------------------- ------------------------ ------------------------
2002 $162,172 $2,840,777 $412,210 $20,507
--------------- ----------------------- ---------------------- ------------------------ ------------------------
--------------- ----------------------- ---------------------- ------------------------ ------------------------
2003 $871,461 $1,777,505 $340,624 $31,482
--------------- ----------------------- ---------------------- ------------------------ ------------------------
--------------- ----------------------- ---------------------- ------------------------ ------------------------
2004 $297,863 $1,247,144 $362,631 $41,200
--------------- ----------------------- ---------------------- ------------------------ ------------------------
1. The Distributor advances concession payments to financial intermediaries
for certain sales of Class A shares and for sales of Class B and Class C
shares from its own resources at the time of sale.

--------------- ----------------------- ----------------------- ------------------------- -----------------------
Fiscal Year Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Deferred Sales Deferred Sales Deferred Sales
Ended 6/30: Charges Retained by Charges Retained by Deferred Sales Charges Charges Retained by
Distributor Distributor Retained by Distributor Distributor
--------------- ----------------------- ----------------------- ------------------------- -----------------------
--------------- ----------------------- ----------------------- ------------------------- -----------------------
2002 $15,944 $988,706 $33,980 $33
--------------- ----------------------- ----------------------- ------------------------- -----------------------
--------------- ----------------------- ----------------------- ------------------------- -----------------------
2003 $76,355 $1,319,090 $32,756 $5,858
--------------- ----------------------- ----------------------- ------------------------- -----------------------
--------------- ----------------------- ----------------------- ------------------------- -----------------------
2004 $220,234 $983,091 $24,734 $12,196
--------------- ----------------------- ----------------------- ------------------------- -----------------------

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

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

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

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

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

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

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

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

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

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

For the fiscal year ended June 30, 2004, payments under the Class A plan
totaled $2,751,432, of which $24,572 was retained by the Distributor under the
arrangement described above, regarding grandfathered retirement accounts, and
including $88,010 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 Distribution and Service Plan Fees. Under
each plan, distribution and service fees are computed on the average of the
net asset value of shares in the respective class, determined as of the
close of each regular business day during the period. Each plan provides
for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid
by the Fund under the plan during the period for which the fee is paid. The
types of services that Recipients provide are similar to the services
provided under the Class A service plan, described above.

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

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

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

Class B, Class C or Class N shares may not be purchased by an investor
directly from the Distributor without the investor designating another
broker-dealer of record. If the investor no longer has another broker-dealer of
record for an existing account, the Distributor is automatically designated as
the broker-dealer of record, but solely for the purpose of acting as the
investor's agent to purchase the shares. In those cases, the Distributor retains
the asset-based sales charge paid on Class B, Class C and Class N shares, but
does not retain any service fees as to the assets represented by that account.

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

---------------------------------------------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Fiscal Year Ended 6/30/04
---------------------------------------------------------------------------------------------------------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
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 $3,478,551 $2,519,8141 $14,476,913 4.77%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class C Plan $1,665,241 $370,3082 $3,525,683 2.36%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class N Plan $52,558 $36,1113 $162,918 1.83%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
1. Includes $24,339 paid to an affiliate of the Distributor's parent company.
2. Includes $33,839 paid to an affiliate of the Distributor's parent company.
3. Includes $1,184 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 1.800.525.7048 or by visiting the OppenheimerFunds
Internet website at www.oppenheimerfunds.com.

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

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

o Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of
each shareholder's account. Your account's performance will vary from the
model performance data if your dividends are received in cash, or you buy
or sell shares during the period, or you bought your shares at a different
time and price than the shares used in the model.

o The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.

o An investment in the Fund is not insured by the FDIC or any other
government agency.

o The principal value of the Fund's shares, its yields and total returns
are not guaranteed and normally will fluctuate on a daily basis.

o When an investor's shares are redeemed, they may be worth more or less
than their original cost.

o Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future yields or returns.

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

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

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

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

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

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.

b = expenses accrued for the period (net of any expense assumptions).

c = the average daily number of shares of that class outstanding during the
30-day period that were entitled to receive dividends.

d = the maximum offering price per share of that class on the last day of
the period, adjusted for undistributed net investment income.

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

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

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

The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B, Class C and Class
N shares is the net asset value per share, without considering the effect of
contingent deferred sales charges. There is no sales charge on Class Y shares.
The Class A dividend yield may also be quoted without deducting the maximum
initial sales charge.

---------------------------------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 6/30/04
---------------------------------------------------------------------------------------------------
----------------- --------------------------------------- -----------------------------------------
Class of Shares Standardized Yield Dividend Yield
----------------- --------------------------------------- -----------------------------------------
----------------- ------------------- ------------------- --------------------- -------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class A 7.04% 6.70% 7.57% 7.21%
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class B 6.24% N/A 6.91% N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class C 6.25% N/A 6.82% N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class N 6.56% N/A 7.08% N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class Y 7.12% N/A 7.71% N/A
----------------- ------------------- ------------------- --------------------- -------------------

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

In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P" in the formula below) (unless the return is shown
without sales charge, as described below). For Class B shares, payment of the
applicable contingent deferred sales charge is applied, depending on the period
for which the return is shown: 5.0% in the first year, 4.0% in the second year,
3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter. For Class C shares, the 1.0% contingent deferred sales
charge is deducted for returns for the one-year period. For Class N shares, the
1.0% contingent deferred sales charge is deducted for returns for the one-year
period, and total returns for the periods prior to 03/01/01 (the inception date
for Class N shares) 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 Average Annual Total Return (After Taxes on Distributions). The "average
annual total return (after taxes on distributions)" of Class A shares is an
average annual compounded rate of return for each year in a specified
number of years, adjusted to show the effect of federal taxes (calculated
using the highest individual marginal federal income tax rates in effect on
any reinvestment date) on any distributions made by the Fund during the
specified period. It is the rate of return based on the change in value of
a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking into account the
effect of taxes on Fund distributions, but not on the redemption of Fund
shares, according to the following formula:

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

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

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

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

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

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

----------------------------------------------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 6/30/04
----------------------------------------------------------------------------------------------------------------------
-------------- ------------------------- -----------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns (10 years or
Shares life-of-class)
-------------- ------------------------- -----------------------------------------------------------------------------
-------------- ------------------------- ------------------------- ------------------------- -------------------------
1-Year 5-Years 10-Years
(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 70.94% 79.46% 5.63% 10.90% 2.42% 3.42% 5.51% 6.02%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class B2 71.31% 71.31% 4.86% 9.86% 2.35% 2.61% 5.53% 5.53%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class C3 50.56% 50.56% 8.96% 9.96% 2.63% 2.63% 4.84% 4.84%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class N4 13.36% 13.36% 9.47% 10.47% 3.84% 3.84% N/A N/A
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class Y5 25.03% 25.03% 10.80% 10.80% 3.51% 3.51% 3.39% 3.39%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1. Inception of Class A: 7/28/78
2. Inception of Class B: 5/3/93
3. Inception of Class C: 11/1/95
4. Inception of Class N: 3/1/01
5. Inception of Class Y: 10/15/97

----------------------------------------------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales Charge)
For the Periods Ended 6/30/04
----------------------------------------------------------------------------------------------------------------
------------------------------------------ --------------------- ------------------------ ----------------------
1-Year 5-Years 10-Years
------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions 3.05% -1.31% 1.71%
------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions and 3.61% -0.31% 2.27%
Redemption of Fund Shares
------------------------------------------ --------------------- ------------------------ ----------------------

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

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

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

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

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

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

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

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

o information about the performance of certain securities or commodities
markets or segments of those markets,

o information about the performance of the economies of particular
countries or regions,

o the earnings of companies included in segments of particular industries,
sectors, securities markets, countries or regions,

o the availability of different types of securities or offerings of
securities,

o information relating to the gross national or gross domestic product of
the United States or other countries or regions,

o comparisons of various market sectors or indices to demonstrate
performance, risk, or other characteristics of the Fund.

ABOUT your account

How to Buy Shares

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

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

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

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

|X| Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together:

o Class A and Class B shares you purchase for your individual accounts
(including IRAs and 403(b) plans), or for your joint accounts, or for trust
or custodial accounts on behalf of your children who are minors,

o Current purchases of Class A and Class B shares of the Fund and other
Oppenheimer funds to reduce the sales charge rate that applies to current
purchases of Class A shares, and

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

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

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

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

And the following money market funds:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:

(a) Class A shares sold with a front-end sales charge or subject to a Class
A contingent deferred sales charge,

(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and

(c) Class A or Class B shares acquired by exchange of either (1) Class A
shares of one of the other Oppenheimer funds that were acquired subject to
a Class A initial or contingent deferred sales charge or (2) Class B shares
of one of the other Oppenheimer funds that were acquired subject to a
contingent deferred sales charge.

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

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

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

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

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

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

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

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

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

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

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

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

|X| Availability of Class N Shares. In addition to the description of the
types of retirement plans which may purchase Class N shares contained in the
prospectus, Class N shares also are offered to the following:

o to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),

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

o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and
Ascender retirement plans,

o to all trustee-to-trustee IRA transfers,

o to all 90-24 type 403(b) transfers,

o to Group Retirement Plans (as defined in Appendix C to this Statement of
Additional Information) which have entered into a special agreement with
the Distributor for that purpose,

o to Retirement Plans qualified under Sections 401(a) or 401(k) of the
Internal Revenue Code, the recordkeeper or the plan sponsor for which has
entered into a special agreement with the Distributor,

o to Retirement Plans of a plan sponsor where the aggregate assets of all
such plans invested in the Oppenheimer funds is $500,000 or more,

o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
purchase with the redemption proceeds of Class A shares of one or more
Oppenheimer funds, and

o to certain customers of broker-dealers and financial advisors that are
identified in a special agreement between the broker-dealer or financial
advisor and the Distributor for that purpose.

The sales concession and the advance of the service fee, as described in
the Prospectus, will not be paid to dealers of record on sales of Class N shares
on:

o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption proceeds of
Class A shares of one or more Oppenheimer funds (other than rollovers from
an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to any IRA
invested in the Oppenheimer funds),

o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption
proceeds of Class C shares of one or more Oppenheimer funds held by
the plan for more than one year (other than rollovers from an
OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to any IRA
invested in the Oppenheimer funds), and

o on purchases of Class N shares by an OppenheimerFunds-sponsored
Pinnacle or Ascender 401(k) plan made with the redemption proceeds of
Class A shares of one or more Oppenheimer funds.

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

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

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

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

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

Listed below are certain cases in which the Fund has elected, in its
discretion, not to assess the Fund Account Fees. These exceptions are subject to
change:

o A fund account whose shares were acquired after September 30th of the prior year;

o A fund account that has a balance below $500 due to the automatic
conversion of shares from Class B to Class A shares. However, once all
Class B shares held in the account have been converted to Class A
shares the new account balance may become subject to the Minimum
Balance Fee;

o Accounts of shareholders who elect to access their account documents
electronically via eDoc Direct;

o A fund account that has only certificated shares and, has a balance
below $500 and is being escheated;

o Accounts of shareholders that are held by broker-dealers under the
NSCC Fund/SERV system;

o Accounts held under the Oppenheimer Legacy Program and/or
holding certain Oppenheimer Variable Account Funds;

o Omnibus accounts holding shares pursuant to the Pinnacle,
Ascender, Custom Plus, Recordkeeper Pro and Pension Alliance
Retirement Plan programs; and

o A fund account that falls below the $500 minimum solely due to
market fluctuations within the 12-month period preceding the date
the fee is deducted.

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

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

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

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

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

|X| Securities Valuation. The Fund's Board of Trustees has
established procedures for the valuation of the Fund's
securities. In general those procedures are as follows:

o Equity securities traded on a U.S. securities exchange or on
Nasdaq(R)are valued as follows:

(1) if last sale information is regularly reported, they are
valued at the last reported sale price on the principal exchange
on which they are traded or on Nasdaq, as applicable, on that
day, or

(2) if last sale information is not available on a valuation
date, they are valued at the last reported sale price preceding
the valuation date if it is within the spread of the closing
"bid" and "asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.

o Equity securities traded on a foreign securities exchange
generally are valued in one of the following ways:

(1) at the last sale price available to the pricing service
approved by the Board of Trustees, or

(2) at the last sale price obtained by the Manager from the
report of the principal exchange on which the security is traded
at its last trading session on or immediately before the
valuation date, or

(3) at the mean between the "bid" and "asked" prices obtained
from the principal exchange on which the security is traded or,
on the basis of reasonable inquiry, from two market makers in the
security.

o Long-term debt securities having a remaining maturity in excess
of 60 days are valued based on the mean between the "bid" and
"asked" prices determined by a portfolio pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from
two active market makers in the security on the basis of
reasonable inquiry.

o The following securities are valued at the mean between the
"bid" and "asked" prices determined by a pricing service approved
by the Fund's Board of Trustees or obtained by the Manager from
two active market makers in the security on the basis of
reasonable inquiry:

(1) debt instruments that have a maturity of more than 397 days
when issued,

(2) debt instruments that had a maturity of 397 days or less when
issued and have a remaining maturity of more than 60 days, and

(3) non-money market debt instruments that had a maturity of 397
days or less when issued and which have a remaining maturity of
60 days or less.

o The following securities are valued at cost, adjusted for
amortization of premiums and accretion of discounts:

(1) money market debt securities held by a non-money market fund
that had a maturity of less than 397 days when issued that have a
remaining maturity of 60 days or less, and

(2) debt instruments held by a money market fund that have a
remaining maturity of 397 days or less.

o Securities (including restricted securities) not having
readily-available market quotations are valued at fair value
determined under the Board's procedures. If the Manager is unable
to locate two market makers willing to give quotes, a security
may be priced at the mean between the "bid" and "asked" prices
provided by a single active market maker (which in certain cases
may be the "bid" price if no "asked" price is available).

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

The closing prices in the London foreign exchange market on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.

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

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

How to Sell Shares

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

Checkwriting. When a check is presented to United Missouri Bank
(the "Bank") for clearance, the Bank will ask the Fund to redeem
a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This
enables the shareholder to continue receiving dividends on those
shares until the check is presented to the Fund. Checks may not
be presented for payment at the offices of the Bank or the Fund's
custodian bank. This limitation does not affect the use of checks
for the payment of bills or to obtain cash at other banks. The
Fund reserves the right to amend, suspend or discontinue offering
checkwriting privileges at any time. The Fund will provide you
notice whenever it is required to do so by applicable law.

In choosing to take advantage of the Checkwriting privilege,
by signing the account application or by completing a
Checkwriting card, each individual who signs:

(1) for individual accounts, represents that they are the
registered owner(s) of the shares of the Fund in that
account;

(2) for accounts for corporations, partnerships, trusts and
other entities, represents that they are an officer, general
partner, trustee or other fiduciary or agent, as applicable,
duly authorized to act on behalf of the registered owner(s);

(3) authorizes the Fund, its Transfer Agent and any bank
through which the Fund's drafts (checks) are payable to pay
all checks drawn on the Fund account of such person(s) and
to redeem a sufficient amount of shares from that account to
cover payment of each check;

(4) specifically acknowledges that if they choose to permit
checks to be honored if there is a single signature on
checks drawn against joint accounts, or accounts for
corporations, partnerships, trusts or other entities, the
signature of any one signatory on a check will be sufficient
to authorize payment of that check and redemption from the
account, even if that account is registered in the names of
more than one person or more than one authorized signature
appears on the Checkwriting card or the application, as
applicable;

(5) understands that the Checkwriting privilege may be
terminated or amended at any time by the Fund and/or the
Fund's bank; and

(6) acknowledges and agrees that neither the Fund nor its
bank shall incur any liability for that amendment or
termination of checkwriting privileges or for redeeming
shares to pay checks reasonably believed by them to be
genuine, or for returning or not paying checks that have not
been accepted for any reason.

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

Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption
proceeds of:

o Class A shares purchased subject to an initial sales
charge or Class A shares on which a contingent deferred
sales charge was paid, or

o Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

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

The following funds do not offer Class Y shares:
Oppenheimer AMT-Free Municipals Oppenheimer Balanced Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer New Jersey Municipal Fund
Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Principal Protected Main Street Fund
Oppenheimer Cash Reserves Oppenheimer Principal Protected Main Street Fund II
Oppenheimer Champion Income Fund Oppenheimer Principal Protected Main Street Fund III
Oppenheimer Convertible Securities Fund Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Developing Markets Fund Oppenheimer Rochester National Municipals
Oppenheimer Gold & Special Minerals Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer International Bond Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Growth Fund Oppenheimer Total Return Bond Fund
Oppenheimer International Small Company Fund Limited Term New York Municipal Fund
Oppenheimer Limited Term 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 Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves or
Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation Fund,
and only those participants may exchange shares of other Oppenheimer funds for
shares of Oppenheimer Capital Preservation Fund.

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

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

o Shares of Oppenheimer Principal Protected Main Street Fund
may be exchanged at net asset value for shares of any of the
Oppenheimer funds. However, shareholders are not permitted
to exchange shares of other Oppenheimer funds for shares of
Oppenheimer Principal Protected Main Street Fund until after
the expiration of the warranty period (8/5/2010).

o Shares of Oppenheimer Principal Protected Main Street Fund
II may be exchanged at net asset value for shares of any of
the Oppenheimer funds. However, shareholders are not
permitted to exchange shares of other Oppenheimer funds for
shares of Oppenheimer Principal Protected Main Street Fund
II until after the expiration of the warranty period
(2/4/2011).

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

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

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

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

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

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

o With respect to Class B shares (other than Limited-Term Government Fund,
Limited Term Municipal Fund, Limited Term New York Municipal Fund, Oppenheimer
Capital Preservation Fund and Oppenheimer Senior Floating Rate Fund), the Class
B contingent deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within six years of the initial purchase of the
exchanged Class B shares.

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

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

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

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

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

|X| Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. 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 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 Trustees and the Manager might determine in a particular year that it would
be in the best interests of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Information About the Fund

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

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

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

Independent Registered Public Accounting Firm. Deloitte & Touche LLP are
the independent registered public accounting firm 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. Audit and non-audit services provided by Deloitte & Touche LLP to
the Fund must be pre-approved by the Audit Committee.

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

--------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER HIGH YIELD FUND:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer High Yield Fund, including the statement of investments, as of June
30, 2004, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of June 30, 2004, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer High Yield Fund as of June 30, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Denver, Colorado
August 13, 2004

STATEMENT OF INVESTMENTS June 30,2004
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

ASSET-BACKED SECURITIES--0.0%
----------------------------------------------------------------------------------------------
Goldman Sachs Asset Management CBO Ltd., Sub. Collateralized
Bond Obligations, Series 1A, Cl. D, 12.54%, 6/13/11 1 (Cost
$2,052,673) $ 2,550,778 $ 357,109
----------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.2%
----------------------------------------------------------------------------------------------
United Mexican States Bonds, Series M4C, 14.50%, 5/12/05 2
[MXN] (Cost $4,093,341) 39,735,700 3,628,222
----------------------------------------------------------------------------------------------
LOAN PARTICIPATIONS--0.0%
----------------------------------------------------------------------------------------------
Telergy, Inc., Sr. Sec. Credit Facilities Term Loan
Participation Nts.,
Tranche A, 1/1/02 1,3,4 (Cost $3,864,760) 3,945,448 --
----------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--85.9%
----------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--23.9%
----------------------------------------------------------------------------------------------
AUTO COMPONENTS--2.0%
Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts.,
Series B, 2/15/10 1,500,000 1,530,000
----------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 10.75% Sr. Nts.,
12/31/11 1,697,000 1,713,970
----------------------------------------------------------------------------------------------
Dana Corp.:
9% Unsec. Nts., 8/15/11 1,770,000 2,079,750
10.125% Nts., 3/15/10 1,800,000 2,047,500
----------------------------------------------------------------------------------------------
Dura Operating Corp.:
8.625% Sr. Nts., Series B, 4/15/12 3,500,000 3,587,500
9% Sr. Sub. Nts., Series B, 5/1/09 [EUR] 400,000 467,194
9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 600,000 591,000
----------------------------------------------------------------------------------------------
Eagle-Picher, Inc., 9.75% Sr. Nts., 9/1/13 3,350,000 3,618,000
----------------------------------------------------------------------------------------------
Keystone Automotive Operations, Inc., 9.75% Sr. Sub.
Nts., 11/1/13 5 900,000 967,500
----------------------------------------------------------------------------------------------
Lear Corp., 8.11% Sr. Unsec. Nts., Series B, 5/15/09 2,800,000 3,192,580
----------------------------------------------------------------------------------------------
Metaldyne Corp.:
10% Sr. Nts., 11/1/13 5 1,500,000 1,477,500
11% Sr. Sub. Nts., 6/15/12 2,150,000 1,838,250
----------------------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 4,250,000 5,025,625
----------------------------------------------------------------------------------------------
Tenneco Automotive, Inc., 10.25% Sr. Sec. Nts.,
Series B, 7/15/13 2,300,000 2,610,500
----------------------------------------------------------------------------------------------
United Components, Inc., 9.375% Sr. Sub. Nts.,
6/15/13 1,300,000 1,332,500
---------------
32,079,369

----------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--7.2%
American Casino & Entertainment, 7.85% Sr. Sec.
Nts., 2/1/12 5 1,750,000 1,785,000
----------------------------------------------------------------------------------------------
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 1 3,080,000 2,787,400
----------------------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 1,300,000 1,446,250
----------------------------------------------------------------------------------------------
Boca Resorts, Inc., 9.875% Sr. Sub. Nts., 4/15/09 4,800,000 5,076,000
----------------------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 3,000,000 3,210,000
----------------------------------------------------------------------------------------------
Capital Gaming International, Inc., 11.50%
Promissory Nts., 8/1/1995 1,3,4 22,500 --
----------------------------------------------------------------------------------------------
Coast Hotels & Casinos, Inc., 9.50% Sr. Unsec. Sub.
Nts., 4/1/09 1 2,500,000 2,637,500

17 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

HOTELS, RESTAURANTS & LEISURE Continued
Domino's, Inc., 8.25% Sr. Unsec. Sub. Nts., 7/1/11 $ 2,650,000 $ 2,822,250
----------------------------------------------------------------------------------------------
Gaylord Entertainment Co., 8% Sr. Nts., 11/15/13 5 1,000,000 1,018,750
----------------------------------------------------------------------------------------------
Hilton Hotels Corp.:
7.625% Nts., 5/15/08 1,650,000 1,786,125
7.625% Nts., 12/1/12 900,000 972,000
----------------------------------------------------------------------------------------------
Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts.,Series B,
2/15/07 2,300,000 2,369,000
----------------------------------------------------------------------------------------------
Intrawest Corp., 7.50% Sr. Unsec. Nts., 10/15/13 2,666,000 2,619,345
----------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Sub. Nts., 3/1/14 5 4,750,000 4,429,375
9% Sr. Sub. Nts., 3/15/12 2,200,000 2,381,500
----------------------------------------------------------------------------------------------
John Q. Hammons Hotels, Inc., 8.875% Sr. Nts., Series B,
5/15/12 3,150,000 3,433,500
----------------------------------------------------------------------------------------------
Mandalay Resort Group, 9.375% Sr. Sub. Nts., 2/15/10 3,500,000 3,832,500
----------------------------------------------------------------------------------------------
MGM Mirage, Inc.:
8.375% Sr. Unsec. Sub. Nts., 2/1/11 2,500,000 2,625,000
9.75% Sr. Unsec. Sub. Nts., 6/1/07 2,000,000 2,195,000
----------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.375% Sr. Sub. Nts., 7/15/09 2,200,000 2,216,500
8% Sr. Sub. Nts., 4/1/12 1,300,000 1,391,000
8.375% Sr. Sub. Nts., 7/1/11 1,000,000 1,085,000
----------------------------------------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Sub. Nts., 3/15/10 3,700,000 3,922,000
9.375% Sr. Unsec. Sub. Nts., 2/15/07 950,000 1,034,313
----------------------------------------------------------------------------------------------
Penn National Gaming, Inc.:
8.875% Sr. Sub. Nts., 3/15/10 900,000 982,125
11.125% Sr. Unsec. Sub. Nts., 3/1/08 6,000,000 6,630,000
----------------------------------------------------------------------------------------------
Pinnacle Entertainment, Inc., 8.25% Sr. Sub. Nts., 3/15/12 5 4,500,000 4,331,250
----------------------------------------------------------------------------------------------
Prime Hospitality Corp., 8.375% Sr. Sub. Nts., 5/1/12 1,700,000 1,763,750
----------------------------------------------------------------------------------------------
River Rock Entertainment LLC, 9.75% Sr. Nts., 11/1/11 5 2,100,000 2,299,500
----------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 8.75% Sr. Unsub. Nts., 2/2/11 2,600,000 2,892,500
----------------------------------------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Nts., 2/1/10 1,600,000 1,592,000
9.625% Sr. Nts., 6/1/14 5 147,000 147,000
9.75% Sr. Nts., 4/15/13 5,100,000 5,151,000
----------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc., 7.875% Sr. Nts.,
5/1/12 5,550,000 5,966,250
----------------------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 5,300,000 5,127,750
9.875% Sr. Unsec. Sub. Nts., 7/1/10 1 2,025,000 2,240,156
----------------------------------------------------------------------------------------------
Sun International Hotels Ltd., 8.875% Sr. Unsec. Sub. Nts.,
8/15/11 3,200,000 3,432,000
----------------------------------------------------------------------------------------------
Trump Casino Holdings LLC/Trump Casino Funding, Inc.,
11.625% Sr. Sec. Nts., 3/15/10 5,347,000 5,507,410
----------------------------------------------------------------------------------------------
Universal City Development Partners Ltd., 11.75% Sr. Nts.,
4/1/10 2,700,000 3,138,750
----------------------------------------------------------------------------------------------
Vail Resorts, Inc., 6.75% Sr. Sub. Nts., 2/15/14 2,700,000 2,571,750
----------------------------------------------------------------------------------------------
Venetian Casino Resort LLC/Las Vegas Sands, Inc., 11% Sec.
Nts., 6/15/10 3,300,000 3,828,000
---------------
114,676,499

18 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

HOUSEHOLD DURABLES--2.5%
Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 $ 3,300,000 $ 3,498,000
----------------------------------------------------------------------------------------------
Blount, Inc., 13% Sr. Sub. Nts., 8/1/09 2,800,000 3,013,500
----------------------------------------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub. Nts., 9/15/10 800,000 931,000
----------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12 1,500,000 1,582,500
----------------------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 2,750,000 2,970,000
9.50% Sr. Unsec. Sub. Nts., 2/15/11 2,000,000 2,215,000
----------------------------------------------------------------------------------------------
Meritage Corp., 9.75% Sr. Unsec. Nts., 6/1/11 3,400,000 3,757,000
----------------------------------------------------------------------------------------------
Norcraft Cos. LP, 9% Sr. Sub. Nts., 11/1/11 5 1,500,000 1,590,000
----------------------------------------------------------------------------------------------
Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 1,000,000 870,000
----------------------------------------------------------------------------------------------
Sealy Mattress Co., 8.25% Sr. Sub. Nts., 6/15/14 5 2,100,000 2,121,000
----------------------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 1,200,000 1,296,000
----------------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 1,750,000 1,907,500
----------------------------------------------------------------------------------------------
WCI Communities, Inc.:
9.125% Sr. Sub. Nts., 5/1/12 1,100,000 1,193,500
10.625% Sr. Unsec. Sub. Nts., 2/15/11 4,600,000 5,117,500
----------------------------------------------------------------------------------------------
William Lyon Homes, Inc., 10.75% Sr. Nts., 4/1/13 1 2,500,000 2,775,000
----------------------------------------------------------------------------------------------
Williams Scotsman, Inc., 9.875% Sr. Unsec. Nts., 6/1/07 4,100,000 4,089,750
---------------
38,927,250

----------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.2%
K2 Corp., 7.375% Sr. Nts., 7/1/14 5,6 1,500,000 1,533,750
----------------------------------------------------------------------------------------------
Remington Arms Co., Inc., 10.50% Sr. Unsec. Nts., 2/1/11 2,300,000 2,242,500
---------------
3,776,250

----------------------------------------------------------------------------------------------
MEDIA--10.0%
Adelphia Communications Corp.:
8.125% Sr. Nts., Series B, 7/15/03 3,4 2,000,000 1,950,000
8.375% Sr. Nts., Series B, 2/1/08 3,4 2,700,000 2,652,750
9.875% Sr. Nts., Series B, 3/1/07 3,4 2,200,000 2,189,000
10.25% Sr. Unsec. Nts., 11/1/06 3,4 1,600,000 1,592,000
10.875% Sr. Unsec. Nts., 10/1/10 3,4 1,500,000 1,522,500
----------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75% Sr. Unsec. Sub. Nts.,
12/15/12 2,300,000 2,277,000
----------------------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Sub. Nts., 3/1/14 5 1,500,000 1,440,000
9.50% Sr. Unsec. Sub. Nts., 2/1/11 7,199,000 7,522,955
----------------------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11 3,450,000 3,355,125
10.25% Sr. Unsec. Sub. Nts., Series B, 5/1/09 450,000 469,125
----------------------------------------------------------------------------------------------
Block Communications, Inc., 9.25% Sr. Sub. Nts., 4/15/09 1,100,000 1,160,500
----------------------------------------------------------------------------------------------
Cablevision Systems Corp., 8% Sr. Nts., 4/15/12 5 4,500,000 4,455,000
----------------------------------------------------------------------------------------------
Callahan Nordrhein-Westfalen GmbH, 14.125% Sr. Nts.,
7/15/11 1,3,4 [EUR] 1,000,000 76,041

19 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

MEDIA Continued
CanWest Media, Inc., 7.625% Sr. Unsec. Sub. Nts., Series B,
4/15/13 $ 900,000 $ 929,250
----------------------------------------------------------------------------------------------
Carmike Cinemas, Inc., 7.50% Sr. Sub. Nts., 2/15/14 5 2,100,000 2,016,000
----------------------------------------------------------------------------------------------
CBD Media LLC/CBD Finance, Inc., 8.625% Sr. Sub. Nts.,
6/1/11 700,000 740,250
----------------------------------------------------------------------------------------------
Charter Communications Holdings II, 10.25% Sr. Unsec.
Nts., 9/15/10 5 4,550,000 4,606,875
----------------------------------------------------------------------------------------------
Charter Communications Holdings LLC/Charter
Communications Holdings Capital Corp.:
0%/11.75% Sr. Unsec. Sub. Disc. Nts., 5/15/11 7 10,000,000 6,525,000
8.375% Sr. Nts., Second Lien, 4/30/14 5 4,100,000 3,987,250
8.625% Sr. Unsec. Nts., 4/1/09 8,900,000 7,142,250
9.92% Sr. Unsec. Disc. Nts., 4/1/11 9,900,000 7,870,500
10% Sr. Nts., 4/1/09 1,000,000 840,000
10% Sr. Unsec. Sub. Nts., 5/15/11 1,147,000 914,733
10.75% Sr. Unsec. Nts., 10/1/09 1,700,000 1,436,500
11.125% Sr. Unsec. Nts., 1/15/11 1,200,000 1,014,000
----------------------------------------------------------------------------------------------
Cinemark USA, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/13 1,800,000 1,973,250
----------------------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr. Disc. Nts., 3/15/14 5,7 5,700,000 3,747,750
----------------------------------------------------------------------------------------------
Corus Entertainment, Inc., 8.75% Sr. Sub. Nts., 3/1/12 1,500,000 1,610,625
----------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Unsub. Nts., Series B,
4/1/11 2,650,000 2,669,875
----------------------------------------------------------------------------------------------
Diva Systems Corp., 12.625% Sr. Unsec. Disc. Nts., Series B,
3/1/08 1,3,4 2,500,000 18,750
----------------------------------------------------------------------------------------------
Emmis Operating Co., 6.875% Sr. Sub. Nts., 5/15/12 5 2,700,000 2,659,500
----------------------------------------------------------------------------------------------
Entercom Radio LLC/Entercom Capital, Inc.,
7.625% Sr. Unsec. Sub. Nts., 3/1/14 1,500,000 1,558,125
----------------------------------------------------------------------------------------------
Entravision Communications Corp., 8.125% Sr. Sub. 1,400,000 1,450,750
Nts., 3/15/09
----------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.75% Sr. Sec. Nts., 12/1/10 6,147,000 5,747,445
----------------------------------------------------------------------------------------------
Gray Television, Inc., 9.25% Sr. Sub. Nts., 12/15/11 1,750,000 1,927,188
----------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 9% Sr.
Unsec. Nts., 12/15/10 3,600,000 4,176,000
----------------------------------------------------------------------------------------------
Houghton Mifflin Co.:
8.25% Sr. Unsec. Nts., 2/1/11 2,500,000 2,512,500
9.875% Sr. Sub. Nts., 2/1/13 147,000 147,735
----------------------------------------------------------------------------------------------
Insight Midwest LP/Insight Capital, Inc., 9.75% Sr. Nts.,
10/1/09 350,000 371,000
----------------------------------------------------------------------------------------------
Kabel Deutschland GmbH, 10.625% Sr. Nts., 7/1/14 5,6 2,700,000 2,787,750
----------------------------------------------------------------------------------------------
Lamar Media Corp., 7.25% Sr. Unsec. Sub. Nts., 1/1/13 1,000,000 1,022,500
----------------------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub. Nts., 5/15/13 1,800,000 1,746,000
----------------------------------------------------------------------------------------------
LodgeNet Entertainment Corp., 9.50% Sr. Sub. Debs., 6/15/13 1,350,000 1,481,625
----------------------------------------------------------------------------------------------
Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts.,
1/15/13 5,547,000 5,380,590
----------------------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 4,700,000 4,300,500
6.875% Sr. Unsec. Sub. Nts., 10/1/13 700,000 665,000
----------------------------------------------------------------------------------------------
News America Holdings, Inc., 8.875% Sr. Debs., 4/26/23 400,000 500,977
----------------------------------------------------------------------------------------------
PanAmSat Corp., 8.50% Sr. Unsec. Nts., 2/1/12 5,100,000 5,814,000

20 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

MEDIA Continued
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13 5 $ 4,500,000 $ 4,252,500
8.875% Sr. Unsec. Nts., 5/15/11 147,000 146,265
----------------------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I:
8.875% Sr. Nts., 12/15/10 5 2,600,000 2,866,500
10.875% Sr. Sub. Nts., 12/15/12 5 3,900,000 4,543,500
----------------------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B,
7/1/11 1,950,000 2,137,688
----------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Unsec. Sub. Nts., 3/15/12 6,050,000 6,216,375
8.75% Sr. Sub. Nts., 12/15/11 1,250,000 1,343,750
----------------------------------------------------------------------------------------------
Spanish Broadcasting System, Inc., 9.625% Sr. Unsec. Sub.
Nts., 11/1/09 5,000,000 5,300,000
----------------------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 2,050,000 2,214,000
10.875% Sr. Unsec. Nts., Series B, 6/15/09 2,400,000 2,592,000
----------------------------------------------------------------------------------------------
Von Hoffmann Corp., 10.25% Sr. Unsec. Nts., 3/15/09 1,100,000 1,137,125
----------------------------------------------------------------------------------------------
WRC Media, Inc./Weekly Reader Corp./CompassLearning, Inc.,
12.75% Sr. Sub. Nts., 11/15/09 4,000,000 3,665,000
---------------
159,368,742

----------------------------------------------------------------------------------------------
SPECIALTY RETAIL--1.3%
Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 1,400,000 1,435,000
----------------------------------------------------------------------------------------------
Atlantic Broadband Finance LLC, 9.375% Sr. Sub. Nts.,
1/15/14 5 1,950,000 1,852,500
----------------------------------------------------------------------------------------------
AutoNation, Inc., 9% Sr. Unsec. Nts., 8/1/08 3,000,000 3,405,000
----------------------------------------------------------------------------------------------
Building Materials Corp., 8% Sr. Nts., 12/1/08 1,350,000 1,360,125
----------------------------------------------------------------------------------------------
CSK Auto, Inc., 7% Sr. Sub. Nts., 1/15/14 5 2,800,000 2,681,000
----------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 9.125% Sr. Unsec. Sub.
Nts., 5/1/08 1,000,000 1,015,000
----------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 6/1/12 5 2,400,000 2,502,000
----------------------------------------------------------------------------------------------
Hollywood Entertainment Corp., 9.625% Sr. Sub. Nts., 3/15/11 1,350,000 1,559,250
----------------------------------------------------------------------------------------------
Just For Feet, Inc., 11% Sr. Sub. Nts., 5/1/09 1,3,4 700,000 --
----------------------------------------------------------------------------------------------
Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 3,500,000 3,937,500
----------------------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr. Unsec. Sub. Nts., Series B,
5/1/10 1,100,000 1,133,000
---------------
20,880,375

----------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.7%
Broder Bros. Co., 11.25% Sr. Unsec. Nts., 10/15/10 1,300,000 1,238,250
----------------------------------------------------------------------------------------------
Consoltex Group, Inc., 11% Sr. Sub. Nts., 1/31/09 1,8 4,705,338 471
----------------------------------------------------------------------------------------------
Invista, Inc., 9.25% Sr. Nts., 5/1/12 5 3,300,000 3,333,000
----------------------------------------------------------------------------------------------
Levi Strauss & Co.:
7% Unsec. Nts., 11/1/06 850,000 797,938
11.625% Sr. Unsec. Nts., 1/15/08 1,200,000 1,182,000
12.25% Sr. Nts., 12/15/12 1,400,000 1,386,000

21 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

TEXTILES, APPAREL & LUXURY GOODS Continued
Oxford Industries, Inc., 8.875% Sr. Nts., 6/1/11 5 $ 1,250,000 $ 1,325,000
----------------------------------------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10 1,500,000 1,601,250
---------------
10,863,909

----------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.8%
----------------------------------------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc., 8.125% Sr. Sub. Nts., 1/15/12 2,000,000 2,140,000
----------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.4%
Great Atlantic & Pacific Tea Co., Inc. (The), 9.125% Sr.
Nts., 12/15/11 947,000 809,685
----------------------------------------------------------------------------------------------
Ingles Markets, Inc., 8.875% Sr. Unsec. Sub. Nts., 12/1/11 1,147,000 1,184,278
----------------------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10 2,650,000 2,802,375
9.50% Sr. Sec. Nts., 2/15/11 1,600,000 1,772,000
---------------
6,568,338

----------------------------------------------------------------------------------------------
FOOD PRODUCTS--2.3%
American Seafoods Group LLC, 10.125% Sr. Sub. Nts., 4/15/10 3,500,000 4,200,000
----------------------------------------------------------------------------------------------
Burns Philp Capital Property Ltd., 9.75% Sr. Unsec. Sub.
Nts., 7/15/12 1,450,000 1,508,000
----------------------------------------------------------------------------------------------
Del Monte Corp.:
8.625% Sr. Sub. Nts., 12/15/12 3,300,000 3,572,250
9.25% Sr. Unsec. Sub. Nts., 5/15/11 1,450,000 1,591,375
----------------------------------------------------------------------------------------------
Doane Pet Care Co.:
9.75% Sr. Unsec. Sub. Nts., 5/15/07 1,900,000 1,762,250
10.75% Sr. Nts., 3/1/10 4,100,000 4,346,000
----------------------------------------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09 2,500,000 2,631,250
8.875% Sr. Unsec. Nts., 3/15/11 1,300,000 1,381,250
----------------------------------------------------------------------------------------------
Hines Nurseries, Inc., 10.25% Sr. Unsec. Sub. Nts.,
10/1/11 1 1,700,000 1,861,500
----------------------------------------------------------------------------------------------
Pinnacle Foods Holding Corp.:
8.25% Sr. Sub. Nts., 12/1/13 5 2,200,000 2,134,000
8.25% Sr. Sub. Nts., 12/1/13 5 900,000 873,000
----------------------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08 2,240,000 2,363,200
8% Sr. Nts., Series B, 10/15/09 400,000 433,000
----------------------------------------------------------------------------------------------
Swift & Co., 10.125% Sr. Nts., 10/1/09 2,500,000 2,681,250
----------------------------------------------------------------------------------------------
Tembec Industries, Inc.:
7.75% Sr. Nts., 3/15/12 2,800,000 2,716,000
8.50% Sr. Unsec. Nts., 2/1/11 147,000 149,205
----------------------------------------------------------------------------------------------
United Biscuits Finance plc, 10.625% Sr. Sub. Nts., 4/15/11
[EUR] 2,000,000 2,652,297
---------------
36,855,827

22 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

HOUSEHOLD PRODUCTS--0.9%
AKI, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 $ 4,200,000 $ 4,336,500
----------------------------------------------------------------------------------------------
Armkel LLC/Armkel Finance, Inc., 9.50% Sr. Sub. Nts.,
8/15/09 1,900,000 2,085,250
----------------------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11 5 2,500,000 2,615,625
9.375% Sr. Unsec. Sub. Nts., 6/1/11 3,500,000 3,421,250
----------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 12% Sr. Sec. Nts., 12/1/05 1,600,000 1,800,000
----------------------------------------------------------------------------------------------
Styling Technology Corp., 10.875% Sr. Unsec. Sub. Nts.,
7/1/08 1,3,4 1,200,000 --
---------------
14,258,625

----------------------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.1%
Elizabeth Arden, Inc., 7.75% Sr. Sub. Nts., 1/15/14 5 1,250,000 1,278,125
----------------------------------------------------------------------------------------------
ENERGY--9.2%
----------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.8%
BRL Universal Equipment Corp., 8.875% Sr. Sec. Nts., 2/15/08 3,000,000 3,228,750
----------------------------------------------------------------------------------------------
Dresser, Inc., 9.375% Sr. Sub. Nts., 4/15/11 1,200,000 1,290,000
----------------------------------------------------------------------------------------------
Grant Prideco Escrow Corp., 9% Sr. Unsec. Nts., 12/15/09 1,500,000 1,638,750
----------------------------------------------------------------------------------------------
Hanover Compress Co., 8.625% Sr. Nts., 12/15/10 2,500,000 2,600,000
----------------------------------------------------------------------------------------------
Hanover Equipment Trust 2001A, 8.50% Sr. Sec. Nts., Series
A, 9/1/08 1,500,000 1,593,750
----------------------------------------------------------------------------------------------
Hornbeck-Leevac Marine Services, Inc., 10.625% Sr. Nts.,
8/1/08 7,000,000 7,673,750
----------------------------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 7,250,000 7,213,750
----------------------------------------------------------------------------------------------
Petroleum Helicopters, Inc., 9.375% Sr. Nts., 5/1/09 1,500,000 1,582,500
----------------------------------------------------------------------------------------------
Universal Compression, Inc., 7.25% Sr. Unsec. Sub. Nts.,
5/15/10 2,500,000 2,593,750
---------------
29,415,000

----------------------------------------------------------------------------------------------
OIL & GAS--7.4%
ANR Pipeline Co., 8.875% Sr. Nts., 3/15/10 1,400,000 1,536,500
----------------------------------------------------------------------------------------------
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07 5,850,000 6,010,875
----------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.875% Sr. Unsec. Nts., 1/15/16 784,000 768,320
8.375% Sr. Unsec. Nts., 11/1/08 1,100,000 1,193,500
9% Sr. Nts., 8/15/12 3,500,000 3,955,000
----------------------------------------------------------------------------------------------
El Paso Corp., 7.875% Sr. Unsec. Nts., 6/15/12 2,547,000 2,298,668
----------------------------------------------------------------------------------------------
El Paso Energy Corp., 7.625% Nts., 7/15/11 1,600,000 1,436,000
----------------------------------------------------------------------------------------------
El Paso Energy Partners LP, 8.50% Sr. Unsec. Sub. Nts.,
Series B, 6/1/11 2,851,000 3,100,463
----------------------------------------------------------------------------------------------
El Paso Production Holding Co., 7.75% Sr. Unsec. Nts.,
6/1/13 7,850,000 7,241,625
----------------------------------------------------------------------------------------------
EXCO Resources, Inc., 7.25% Sr. Nts., 1/15/11 1,850,000 1,887,000
----------------------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 2,000,000 2,050,000
----------------------------------------------------------------------------------------------
Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 6,000,000 6,585,000
----------------------------------------------------------------------------------------------
GulfTerra Energy Partners LP:
8.50% Sr. Unsec. Sub. Nts., Series B, 6/1/10 1,079,000 1,178,808
10.625% Sr. Sub. Nts., 12/1/12 1,239,000 1,480,605

23 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

OIL & GAS Continued
Newfield Exploration Co., 8.375% Sr. Sub. Nts., 8/15/12 $ 2,850,000 $ 3,106,500
----------------------------------------------------------------------------------------------
Paramount Resources Ltd., 7.875% Sr. Nts., 11/1/10 2,300,000 2,208,000
----------------------------------------------------------------------------------------------
Pioneer Natural Resources Co., 7.50% Sr. Nts., 4/15/12 1,000,000 1,134,122
----------------------------------------------------------------------------------------------
Plains Exploration & Production Co., 7.125% Sr. Nts.,
6/15/14 5 1,700,000 1,738,250
----------------------------------------------------------------------------------------------
Premcor Refining Group, Inc.:
6.75% Sr. Nts., 5/1/14 3,000,000 2,985,000
9.50% Sr. Nts., 2/1/13 2,000,000 2,315,000
----------------------------------------------------------------------------------------------
Range Resources Corp., 7.375% Sr. Sub. Nts., 7/15/13 5 1,500,000 1,500,000
----------------------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31 2,800,000 2,520,000
8% Sr. Unsub. Nts., 3/1/32 4,800,000 4,536,000
8.875% Sr. Nts., 3/15/10 1,800,000 1,975,500
----------------------------------------------------------------------------------------------
Stone Energy Corp., 8.25% Sr. Unsec. Sub. Nts., 12/15/11 3,500,000 3,666,250
----------------------------------------------------------------------------------------------
Teekay Shipping Corp., 8.875% Sr. Nts., 7/15/11 3,175,000 3,528,219
----------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 11,550,000 11,319,000
----------------------------------------------------------------------------------------------
Tesoro Petroleum Corp.:
8% Sr. Sec. Nts., 4/15/08 2,300,000 2,472,500
9.625% Sr. Sub. Nts., 4/1/12 1,597,000 1,800,618
----------------------------------------------------------------------------------------------
Transcontinental Gas Pipe Line Corp.:
6.125% Nts., 1/15/05 1,000,000 1,020,000
8.875% Sr. Unsub. Nts., Series B, 7/15/12 1,200,000 1,362,000
----------------------------------------------------------------------------------------------
Westport Resources Corp., 8.25% Sr. Unsec. Sub. Nts.,
11/1/11 5,500,000 6,249,375
----------------------------------------------------------------------------------------------
Whiting Petroleum Corp., 7.25% Sr. Sub. Nts., 5/1/12 3,300,000 3,283,500
----------------------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11 7,400,000 7,548,000
8.625% Sr. Nts., 6/1/10 8,450,000 9,337,250
----------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.50% Nts., 12/1/08 1 800,000 841,000
---------------
117,168,448

----------------------------------------------------------------------------------------------
FINANCIALS--2.2%
----------------------------------------------------------------------------------------------
CAPITAL MARKETS--1.0%
American Color Graphics, Inc., 10% Sr. Sec. Nts., 6/15/10 1,350,000 1,211,625
----------------------------------------------------------------------------------------------
BCP Caylux Holdings Luxembourg SCA, 9.625% Sr. Sub. Nts.,
6/15/14 5 5,875,000 6,117,344
----------------------------------------------------------------------------------------------
Berry Plastics Corp., 10.75% Sr. Sub. Nts., 7/15/12 6,100,000 6,801,500
----------------------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts.,
Series B, 9/30/08 3,700,000 2,423,500
---------------
16,553,969

----------------------------------------------------------------------------------------------
COMMERCIAL BANKS--0.2%
ABN Amro Bank NV (NY Branch), 4% Sec. Nts., 11/5/17 1,2 2,069,459 1,614,178
----------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 78,000 84,045
----------------------------------------------------------------------------------------------
Western Financial Bank, 9.625% Unsec. Sub. Debs., 5/15/12 1,700,000 1,878,500
---------------
3,576,723

24 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

DIVERSIFIED FINANCIAL SERVICES--0.1%
Global Cash Access LLC/Global Cash Finance Corp.,
8.75% Sr. Sub. Nts., 3/15/12 5 $ 1,200,000 $ 1,254,000
----------------------------------------------------------------------------------------------
Noteco Ltd.:
7.02% Nts., Series B, 6/30/25 2 [GBP] 197,000 298,312
7.538% Nts., Series A1, 6/30/15 2 [GBP] 233,000 416,207
---------------
1,968,519

----------------------------------------------------------------------------------------------
INSURANCE--0.1%
Texas Gas Transmission Corp., 7.25% Debs., 7/15/27 1,000,000 1,084,493
----------------------------------------------------------------------------------------------
REAL ESTATE--0.8%
Felcor Lodging LP:
9% Sr. Nts., 6/1/11 2,552,000 2,647,700
10% Sr. Unsec. Nts., 9/15/08 369,000 391,140
----------------------------------------------------------------------------------------------
HMH Properties, Inc., 7.875% Sr. Nts., Series B, 8/1/08 2,932,000 3,019,960
----------------------------------------------------------------------------------------------
MeriStar Hospitality Corp.:
9.125% Sr. Unsec. Nts., 1/15/11 2,797,000 2,838,955
10.50% Sr. Unsec. Nts., 6/15/09 2,700,000 2,889,000
---------------
11,786,755

----------------------------------------------------------------------------------------------
HEALTH CARE--5.6%
----------------------------------------------------------------------------------------------
BIOTECHNOLOGY--0.2%
Polypore, Inc., 8.75% Sr. Sub. Nts., 5/15/12 5 3,500,000 3,666,250
----------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.7%
Dade Behring Holdings, Inc., 11.91% Sr. Unsec. Sub. Nts.,
10/3/10 820,429 943,493
----------------------------------------------------------------------------------------------
Fisher Scientific International, Inc., 8.125% Sr. Sub.
Nts., 5/1/12 1,736,000 1,866,200
----------------------------------------------------------------------------------------------
HMP Equity Holdings Corp., Units (each unit consists of
$1,000 principal amount of 15.43% sr. sec. disc. nts.,
5/15/08 and one warrant to purchase 2.8094 shares of
Huntsman Corp. common stock) 9,10 2,800,000 2,170,000
----------------------------------------------------------------------------------------------
Inverness Medical Innovations, Inc., 8.75% Sr. Sub. Nts.,
2/15/12 5 1,100,000 1,130,250
----------------------------------------------------------------------------------------------
Sybron Dental Specialties, Inc., 8.125% Sr. Sub. Nts.,
6/15/12 1 2,200,000 2,365,000
----------------------------------------------------------------------------------------------
Universal Hospital Services, Inc., 10.125% Sr. Unsec. Nts.,
11/1/11 1 2,150,000 2,193,000
----------------------------------------------------------------------------------------------
Vanguard Health Systems, Inc., 9.75% Sr. Unsec. Sub. Nts.,
8/1/11 500,000 543,750
---------------
11,211,693

----------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--4.4%
Alderwoods Group, Inc., 12.25% Sr. Nts., 1/2/09 3,200,000 3,552,000
----------------------------------------------------------------------------------------------
Alliance Imaging, Inc., 10.375% Sr. Unsec. Sub. Nts.,
4/15/11 947,000 996,718
----------------------------------------------------------------------------------------------
AmeriPath, Inc., 10.50% Sr. Unsec. Sub. Nts., 4/1/13 2,000,000 2,030,000
----------------------------------------------------------------------------------------------
Beverly Enterprises, Inc., 7.875% Sr. Sub. Nts., 6/15/14 5 2,300,000 2,274,125
----------------------------------------------------------------------------------------------
Extendicare Health Services, Inc.:
6.875% Sr. Sub. Nts., 5/1/14 5 1,300,000 1,228,500
9.50% Sr. Unsec. Sub. Nts., 7/1/10 1,900,000 2,118,500
----------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 2,800,000 2,961,000

25 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

HEALTH CARE PROVIDERS & SERVICES Continued
Genesis HealthCare Corp., 8% Sr. Sub. Nts., 10/15/13 5 $ 1,300,000 $ 1,332,500
----------------------------------------------------------------------------------------------
HCA, Inc.:
7.875% Sr. Nts., 2/1/11 1,000,000 1,098,192
8.75% Sr. Nts., 9/1/10 2,000,000 2,286,490
----------------------------------------------------------------------------------------------
HealthSouth Corp.:
7.625% Nts., 6/1/12 2,000,000 1,895,000
10.75% Sr. Unsec. Sub. Nts., 10/1/08 147,000 152,145
----------------------------------------------------------------------------------------------
InSight Health Services Corp., 9.875% Sr. Sub. Nts., 11/1/11 2,000,000 2,150,000
----------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 9.375% Sr. Unsec. Nts.,
Series A, 11/15/08 4,435,654 4,779,417
----------------------------------------------------------------------------------------------
Medquest, Inc., 11.875% Sr. Unsec. Sub. Nts., Series B,
8/15/12 3,200,000 3,648,000
----------------------------------------------------------------------------------------------
National Nephrology Assn., 9% Sr. Sub. Nts., 11/1/11 5 650,000 747,500
----------------------------------------------------------------------------------------------
NDCHealth Corp., 10.50% Sr. Unsec. Sub. Nts., 12/1/12 4,100,000 4,540,750
----------------------------------------------------------------------------------------------
PacifiCare Health Systems, Inc., 10.75% Sr. Unsec. Unsub.
Nts., 6/1/09 2,207,000 2,527,015
----------------------------------------------------------------------------------------------
Quintiles Transnational Corp., 10% Sr. Sub. Nts., 10/1/13 1,900,000 1,890,500
----------------------------------------------------------------------------------------------
Rotech Healthcare, Inc., 9.50% Sr. Unsec. Sub. Nts., 4/1/12 2,400,000 2,574,000
----------------------------------------------------------------------------------------------
Stewart Enterprises, Inc., 10.75% Sr. Unsec. Sub. Nts.,
7/1/08 5,400,000 6,027,750
----------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11 3,350,000 2,948,000
7.375% Nts., 2/1/13 147,000 133,770
9.875% Sr. Nts., 7/1/14 5 2,125,000 2,172,813
----------------------------------------------------------------------------------------------
Triad Hospitals, Inc.:
7% Sr. Nts., 5/15/12 3,200,000 3,240,000
7% Sr. Sub. Nts., 11/15/13 5,110,000 4,880,050
----------------------------------------------------------------------------------------------
US Oncology, Inc., 9.625% Sr. Sub. Nts., 2/1/12 1,000,000 1,185,000
----------------------------------------------------------------------------------------------
Vicar Operating, Inc., 9.875% Sr. Sub. Nts., 12/1/09 4,000,000 4,420,000
---------------
69,789,735

----------------------------------------------------------------------------------------------
PHARMACEUTICALS--0.3%
aaiPharma, Inc., 11% Sr. Sub. Nts., 4/1/10 1,400,000 1,176,000
----------------------------------------------------------------------------------------------
Valeant Pharmaceuticals International, Inc., 7% Sr. Nts.,
12/15/11 5 2,900,000 2,842,000
---------------
4,018,000

----------------------------------------------------------------------------------------------
INDUSTRIALS--10.2%
----------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.3%
Alliant Techsystems, Inc., 8.50% Sr. Unsec. Sub. Nts.,
5/15/11 2,400,000 2,604,000
----------------------------------------------------------------------------------------------
Argo-Tech Corp., 9.25% Sr. Nts., 6/1/11 5 1,800,000 1,863,000
----------------------------------------------------------------------------------------------
BE Aerospace, Inc.:
8% Sr. Unsec. Sub. Nts., Series B, 3/1/08 2,900,000 2,711,500
8.50% Sr. Unsec. Nts., 10/1/10 1,100,000 1,163,250
8.875% Sr. Unsec. Sub. Nts., 5/1/11 147,000 137,445
9.50% Sr. Unsec. Sub. Nts., 11/1/08 1,000,000 970,000
----------------------------------------------------------------------------------------------
K&F Industries, Inc., 9.625% Sr. Unsec. Sub. Nts., 12/15/10 700,000 770,875

26 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

AEROSPACE & DEFENSE Continued
L-3 Communications Holdings, Inc., 7.625% Sr. Sub. Nts.,
6/15/12 $ 1,200,000 $ 1,272,000
----------------------------------------------------------------------------------------------
Rexnord Corp., 10.125% Sr. Unsec. Sub. Nts., 12/15/12 1,900,000 2,099,500
----------------------------------------------------------------------------------------------
TD Funding Corp., 8.375% Sr. Sub. Nts., 7/15/11 2,800,000 2,856,000
----------------------------------------------------------------------------------------------
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13 1,517,000 1,718,003
11% Sr. Sub. Nts., 2/15/13 1,299,000 1,539,315
----------------------------------------------------------------------------------------------
Vought Aircraft Industries, Inc., 8% Sr. Nts., 7/15/11 5 1,050,000 1,002,750
---------------
20,707,638

----------------------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.2%
Atlas Air, Inc., 9.375% Sr. Unsec. Nts., 11/15/06 3,4 3,650,000 1,733,750
----------------------------------------------------------------------------------------------
Park-Ohio Industries, Inc., 9.25% Sr. Sub. Nts., 12/1/07 1 2,000,000 2,045,000
---------------
3,778,750

----------------------------------------------------------------------------------------------
AIRLINES--0.4%
ATA Holdings Corp.:
0%/12.125% Sr. Unsec. Nts., 6/15/10 5,7 2,000,000 1,290,000
13% Sr. Unsec. Nts., 2/1/09 6,720,000 4,737,600
---------------
6,027,600

----------------------------------------------------------------------------------------------
BUILDING PRODUCTS--0.4%
Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12 1,500,000 1,672,500
----------------------------------------------------------------------------------------------
Jacuzzi Brands, Inc., 9.625% Sr. Sec. Nts., 7/1/10 1,944,000 2,089,800
----------------------------------------------------------------------------------------------
Nortek, Inc., 9.875% Sr. Unsec. Sub. Nts., 6/15/11 1 1,000,000 1,145,000
----------------------------------------------------------------------------------------------
North America Energy Partners, Inc., 8.75% Sr. Unsec. Nts.,
12/1/11 5 1,300,000 1,293,500
---------------
6,200,800

----------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--3.5%
Allied Waste North America, Inc.:
7.375% Sr. Unsec. Nts., 4/15/14 5 6,400,000 6,256,000
7.875% Sr. Nts., 4/15/13 2,200,000 2,310,000
8.50% Sr. Sub. Nts., 12/1/08 2,200,000 2,417,250
8.875% Sr. Nts., Series B, 4/1/08 1,700,000 1,870,000
9.25% Sr. Sec. Debs., Series B, 9/1/12 2,000,000 2,250,000
----------------------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B,
11/15/05 1,3,4 2,500,000 --
----------------------------------------------------------------------------------------------
Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06 1,3,4 6,500,000 1,153,750
----------------------------------------------------------------------------------------------
Buhrmann US, Inc., 12.25% Sr. Unsec. Sub. Nts., 11/1/09 2,500,000 2,751,490
----------------------------------------------------------------------------------------------
Coinmach Corp., 9% Sr. Nts., 2/1/10 2,250,000 2,266,875
----------------------------------------------------------------------------------------------
Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 1 2,400,000 2,256,000
----------------------------------------------------------------------------------------------
Corrections Corp. of America:
7.50% Sr. Nts., 5/1/11 1,350,000 1,370,250
9.875% Sr. Nts., 5/1/09 1,500,000 1,672,500

27 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

COMMERCIAL SERVICES & SUPPLIES Continued
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub.
Nts., 8/1/07 1 $ 3,500,000 $ 3,543,750
----------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.50% Sr. Sub.
Nts., 2/15/09 2,303,000 2,349,060
----------------------------------------------------------------------------------------------
Mail-Well I Corp.:
7.875% Sr. Sub. Nts., 12/1/13 5 3,500,000 3,202,500
9.625% Sr. Nts., 3/15/12 4,150,000 4,482,000
----------------------------------------------------------------------------------------------
Protection One, Inc./Protection One Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05 1,500,000 1,432,500
----------------------------------------------------------------------------------------------
Stericycle, Inc., 12.375% Sr. Unsec. Sub. Nts., Series B,
11/15/09 2,584,000 2,829,480
----------------------------------------------------------------------------------------------
Synagro Technologies, Inc., 9.50% Sr. Sub. Nts., 4/1/09 1,700,000 1,785,000
----------------------------------------------------------------------------------------------
United Rentals, Inc., 7% Sr. Sub. Nts., 2/15/14 7,600,000 6,802,000
----------------------------------------------------------------------------------------------
Videotron Ltee, 6.875% Sr. Unsec. Nts., 1/15/14 1,100,000 1,075,250
----------------------------------------------------------------------------------------------
Waste Services, Inc., 9.50% Sr. Sub. Nts., 4/15/14 5 1,350,000 1,390,500
---------------
55,466,155

----------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.2%
Integrated Electrical Services, Inc.:
9.375% Sr. Sub. Nts., Series B, 2/1/09 499,000 517,713
9.375% Sr. Sub. Nts., Series C, 2/1/09 500,000 518,750
----------------------------------------------------------------------------------------------
URS Corp., 11.50% Sr. Unsec. Nts., 9/15/09 1,428,000 1,645,770
---------------
2,682,233

----------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.3%
Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 1,050,000 918,750
----------------------------------------------------------------------------------------------
General Cable Corp., 9.50% Sr. Nts., 11/15/10 2,200,000 2,376,000
----------------------------------------------------------------------------------------------
Riverside Forest Products Ltd., 7.875% Sr. Nts., 3/1/14 5 1,200,000 1,230,000
---------------
4,524,750

----------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.7%
Great Lakes Dredge & Dock Co., 7.75% Sr. Unsec. Sub. Nts.,
12/15/13 2,100,000 1,785,000
----------------------------------------------------------------------------------------------
Norse CBO Ltd., 9.342% Sub. Bonds, Series 1A, Cl. C2,
8/13/10 1 11,000,000 9,570,000
---------------
11,355,000

----------------------------------------------------------------------------------------------
MACHINERY--1.8%
Actuant Corp., 13% Sr. Sub. Nts., 5/1/09 1,455,000 1,753,275
----------------------------------------------------------------------------------------------
AGCO Corp., 9.50% Sr. Unsec. Nts., 5/1/08 6,000,000 6,570,000
----------------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The):
7.125% Sr. Nts., 11/1/13 600,000 603,000
10.50% Sr. Sub. Nts., 8/1/12 3,350,000 3,852,500
----------------------------------------------------------------------------------------------
Milacron Escrow Corp., 11.50% Sr. Sec. Nts., 5/15/11 5 2,400,000 2,400,000
----------------------------------------------------------------------------------------------
Navistar International Corp., 7.50% Sr. Nts., 6/15/11 2,800,000 2,884,000
----------------------------------------------------------------------------------------------
NMHG Holding Co., 10% Sr. Nts., 5/15/09 1,600,000 1,768,000
----------------------------------------------------------------------------------------------
SPX Corp., 7.50% Sr. Nts., 1/1/13 3,000,000 3,090,000

28 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

MACHINERY Continued
Terex Corp.:
9.25% Sr. Unsec. Sub. Nts., 7/15/11 $ 3,900,000 $ 4,270,500
10.375% Sr. Unsec. Sub. Nts., Series B, 4/1/11 500,000 560,000
----------------------------------------------------------------------------------------------
Trinity Industries, Inc., 6.50% Sr. Nts., 3/15/14 5 1,450,000 1,334,000
---------------
29,085,275

----------------------------------------------------------------------------------------------
MARINE--0.7%
CP Ships Ltd., 10.375% Sr. Nts., 7/15/12 5,000,000 5,737,500
----------------------------------------------------------------------------------------------
Millenium Seacarriers, Inc., 12% Sr. Sec. Nts.,
7/15/05 1,3,4 5,000,000 1,281,500
----------------------------------------------------------------------------------------------
Navigator Gas Transport plc, 10.50% First Priority Ship
Mtg. Nts., 6/30/07 1,3,4 5,800,000 3,416,780
----------------------------------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc., 3.75% Sec. Nts.,
12/31/07 5 2,330,544 1,016,583
---------------
11,452,363

----------------------------------------------------------------------------------------------
ROAD & RAIL--0.5%
Kansas City Southern Railway Co. (The), 7.50% Sr. Nts.,
6/15/09 2,000,000 2,010,000
----------------------------------------------------------------------------------------------
Stena AB:
7.50% Sr. Unsec. Nts., 11/1/13 3,093,000 3,073,669
9.625% Sr. Nts., 12/1/12 2,000,000 2,230,000
---------------
7,313,669

----------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.2%
Horizon Lines LLC, 9% Nts., 11/1/12 5,6 2,300,000 2,348,875
----------------------------------------------------------------------------------------------
Worldspan LP/Worldspan Financial Corp., 9.625% Sr. Nts.,
6/15/11 1,250,000 1,281,250
---------------
3,630,125

----------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--1.8%
----------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.1%
Orion Network Systems, Inc., 12.50% Sr. Unsub. Disc. Nts.,
1/15/07 1,3,4 5,310,000 1,938,150
----------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.1%
Seagate Technology Hdd Holdings, 8% Sr. Nts., 5/15/09 1,700,000 1,785,000
----------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5%
Ingram Micro, Inc., 9.875% Sr. Unsec. Sub. Nts., 8/15/08 3,000,000 3,300,000
----------------------------------------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts., 8/15/07 1,3,4 7,500,000 --
----------------------------------------------------------------------------------------------
Sensus Metering System, Inc., 8.625% Sr. Sub. Nts.,
12/15/13 5 4,200,000 4,053,000
---------------
7,353,000

----------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.1%
Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09 1,3,4
[EUR] 4,232,751 231,740
----------------------------------------------------------------------------------------------
Globix Corp., 11% Sr. Nts., 4/26/08 500,368 452,833
----------------------------------------------------------------------------------------------
NorthPoint Communications Group, Inc., 12.875% Nts.,
2/15/10 1,3 1,040,900 104

29 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

INTERNET SOFTWARE & SERVICES Continued
PSINet, Inc.:
10.50% Sr. Unsec. Nts., 12/1/06 1,3,4 [EUR] 1,000,000 $ 47,906
11% Sr. Nts., 8/1/09 1,3,4 2,118,662 116,526
----------------------------------------------------------------------------------------------
Verado Holdings, Inc., 13% Sr. Disc. Nts., 4/15/08 1,3,4 5,000,000 500
---------------
849,609

----------------------------------------------------------------------------------------------
IT SERVICES--0.3%
Iron Mountain, Inc.:
7.75% Sr. Sub. Nts., 1/15/15 1,200,000 1,197,000
8.625% Sr. Unsec. Sub. Nts., 4/1/13 2,400,000 2,556,000
----------------------------------------------------------------------------------------------
Titan Corp. (The), 8% Sr. Sub. Nts., 5/15/11 5 1,400,000 1,421,000
---------------
5,174,000

----------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.7%
AMI Semiconductor, Inc., 10.75% Sr. Unsec. Sub. Nts.,
2/1/13 1 2,597,000 3,044,983
----------------------------------------------------------------------------------------------
Amkor Technology, Inc.:
7.75% Sr. Nts., 5/15/13 2,350,000 2,238,375
9.25% Sr. Unsec. Sub. Nts., 2/15/08 3,500,000 3,675,000
----------------------------------------------------------------------------------------------
ChipPAC International Co. Ltd., 12.75% Sr. Unsec. Sub. Nts.,
Series B, 8/1/09 2,500,000 2,681,250
---------------
11,639,608

----------------------------------------------------------------------------------------------
MATERIALS--12.2%
----------------------------------------------------------------------------------------------
CHEMICALS--4.0%
Avecia Group plc, 11% Sr. Unsec. Nts., 7/1/09 1,750,000 1,338,750
----------------------------------------------------------------------------------------------
ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B,
12/1/07 2,000,000 820,000
----------------------------------------------------------------------------------------------
Compass Minerals Group, Inc., 10% Sr. Sub. Nts., 8/15/11 3,200,000 3,568,000
----------------------------------------------------------------------------------------------
Equistar Chemicals LP/Equistar Funding Corp.:
10.125% Sr. Unsec. Nts., 9/1/08 147,000 161,700
10.625% Sr. Unsec. Nts., 5/1/11 5,800,000 6,467,000
----------------------------------------------------------------------------------------------
Huntsman Co. LLC:
11.50% Sr. Nts., 7/15/12 5 3,425,000 3,484,938
11.625% Sr. Unsec. Nts., 10/15/10 147,000 163,170
----------------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts., 7/1/09 9,150,000 9,378,750
13.09% Sr. Unsec. Disc. Nts., 12/31/09 10 4,000,000 1,980,000
----------------------------------------------------------------------------------------------
Huntsman International LLC, 9.875% Sr. Nts., 3/1/09 6,100,000 6,618,500
----------------------------------------------------------------------------------------------
IMC Global, Inc.:
7.625% Bonds, 11/1/05 1 24,000 24,600
10.875% Sr. Unsec. Nts., 8/1/13 147,000 176,033
----------------------------------------------------------------------------------------------
ISP Chemco, Inc., 10.25% Sr. Unsec. Sub. Nts., 7/1/11 2,700,000 3,017,250
----------------------------------------------------------------------------------------------
ISP Holdings, Inc., 10.625% Sr. Sec. Nts., 12/15/09 1,800,000 1,989,000
----------------------------------------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08 147,000 153,983

30 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

CHEMICALS Continued
Lyondell Chemical Co.: Continued
9.50% Sr. Sec. Nts., 12/15//08 $ 700,000 $ 735,000
9.625% Sr. Sec. Nts., Series A, 5/1/07 4,400,000 4,620,000
9.875% Sec. Nts., Series B, 5/1/07 1,350,000 1,417,500
----------------------------------------------------------------------------------------------
PCI Chemicals Canada, 10% Sr. Sec. Nts., 12/31/08 989,550 945,020
----------------------------------------------------------------------------------------------
Pioneer Cos., Inc., 5.086% Sr. Sec. Nts., 12/31/06 2 313,358 297,690
----------------------------------------------------------------------------------------------
PolyOne Corp.:
8.875% Sr. Unsec. Nts., 5/1/12 5,000,000 4,950,000
10.625% Sr. Unsec. Nts., 5/15/10 1,597,000 1,700,805
----------------------------------------------------------------------------------------------
Resolution Performance Products LLC:
8% Sr. Sec. Nts., 12/15/09 1,650,000 1,720,125
13.50% Sr. Unsec. Sub. Nts., 11/15/10 1,350,000 1,265,625
----------------------------------------------------------------------------------------------
Rockwood Specialties, Inc., 10.625% Sr. Unsec. Sub. Nts.,
5/15/11 950,000 1,016,500
----------------------------------------------------------------------------------------------
Royster-Clark, Inc., 10.25% First Mtg. Nts., 4/1/09 1,500,000 1,507,500
----------------------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
10% Sr. Sec. Nts., 12/19/07 2,045,678 1,943,394
11.25% Sr. Sub. Nts., 8/15/06 1,3,4 3,000,000 --
----------------------------------------------------------------------------------------------
Westlake Chemical Corp., 8.75% Sr. Nts., 7/15/11 1 1,300,000 1,417,000
---------------
62,877,833

----------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.2%
Formica Corp., 10.875% Sr. Unsec. Sub. Nts., Series B,
3/1/09 1,3,4 3,500,000 682,500
----------------------------------------------------------------------------------------------
Texas Industries, Inc., 10.25% Sr. Unsec. Nts., 6/15/11 2,600,000 2,912,000
---------------
3,594,500

----------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--2.9%
Crown Euro Holdings SA:
9.50% Sr. Sec. Nts., 3/1/11 2,800,000 3,066,000
10.875% Sr. Sec. Nts., 3/1/13 1,400,000 1,603,000
----------------------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11 3,300,000 3,547,500
9.50% Sr. Sub. Nts., 8/15/13 2,100,000 2,289,000
----------------------------------------------------------------------------------------------
Jefferson Smurfit Corp.:
7.50% Sr. Unsec. Unsub. Nts., 6/1/13 650,000 646,750
8.25% Sr. Unsec. Nts., 10/1/12 2,500,000 2,612,500
----------------------------------------------------------------------------------------------
MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12 2,500,000 2,750,000
----------------------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11 700,000 731,500
8.25% Sr. Unsec. Nts., 5/15/13 1,347,000 1,397,513
8.75% Sr. Sec. Nts., 11/15/12 5,400,000 5,886,000
8.875% Sr. Sec. Nts., 2/15/09 3,000,000 3,255,000
----------------------------------------------------------------------------------------------
Pliant Corp., 0%/11.125% Sr. Sec. Disc. Nts., 6/15/09 5,7 1,650,000 1,398,375
----------------------------------------------------------------------------------------------
Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14 5 5,050,000 4,721,750

31 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

CONTAINERS & PACKAGING Continued
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12 $ 2,500,000 $ 2,625,000
9.25% Sr. Unsec. Nts., 2/1/08 1,000,000 1,097,500
9.75% Sr. Unsec. Nts., 2/1/11 4,000,000 4,420,000
----------------------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec. Sub. Nts., 6/15/12 4,200,000 4,473,000
---------------
46,520,388

----------------------------------------------------------------------------------------------
METALS & MINING--3.4%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12 147,000 133,403
7.875% Sr. Unsec. Nts., 2/15/09 900,000 846,000
----------------------------------------------------------------------------------------------
Arch Western Finance LLC, 6.75% Sr. Nts., 7/1/13 5 2,650,000 2,663,250
----------------------------------------------------------------------------------------------
California Steel Industries, Inc., 6.125% Sr. Nts., 3/15/14 2,000,000 1,875,000
----------------------------------------------------------------------------------------------
Century Aluminum Co., 11.75% Sr. Sec. Nts., 4/15/08 5,460,000 6,115,200
----------------------------------------------------------------------------------------------
IMCO Recycling, Inc., 10.375% Sr. Sec. Nts., 10/15/10 2,200,000 2,387,000
----------------------------------------------------------------------------------------------
International Utility Structures, Inc., 13% Unsec. Sub.
Nts., 2/1/08 1,3,4 814,000 --
----------------------------------------------------------------------------------------------
IPSCO, Inc., 8.75% Sr. Nts., 6/1/13 850,000 952,000
----------------------------------------------------------------------------------------------
Ispat Inland ULC, 9.75% Sr. Sec. Nts., 4/1/14 5 5,500,000 5,692,500
----------------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 1 2,500,000 2,750,000
----------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 10.875% Sr. Nts., Series
B, 10/15/06 3,4 2,000,000 2,105,000
----------------------------------------------------------------------------------------------
Koppers Industry, Inc., 9.875% Sr. Sec. Nts., 10/15/13 2,800,000 3,080,000
----------------------------------------------------------------------------------------------
Massey Energy Co., 6.625% Sr. Nts., 11/15/10 1,750,000 1,750,000
----------------------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 6,320,000 3,191,600
----------------------------------------------------------------------------------------------
Northwest Pipeline Corp., 8.125% Sr. Nts., 3/1/10 850,000 920,125
----------------------------------------------------------------------------------------------
Oregon Steel Mills, Inc., 10% Sr. Nts., 7/15/09 5,750,000 6,123,750
----------------------------------------------------------------------------------------------
Peabody Energy Corp., 6.875% Sr. Unsec. Nts., Series B,
3/15/13 2,500,000 2,543,750
----------------------------------------------------------------------------------------------
Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09 1,500,000 1,665,000
----------------------------------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 700,000 782,250
----------------------------------------------------------------------------------------------
United States Steel Corp., 9.75% Sr. Nts., 5/15/10 1,514,000 1,684,325
----------------------------------------------------------------------------------------------
United States Steel LLC, 10.75% Sr. Nts., 8/1/08 1,493,000 1,713,218
----------------------------------------------------------------------------------------------
WHX Corp., 10.50% Sr. Unsec. Nts., 4/15/05 5,000,000 4,475,000
---------------
53,448,371

----------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.7%
Abitibi-Consolidated, Inc., 8.55% Nts., 8/1/10 1,250,000 1,324,290
----------------------------------------------------------------------------------------------
Appleton Papers, Inc., 8.125% Sr. Nts., 6/15/11 5 2,250,000 2,289,375
----------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.50% Sr. Nts., 10/1/13 1,000,000 1,015,000
----------------------------------------------------------------------------------------------
Doman Industries Ltd., 8.75% Sr. Nts., 3/15/04 1,3,4 11,000,000 4,097,500
----------------------------------------------------------------------------------------------
Georgia-Pacific Corp.:
8.125% Sr. Unsec. Nts., 5/15/11 3,500,000 3,885,000
9.375% Sr. Unsec. Nts., 2/1/13 5,400,000 6,210,000

32 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

PAPER & FOREST PRODUCTS Continued
Inland Fiber Group LLC, 9.625% Sr. Unsec. Nts., 11/15/07 3 $ 4,000,000 $ 2,020,000
----------------------------------------------------------------------------------------------
Norske Skog Canada Ltd., 7.375% Sr. Nts., 3/1/14 5 1,500,000 1,458,750
----------------------------------------------------------------------------------------------
Tekni-Plex, Inc., 8.75% Sr. Sec. Nts., 11/15/13 5 4,947,000 4,749,120
---------------
27,049,035

----------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--10.3%
----------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--4.2%
360networks, Inc., 13% Sr. Unsec. Nts., 5/1/08 1,3,4 [EUR] 1,000,000 --
----------------------------------------------------------------------------------------------
COLO.com, Inc., 13.875% Sr. Nts., 3/15/10 1,3,4 1,665,849 167
----------------------------------------------------------------------------------------------
Crown Castle International Corp.:
7.50% Sr. Nts., 12/1/13 3,950,000 3,950,000
7.50% Sr. Nts., Series B, 12/1/13 500,000 500,000
----------------------------------------------------------------------------------------------
Dex Media East LLC/Dex Media East Finance Co.,
9.875% Sr. Unsec. Nts., 11/15/09 3,000,000 3,382,500
----------------------------------------------------------------------------------------------
Dex Media West LLC/Dex Media West Finance Co.:
8.50% Sr. Nts., 8/15/10 2,100,000 2,299,500
9.875% Sr. Sub. Nts., 8/15/13 3,600,000 3,969,000
----------------------------------------------------------------------------------------------
Dex Media, Inc., 8% Nts., 11/15/13 5 10,725,000 10,349,625
----------------------------------------------------------------------------------------------
IPC Acquisition Corp., 11.50% Sr. Sub. Nts., 12/15/09 550,000 596,750
----------------------------------------------------------------------------------------------
Level 3 Communications, Inc.:
9.125% Sr. Unsec. Nts., 5/1/08 147,000 117,233
10.50% Sr. Disc. Nts., 12/1/08 650,000 518,375
----------------------------------------------------------------------------------------------
MCI, Inc.:
5.908% Sr. Unsec. Nts., 5/1/07 743,000 722,568
6.688% Sr. Unsec. Nts., 5/1/09 743,000 689,133
7.735% Sr. Unsec. Nts., 5/1/14 637,000 571,708
----------------------------------------------------------------------------------------------
Pratama Datakom Asia BV, 12.75% Gtd. Nts., 7/15/05 1,3,4 4,000,000 100,000
----------------------------------------------------------------------------------------------
Qwest Capital Funding, Inc., 7.90% Unsec. Nts., 8/15/10 147,000 130,830
----------------------------------------------------------------------------------------------
Qwest Corp., 8.875% Nts., 3/15/12 5 4,400,000 4,774,000
----------------------------------------------------------------------------------------------
Qwest Services Corp., 13.50% Nts., 12/15/10 5 15,900,000 18,563,250
----------------------------------------------------------------------------------------------
Telewest Communications plc:
0%/9.875% Sr. Disc. Nts., 4/15/09 3,4 [GBP] 4,000,000 3,082,949
9.25% Sr. Disc. Nts., 4/15/09 3,4 7,300,000 3,540,500
11.25% Sr. Nts., 11/1/08 3,4 3,700,000 2,183,000
----------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 1,3,4 2,300,000 --
----------------------------------------------------------------------------------------------
Time Warner Telecom LLC/Time Warner Telecom, Inc.,
9.75% Sr. Nts., 7/15/08 5,800,000 5,452,000
----------------------------------------------------------------------------------------------
Time Warner Telecom, Inc., 10.125% Sr. Unsec. Sub. Nts.,
2/1/11 2,700,000 2,470,500
---------------
67,963,588

33 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

WIRELESS TELECOMMUNICATION SERVICES--6.1%
Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12 5 $ 2,750,000 $ 2,708,750
11% Sr. Unsec. Nts., 7/31/10 147,000 160,965
12.50% Sr. Unsec. Nts., 2/1/11 2,200,000 2,453,000
----------------------------------------------------------------------------------------------
American Cellular Corp., 10% Sr. Nts., Series B, 8/1/11 7,150,000 6,202,625
----------------------------------------------------------------------------------------------
American Tower Corp., 7.50% Sr. Nts., 5/1/12 5 5,350,000 5,202,875
----------------------------------------------------------------------------------------------
American Tower Escrow Corp., 12.25% Sr. Sub. Disc. Nts.,
8/1/08 10 4,300,000 3,160,500
----------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., Sr. Unsec. Disc. Nts.,
10/1/07 1,3,4 9,220,000 --
----------------------------------------------------------------------------------------------
Centennial Cellular Operating Co./Centennial
Communications Corp., 10.125% Sr. Nts., 6/15/13 7,350,000 7,625,625
----------------------------------------------------------------------------------------------
Crown Castle International Corp., 10.75% Sr. Nts., 8/1/11 2,000,000 2,250,000
----------------------------------------------------------------------------------------------
Dobson Communications Corp.:
8.875% Sr. Nts., 10/1/13 6,347,000 4,855,455
10.875% Sr. Unsec. Nts., 7/1/10 5,700,000 4,930,500
----------------------------------------------------------------------------------------------
IPCS, Inc., 0%/14% Sr. Unsec. Disc. Nts., 7/15/10 3,4,7 1,350,000 735,750
----------------------------------------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts., 4/15/10 1,3,4,7 4,500,000 652,500
12.50% Sr. Nts., 4/15/10 1,3,4 2,900,000 514,750
----------------------------------------------------------------------------------------------
Nextel Communications, Inc.:
7.375% Sr. Nts., 8/1/15 3,460,000 3,511,900
9.50% Sr. Unsec. Nts., 2/1/11 7,250,000 8,156,250
----------------------------------------------------------------------------------------------
Nextel Partners, Inc., 8.125% Sr. Nts., 7/1/11 2,150,000 2,203,750
----------------------------------------------------------------------------------------------
Rural Cellular Corp.:
8.25% Sr. Sec. Nts., 3/15/12 5 2,100,000 2,157,750
9.625% Sr. Sub. Nts., Series B, 5/15/08 3,000,000 2,850,000
9.75% Sr. Sub. Nts., 1/15/10 3,447,000 3,145,388
9.875% Sr. Nts., 2/1/10 3,900,000 3,890,250
----------------------------------------------------------------------------------------------
SBA Communications Corp., 10.25% Sr. Unsec. Nts., 2/1/09 6,900,000 7,107,000
----------------------------------------------------------------------------------------------
SBA Telecommunications, Inc./SBA Communications Corp.,
0%/9.75% Sr. Disc. Nts., 12/15/11 5,7 5,047,000 3,760,015
----------------------------------------------------------------------------------------------
Triton PCS, Inc.:
8.50% Sr. Unsec. Nts., 6/1/13 2,600,000 2,470,000
8.75% Sr. Unsec. Sub. Nts., 11/15/11 497,000 412,510
9.375% Sr. Unsec. Sub. Nts., 2/1/11 1,800,000 1,548,000
----------------------------------------------------------------------------------------------
UbiquiTel Operating Co., 9.875% Sr. Nts., 3/1/11 5 4,200,000 4,221,000
----------------------------------------------------------------------------------------------
US Unwired, Inc.:
0%/13.375% Sr. Unsec. Sub. Disc. Nts., Series B, 11/1/09 7 5,850,000 5,908,500
10% Sr. Sec. Nts., 6/15/12 1,625,000 1,649,375
----------------------------------------------------------------------------------------------
Western Wireless Corp., 9.25% Sr. Unsec. Nts., 7/15/13 2,197,000 2,273,895
---------------
96,718,878

34 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

UTILITIES--6.7%
----------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--4.3%
AES Corp. (The):
5.22% Nts., 1/1/15 [GBP] 268,000 $ 486,018
6.22% Nts., 1/1/20 [GBP] 50,000 90,675
8.375% Sr. Unsec. Unsub. Nts., 3/1/11 [GBP] 2,500,000 4,290,060
8.75% Sr. Sec. Nts., 5/15/13 5 2,700,000 2,905,875
10% Sec. Nts., 7/15/05 5 1,716,488 1,763,692
----------------------------------------------------------------------------------------------
Allegheny Energy Supply Co. LLC, 8.25% Bonds, 4/15/12 5 147,000 146,081
----------------------------------------------------------------------------------------------
Allegheny Energy, Inc., 7.75% Nts., 8/1/05 1,350,000 1,404,000
----------------------------------------------------------------------------------------------
Caithness Coso Funding Corp., 9.05% Sr. Sec. Nts., Series
B, 12/15/09 795,637 871,223
----------------------------------------------------------------------------------------------
Calpine Corp.:
7.625% Sr. Nts., 4/15/06 10,850,000 9,602,250
8.75% Sr. Nts., 7/15/07 2,800,000 2,002,000
8.75% Sr. Sec. Nts., 7/15/13 5 1,700,000 1,402,500
9.875% Sr. Sec. Nts., 12/1/11 5 2,900,000 2,479,500
----------------------------------------------------------------------------------------------
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09 1,147,000 1,147,000
7.75% Sr. Nts., 8/1/10 5 1,400,000 1,400,000
9.875% Sr. Unsec. Nts., 10/15/07 4,000,000 4,330,000
----------------------------------------------------------------------------------------------
CMS Energy X-TRAS Pass-Through Trust I, 7% Sr. Unsec.
Pass-Through Certificates, 1/15/05 1,300,000 1,313,000
----------------------------------------------------------------------------------------------
Edison Mission Energy, 10% Sr. Unsec. Nts., 8/15/08 275,000 294,938
----------------------------------------------------------------------------------------------
Midwest Generation LLC, 8.75% Sr. Sec. Nts., 5/1/34 5 8,100,000 8,221,500
----------------------------------------------------------------------------------------------
Mirant Americas Generation LLC, 8.30% Sr. Unsec. Nts.,
5/1/11 3,4 1,300,000 981,500
----------------------------------------------------------------------------------------------
MSW Energy Holdings LLC/MSW Energy Finance Co., Inc.:
7.375% Sr. Sec. Nts., 9/1/10 5 3,350,000 3,350,000
8.50% Sr. Sec. Nts., 9/1/10 1,300,000 1,381,250
----------------------------------------------------------------------------------------------
NRG Energy, Inc., 8% Sr. Sec. Nts., 12/15/13 5 7,600,000 7,714,000
----------------------------------------------------------------------------------------------
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10 4,997,000 5,359,283
9.50% Sr. Sec. Nts., 7/15/13 4,750,000 5,141,875
----------------------------------------------------------------------------------------------
Westar Energy, Inc., 9.75% Sr. Unsec. Nts., 5/15/07 503,000 575,480
---------------
68,653,700

----------------------------------------------------------------------------------------------
GAS UTILITIES--0.2%
AmeriGas Partners LP/AmeriGas Eagle Finance Corp.,
8.875% Sr. Unsec. Nts., Series B, 5/20/11 750,000 802,500
----------------------------------------------------------------------------------------------
SEMCO Energy, Inc.:
7.125% Sr. Nts., 5/15/08 1,100,000 1,133,000
7.75% Sr. Nts., 5/15/13 1,100,000 1,138,500
---------------
3,074,000

35 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

MULTI-UTILITIES & UNREGULATED POWER--2.1%
AES Red Oak LLC, 8.54% Sr. Sec. Bonds, Series A, 11/30/19 $ 3,352,781 $ 3,495,274
----------------------------------------------------------------------------------------------
Aquila, Inc., 7% Sr. Unsec. Nts., 7/15/04 850,000 848,938
----------------------------------------------------------------------------------------------
Calpine Canada Energy Finance ULC, 8.50% Sr. Unsec. Nts.,
5/1/08 4,647,000 3,090,255
----------------------------------------------------------------------------------------------
Consumers Energy Co.:
6.25% Nts., 9/15/06 1,100,000 1,156,252
6.375% Sr. Sec. Nts., 2/1/08 800,000 849,356
7.375% Nts., 9/15/23 1,600,000 1,631,418
----------------------------------------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts., 4/1/11 9,150,000 7,926,188
8.75% Sr. Nts., 2/15/12 4,647,000 4,437,885
10.125% Sr. Sec. Nts., 7/15/13 5 6,200,000 6,742,500
----------------------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625% Sec. Pass-Through
Certificates, Series A, 6/30/12 2,428,739 2,503,119
---------------
32,681,185

----------------------------------------------------------------------------------------------
WATER UTILITIES--0.1%
National Waterworks, Inc., 10.50% Sr. Unsec. Sub. Nts.,
Series B, 12/1/12 1,400,000 1,561,000
---------------
Total Corporate Bonds and Notes (Cost $1,377,750,897) 1,367,019,097

SHARES
----------------------------------------------------------------------------------------------

PREFERRED STOCKS--1.7%
----------------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg. 1,4,8 110,146 1,101
----------------------------------------------------------------------------------------------
Doane Pet Care Co., 14.25% Jr. Sub. Debs., Non-Vtg. 1,4 140,000 6,755,000
----------------------------------------------------------------------------------------------
Dobson Communications Corp., 6% Cv., Series F (converts into
Dobson Communications Corp., Cl. A common stock), Non-Vtg. 2,800 273,123
----------------------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr. Redeemable,
Non-Vtg. 1,4,8 3,738 374
----------------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable,
Series B, Non-Vtg. 1,4 28,000 2,457,000
----------------------------------------------------------------------------------------------
Focal Communications Corp., Cv., Series A 1,4 11,480 115,948
----------------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg. 1,4,8 1 --
----------------------------------------------------------------------------------------------
McLeodUSA, Inc., 2.50% Cv., Series A 4 6,516 16,948
----------------------------------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable
Exchangeable, Non-Vtg. 1,4,8 96,993 --
----------------------------------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc., 7.50% Cum. Cv., Series
A 1,4,8 124,999 249,998
----------------------------------------------------------------------------------------------
Paxson Communications Corp.:
14.25% Cum. 4,8 1 8,059
14.25% Cum. Jr. Exchangeable, Non-Vtg. 8 864 7,592,381
----------------------------------------------------------------------------------------------
PTV, Inc., 10% Cum., Series A, Non-Vtg. 197 1,507
----------------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg. 4,8 6,236 5,285,010
----------------------------------------------------------------------------------------------
Sovereign Real Estate Investment Trust, 12% Non-Cum.,
Series A 1 26,250 3,839,063
----------------------------------------------------------------------------------------------
Ziff Davis Holdings, Inc., 10%, Series E-1 1,4 168 4,116
---------------
Total Preferred Stocks (Cost $38,243,305) 26,599,628

36 | OPPENHEIMER HIGH YIELD FUND

VALUE
SHARES SEE NOTE 1
----------------------------------------------------------------------------------------------

COMMON STOCKS--0.9%
----------------------------------------------------------------------------------------------
AboveNet, Inc. 4 5,710 $ 165,590
----------------------------------------------------------------------------------------------
AES Drax Group Ltd. 4 50,000 35,091
----------------------------------------------------------------------------------------------
Aurora Foods, Inc., Equity Trust Interests 1,4 963 1,249,063
----------------------------------------------------------------------------------------------
Classic Cable, Inc. 4 6,613 --
----------------------------------------------------------------------------------------------
Conseco, Inc. 4 46,622 927,778
----------------------------------------------------------------------------------------------
Covad Communications Group,Inc. 4 132,227 317,345
----------------------------------------------------------------------------------------------
Dobson Communications Corp., Cl. A 4 180,219 587,514
----------------------------------------------------------------------------------------------
Equinix, Inc. 4 277 9,401
----------------------------------------------------------------------------------------------
Globix Corp. 4 80,275 232,798
----------------------------------------------------------------------------------------------
Horizon Natural Resources Co. 1,4 93,333 --
----------------------------------------------------------------------------------------------
ICG Communications, Inc. 4 3,590 1,616
----------------------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd. 1,4 168,429 87,583
----------------------------------------------------------------------------------------------
Magellan Health Services, Inc. 4 70,584 2,361,035
----------------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 3,772 127,682
----------------------------------------------------------------------------------------------
MCI, Inc. 4 24,441 352,684
----------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., Cl. A 4 194 4,679
----------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., Cl. B 4 46,547 1,121,363
----------------------------------------------------------------------------------------------
Orbital Sciences Corp. 4 14,063 194,210
----------------------------------------------------------------------------------------------
Pioneer Cos., Inc. 4 63,991 454,976
----------------------------------------------------------------------------------------------
Polymer Group, Inc., Cl. A 4 8,124 106,424
----------------------------------------------------------------------------------------------
Pope, Evans & Robbins, Inc. 1,4 1,688,400 --
----------------------------------------------------------------------------------------------
Prandium, Inc. 4,11 459,132 25,252
----------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. 4 3,987 97,682
----------------------------------------------------------------------------------------------
TVMAX Holdings, Inc. 1,4 30,000 132,750
----------------------------------------------------------------------------------------------
UnitedGlobalCom, Inc., Cl. A 4 739,372 5,367,841
----------------------------------------------------------------------------------------------
Viatel Holding Ltd. (Bermuda) 1,4 13,172 16,136
----------------------------------------------------------------------------------------------
WRC Media Corp. 1,4 9,471 189
----------------------------------------------------------------------------------------------
XO Communications, Inc. 4 16,729 69,425
---------------
Total Common Stocks (Cost $34,280,150) 14,046,107

UNITS
----------------------------------------------------------------------------------------------

RIGHTS, WARRANTS AND CERTIFICATES--0.1%
----------------------------------------------------------------------------------------------
AboveNet, Inc. Wts.:
Exp. 9/8/08 1,4 2,403 29,085
Exp. 9/8/10 1,4 2,828 32,299
----------------------------------------------------------------------------------------------
American Tower Corp. Wts., Exp. 8/1/08 1,4 4,300 819,150
----------------------------------------------------------------------------------------------
Chesapeake Energy Corp. Wts.:
Exp. 5/1/05 1,4 22,514 65,029
Exp. 9/1/04 4 32,054 2,355

37 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF INVESTMENTS Continued
--------------------------------------------------------------------------------

VALUE
UNITS SEE NOTE 1
----------------------------------------------------------------------------------------------

RIGHTS, WARRANTS AND CERTIFICATES Continued
----------------------------------------------------------------------------------------------
Citigroup, Inc. Wts., Exp. 12/31/50 4 107,699 $ 93,698
----------------------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 1,4 2,000 20
----------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07 1,4 3,330 --
----------------------------------------------------------------------------------------------
Covergent Communications, Inc. Wts., Exp. 4/1/08 1,4 8,200 82
----------------------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 1,4 4,000 --
----------------------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08 1,4 7,500 --
----------------------------------------------------------------------------------------------
e.spire Communications, Inc. Wts., Exp. 11/1/05 1,4 2,575 26
----------------------------------------------------------------------------------------------
Focal Communications Corp. Wts.:
Exp. 6/19/06 1,4 4,502 16,207
Exp. 6/19/08 4 22,510 --
----------------------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/09 1,4 1,445 195
----------------------------------------------------------------------------------------------
Horizon PCS, Inc. Wts., Exp. 10/1/10 1,4 6,300 --
----------------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/15/05 1,4 50,820 508
----------------------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd. Wts.:
Exp. 5/16/06 1,4 42,243 422
Exp. 5/16/06 1,4 63 --
----------------------------------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07 1,4 7,055 --
----------------------------------------------------------------------------------------------
IPCS, Inc. Wts., Exp. 6/15/10 1,4 3,750 38
----------------------------------------------------------------------------------------------
Leap Wireless International, Inc. Wts., Exp. 4/15/10 1,4 3,500 --
----------------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/13/08 1,4 2,800 --
----------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts., Exp. 1/15/07 1,4 3,910 39
----------------------------------------------------------------------------------------------
McLeodUSA, Inc. Wts., Exp. 4/16/07 4 14,440 2,022
----------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., Cl. A Wts., Exp.
5/1/05 4 8,619 79,778
----------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc., Cl. B Wts., Exp.
5/1/08 4 14,365 126,963
----------------------------------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts., Exp. 7/15/05 1,4 6,400 64
----------------------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 1,4 5,000 50
----------------------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp. 9/19/10 4 100,000 85,000
----------------------------------------------------------------------------------------------
Protection One, Inc. Wts., Exp. 6/30/05 1,4 49,120 --
----------------------------------------------------------------------------------------------
Republic Technologies International LLC Wts., Exp.
7/15/09 1,4 1,200 1
----------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts., Exp. 12/19/08 1,4 6,474 9,387
----------------------------------------------------------------------------------------------
Telergy, Inc. Wts., Exp. 9/25/10 1,4 8,078 --
----------------------------------------------------------------------------------------------
XO Communications, Inc., Cl. A Wts., Exp. 1/16/10 4 33,465 50,198
----------------------------------------------------------------------------------------------
XO Communications, Inc., Cl. B Wts., Exp. 1/16/10 4 25,098 26,353
----------------------------------------------------------------------------------------------
XO Communications, Inc., Cl. C Wts., Exp. 1/16/10 4 25,098 17,945
----------------------------------------------------------------------------------------------
Ziff Davis Holdings, Inc. Wts., Exp. 8/12/12 1,4 30,800 15,400
---------------
Total Rights, Warrants and Certificates (Cost $1,697,265) 1,472,314

38 | OPPENHEIMER HIGH YIELD FUND

PRINCIPAL VALUE
AMOUNT SEE NOTE 1
----------------------------------------------------------------------------------------------

STRUCTURED NOTES--3.3%
----------------------------------------------------------------------------------------------
JPMorgan Chase Bank, TRAC-X NA High Yield T3 Credit
Linked Nts., 8%, 3/25/09 5 $ 53,700,000 $ 52,189,688
----------------------------------------------------------------------------------------------
Parametric RE Ltd. Catastrophe Linked Nts.,
5.85%,11/19/07 2,5 1,000,000 1,038,510
---------------
Total Structured Notes (Cost $54,700,000) 53,228,198

----------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--6.7%
----------------------------------------------------------------------------------------------
Undivided interest of 35.39% in joint repurchase
agreement (Principal Amount/Value $300,576,000, with a
maturity value of $300,586,019) with DB Alex Brown LLC,
1.20%, dated 6/30/04, to be repurchased at $106,383,546 on
7/1/04, collateralized by U.S. Treasury Nts., 4.875%,
2/15/12, with a value of $306,953,645 (Cost $106,380,000) 106,380,000 106,380,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,623,062,391) 98.8% 1,572,730,675
----------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.2 19,535,896
-------------------------------
NET ASSETS 100.0% $ 1,592,266,571
===============================

FOOTNOTES TO STATEMENT OF INVESTMENTS

Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:

EUR Euro

GBP British Pound Sterling

MXN Mexican Nuevo Peso

1. Identifies issues considered to be illiquid. See Note 8 of Notes to Financial
Statements.

2. Represents the current interest rate for a variable or increasing rate
security.

3. Issue is in default. See Note 1 of Notes to Financial Statements.

4. Non-income producing security.

5. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $301,311,909 or 18.92% of the Fund's net
assets as of June 30, 2004.

6. When-issued security or forward commitment to be delivered and settled after
June 30, 2004. See Note 1 of Notes to Financial Statements.

7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.

8. Interest or dividend is paid-in-kind.

9. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units, which
represent debt securities, principal amount disclosed represents total
underlying principal.

10. Zero coupon bond reflects effective yield on the date of purchase.

11. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended June 30, 2004. The
aggregate value of securities of affiliated companies held by the Fund as of
June 30, 2004 amounts to $25,252. Transactions during the period in which the
issuer was an affiliate are as follows:

SHARES SHARES
JUNE 30, GROSS GROSS JUNE 30, UNREALIZED
2003 ADDITIONS REDUCTIONS 2004 DEPRECIATION
---------------------------------------------------------------------------------------

STOCKS AND/OR WARRANTS
Prandium, Inc. 459,132 -- -- 459,132 $ 5,374,748

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

39 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF ASSETS AND LIABILITIES June 30, 2004
--------------------------------------------------------------------------------

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

ASSETS
------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $1,617,662,391) $ 1,572,705,423
Affiliated companies (cost $5,400,000) 25,252
----------------
1,572,730,675
------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 2,572,348
------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 30,294,977
Investments sold 11,004,792
Shares of beneficial interest sold 1,346,825
Other 23,953
----------------
Total assets 1,617,973,570

------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------
Bank overdraft 88,534
------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $6,500,000 purchased on a
when-issued basis or forward commitment) 16,361,094
Shares of beneficial interest redeemed 4,629,171
Dividends 3,204,206
Distribution and service plan fees 972,055
Transfer and shareholder servicing agent fees 220,125
Shareholder communications 133,927
Trustees' compensation 29,181
Other 68,706
----------------
Total liabilities 25,706,999

------------------------------------------------------------------------------------
NET ASSETS $ 1,592,266,571
================

------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 169,841
------------------------------------------------------------------------------------
Additional paid-in capital 2,216,886,582
------------------------------------------------------------------------------------
Accumulated net investment loss (2,518,220)
------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions (574,512,631)
------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of
assets and liabilities denominated in foreign currencies (47,759,001)
----------------
NET ASSETS $ 1,592,266,571
================

40 | OPPENHEIMER HIGH YIELD FUND

-------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
-------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $1,073,707,863 and 114,130,869 shares of beneficial interest
outstanding) $ 9.41
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $ 9.88
-------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $303,184,141 and 32,727,752 shares of beneficial interest
outstanding) $ 9.26
-------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $149,505,003 and 15,933,793 shares of beneficial interest
outstanding) $ 9.38
-------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $8,893,625 and 943,572 shares of beneficial interest
outstanding) $ 9.43
-------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $56,975,939 and 6,105,170 shares of beneficial
interest outstanding) $ 9.33

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

41 | OPPENHEIMER HIGH YIELD FUND

STATEMENT OF OPERATIONS For the Year Ended June 30, 2004
------------------------------------------------------------------------------

------------------------------------------------------------------------------
INVESTMENT INCOME
------------------------------------------------------------------------------
Interest $ 150,708,466
------------------------------------------------------------------------------
Dividends 1,438,711
------------------------------------------------------------------------------
Portfolio lending fees 178,988
--------------
Total investment income 152,326,165

------------------------------------------------------------------------------
EXPENSES
------------------------------------------------------------------------------
Management fees 10,492,559
------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 2,751,432
Class B 3,478,551
Class C 1,665,241
Class N 52,558
------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,684,946
Class B 547,619
Class C 257,669
Class N 25,145
Class Y 290,355
------------------------------------------------------------------------------
Shareholder communications:
Class A 209,604
Class B 84,389
Class C 32,483
Class N 1,927
------------------------------------------------------------------------------
Trustees' compensation 52,930
------------------------------------------------------------------------------
Custodian fees and expenses 33,602
------------------------------------------------------------------------------
Other 81,897
--------------
Total expenses 21,742,907
Less reduction to custodian expenses (11,887)
Less payments and waivers of expenses (111,898)
--------------
Net expenses 21,619,122

------------------------------------------------------------------------------
NET INVESTMENT INCOME 130,707,043

42 | OPPENHEIMER HIGH YIELD FUND

-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
-------------------------------------------------------------------------------
Net realized gain on:
Investments $ 6,762,520
Closing of futures contracts 42,711
Foreign currency transactions 587,286
Swap contracts 160,284
-------------
Net realized gain 7,552,801
------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 29,692,263
Translation of assets and liabilities denominated in foreign
currencies 106,137
Swap contracts 2,572,348
-------------
Net change in unrealized appreciation (depreciation) 32,370,748

------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 170,630,592
=============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

43 | OPPENHEIMER HIGH YIELD FUND

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

YEAR ENDED JUNE 30, 2004 2003
-----------------------------------------------------------------------------------------

OPERATIONS
-----------------------------------------------------------------------------------------
Net investment income $ 130,707,043 $ 132,671,921
-----------------------------------------------------------------------------------------
Net realized gain (loss) 7,552,801 (163,255,101)
-----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 32,370,748 268,800,841
----------------------------------
Net increase in net assets resulting from operations 170,630,592 238,217,661

-----------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (86,840,525) (75,259,993)
Class B (23,983,742) (24,005,931)
Class C (11,359,611) (8,842,615)
Class N (757,025) (354,824)
Class Y (4,327,419) (3,503,240)
-----------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A -- (10,312,510)
Class B -- (3,545,582)
Class C -- (1,335,631)
Class N -- (53,283)
Class Y -- (476,622)

-----------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A (106,090,589) 215,493,585
Class B (78,231,133) 13,616,121
Class C (14,771,121) 44,034,511
Class N 565,563 5,191,070
Class Y 1,289,210 12,011,100

-----------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------
Total increase (decrease) (153,875,800) 400,873,817
-----------------------------------------------------------------------------------------
Beginning of period 1,746,142,371 1,345,268,554
----------------------------------
End of period (including accumulated net investment
loss of $2,518,220 and $8,198,469, respectively) $ 1,592,266,571 $ 1,746,142,371
==================================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

44 | OPPENHEIMER HIGH YIELD FUND

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

CLASS A YEAR ENDED JUNE 30, 2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.15 $ 8.62 $ 10.20 $ 11.89 $ 13.06
--------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .73 .84 .92 1.18 1.26
Net realized and unrealized gain (loss) .24 .47 (1.44) (1.59) (1.18)
---------------- ----------------------------------------------------------------
Total from investment operations .97 1.31 (.52) (.41) .08
--------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.71) (.69) (1.01) (1.28) (1.25)
Tax return of capital distribution -- (.09) (.05) -- --
---------------- ----------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.71) (.78) (1.06) (1.28) (1.25)
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.41 $ 9.15 $ 8.62 $ 10.20 $ 11.89
=================================================================================

--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 10.90% 16.38% (5.47)% (3.69)% 0.71%
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,073,708 $ 1,150,055 $ 858,834 $ 962,017 $ 1,065,220
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,146,751 $ 934,227 $ 948,097 $ 1,038,442 $ 1,125,834
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 7.80% 9.54% 9.68% 10.66% 10.12%
Total expenses 1.03% 3,4 1.07% 3 1.10% 3 1.00% 3 1.02% 3
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 55% 68% 47% 33% 24%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one year.
Returns do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.

2. Annualized for periods of less than one full year.

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

45 | OPPENHEIMER HIGH YIELD FUND

FINANCIAL HIGHLIGHTS Continued
--------------------------------------------------------------------------------

CLASS B YEAR ENDED JUNE 30, 2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.03 $ 8.51 $ 10.09 $ 11.77 $ 12.95
-------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income 63 .74 .84 1.10 1.15
Net realized and unrealized gain
(loss) .24 .49 (1.43) (1.58) (1.18)
-------------------------------------------------------------------------
Total from investment operations .87 1.23 (.59) (.48) (.03)
-------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.64) (.62) (.94) (1.20) (1.15)
Tax return of capital distribution -- (.09) (.05) -- --
-------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.64) (.71) (.99) (1.20) (1.15)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.26 $ 9.03 $ 8.51 $ 10.09 $ 11.77
=========================================================================

-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 9.86% 15.60% (6.23)% (4.37)% (0.13)%
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $ 303,184 $ 372,947 $ 338,654 $ 386,309 $ 453,375
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 347,319 $ 321,200 $ 366,869 $ 414,648 $ 509,815
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 7.03% 8.81% 8.93% 9.91% 9.35%
Total expenses 1.80% 3,4 1.84% 3 1.86% 3 1.76% 3 1.79% 3
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 55% 68% 47% 33% 24%

2. Annualized for periods of less than one full year.

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

46 | OPPENHEIMER HIGH YIELD FUND

CLASS C YEAR ENDED JUNE 30, 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.13 $ 8.60 $ 10.18 $ 11.87 $ 13.04
------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .66 .78 .86 1.11 1.16
Net realized and unrealized gain
(loss) .23 .46 (1.45) (1.60) (1.18)
---------------------------------------------------------------------
Total from investment operations .89 1.24 (.59) (.49) (.02)
------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.64) (.62) (.94) (1.20) (1.15)
Tax return of capital distribution -- (.09) (.05) -- --
---------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.64) (.71) (.99) (1.20) (1.15)
------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.38 $ 9.13 $ 8.60 $ 10.18 $ 11.87
=====================================================================

------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 9.96% 15.55% (6.08)% (4.43)% (0.06)%
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $ 149,505 $ 160,713 $ 106,884 $ 90,603 $ 82,204
------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 166,367 $ 120,997 $ 104,882 $ 83,776 $ 87,141
------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 7.03% 8.78% 8.75% 9.90% 9.35%
Total expenses 1.79% 3,4 1.83% 3 1.86% 3 1.76% 3 1.79% 3
------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 55% 68% 47% 33% 24%

2. Annualized for periods of less than one full year.

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

47 | OPPENHEIMER HIGH YIELD FUND

FINANCIAL HIGHLIGHTS Continued
--------------------------------------------------------------------------------

CLASS N YEAR ENDED JUNE 30, 2004 2003 2002 2001 1
-------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.17 $ 8.63 $ 10.20 $ 11.33
-------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .70 .80 .96 .41
Net realized and unrealized gain
(loss) .24 .49 (1.48) (1.13)
-------------------------------------------------------
Total from investment operations .94 1.29 (.52) (.72)
-------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.68) (.66) (1.00) (.41)
Tax return of capital distribution -- (.09) (.05) --
-------------------------------------------------------
Total dividends and/or distributions
to shareholders (.68) (.75) (1.05) (.41)
-------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.43 $ 9.17 $ 8.63 $ 10.20
=======================================================

-------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.47% 16.08% (5.53)% (6.43)%
-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $ 8,894 $ 8,324 $ 2,396 $ 146
-------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 10,501 $ 4,827 $ 799 $ 46
-------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 7.41% 9.14% 8.41% 11.47%
Total expenses 1.38% 4,5 1.41% 4 1.35% 4 1.04% 4
-------------------------------------------------------------------------------------------------
Portfolio turnover rate 55% 68% 47% 33%

1. For the period from March 1, 2001 (inception of offering) to June 30, 2001.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

3. Annualized for periods of less than one full year.

4. Reduction to custodian expenses less than 0.01%.

5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

48 | OPPENHEIMER HIGH YIELD FUND

CLASS Y YEAR ENDED JUNE 30, 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.09 $ 8.56 $ 10.14 $ 11.82 $ 13.02
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .73 .86 .90 1.20 1.27
Net realized and unrealized gain (loss) .23 .45 (1.41) (1.59) (1.18)
--------------------------------------------------------
Total from investment operations .96 1.31 (.51) (.39) .09
----------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment income (.72) (.69) (1.02) (1.29) (1.29)
Tax return of capital distribution -- (.09) (.05) -- --
--------------------------------------------------------
Total dividends and/or distributions
to shareholders (.72) (.78) (1.07) (1.29) (1.29)
----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.33 $ 9.09 $ 8.56 $ 10.14 $ 11.82
========================================================

----------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 10.80% 16.51% (5.37)% (3.57)% 0.85%
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 56,976 $ 54,102 $ 38,500 $ 60,244 $ 54,117
----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 56,276 $ 43,178 $ 44,583 $ 56,669 $ 54,022
----------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 7.85% 9.63% 9.88% 10.72% 10.30%
Total expenses 1.14% 1.34% 1.01% 0.94% 0.86%
Expenses after payments and waivers
and reduction to custodian expenses 0.98% 0.98% 0.98% N/A 3 N/A 3
----------------------------------------------------------------------------------------------------
Portfolio turnover rate 55% 68% 47% 33% 24%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

2. Annualized for periods of less than one full year.

3. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

49 | OPPENHEIMER HIGH YIELD FUND

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

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

Oppenheimer High Yield Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's primary investment objective is to seek a high level of current
income by investing in a diversified portfolio of high-yield, lower-rated
fixed-income securities the Fund's investment Manager, OppenheimerFunds, Inc.
(the Manager), believes do not involve undue risk.

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 and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications directly attributable to that class. 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 Fund assesses a 2% fee on the proceeds of
fund shares that are redeemed (either by selling or exchanging to another
Oppenheimer fund) within 30 days of their purchase. The fee, which is retained
by the Fund, is accounted for as an addition to paid-in capital.

The following is a summary of significant accounting policies consistently
followed by the Fund.

--------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Securities may be valued primarily using dealer-supplied valuations or a
portfolio pricing service authorized by the Board of Trustees. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board

50 | OPPENHEIMER HIGH YIELD FUND

of Trustees. Short-term "money market type" debt securities with remaining
maturities of sixty days or less are valued at amortized cost (which
approximates market value).

--------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying financial statements. The Fund records a realized gain or loss when
a structured note is sold or matures. As of June 30, 2004, the market value of
these securities comprised 3.3% of the Fund's net assets and resulted in
unrealized cumulative losses of $1,471,802.

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of June 30, 2004, the Fund had purchased $6,500,000
(principal amount) of securities on a when-issued basis or forward commitment.

--------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of June 30, 2004, securities with an aggregate
market value of $40,617,863, representing 2.55% of the Fund's net assets, were
in default.

--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the close of The New York Stock
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. Foreign exchange rates may be

51 | OPPENHEIMER HIGH YIELD FUND

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

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

valued primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.

Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.

The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.

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

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

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

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

52 | OPPENHEIMER HIGH YIELD FUND

NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES
--------------------------------------------------------------------------
$ -- $ -- $ 564,993,016 $ 56,709,627

1. As of June 30, 2004, the Fund had $564,993,016 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of June 30, 2004, details
of the capital loss carryforwards were as follows:

EXPIRING
------------------------
2007 $ 30,649,297
2008 35,734,504
2009 57,513,604
2010 101,344,550
2011 284,056,063
2012 55,694,998
-------------
Total $ 564,993,016
=============

2. During the fiscal year ended June 30, 2004, the Fund did not utilize any
capital loss carryforward.

3. During the fiscal year ended June 30, 2003, the Fund did not utilize any
capital loss carryforward.

4. During the fiscal year ended June 30, 2004, $25,763,959 of unused capital
loss carryforward expired.

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for June 30, 2004. Net assets of the
Fund were unaffected by the reclassifications.

REDUCTION TO
REDUCTION TO ACCUMULATED NET
REDUCTION TO PAID-IN ACCUMULATED NET REALIZED LOSS
CAPITAL INVESTMENT LOSS ON INVESTMENTS
--------------------------------------------------------
$ 26,251,186 $ 2,241,528 $ 24,009,658

The tax character of distributions paid during the years ended June 30, 2004 and
June 30, 2003 was as follows:

YEAR ENDED YEAR ENDED
JUNE 30, 2004 JUNE 30, 2003
--------------------------------------------------------
Distributions paid from:
Ordinary income $ 127,268,322 $ 111,966,603
Return of capital -- 15,723,628
-----------------------------
Total $ 127,268,322 $ 127,690,231
=============================

53 | OPPENHEIMER HIGH YIELD FUND

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

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

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of June 30, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.

Federal tax cost of securities $ 1,632,013,017
================
Gross unrealized appreciation $ 87,923,184
Gross unrealized depreciation (144,632,811)
----------------
Net unrealized depreciation $ (56,709,627)
================

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund does purchase shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.

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

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

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

--------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.

--------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that

54 | OPPENHEIMER HIGH YIELD FUND

affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.

--------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST

The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:

YEAR ENDED JUNE 30, 2004 YEAR ENDED JUNE 30, 2003
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------

CLASS A
Sold 65,440,622 $ 609,447,561 87,336,667 $ 736,289,514
Dividends and/or
distributions reinvested 6,284,592 59,173,057 6,545,577 55,293,487
Redeemed (83,219,779) (774,711,207) (67,886,608) (576,089,416)
------------------------------------------------------------
Net increase (decrease) (11,494,565) $ (106,090,589) 25,995,636 $ 215,493,585
============================================================

---------------------------------------------------------------------------------------
CLASS B
Sold 10,475,101 $ 96,503,159 15,654,941 $ 130,451,578
Dividends and/or
distributions reinvested 1,439,766 13,343,552 1,761,918 14,661,070
Redeemed (20,508,450) (188,077,844) (15,888,264) (131,496,527)
------------------------------------------------------------
Net increase (decrease) (8,593,583) $ (78,231,133) 1,528,595 $ 13,616,121
============================================================

---------------------------------------------------------------------------------------
CLASS C
Sold 8,189,437 $ 76,360,660 9,967,771 $ 84,476,514
Dividends and/or
distributions reinvested 805,948 7,573,293 746,825 6,304,053
Redeemed (10,659,737) (98,705,074) (5,541,975) (46,746,056)
------------------------------------------------------------
Net increase (decrease) (1,664,352) $ (14,771,121) 5,172,621 $ 44,034,511
============================================================

---------------------------------------------------------------------------------------
CLASS N
Sold 1,242,698 $ 11,666,882 779,085 $ 6,484,742
Dividends and/or
distributions reinvested 73,083 691,810 45,571 390,759
Redeemed (1,279,807) (11,793,129) (194,820) (1,684,431)
------------------------------------------------------------
Net increase 35,974 $ 565,563 629,836 $ 5,191,070
============================================================

---------------------------------------------------------------------------------------
CLASS Y
Sold 3,378,069 $ 31,354,635 4,098,729 $ 34,534,730
Dividends and/or
distributions reinvested 463,551 4,327,419 474,376 3,979,861
Redeemed (3,690,109) (34,392,844) (3,119,654) (26,503,491)
------------------------------------------------------------
Net increase 151,511 $ 1,289,210 1,453,451 $ 12,011,100
============================================================

55 | OPPENHEIMER HIGH YIELD FUND

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

--------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended June 30, 2004, were $843,452,975
and $1,002,543,228, respectively.

--------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.75% of the first $200 million of average annual net assets,
0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the
next $200 million, 0.60% of the next $200 million and 0.50% of average annual
net assets over $1 billion.

--------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
preparing and filing the Fund's tax returns.

--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended June 30, 2004, the Fund paid
$2,704,040 to OFS for services to the Fund.

Additionally, Class Y shares are subject to minimum fees of $10,000 for
assets of $10 million or more. The Class Y shares are subject to the minimum
fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.

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

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B shares and on Class C shares and 0.25% per year on Class N shares. The
Distributor also receives a service fee of up to 0.25% per

56 | OPPENHEIMER HIGH YIELD FUND

year under each plan. If either the Class B, Class C or Class N plan is
terminated by the Fund or by the shareholders of a class, the Board of Trustees
and its independent trustees must determine whether the Distributor shall be
entitled to payment from the Fund of all or a portion of the service fee and/or
asset-based sales charge in respect to shares sold prior to the effective date
of such termination. The Distributor's aggregate uncompensated expenses under
the plan at June 30, 2004 for Class B, Class C and Class N shares were
$14,476,913, $3,525,683 and $162,918, respectively. Fees incurred by the Fund
under the plans are detailed in the Statement of Operations.

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

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

June 30, 2004 $ 568,298 $ 220,234 $ 983,091 $ 24,734 $ 12,196

--------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. OFS has voluntarily agreed to limit transfer
and shareholder servicing agent fees for all classes to 0.35% of average annual
net assets per class. During the year ended June 30, 2004, OFS waived $13,981,
$4,334 $1,377, $240 and $91,966 for Class A, Class B, Class C, Class N and Class
Y shares, respectively. This undertaking may be amended or withdrawn at any
time.

--------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS

A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.

The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.

The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized

57 | OPPENHEIMER HIGH YIELD FUND

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

--------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued

gains or losses. Such realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.

As of June 30, 2004, the Fund had no outstanding foreign currency
contracts.

--------------------------------------------------------------------------------
6. FUTURES CONTRACTS

A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. 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 protection from changes in market value of stocks 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 as a 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 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 has expired.

Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
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 in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported on the Statement of Operations.

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.

As of June 30, 2004, the Fund had no outstanding futures contracts.

--------------------------------------------------------------------------------
7. INTEREST RATE SWAP CONTRACTS

The Fund may enter into an interest rate swap transaction to maintain a total
return or yield spread on a particular investment, or portion of its portfolio,
or for other non-speculative purposes. Interest rate swaps involve the exchange
of commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments.

58 | OPPENHEIMER HIGH YIELD FUND

The coupon payments are based on an agreed upon principal amount and a specified
index. Because the principal amount is not exchanged, it represents neither an
asset nor a liability to either counterparty, and is referred to as notional.
The Fund records an increase or decrease to unrealized gain (loss), in the
amount due to or owed by the Fund at termination or settlement.

Interest rate swaps are subject to credit risk (if the counterparty fails
to meet its obligations) and interest rate risk. The Fund could be obligated to
pay more under its swap agreements than it receives under them, as a result of
interest rate changes.

As of June 30, 2004, the Fund had entered into the following interest rate swap
agreements:

FIXED FLOATING RATE
RATE PAID BY RECEIVED BY
THE FUND AT THE FUND AT
SWAP NOTIONAL JUNE 30, JUNE 30, FLOATING TERMINATION UNREALIZED
COUNTERPARTY AMOUNT 2004 2004 RATE INDEX DATES APPRECIATION
------------------------------------------------------------------------------------------------------

Three-Month
Deutsche Bank LIBOR
AG $ 36,000,000 3.19% 1.4275% rate 3/9/09 $ 1,472,623
Three-Month
Deutsche Bank LIBOR
AG 20,000,000 4.23 1.4275 rate 3/9/14 1,099,725
-----------
$ 2,572,348
===========

Index abbreviation is as follows:

LIBOR London-Interbank Offered Rate

--------------------------------------------------------------------------------
8. ILLIQUID SECURITIES

As of June 30, 2004, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of June 30,
2004 was $75,694,134, which represents 4.75% of the Fund's net assets.

--------------------------------------------------------------------------------
9. SECURITIES LENDING

The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents.

59 | OPPENHEIMER HIGH YIELD FUND

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

--------------------------------------------------------------------------------
9. SECURITIES LENDING Continued

The Fund retains a portion of the interest earned from the collateral. The Fund
also continues to receive interest or dividends paid on the securities loaned.
As of June 30, 2004, the Fund had no securities on loan.

Appendix A

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

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

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

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following considerations:

o Likelihood of payment-capacity and willingness of the
obligor to meet its financial commitment on an obligation in
accordance with the terms of the obligation;

o Nature of and provisions of the obligation; and

o Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.

The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above.

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

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

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

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

BB, B, CCC, CC, and C

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

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

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

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

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

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

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

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

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

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

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

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

N.R. Not rated.

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

Bond Investment Quality Standards

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

SHORT-TERM ISSUE CREDIT RATINGS

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

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

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

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

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

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

NOTES:

A Standard & Poor's note rating reflects the liquidity
factors and market access risks unique to notes. Notes due
in three years or less will likely receive a note rating.
Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used
in making that assessment:

o Amortization schedule-the larger the final maturity
relative to other maturities, the more likely it will be
treated as a note; and

o Source of payment-the more dependent the issue is on the
market for its refinancing, the more likely it will be
treated as a note.

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

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

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

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

INTERNATIONAL LONG-TERM CREDIT RATINGS

The following ratings scale applies to foreign currency and local currency ratings.

Investment Grade:

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

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

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

Speculative Grade:

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

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

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

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

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

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

INTERNATIONAL SHORT-TERM CREDIT RATINGS

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

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.

B-1
Appendix B

Industry Classifications

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

C-11
Appendix C

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

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

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

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

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

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

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

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

There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months (24 months in the case of Oppenheimer Rochester National Municipals and
Rochester Fund Municipals) of the beginning of the calendar month of their
purchase, as described in the Prospectus (unless a waiver described elsewhere in
this Appendix applies to the redemption). Additionally, on shares purchased
under these waivers that are subject to the Class A contingent deferred sales
charge, the Distributor will pay the applicable concession described in the
Prospectus under "Class A Contingent Deferred Sales Charge."5 This waiver
provision applies to:

|_| Purchases of Class A shares aggregating $1 million or more.

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

|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:

1) through a broker, dealer, bank or registered investment
adviser that has made special arrangements with the
Distributor for those purchases, or

2) by a direct rollover of a distribution from a qualified
Retirement Plan if the administrator of that Plan has made
special arrangements with the Distributor for those
purchases.

|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:

1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On
the date the plan sponsor signs the record-keeping service agreement with
Merrill Lynch, the Plan must have $3 million or more of its assets invested in
(a) mutual funds, other than those advised or managed by Merrill Lynch
Investment Management, L.P. ("MLIM"), that are made available under a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor, and (b) funds advised or managed by MLIM (the funds described in
(a) and (b) are referred to as "Applicable Investments").

2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided under a contract
or arrangement between the Retirement Plan and Merrill Lynch. On the date the
plan sponsor signs the record keeping service agreement with Merrill Lynch, the
Plan must have $3 million or more of its assets (excluding assets invested in
money market funds) invested in Applicable Investments.

3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs that
agreement, the Plan has 500 or more eligible employees (as determined by the
Merrill Lynch plan conversion 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 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.6

5) Under a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.

6) To meet the minimum distribution requirements of the Internal Revenue
Code.

7) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.

8) For loans to participants or beneficiaries.

9) Separation from service.7

10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager) if the
plan has made special arrangements with the Distributor.

11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.

|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.

|_| For distributions from retirement plans that have $10 million or more
in plan assets and that have entered into a special agreement with the
Distributor.

|_| For distributions from retirement plans which are part of a retirement
plan product or platform offered by certain banks, broker-dealers, financial
advisors, insurance companies or record keepers which have entered into a
special agreement with the Distributor.

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales
charges will be waived for redemptions of shares in the
following cases:

|_| Shares redeemed involuntarily, as described in
"Shareholder Account Rules and Policies," in the applicable
Prospectus.

|_| Redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving
shareholder. The death or disability must have occurred
after the account was established, and for disability you
must provide evidence of a determination of disability by
the Social Security Administration.

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

|_| Distributions from accounts for which the broker-dealer
of record has entered into a special agreement with the
Distributor allowing this waiver.

|_| Redemptions of Class B shares held by Retirement Plans
whose records are maintained on a daily valuation basis by
Merrill Lynch or an independent record keeper under a
contract with Merrill Lynch.

|_| Redemptions of Class C shares of Oppenheimer U.S.
Government Trust from accounts of clients of financial
institutions that have entered into a special arrangement
with the Distributor for this purpose.

|_| Redemptions requested in writing by a Retirement Plan
sponsor of Class C shares of an Oppenheimer fund in amounts
of $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.

|_| Distributions8 from Retirement Plans or other employee benefit plans
for any of the following purposes: 1) Following the death or disability (as
defined in the Internal Revenue Code) of the participant or beneficiary. The
death or disability must occur after the participant's account was established
in an Oppenheimer fund.

2) To return excess contributions made to a participant's
account.

3) To return contributions made due to a mistake of fact.

4) To make hardship withdrawals, as defined in the plan.9

5) To make distributions required under a Qualified Domestic
Relations Order or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the
Internal Revenue Code.

6) To meet the minimum distribution requirements of the
Internal Revenue Code.

7) To make "substantially equal periodic payments" as
described in Section 72(t) of the Internal Revenue Code.

8) For loans to participants or beneficiaries.10

9) On account of the participant's separation from
service.11

10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) offered as an investment option
in a Retirement Plan if the plan has made special
arrangements with the Distributor.

11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are
rolled over directly to an OppenheimerFunds-sponsored IRA.

12) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age
59 1/2, as long as the aggregate value of the distributions
does not exceed 10% of the account's value, adjusted
annually.

13) Redemptions of Class B shares under an Automatic
Withdrawal Plan for an account other than a Retirement Plan,
if the aggregate value of the redeemed shares does not
exceed 10% of the account's value, adjusted annually.

14) For distributions from 401(k) plans sponsored by
broker-dealers that have entered into a special arrangement
with the Distributor allowing this waiver.

|_| Redemptions of Class B shares or Class C shares under an
Automatic Withdrawal Plan from an account other than a
Retirement Plan if the aggregate value of the redeemed
shares does not exceed 10% of the account's value annually.

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

The contingent deferred sales charge is also waived on Class
B and Class C shares sold or issued in the following cases:

|_| Shares sold to the Manager or its affiliates.

|_| Shares sold to registered management investment
companies or separate accounts of insurance companies having
an agreement with the Manager or the Distributor for that
purpose.

|_| Shares issued in plans of reorganization to which the Fund is a party.

|_| Shares sold to present or former officers, directors,
trustees or employees (and their "immediate families" as
defined above in Section I.A.) of the Fund, the Manager and
its affiliates and retirement plans established by them for
their employees.

IV.

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

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

Oppenheimer Quest Value Fund, Inc. Oppenheimer Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund

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

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

All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent
deferred sales charges described in this Appendix apply to shares of an
Oppenheimer fund that are either:

|_| acquired by such shareholder pursuant to an exchange of shares of
an Oppenheimer fund that was one of the Former Quest for Value Funds, or

|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of the
Former Quest for Value Funds into that other Oppenheimer fund on November
24, 1995.

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

The initial and contingent deferred sale charge rates and waivers
for Class A and Class B shares described in the respective Prospectus
(or this Appendix) of the following Oppenheimer funds (each is
referred to as a "Fund" in this section):

Oppenheimer U. S. Government Trust,
Oppenheimer Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund\

are modified as described below for those Fund shareholders who
were shareholders of the following funds (referred to as the "Former
Connecticut Mutual Funds") on March 1, 1996, when OppenheimerFunds,
Inc. became the investment adviser to the Former Connecticut Mutual
Funds:

Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities Account CMIA LifeSpan Capital Appreciation Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account

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

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

Those shareholders who are eligible for the prior Class A CDSC
are:

1) persons whose purchases of Class A shares of a Fund and other
Former Connecticut Mutual Funds were $500,000 prior to March 18, 1996,
as a result of direct purchases or purchases pursuant to the Fund's
policies on Combined Purchases or Rights of Accumulation, who still
hold those shares in that Fund or other Former Connecticut Mutual
Funds, and

2) persons whose intended purchases under a Statement of
Intention entered into prior to March 18, 1996, with the former
general distributor of the Former Connecticut Mutual Funds to purchase
shares valued at $500,000 or more over a 13-month period entitled
those persons to purchase shares at net asset value without being
subject to the Class A initial sales charge

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

Class A Sales Charge Waivers. Additional Class A shares of a Fund
may be purchased without a sales charge, by a person who was in one
(or more) of the categories below and acquired Class A shares prior to
March 18, 1996, and still holds Class A shares:

1) any purchaser, provided the total initial amount invested in
the Fund or any one or more of the Former Connecticut Mutual Funds
totaled $500,000 or more, including investments made pursuant to the
Combined Purchases, Statement of Intention and Rights of Accumulation
features available at the time of the initial purchase and such
investment is still held in one or more of the Former Connecticut
Mutual Funds or a Fund into which such Fund merged;

2) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or more of
the Former Connecticut Mutual Funds totaled $500,000 or more;

3) Directors of the Fund or any one or more of the Former
Connecticut Mutual Funds and members of their immediate families;

4) employee benefit plans sponsored by Connecticut Mutual
Financial Services, L.L.C. ("CMFS"), the prior distributor of the
Former Connecticut Mutual Funds, and its affiliated companies;

5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other activity,
and the spouses and minor dependent children of such persons, pursuant
to a marketing program between CMFS and such group; and

6) an institution acting as a fiduciary on behalf of an
individual or individuals, if such institution was directly
compensated by the individual(s) for recommending the purchase of the
shares of the Fund or any one or more of the Former Connecticut Mutual
Funds, provided the institution had an agreement with CMFS.

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

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

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

In addition to the waivers set forth in the Prospectus and in
this Appendix, above, the contingent deferred sales charge will be
waived for redemptions of Class A and Class B shares of a Fund and
exchanges of Class A or Class B shares of a Fund into Class A or Class
B shares of a Former Connecticut Mutual Fund provided that the Class A
or Class B shares of the Fund to be redeemed or exchanged were (i)
acquired prior to March 18, 1996 or (ii) were acquired by exchange
from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must
have been purchased prior to March 18, 1996:

1) by the estate of a deceased shareholder;

2) upon the disability of a shareholder, as defined in Section
72(m)(7) of the Internal Revenue Code;

3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans
created under Section 457 of the Code, or other employee benefit
plans;

4) as tax-free returns of excess contributions to such retirement
or employee benefit plans;

5) in whole or in part, in connection with shares sold to any
state, county, or city, or any instrumentality, department, authority,
or agency thereof, that is prohibited by applicable investment laws
from paying a sales charge or concession in connection with the
purchase of shares of any registered investment management company;

6) in connection with the redemption of shares of the Fund due to
a combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;

7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;

8) in connection with automatic redemptions of Class A shares and
Class B shares in certain retirement plan accounts pursuant to an
Automatic Withdrawal Plan but limited to no more than 12% of the
original value annually; or

9) as involuntary redemptions of shares by operation of law, or
under procedures set forth in the Fund's Articles of Incorporation, or
as adopted by the Board of Directors of the Fund.

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

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

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

Oppenheimer Convertible Securities Fund (referred to as the
"Fund" in this section) may sell Class M shares at net asset value
without any initial sales charge to the classes of investors listed
below who, prior to March 11, 1996, owned shares of the Fund's
then-existing Class A and were permitted to purchase those shares at
net asset value without sales charge:

|_| the Manager and its affiliates,

|_| present or former officers, directors, trustees and employees
(and their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,

|_| registered management investment companies or separate
accounts of insurance companies that had an agreement with the Fund's
prior investment advisor or distributor for that purpose,

|_| dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees,

|_| employees and registered representatives (and their spouses)
of dealers or brokers described in the preceding section or financial
institutions that have entered into sales arrangements with those
dealers or brokers (and whose identity is made known to the
Distributor) or with the Distributor, but only if the purchaser
certifies to the Distributor at the time of purchase that the
purchaser meets these qualifications,

|_| dealers, brokers, or registered investment advisors that had
entered into an agreement with the Distributor or the prior
distributor of the Fund specifically providing for the use of Class M
shares of the Fund in specific investment products made available to
their clients, and

|_| dealers, brokers or registered investment advisors that had
entered into an agreement with the Distributor or prior distributor of
the Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.

--------

In accordance with Rule 12b-1 of the Investment Company Act, the
term "Independent Trustees/Director" in this Statement of Additional
Information refers to those Trustees who are not "interested persons"
of the Fund and who do not have any direct or indirect financial
interest in the operation of the distribution plan or any agreement
under the plan.

1 Certain waivers also apply to Class M shares of Oppenheimer
Convertible Securities Fund.

2 In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent
deferred sales charges mean the Fund's Early Withdrawal Charges and
references to "redemptions" mean "repurchases" of shares.

3 An "employee benefit plan" means any plan or arrangement,
whether or not it is "qualified" under the Internal Revenue Code,
under which Class N shares of an Oppenheimer fund or funds are
purchased by a fiduciary or other administrator for the account of
participants who are employees of a single employer or of affiliated
employers. These may include, for example, medical savings accounts,
payroll deduction plans or similar plans. The fund accounts must be
registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.

4 The term "Group Retirement Plan" means any qualified or
non-qualified retirement plan for employees of a corporation or sole
proprietorship, members and employees of a partnership or association
or other organized group of persons (the members of which may include
other groups), if the group has made special arrangements with the
Distributor and all members of the group participating in (or who are
eligible to participate in) the plan purchase shares of an Oppenheimer
fund or funds through a single investment dealer, broker or other
financial institution designated by the group. Such plans include 457
plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than
plans for public school employees. The term "Group Retirement Plan"
also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase shares of an Oppenheimer
fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the
Distributor.

5 However, that concession will not be paid on purchases of
shares in amounts of $1 million or more (including any right of
accumulation) by a Retirement Plan that pays for the purchase with the
redemption proceeds of Class C shares of one or more Oppenheimer funds
held by the Plan for more than one year.

6 This provision does not apply to IRAs.

7 This provision does not apply to 403(b)(7) custodial plans if
the participant is less than age 55, nor to IRAs.

8 The distribution must be requested prior to Plan termination or
the elimination of the Oppenheimer funds as an investment option under
the Plan.

9 This provision does not apply to IRAs.

10 This provision does not apply to loans from 403(b)(7)
custodial plans and loans from the OppenheimerFunds-sponsored Single K
retirement plan.

11 This provision does not apply to 403(b)(7) custodial plans if
the participant is less than age 55, nor to IRAs.

Oppenheimer High Yield Fund

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

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

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

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

Custodian Bank
JPMorgan Chase Bank
4 Chase Metro Tech Center
Brooklyn, New York, 11245

Independent registered public accounting firm
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202

Counsel to the Funds
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202

Counsel to the Independent Trustees
Bell, Boyd & Lloyd LLC
70 West Madison Street, Suite 3100
Chicago, Illinois 60602

(OppenheimerFunds logo)
PX0280.001.0205