Oppenheimer High Yield Fund

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

Statement of Additional Information dated October 28, 2005, revised December 6, 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 October 28, 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
     Disclosure of Portfolio Holdings................................................................     32
How the Fund is Managed .............................................................................     36
     Organization and History........................................................................     36
     Board of Trustees and Oversight Committees......................................................     38
     Trustees and Officers of the Fund...............................................................     39
     The Manager.....................................................................................     48
Brokerage Policies of the Fund.......................................................................     51
Distribution and Service Plans.......................................................................     54
Payment to Fund Intermediaries.......................................................................     58
Performance of the Fund..............................................................................     62

About Your Account
How To Buy Shares....................................................................................     68
How To Sell Shares...................................................................................     79
How To Exchange Shares...............................................................................     85
Dividends, Capital Gains and Taxes...................................................................     89
Additional Information About the Fund................................................................     93

Financial Information About the Fund
Independent Registered Public Accounting Firm's Report...............................................     95
Financial Statements.................................................................................     96

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





181


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 net 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 IRC ss.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 total 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.

Disclosure of Portfolio Holdings. The Fund has adopted policies and procedures
concerning the dissemination of information about its portfolio holdings by
employees, officers and/or directors of the Manager, Distributor and Transfer
Agent. These policies are designed to assure that non-public information about
portfolio securities is distributed only for a legitimate business purpose, and
is done in a manner that (a) conforms to applicable laws and regulations and (b)
is designed to prevent that information from being used in a way that could
negatively affect the Fund's investment program or enable third parties to use
that information in a manner that is harmful to the Fund.

o             Public Disclosure. The Fund's portfolio holdings are made publicly
              available no later than 60 days after the close of each of the
              Fund's fiscal quarters in semi-annual and annual reports to
              shareholders, or in its Statements of Investments on Form N-Q,
              which are publicly available at the SEC. In addition, the top 10
              or more holdings are posted on the OppenheimerFunds' website at
              www.oppenheimerfunds.com in the "Fund Profiles" section. Other
              general information about the Fund's portfolio investments, such
              as portfolio composition by asset class, industry, country,
              currency, credit rating or maturity, may also be posted with a
              15-day lag.

         Until publicly disclosed, the Fund's portfolio holdings are
proprietary, confidential business information. While recognizing the importance
of providing Fund shareholders with information about their Fund's investments
and providing portfolio information to a variety of third parties to assist with
the management, distribution and administrative process, the need for
transparency must be balanced against the risk that third parties who gain
access to the Fund's portfolio holdings information could attempt to use that
information to trade ahead of or against the Fund, which could negatively affect
the prices the Fund is able to obtain in portfolio transactions or the
availability of the securities that portfolio managers are trading on the Fund's
behalf.

         The Manager and its subsidiaries and affiliates, employees, officers,
and directors, shall neither solicit nor accept any compensation or other
consideration (including any agreement to maintain assets in the Fund or in
other investment companies or accounts managed by the Manager or any affiliated
person of the Manager) in connection with the disclosure of the Fund's
non-public portfolio holdings. The receipt of investment advisory fees or other
fees and compensation paid to the Manager and its subsidiaries pursuant to
agreements approved by the Fund's Board shall not be deemed to be "compensation"
or "consideration" for these purposes. It is a violation of the Code of Ethics
for any covered person to release holdings in contravention of portfolio
holdings disclosure policies and procedures adopted by the Fund.

         A list of the top 10 or more portfolio securities holdings (based on
invested assets), listed by security or by issuer, as of the end of each month
may be disclosed to third parties (subject to the procedures below) no sooner
than 15 days after month-end.

         Except under special limited circumstances discussed below, month-end
lists of the Fund's complete portfolio holdings may be disclosed no sooner than
30-days after the relevant month-end, subject to the procedures below. If the
Fund's complete portfolio holdings have not been disclosed publicly, they may be
disclosed pursuant to special requests for legitimate business reasons, provided
that:

o             The third-party recipient must first submit a request for release
              of Fund portfolio holdings, explaining the business reason for the
              request;
o             Senior officers (a Senior Vice President or above) in the
              Manager's Portfolio and Legal departments must approve the
              completed request for release of Fund portfolio holdings; and
o             The third-party recipient must sign the Manager's portfolio
              holdings non-disclosure agreement before receiving the data,
              agreeing to keep information that is not publicly available
              regarding the Fund's holdings confidential and agreeing not to
              trade directly or indirectly based on the information.

         The Fund's complete portfolio holdings positions may be released to the
following categories of entities or individuals on an ongoing basis, provided
that such entity or individual either (1) has signed an agreement to keep such
information confidential and not trade on the basis of such information or (2)
is subject to fiduciary obligations, as a member of the Fund's Board, or as an
employee, officer and/or director of the Manager, Distributor, or Transfer
Agent, or their respective legal counsel, not to disclose such information
except in conformity with these policies and procedures and not to trade for
his/her personal account on the basis of such information:

o             Employees of the Fund's Manager, Distributor and Transfer Agent
              who need to have access to such information (as determined by
              senior officers of such entity),
o The Fund's certified public accountants and independent registered public
accounting firm, o Members of the Fund's Board and the Board's legal counsel, o
The Fund's custodian bank,
o        A proxy voting service designated by the Fund and its Board,
o        Rating/ranking organizations (such as Lipper and Morningstar),
o Portfolio pricing services retained by the Manager to provide portfolio
security prices, and o Dealers, to obtain bids (price quotations if securities
are not priced by the Fund's regular pricing services).

         Portfolio holdings information of the Fund may be provided, under
limited circumstances, to brokers and/or dealers with whom the Fund trades
and/or entities that provide investment coverage and/or analytical information
regarding the Fund's portfolio, provided that there is a legitimate investment
reason for providing the information to the broker, dealer or other entity.
Month-end portfolio holdings information may, under this procedure, be provided
to vendors providing research information and/or analytics to the fund, with at
least a 15-day delay after the month end, but in certain cases may be provided
to a broker or analytical vendor with a 1-2 day lag to facilitate the provision
of requested investment information to the manager to facilitate a particular
trade or the portfolio manager's investment process for the Fund. Any third
party receiving such information must first sign the Manager's portfolio
holdings non-disclosure agreement as a pre-condition to receiving this
information.

         Portfolio holdings information (which may include information on
individual securities positions or multiple securities) may be provided to the
entities listed below (1) by portfolio traders employed by the Manager in
connection with portfolio trading, and (2) by the members of the Manager's
Security Valuation Group and Accounting Departments in connection with portfolio
pricing or other portfolio evaluation purposes:

o        Brokers and dealers in connection with portfolio transactions (purchases and sales)
o             Brokers and dealers to obtain bids or bid and asked prices (if
              securities held by the Fund are not priced by the fund's regular
              pricing services)
o        Dealers to obtain price quotations where the fund is not identified as the owner

         Portfolio holdings information (which may include information on the
Fund's entire portfolio or individual securities therein) may be provided by
senior officers of the Manager or attorneys on the legal staff of the Manager,
Distributor, or Transfer Agent, in the following circumstances:

o             Response to legal process in litigation matters, such as responses
              to subpoenas or in class action matters where the Fund may be part
              of the plaintiff class (and seeks recovery for losses on a
              security) or a defendant,
o             Response to regulatory requests for information (the SEC, NASD,
              state securities regulators, and/or foreign securities
              authorities, including without limitation requests for information
              in inspections or for position reporting purposes),
o        To potential sub-advisers of portfolios (pursuant to confidentiality agreements),
o        To consultants for retirement plans for plan sponsors/discussions at due diligence meetings (pursuant to confidentiality
              agreements),
o        Investment bankers in connection with merger discussions (pursuant to confidentiality agreements)

         Portfolio managers and analysts may, subject to the Manager's policies
on communications with the press and other media, discuss portfolio information
in interviews with members of the media, or in due diligence or similar meetings
with clients or prospective purchasers of Fund shares or their financial
intermediary representatives.

         The Fund's shareholders may, under unusual circumstances (such as a
lack of liquidity in the Fund's portfolio to meet redemptions), receive
redemption proceeds of their Fund shares paid as pro rata shares of securities
held in the Fund's portfolio. In such circumstances, disclosure of the Fund's
portfolio holdings may be made to such shareholders.

         The Chief Compliance Officer of the Fund and the Manager, Distributor,
and Transfer Agent (the "CCO") shall oversee the compliance by the Manager,
Distributor, Transfer Agent, and their personnel with these policies and
procedures. At least annually, the CCO shall report to the Fund's Board on such
compliance oversight and on the categories of entities and individuals to which
disclosure of portfolio holdings of the Funds has been made during the preceding
year pursuant to these policies. The CCO shall report to the Fund's Board any
material violation of these policies and procedures during the previous calendar
quarter and shall make recommendations to the Board as to any amendments that
the CCO believes are necessary and desirable to carry out or improve these
policies and procedures.

         The Manager and/or the Fund have entered into ongoing arrangements to
make available information about the Fund's portfolio holdings. One or more of
the Oppenheimer funds may currently disclose portfolio holdings information
based on ongoing arrangements to the following parties:






A.G. Edwards & Sons
ABG Securities
ABN AMRO
Advest
AG Edwards
American Technology Research Auerbach Grayson Banc of America Securities
Barclays Baseline Bear Stearns Belle Haven Bloomberg BNP Paribas BS Financial
Services Buckingham Research Group Caris & Co.
CIBC World Markets
Citigroup
Citigroup Global Markets
Collins Stewart
Craig-Hallum Capital Group LLC
Credit Agricole Cheuvreux N.A. Inc. Credit Suisse First Boston Daiwa Securities
Davy Deutsche Bank Deutsche Bank Securities Dresdner Kleinwort Wasserstein Emmet
& Co Empirical Research Enskilda Securities Essex Capital Markets Exane BNP
Paribas Factset Fidelity Capital Markets Fimat USA Inc.
First Albany
First Albany Corporation
Fixed Income Securities
Fortis Securities
Fox-Pitt, Kelton
Friedman, Billing, Ramsey
Fulcrum Global Partners
Garp Research
George K Baum & Co.
Goldman
Goldman Sachs
HSBC HSBC Securities Inc ING Barings ISI Group Janney Montgomery Jefferies
Jeffries & Co. JP Morgan JP Morgan Securities JPP Eurosecurities Keefe, Bruyette
& Woods Keijser Securities Kempen & Co. USA Inc.
Kepler Equities/Julius Baer Sec
KeyBanc Capital Markets
Leerink Swan
Legg Mason
Lehman
Lehman Brothers
Lipper
Loop Capital Markets
MainFirst Bank AG Makinson Cowell US Ltd Maxcor Financial Merrill Merrill Lynch
Midwest Research Mizuho Securities Morgan Stanley Morningstar Natexis
Bleichroeder Ned Davis Research Group Nomura Securities Pacific Crest Pacific
Crest Securities Pacific Growth Equities Petrie Parkman Pictet Piper Jaffray
Inc. Plexus Prager Sealy & Co. Prudential Securities Ramirez & Co.
Raymond James RBC Capital Markets RBC Dain Rauscher Research Direct Robert W.
Baird Roosevelt & Cross Russell Mellon Ryan Beck & Co. Sanford C. Bernstein
Scotia Capital Markets SG Cowen & Co. SG Cowen Securities Soleil Securities
Group Standard & Poors Stone & Youngberg SWS Group Taylor Rafferty Think Equity
Partners Thomas Weisel Partners UBS Wachovia Wachovia Corp Wachovia Securities
Wescott Financial William Blair Yieldbook






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 August 1986.

|X| Classes of Shares. The Trustees are authorized, without shareholder
approval, to create new series and classes of shares, to reclassify unissued
shares into additional series or classes and to 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, preemptive rights 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 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        generally may have a different net asset value,
o        generally 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 a 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 hold shareholder meetings 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 and that
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 Trustees who are not
"interested persons" under the Investment Company Act (the "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 7 meetings during the Fund's fiscal year ended June 30, 2005. The
Audit Committee furnishes the Board with recommendations regarding the selection
of the Fund's independent registered public accounting firm (also referred to as
the "independent Auditors"). Other main functions of the Audit Committee,
outlined in the Audit Committee Charter, 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) reviewing reports
from the Manager's Internal Audit Department; (iv) reviewing certain reports
from and meet periodically with the Funds' Chief Compliance Officer; (v)
maintaining a separate line of communication between the Fund's independent
Auditors and the Independent Trustees; (vi) reviewing the independence of the
Fund's independent Auditors; and (vii) pre-approving the provision of any audit
or non-audit services by the Fund's independent Auditors, including tax
services, that are not prohibited by the Sarbanes-Oxley Act, to the Fund, the
Manager and certain affiliates of the Manager.

         The Review Committee is comprised solely of Independent Trustees. The
members of the Review Committee are Jon S. Fossel (Chairman), Robert G. Avis,
Sam Freedman and Beverly L. Hamilton. The Review Committee held 6 meetings
during the Fund's fiscal year ended June 30, 2005. Among other duties, as set
forth in the Review Committee's Charter, the Review Committee 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 as well as the policies and procedures adopted by the Fund to comply
with the Investment Company Act and other applicable law.

         The Governance Committee is comprised solely of Independent Trustees.
The members of the Governance Committee are, Robert J. Malone (Chairman),
William Armstrong, Beverly L. Hamilton and F. William Marshall, Jr. The
Governance Committee held 5 meetings during the Fund's fiscal year ended June
30, 2005. The Governance Committee has adopted a charter setting forth its
duties and responsibilities. Among other duties, the Governance Committee
reviews and oversees the Fund's governance guidelines, the adequacy of the
Fund's Codes of Ethics and the nomination of Trustees, including Independent
Trustees. The Governance Committee has adopted a process for 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
Governance Committee in care of the Fund. The Governance Committee may consider
such persons at such time as it meets to consider possible nominees. The
Governance Committee, however, reserves sole discretion to determine which
candidates for Trustees and Independent Trustees it will recommend to the Board
and/or shareholders and it may identify candidates other than those submitted by
Shareholders. The Governance Committee may, but need not, consider the advice
and recommendation of the Manager and/or 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 or an individual Board member and may submit their
correspondence electronically at www.oppenheimerfunds.com under the caption
"contact us" or by mail to the Fund at the address below. 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 is an "Independent Trustee" under the Investment
Company Act. All of the Trustees are also trustees or directors of the following Oppenheimer/Centennial funds (referred to as "Board
II Funds")

Oppenheimer Cash Reserves                                      Oppenheimer Principal Protected Trust II
Oppenheimer Capital Income Fund                                Oppenheimer Principal Protected Trust III
Oppenheimer Champion Income Fund                               Oppenheimer Real Asset Fund
Oppenheimer Equity Fund, Inc.                                  Oppenheimer Senior Floating Rate Fund
Oppenheimer High Yield Fund                                    Oppenheimer Strategic Income Fund
Oppenheimer Integrity Funds                                    Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund                            Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.                            Centennial California Tax Exempt Trust
Oppenheimer Main Street Opportunity Fund                       Centennial Government Trust
Oppenheimer Main Street Small Cap Fund                         Centennial Money Market Trust
Oppenheimer Municipal Fund                                     Centennial New York Tax Exempt Trust
Oppenheimer Principal Protected Trust                          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 charge on Class A shares is waived for
that group because of the reduced sales efforts realized by the Distributor.

         Messrs. Gillespie, Kourkoulakos, Murphy, Petersen, Vandehey, Vottiero,
Wixted and Zack and Mss. Bloomberg and Ives, who are officers of the Fund, hold
the same offices with one or more of the other Board II Funds. As of September
30, 2005 the Trustees and officers of the Fund, as a group, owned of record or
beneficially less than 1% of any 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 Board II Funds. In addition, none
of the Independent Trustees (nor any of their immediate family members) own
securities of either the Manager or the Distributor or of any entity directly or
indirectly controlling, controlled by or under common control with the Manager
or the Distributor of the Board II Funds.

         Biographical Information. The Trustees and officers, their positions
with the Fund, length of service in such position(s), and principal occupations
and business affiliations during at least the past five years are listed in the
charts below. The charts also include information about each Trustee's
beneficial share ownership in the Fund and in all of the registered investment
companies that the Trustee oversees in the Oppenheimer family of funds
("Supervised Funds"). The address of each Trustee in the chart below is 6803 S.
Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an
indefinite term, or until his or her resignation, retirement, death or removal.


---------------------------------------------------------------------------------------------------------------------------
                                                   Independent Trustees
---------------------------------------------------------------------------------------------------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Name,                          Principal Occupation(s) During the Past 5 Years; Other      Dollar Range    Aggregate
                                                                                                           Dollar Range
                                                                                                           of Shares
Position(s) Held with the                                                                  of Shares       Beneficially
Fund,                                                                                      Beneficially    Owned in All
Length of Service,             Trusteeships/Directorships Held; Number of Portfolios in    Owned in the    Supervised
Age                            the Fund Complex Currently Overseen                         Fund            Funds
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------------------------
                                                                                               As of December 31, 2004
------------------------------ ----------------------------------------------------------- --------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
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),  and The
Age: 68                        El Paso Mortgage  Company  (since  1993);  Chairman of the
                               following private companies: Ambassador Media
                               Corporation (since 1984) and Broadway Ventures
                               (since 1984); Director of the following:
                               Helmerich & Payne, Inc. (oil and gas
                               drilling/production company) (since 1992), Campus
                               Crusade for Christ (since 1991) and The Lynde and
                               Harry Bradley Foundation, Inc. (non-profit
                               organization) (since 2002); former Chairman of
                               the following: Transland Financial Services, Inc.
                               (private mortgage banking company) (1997-2003),
                               Great Frontier Insurance (insurance agency)
                               (1995-2000), Frontier Real Estate, Inc.
                               (residential real estate brokerage) (1994-2000)
                               and Frontier Title (title insurance agency)
                               (1995-2000); former Director of the following:
                               UNUMProvident (insurance company) (1991-2004),
                               Storage Technology Corporation (computer
                               equipment company) (1991-2003) and International
                               Family Entertainment (television channel)
                               (1992-1997); U.S. Senator (January 1979-January
                               1991). Oversees 38 portfolios in the
                               OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Robert G. Avis,                Director  and  President  of A.G.  Edwards  Capital,  Inc.  $0              Over $100,000
Trustee since 1990             (General  Partner of private equity funds) (until February
Age: 74                        2001); Chairman,  President and Chief Executive Officer of
                               A.G. Edwards Capital, Inc. (until March 2000);
                               Director of A.G. Edwards & Sons, Inc. (brokerage
                               company) (until 2000) and A.G. Edwards Trust
                               Company (investment adviser) (until 2000); Vice
                               Chairman and Director of A.G. Edwards, Inc.
                               (until March 1999); Vice Chairman of A.G. Edwards
                               & Sons, Inc. (until March 1999); Chairman of A.G.
                               Edwards Trust Company (until March 1999) and
                               A.G.E. Asset Management (investment adviser)
                               (until March 1999). Oversees 38 portfolios in the
                               OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
George C. Bowen,               Assistant  Secretary  and  Director  of  Centennial  Asset  $10,001 -       Over $100,000
Trustee since 1998             Management   Corporation   (December   1991-April   1999);  $50,000
Age: 69                        President,  Treasurer and Director of  Centennial  Capital
                               Corporation (June 1989-April 1999); Chief
                               Executive Officer and Director of MultiSource
                               Services, Inc. (March 1996-April 1999); Mr. Bowen
                               held several positions with the Manager and with
                               subsidiary or affiliated companies of the Manager
                               (September 1987-April 1999). Oversees 38
                               portfolios in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Edward L. Cameron,             Member  of  The  Life  Guard  of  Mount   Vernon   (George  $10,001 -       Over $100,000
Trustee since 2000             Washington  historical  site) (since June 2000);  Director  $50,000
Age: 67                        of Genetic  ID, Inc.  (biotech  company)  (March  2001-May
                               2002); Partner at PricewaterhouseCoopers LLP
                               (accounting firm) (July 1974-June 1999); Chairman
                               of Price Waterhouse LLP Global Investment
                               Management Industry Services Group (July
                               1994-June 1998). Oversees 38 portfolios in the
                               OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Jon S. Fossel,                 Director of UNUMProvident  (insurance company) (since June  $0              Over $100,000
Trustee since 1990             2002);  Director  of  Northwestern  Energy  Corp.  (public
Age: 63                        utility  corporation)  (since November 2004);  Director of
                               P.R. Pharmaceuticals (October 1999-October 2003);
                               Director of Rocky Mountain Elk Foundation
                               (non-profit organization) (February 1998-February
                               2003); Chairman and Director (until October 1996)
                               and President and Chief Executive Officer (until
                               October 1995) of the Manager; President, Chief
                               Executive Officer and Director of the following:
                               Oppenheimer Acquisition Corp. ("OAC") (parent
                               holding company of the Manager), Shareholders
                               Services, Inc. and Shareholder Financial
                               Services, Inc. (until October 1995). Oversees 38
                               portfolios in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Sam Freedman,                  Director  of  Colorado  Uplift  (charitable  organization)  $0              Over $100,000
Trustee since 1996             (since   September   1984).   Mr.  Freedman  held  several
Age: 65                        positions   with  the  Manager  and  with   subsidiary  or
                               affiliated  companies of the Manager (until October 1994).
                               Oversees 38 portfolios in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Beverly L. Hamilton,           Trustee of Monterey  Institute for  International  Studies  $0              Over $100,000
Trustee since 2002             (educational    organization)   (since   February   2000);
Age: 59                        Director  of  The  California   Endowment   (philanthropic
                               organization) (since April 2002); Director of
                               Community Hospital of Monterey Peninsula (since
                               February 2002); Director of American Funds'
                               Emerging Markets Growth Fund, Inc. (mutual fund)
                               (since October 1991); President of ARCO
                               Investment Management Company (February
                               1991-April 2000); Member of the investment
                               committees of The Rockefeller Foundation and The
                               University of Michigan; Advisor at Credit Suisse
                               First Boston's Sprout venture capital unit
                               (venture capital fund) (1994-January 2005);
                               Trustee of MassMutual Institutional Funds
                               (investment company) (1996-June 2004); Trustee of
                               MML Series Investment Fund (investment company)
                               (April 1989-June 2004); Member of the investment
                               committee of Hartford Hospital (2000-2003); and
                               Advisor to Unilever (Holland) pension fund
                               (2000-2003). Oversees 38 portfolios in the
                               OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Robert J. Malone,              Director of Jones  International  University  (educational  $0              Over $100,000
Trustee since 2002             organization)   (since  August  2005);   Chairman,   Chief
Age: 61                        Executive  Officer  and  Director of Steele  Street  State
                               Bank  (commercial  banking) (since August 2003);  Director
                               of  Colorado  UpLIFT  (charitable   organization)   (since
                               1986);   Trustee  of  the  Gallagher   Family   Foundation
                               (non-profit  organization)  (since 2000);  Former Chairman
                               of U.S.  Bank-Colorado  (subsidiary  of U.S.  Bancorp  and
                               formerly  Colorado  National Bank) (July 1996-April 1999);
                               Director  of   Commercial   Assets,   Inc.   (real  estate
                               investment   trust)   (1993-2000);   Director   of   Jones
                               Knowledge,  Inc.  (2001-July  2004);  and Director of U.S.
                               Exploration,    Inc.    (oil    and    gas    exploration)
                               (1997-February   2004).  Oversees  38  portfolios  in  the
                               OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
F. William Marshall, Jr.,      Trustee of MassMutual  Select Funds  (formerly  MassMutual  $0              Over $100,000
Trustee since 2000             Institutional  Funds)  (investment  company)  (since 1996)
Age: 63                        and  MML  Series  Investment  Fund  (investment   company)
                               (since   1996),   the   Springfield   Library  and  Museum
                               Association  (museums)  (since  1995)  and  the  Community
                               Music School of  Springfield  (music school) (since 1996);
                               Chairman  and  Trustee  (since  2003) and  Chairman of the
                               Investment   Committee   (since  1994)  of  the  Worcester
                               Polytech  Institute  (private  university);  President and
                               Treasurer  of the  SIS  Funds  (private  charitable  fund)
                               (since  January  1999);  Chairman  of SIS &  Family  Bank,
                               F.S.B. (formerly SIS Bank) (commercial bank)
(January
                               1999-July  1999);  Member of the  Investment  Committee of
                the Community Foundation of Western Massachusetts
              (1998-2003); and Executive Vice President of Peoples
            Heritage Financial Group, Inc. (commercial bank) (January
                 1999-July 1999). Oversees 40 portfolios in the
                               OppenheimerFunds complex.*
------------------------------ ----------------------------------------------------------- --------------- ----------------
*    Includes two open-end investment companies: MassMutual Select Funds and MML
     Series Investment Fund. In accordance with the instructions for Form N-1A,
     for purposes of this section only, MassMutual Select Funds and MML Series
     Investment Fund are included in the "Fund Complex." The Manager does not
     consider MassMutual Select Funds and MML Series Investment Fund to be part
     of the OppenheimerFunds' "Fund Complex" as that term may be otherwise
     interpreted.

The address of Mr. Murphy is Two World Financial Center, 225 Liberty Street,
11th Floor, New York, New York 10281-1008. Mr. Murphy serves as a Trustee for an
indefinite term and as an officer for an indefinite term, or until his
resignation, retirement, death or removal. 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 director or trustee.

---------------------------------------------------------------------------------------------------------------------------
                                              Interested Trustee and Officer
---------------------------------------------------------------------------------------------------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
Name,                          Principal Occupation(s) During the Past 5 Years; Other      Dollar Range    Aggregate
                                                                                                           Dollar Range
                                                                                                           Of Shares
Position(s) Held with the                                                                  of Shares       Beneficially
Fund,                                                                                      Beneficially    Owned in All
Length of Service,             Trusteeships/Directorships Held; Number of Portfolios in    Owned in the    Supervised
Age                            the Fund Complex Currently Overseen                         Fund            Funds
------------------------------ ----------------------------------------------------------- --------------- ----------------
------------------------------ ----------------------------------------------------------- --------------------------------
                                                                                               As of December 31, 2004
------------------------------ ----------------------------------------------------------- --------------------------------
------------------------------ ----------------------------------------------------------- --------------- ----------------
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  director  or  trustee  of  other
Age: 56                        Oppenheimer  funds;  President  and Director of OAC and of
                               Oppenheimer Partnership Holdings, Inc. (holding
                               company subsidiary of the Manager) (since July
                               2001); Director of OppenheimerFunds Distributor,
                               Inc. (subsidiary of the Manager) (since November
                               2001); Chairman and Director of Shareholder
                               Services, Inc. and of Shareholder Financial
                               Services, Inc. (transfer agent subsidiaries of
                               the Manager) (since July 2001); President and
                               Director of OppenheimerFunds Legacy Program
                               (charitable trust program established by the
                               Manager) (since July 2001); 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 2001) and
                               Director (since July 2001) of Oppenheimer Real
                               Asset Management, Inc.; Executive Vice President
                               of Massachusetts Mutual Life Insurance Company
                               (OAC's parent company) (since February 1997);
                               Director of DLB Acquisition Corporation (holding
                               company parent of Babson Capital Management LLC)
                               (since June 1995); Member of the Investment
                               Company Institute's Board of Governors (since
                               October 3, 2003); Chief Operating Officer of the
                               Manager (September 2000-June 2001); President and
                               Trustee of MML Series Investment Fund and
                               MassMutual Select Funds (open-end investment
                               companies) (November 1999-November 2001);
                               Director of C.M. Life Insurance Company
                               (September 1999-August 2000); President, Chief
                               Executive Officer and Director of MML Bay State
                               Life Insurance Company (September 1999-August
                               2000); Director of Emerald Isle Bancorp and
                               Hibernia Savings Bank (wholly-owned subsidiary of
                               Emerald Isle Bancorp) (June 1989-June 1998).
                               Oversees 77 portfolios as an officer and director
                               or trustee and 10 additional portfolios as an
                               officer in the OppenheimerFunds complex.
------------------------------ ----------------------------------------------------------- --------------- ----------------

       The addresses of the officers in the chart below are as follows: for Messrs. Gillespie, Kourkoulakos and Zack and Ms. and
Bloomberg, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Petersen, Vandehey, Vottiero,
and Wixted and Ms. Ives, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each officer serves for an indefinite term or until his
or her resignation, retirement death or removal.

---------------------------------------------------------------------------------------------------------------------------
                                                Other Officers of the Fund
---------------------------------------------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Name,                                  Principal Occupation(s) During Past 5 Years
Position(s) Held with the 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: 39
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Mark S. Vandehey,                      Senior Vice  President  and Chief  Compliance  Officer of the Manager  (since March
Vice President and Chief Compliance    2004);  Vice President of  OppenheimerFunds  Distributor,  Inc.,  Centennial  Asset
Officer since 2004                     Management  Corporation and  Shareholder  Services,  Inc.  (since June 1983);  Vice
Age: 55                                President and Director of Internal Audit of the Manager  (1997-February  2004).  An
                                       officer of 87 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Brian W. Wixted,                       Senior Vice  President and Treasurer of the Manager  (since March 1999);  Treasurer
Treasurer since 1999                   of the following:  HarbourView Asset Management Corporation,  Shareholder Financial
Age: 46                                Services,  Inc.,  Shareholder  Services,  Inc.,  Oppenheimer  Real Asset Management
                                       Corporation, and Oppenheimer Partnership
                                       Holdings, Inc. (since March 1999), OFI
                                       Private Investments, Inc. (since March
                                       2000), OppenheimerFunds International
                                       Ltd. and OppenheimerFunds plc (since May
                                       2000), OFI Institutional Asset
                                       Management, Inc. (since November 2000),
                                       and OppenheimerFunds Legacy Program
                                       (since June 2003); Treasurer and Chief
                                       Financial Officer of OFI Trust Company
                                       (trust company subsidiary of the Manager)
                                       (since May 2000); Assistant Treasurer of
                                       the following: OAC (since March 1999),
                                       Centennial Asset Management Corporation
                                       (March 1999-October 2003) and
                                       OppenheimerFunds Legacy Program (April
                                       2000-June 2003); Principal and Chief
                                       Operating Officer of Bankers Trust
                                       Company-Mutual Fund Services Division
                                       (March 1995-March 1999). An officer of 87
                                       portfolios in the OppenheimerFunds
                                       complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Brian Petersen,                        Assistant  Vice  President of the Manager  (since August  2002);  Manager/Financial
Assistant Treasurer since 2004         Product  Accounting  of the Manager  (November  1998-July  2002).  An officer of 87
Age: 35                                portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Philip F. Vottiero,                    Vice   President/Fund   Accounting  of  the  Manager   (since  March  2002);   Vice
Assistant Treasurer since 2002         President/Corporate  Accounting  of  the  Manager  (July  1999-March  2002);  Chief
Age: 42                                Financial Officer of Sovlink  Corporation  (April 1996-June 1999). An officer of 87
                                       portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Robert G. Zack,                        Executive  Vice  President  (since  January 2004) and General  Counsel (since March
Vice President & Secretary             2002) of the  Manager;  General  Counsel  and  Director of the  Distributor  (since
since 2001                             December 2001);  General Counsel of Centennial Asset Management  Corporation (since
Age: 57                                December  2001);  Senior Vice President and General  Counsel of  HarbourView  Asset
                                       Management  Corporation (since December 2001); Secretary and General Counsel of OAC
                                       (since  November 2001);  Assistant  Secretary  (since  September 1997) and Director
                                       (since November 2001) of OppenheimerFunds  International Ltd. and  OppenheimerFunds
                                       plc; Vice President and Director of Oppenheimer  Partnership Holdings,  Inc. (since
                                       December  2002);  Director  of  Oppenheimer  Real  Asset  Management,  Inc.  (since
                                       November 2001); Senior Vice President,  General Counsel and Director of Shareholder
                                       Financial  Services,  Inc. and  Shareholder  Services,  Inc. (since December 2001);
                                       Senior Vice  President,  General  Counsel and Director of OFI Private  Investments,
                                       Inc.  and  OFI  Trust   Company   (since   November   2001);   Vice   President  of
                                       OppenheimerFunds  Legacy  Program  (since June 2003);  Senior  Vice  President  and
                                       General Counsel of OFI Institutional Asset Management,  Inc. (since November 2001);
                                       Director of  OppenheimerFunds  (Asia) Limited (since  December  2003);  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  the   following:   Shareholder   Services,   Inc.   (May
                                       1985-November 2001),  Shareholder Financial Services,  Inc. (November 1989-November
                                       2001), and OppenheimerFunds  International Ltd. (September  1997-November 2001). An
                                       officer of 87 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------
-------------------------------------- ------------------------------------------------------------------------------------
Lisa I. Bloomberg,                     Vice President and Associate  Counsel of the Manager  (since May 2004);  First Vice
Assistant Secretary since 2004         President (April 2001-April 2004),  Associate General Counsel (December  2000-April
Age: 37                                2004),  Corporate  Vice  President  (May  1999-April  2001) and  Assistant  General
                                       Counsel  (May  1999-December  2000)  of  UBS  Financial  Services  Inc.  (formerly,
                                       PaineWebber  Incorporated).  An officer of 87  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: 40                                (since October 2003) of the  Distributor;  Assistant  Secretary of Centennial Asset
                                       Management   Corporation   (since  October  2003);  Vice  President  and  Assistant
                                       Secretary of  Shareholder  Services,  Inc.  (since  1999);  Assistant  Secretary of
                                       OppenheimerFunds  Legacy Program and Shareholder  Financial  Services,  Inc. (since
                                       December 2001);  Assistant  Counsel of the Manager (August  1994-October  2003). An
                                       officer of 87 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); First Vice President  (2000-September 2004), Director  (2000-September 2004)
Age: 41                                and Vice President (1998-2000) of Merrill Lynch Investment  Management.  An officer
                                       of 87 portfolios in the OppenheimerFunds complex.
-------------------------------------- ------------------------------------------------------------------------------------

|X| Remuneration of the Officers and Trustees. The officers and the interested
Trustee of the Fund, who are affiliated with the Manager, receive no salary or
fee from the Fund. The Independent Trustees received the compensation shown
below from the Fund for serving as a Trustee and member of a committee (if
applicable), with respect to the Fund's fiscal year ended June 30, 2005. The
total compensation, including accrued retirement benefits, from the Fund and
fund complex represents compensation received for serving as a Trustee and
member of a committee (if applicable) of the Boards of the Fund and other funds
in the OppenheimerFunds complex during the calendar year ended December 31,
2004.








------------------------------------------------ ---------------------------------- ---------------------------------
Name of Trustee and Other Fund Position(s) (as    Aggregate Compensation From the     Total Compensation From the

applicable) Fund(1) Fund and Fund Complex(2)
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
William L. Armstrong                                          $5,848                            $178,000
Chairman of the Board and
Governance Committee Member
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
Robert G. Avis                                                $3,892                            $118,500
Review Committee Member
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
George C. Bowen                                               $3,892                            $118,500
Audit Committee Member
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
Edward L. Cameron                                             $4,468                            $136,000
Audit Committee Chairman
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
Jon S. Fossel                                                 $4,468                            $136,000
Review Committee Chairman
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
Sam Freedman                                                  $3,892                            $118,500
Review Committee Member
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
Beverly Hamilton
Review Committee Member and                                  $3,913(3)                        $152,355(5)
Governance Committee Member
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
Robert J. Malone
Governance Committee Chairman and                            $4,394(4)                          $121,726
Audit Committee Member
------------------------------------------------ ---------------------------------- ---------------------------------
------------------------------------------------ ---------------------------------- ---------------------------------
F. William Marshall, Jr.
Audit Committee Member and                                    $3,892                          $167,500(6)
Governance Committee Member
------------------------------------------------ ---------------------------------- ---------------------------------
1.   Aggregate Compensation from Fund includes fees and deferred compensation,
     if any.
2.   In accordance with SEC regulations, for purposes of this section only,
     "Fund Complex" includes the Oppenheimer funds, the MassMutual Institutional
     Funds, the MassMutual Select Funds and the 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 following:
     MassMutual Premier International Equity Fund, MassMutual Premier Main
     Street Fund, MassMutual Premier Strategic Income Fund, MassMutual Premier
     Capital Appreciation Fund, and MassMutual Premier Global Fund. The Manager
     does not consider MassMutual Institutional Funds, MassMutual Select Funds
     and MML Series Investment Fund to be part of the OppenheimerFunds' "Fund
     Complex" as that term may be otherwise interpreted.
3.   Includes $3,913 deferred by Ms. Hamilton under the "Deferred Compensation
     Plan" described below. 4. Includes $4,394 deferred by Mr. Malone under the
     "Deferred Compensation Plan" described below. 5. Includes $36,654 deferred
     by Ms. Hamilton under a deferred compensation plan for serving as a Trustee
     for MassMutual
     Institutional Funds and MML Series Investment Fund (until June 30, 2004).
6.   Includes $49,000 compensation paid to Mr. Marshall for serving as a Trustee
     for MassMutual Select Funds and MML Series Investment Fund.

|X| Deferred Compensation Plan For Trustees. The Board of Trustees has adopted a
Deferred Compensation Plan for Independent 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 Trustees. The amount paid to
the Trustees under the plan will be determined based upon the amount of
compensation deferred and the performance of the selected funds.

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

|X| Major Shareholders. As of September 30, 2005, the only persons or entities
who owned of record or were known by the Fund to own beneficially 5% or more of
any class of the Fund's outstanding shares were:


         Citigroup Global Markets Inc., Attn.: Cindy Tempesta,  7th Fl., 333 West 34th Street, New York, NY 10001-2483,  which
         owned 884,570.800 Class C shares (representing approximately 6.43% of the Fund's then outstanding Class C shares).

         Orchard Trust Company LLC, FBO Oppen. RecordkeeperPro, 8515 E. Orchard
         Road, Greenwood Village, Colorado 80111-500, which owned 89,993.543
         Class N shares ( representing approximately 5.73% of the Fund's then
         outstanding Class N shares).

         Massachusetts Mutual Life Insurance Company, Attn.: N225, Separate
         Investment Account, 1295 State Street, Springfield, Massachusetts
         01111-0001 which owned 3,454,270.193 Class Y shares (representing
         approximately 65.78% of the Fund's then outstanding Class Y shares).

         Oppenheimer Portfolio Series, Moderate Investor, Attn.: FPA Trade
         Settle (2-FA), 6803 S. Tucson Way, Centennial Colorado, 80112-3924,
         which owned 987,536.063 Class Y shares (representing approximately
         18.18% of the Fund's then outstanding Class Y shares.)

         Oppenheimer Portfolio Series, Conservative Investor, Attn.: FPA Trade
         Settle (2-FA), 6803 S. Tucson Way, Centennial Colorado, 80112-3924,
         which owned 494,851.817 Class Y shares (representing approximately
         9.42% of the Fund's then outstanding Class Y shares.)

         Taynik & Co., C/O Investors Bank & Trust, FPG90, P.O. Box 9130, Boston,
         Massachusetts, 02117-9130, which owned 314,307.208 Class Y shares
         (representing approximately 5.98% 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 the Manager where a directly-controlled affiliate of
the Manager 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 the independent registered public
              accounting firm, unless circumstances indicate otherwise.
o             In general, the Fund opposes "anti-takeover" proposals and
              supports the 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 filing 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.
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
                2003                                                      $8,956,614
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
                2004                                                      $10,492,559
------------------------------------- ---------------------------------------------------------------------------
------------------------------------- ---------------------------------------------------------------------------
                2005                                                      $9,926,511
------------------------------------- ---------------------------------------------------------------------------

         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.

     Portfolio   Manager.   The  Fund's   portfolio   is  managed  by  Dimitrios
Kourkoulakos  (referred  to  as  the  "Portfolio  Manager").  He is  the  person
responsible for the day-to-day management of the Fund's investments.

     Other Accounts  Managed by the Portfolio  Manager.  In addition to managing
the Fund's investment portfolio,  Mr. Kourkoulakos also manages other investment
portfolios  and other accounts on behalf of the Manager or its  affiliates.  The
following table provides information regarding the other portfolios and accounts
managed  by  Mr.   Kourkoulakos   as  of  June  30,  2005.   No  account  has  a
performance-based advisory fee:


                       Registered Investment Other Pooled
                                                       Companies         Investment Vehicles    Other Accounts
         --------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------
         Accounts Managed                                  2                    None                 None
         --------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------
         Total Assets Managed*                         $2,133.3                 None                 None
         --------------------------------------------------------------------------------------------------------
         *  In millions.

       As indicated above, the Portfolio Manager also manages other funds and
accounts. Potentially, at times, those responsibilities could conflict with the
interests of the Fund. That may occur whether the investment objectives and
strategies of the other funds and accounts are the same as, or different from,
the Fund's investment objectives and strategies. For example the Portfolio
Manager may need to allocate investment opportunities between the Fund and
another fund or account having similar objectives or strategies, or he may need
to execute transactions for another fund or account that could have a negative
impact on the value of securities held by the Fund. Not all funds and accounts
advised by the Manager have the same management fee. If the management fee
structure of another fund or account is more advantageous to the Manager than
the fee structure of the Fund, the Manager could have an incentive to favor the
other fund or account. However, the Manager's compliance procedures and Code of
Ethics recognize the Manager's fiduciary obligation to treat all of its clients,
including the Fund, fairly and equitably, and are designed to preclude the
Portfolio Manager from favoring one client over another. It is possible, of
course, that those compliance procedures and the Code of Ethics may not always
be adequate to do so. At different times, the Fund's Portfolio Manager may
manage other funds or accounts with investment objectives and strategies similar
to those of the Fund, or he may manage funds or accounts with different
investment objectives and strategies.


     Compensation  of the Portfolio  Manager.  The Fund's  Portfolio  Manager is
employed and  compensated  by the  Manager,  not the Fund.  Under the  Manager's
compensation  program for its portfolio managers and portfolio  analysts,  their
compensation  is based  primarily on the investment  performance  results of the
funds and accounts  they  manage,  rather than on the  financial  success of the
Manager.  This is  intended  to align  the  portfolio  managers'  and  analysts'
interests  with the success of the funds and accounts and their  investors.  The
Manager's  compensation  structure  is  designed  to attract  and retain  highly
qualified investment management  professionals and to reward individual and team
contributions  toward  creating  shareholder  value.  As of June 30,  2005,  the
Portfolio Manager's  compensation consisted of three elements: a base salary, an
annual discretionary bonus and eligibility to participate in long-term awards of
options and  appreciation  rights in regard to the common stock of the Manager's
holding  company  parent.  Senior  portfolio  managers  may also be  eligible to
participate in the Manager's deferred compensation plan.

         To help the Manager attract and retain talent, the base pay component
of each portfolio manager is reviewed regularly to ensure that it reflects the
performance of the individual, is commensurate with the requirements of the
particular portfolio, reflects any specific competence or specialty of the
individual manager, and is competitive with other comparable positions. The
annual discretionary bonus is determined by senior management of the Manager and
is based on a number of factors, including a fund's pre-tax performance for
periods of up to five years, measured against an appropriate benchmark selected
by management. The Lipper benchmark with respect to the Fund is Lipper - High
Current Yield Fund. Other factors include management quality (such as style
consistency, risk management, sector coverage, team leadership and coaching) and
organizational development. The Portfolio Manager's compensation is not based on
the total value of the Fund's portfolio assets, although the Fund's investment
performance may increase those assets. The compensation structure is also
intended to be internally equitable and serve to reduce potential conflicts of
interest between the Fund and other funds managed by the Portfolio Manager. The
compensation structure of the other funds managed by the Portfolio Manager is
the same as the compensation structure of the Fund, described above.

     Ownership of Fund Shares.  As of June 30, 2005,  the Portfolio  Manager did
not beneficially own any shares of the Fund.

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

      Rule 12b-1 under the Investment Company Act prohibits 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 adviser 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 broaden the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the 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 Fund(1)
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2003                                             $22,536
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2004                                             $33,782
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2005                                            $45,616(2)
     ---------------------------------- -----------------------------------------------------------------
1.   Amounts do not include spreads or commissions on principal transactions on
     a net trade basis.
2.   In the fiscal year ended 6/30/05, there were no transactions directed to
     brokers for research services and no commissions paid to broker-dealers for
     those 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          Distributor(1)
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2003             $2,298,314               $365,916
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2004             $2,133,450               $568,298
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2005             $1,673,059               $478,278
--------------- ----------------------- -----------------------
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    Concessions on Class
Ended 6/30:     A Shares Advanced by   B Shares Advanced by    C Shares Advanced by    N Shares Advanced by
                Distributor(1)         Distributor(1)          Distributor(1)          Distributor(1)
--------------- ---------------------- ----------------------- ----------------------- -----------------------
--------------- ---------------------- ----------------------- ----------------------- -----------------------
     2003             $871,461               $1,777,505               $340,624                $31,482
--------------- ---------------------- ----------------------- ----------------------- -----------------------
--------------- ---------------------- ----------------------- ----------------------- -----------------------
     2004             $297,863               $1,247,144               $362,631                $41,200
--------------- ---------------------- ----------------------- ----------------------- -----------------------
--------------- ---------------------- ----------------------- ----------------------- -----------------------
     2005             $148,988                $652,892                $142,195                $31,458
--------------- ---------------------- ----------------------- ----------------------- -----------------------
1.   The Distributor advances concession payments to financial intermediaries
     for certain sales of Class A shares and for sales of Class B, Class C and
     Class N shares from its own resources at the time of sale.

--------------- ---------------------- ----------------------- ----------------------- -----------------------
Fiscal    Year  Class A Contingent     Class B Contingent      Class C Contingent      Class N Contingent
                Deferred Sales         Deferred Sales          Deferred Sales          Deferred Sales
Ended 6/30:     Charges Retained by    Charges Retained by     Charges Retained by     Charges Retained by
                Distributor            Distributor             Distributor             Distributor
--------------- ---------------------- ----------------------- ----------------------- -----------------------
--------------- ---------------------- ----------------------- ----------------------- -----------------------
     2003              $76,355               $1,319,090               $32,756                  $5,858
--------------- ---------------------- ----------------------- ----------------------- -----------------------
--------------- ---------------------- ----------------------- ----------------------- -----------------------
     2004             $220,234                $983,091                $24,734                 $12,196
--------------- ---------------------- ----------------------- ----------------------- -----------------------
--------------- ---------------------- ----------------------- ----------------------- -----------------------
     2005              $10,421                $741,637                $39,121                  $4,826
--------------- ---------------------- ----------------------- ----------------------- -----------------------


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 Trustees(1), 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.

         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 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 period 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.

|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
recipients periodically 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 periodically 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, 2005, payments under the Class A
plan totaled $2,696,103, of which $2,058 was retained by the Distributor under
the arrangement described above, regarding grandfathered retirement accounts,
and included $109,886 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 periodic
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 periodically 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 registered
broker-dealer. 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 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 periodically in lieu of
paying the sales concession and service fee in advance at the time of purchase.

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

The Distributor's actual expenses in selling Class B, Class C and Class N shares
may be more than the payments it receives from the contingent deferred sales
charges collected on redeemed shares and from the Fund under the plans. If
either the Class B, Class C or Class N plan is terminated by the Fund, the Board
of 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 6/30/05
---------------------------------------------------------------------------------------------------------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
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               $2,786,128             $2,145,032(1)            $13,227,741                5.70%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class C Plan               $1,490,963              $232,004(2)              $3,717,622                2.77%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class N Plan                $68,758                $43,734(3)                $190,592                 1.19%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
1. Includes $25,883 paid to an affiliate of the Distributor's parent company. 2.
Includes $46,381 paid to an affiliate of the Distributor's parent company. 3.
Includes $3,085 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.

Payments to Fund Intermediaries

         Financial intermediaries may receive various forms of compensation or
reimbursement from the Fund in the form of 12b-1 plan payments as described in
the preceding section of this Statement of Additional Information ("SAI"). They
may also receive reallowance of commissions from the Distributor, derived from
sales charges paid by the clients of the financial intermediary, also as
described in this SAI. Additionally, the Manager and/or the Distributor
(including their affiliates) may make payments to financial intermediaries in
connection with their offering and selling shares of the Fund and other
Oppenheimer funds, providing marketing or promotional support, transaction
processing and/or administrative services. Among the financial intermediaries
that may receive these payments are brokers and dealers who sell and/or hold
shares of the Fund, banks (including bank trust departments), registered
investment advisers, insurance companies, retirement plan and qualified tuition
program administrators, third party administrators, and other institutions that
have selling, servicing or similar arrangements with the Manager or Distributor.
The payments to intermediaries vary by the types of product sold, the features
of the Fund share class and the role played by the intermediary.

         Possible types of payments to financial intermediaries include, without
limitation, those discussed below.

o Payments made by the Fund, or by an investor buying or selling shares of the
Fund may include:

o                   depending on the share class that the investor selects,
                    contingent deferred sales charges or initial front-end sales
                    charges, all or a portion of which front-end sales charges
                    are payable by the Distributor to financial intermediaries
                    as sales commissions (see "About Your Account" in the
                    Prospectus);
o                   ongoing asset-based payments attributable to the share class
                    selected, including fees payable under the Fund's
                    distribution and/or service plans adopted under Rule 12b-1
                    under the Investment Company Act, which are paid from the
                    Fund's assets and allocated to the class of shares to which
                    the plan relates (see "About the Fund -- Distribution and
                    Service Plans" above);
o                   shareholder servicing payments for providing omnibus
                    accounting, recordkeeping, networking, sub-transfer agency
                    or other administrative or shareholder services, including
                    retirement plan and 529 plan administrative services fees,
                    which are paid from the assets of a Fund as reimbursement to
                    the Manager or Distributor for expenses they incur on behalf
                    of the Fund.

o            Payments made by the Manager or Distributor out of their respective
             resources and assets, which may include profits the Manager derives
             from investment advisory fees paid by the Fund. These payments are
             made at the discretion of the Manager and/or the Distributor. These
             payments, often referred to as "revenue sharing" payments, may be
             in addition to the payments by the Fund listed above.

o                   These types of payments may reflect compensation for
                    marketing support, support provided in offering the Fund or
                    other Oppenheimer funds through certain trading platforms
                    and programs, transaction processing or other services;
o                   The Manager and Distributor each may also pay other
                    compensation to the extent the payment is not prohibited by
                    law or by any self-regulatory agency, such as the NASD.
                    Payments are made based on the guidelines established by the
                    Manager and Distributor, subject to applicable law.

         These payments may provide an incentive to financial intermediaries to
actively market or promote the sale of shares of the Fund or other Oppenheimer
funds, or to support the marketing or promotional efforts of the Distributor in
offering shares of the Fund or other Oppenheimer funds. In addition, some types
of payments may provide a financial intermediary with an incentive to recommend
the Fund or a particular share class. Financial intermediaries may earn profits
on these payments, since the amount of the payment may exceed the cost of
providing the service. Certain of these payments are subject to limitations
under applicable law. Financial intermediaries may categorize and disclose these
arrangements to their clients and to members of the public in a manner different
from the disclosures in the Fund's prospectus and this SAI. You should ask your
financial intermediary for information about any payments it receives from the
Fund, the Manager or the Distributor and any services it provides, as well as
the fees and commissions it charges.

         Although brokers or dealers that sell Fund shares may also act as a
broker or dealer in connection with the execution of the purchase or sale of
portfolio securities by the Fund or other Oppenheimer funds, a financial
intermediary's sales of shares of the Fund or such other Oppenheimer funds is
not a consideration for the Manager when choosing brokers or dealers to effect
portfolio transactions for the Fund or such other Oppenheimer funds.

         Revenue sharing payments can pay for distribution-related or asset retention items including, without limitation,

o            transactional support, one-time charges for setting up access for
             the Fund or other Oppenheimer funds on particular trading systems,
             and paying the intermediary's networking fees;
o            program support, such as expenses related to including the
             Oppenheimer funds in retirement plans, college savings plans,
             fee-based advisory or wrap fee programs, fund "supermarkets", bank
             or trust company products or insurance companies' variable annuity
             or variable life insurance products;
o            placement on the dealer's list of offered funds and providing
             representatives of the Distributor with access to a financial
             intermediary's sales meetings, sales representatives and management
             representatives.

         Additionally, the Manager or Distributor may make payments for firm
support, such as business planning assistance, advertising, and educating a
financial intermediary's sales personnel about the Oppenheimer funds and
shareholder financial planning needs.

         For the year ended December 31, 2004, the following financial
intermediaries that are broker-dealers offering shares of the Oppenheimer funds,
and/or their respective affiliates, received revenue sharing or similar
distribution-related payments from the Manager or Distributor for marketing or
program support:

   ADVEST INC.                                                AEGON
   A.G. Edwards & Sons, Inc                                   AIG Network
   Allianz Life Insurance Company                             Allstate Life Insurance Company
   Ameritas Life Insurance Corporation                        American Centurian Life Insurance
   American Enterprise Life Insurance                         American Express Financial Advisors Inc.
   American Portfolios                                        Annuity Investors Life
   AXA Advisors                                               Banc One Securities Corporation
   Bank of New York                                           Cadaret Grant & Co. Inc.
   Charter One Securities Inc.                                Chase Investment Services
   Citigroup Financial Network                                CitiStreet
   Citizens Bank of Rhode Island                              CJM Planning Corp.
   Columbus Life Insurance Company                            Commonwealth Financial Network
   CUNA Brokerage Services Inc.                               CUSO Financial Services, L.P.
   Federal Kemper                                             First Allied Securities Inc
   First Global Capital                                       GE Financial Assurance
   GlenBrook Life and Annuity Co.                             Great West Life & Annuity Co., Inc.
   HD Vest                                                    Hewitt Associates
   HSBC Brokerage (USA) Inc.                                  ING Network
   Jefferson Pilot Securities Corporation                     John Hancock Variable Life Insurance Company
   Kemper Life Assurance Company                              Legend Equities Corporation
   Legg Mason Wood Walker, Incorporated                       Lincoln National Life Insurance Company
   Lincoln Financial Advisors Corporation                     Lincoln Investment Planning
   Linsco/Private Ledger Corp.                                MassMutual Financial Group and affiliates
   McDonald Investments, Inc.                                 Merrill Lynch & Co., Inc. and affiliates
   Metlife and affiliates                                     Minnesota Life Insurance Company
   Morgan Stanley DW Inc.                                     NPH Network
   Nationwide and affiliates                                  New York Life Securities, LLC
   PacLife Network                                            Park Avenue Securities LLC
   Planmember Securities Corporation                          Prime Capital Services, Inc.
   Princor Financial Services Corporation                     Protective Life Insurance Co.
   Provident Mutual Insurance Company                         Prudential Investment Management Services LLC
   Raymond James Financial Services, Inc.                     Raymond James & Associates, Inc.
   RBC Dain Rauscher Inc.                                     Securities America, Inc.
   Security Benefit Life Insurance Company                    Signator Investments
   Sun Life Insurance Company                                 Suntrust Investment Services, Inc.
   Tower Square Securities, Inc                               Travelers Life & Annuity Co., Inc.
   UBS Financial Services Inc.                                Union Central Life Insurance Company
   Wachovia Securities LLC                                    Wells Fargo Investments, LLC

         For the year ended December 31, 2004, the following firms, which in
some cases are broker-dealers, received payments from the Manager or Distributor
for administrative or other services provided (other than revenue sharing
arrangements), as described above:

   ABN AMRO                                                   ADP
   Alliance Benefit Group                                     AMVESCAP Retirement Plans
   American Stock & Transfer                                  Baden Retirement
   BCG                                                        Benefit Administration Co., LLC
   Benefit Administration, Inc.                               Benefit Plans Administrative Services
   Benetech, Inc.                                             BISYS Retirement Services
   Boston Financial Data Services                             Ceridian
   Circle Trust Company                                       Citigroup
   CitiStreet                                                 CPI
   Daily Access.Com, Inc.                                     Digital Retirement Solutions
   Dyatech                                                    ERISA Administrative Services, Inc.
   ExpertPlan.com                                             FAScore
   FBD Consulting                                             Federated Investors
   Fidelity Institutional                                     First National Bank of Omaha
   First Trust Corp.                                          Franklin Templeton
   Geller Group                                               Gold K
   Great West Financial Services Equities, Inc.               Hartford Life Insurance Co.
   ICMA - RC Services                                         In West Pension Mgmt
   Independent Plan Coordinators                              Ingham Group
   Interactive Retirement Systems, Ltd.                       Invesmart, Inc.
   Kaufman & Goble                                            Leggette & Co., Inc.
   Manulife                                                   MassMutual Financial Group and affiliates
   Matrix Settlement & Clearance Services                     Mellon HR Solutions
   Merrill Lynch & Co., Inc.                                  Metavante
   Metlife Securities Inc.                                    MFS Investment Management
   Mid Atlantic Capital Corp.                                 Milliman USA
   Morgan Stanley DW Inc.                                     National City Bank
   National Financial Services Corp.                          National Investors Services Corp.
   Nationwide Investment Service Corp.                        New York Life Investment Management, Inc.
   Northwest Plan Services                                    Pension Administration and Consulting
   PFPC, Inc.                                                 PSMI Group
   Putnam Fiduciary Trust Company                             Quads Trust Company
   RSM McGladrey                                              SAFECO
   Charles Schwab & Co., Inc.                                 Security Trust Company
   Sentinel / National Life                                   Standard Insurance Co
   Stanley, Hunt, Dupree & Rhine                              State Street Bank & Trust Company
   Suntrust Investment Services, Inc.                         Swerdlin & Co.
   T. Rowe Price Brokerage Services, L.P.                     Taylor, Perky & Parker, LLC
   The 401k Company                                           The Investment Center, Inc.
   Trusource                                                  Union Bank and Trust Co.
   USI Consulting Group                                       Vanguard Group
   Web401K.com                                                Wilmington Trust Company

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how total
returns are calculated is set forth below. The charts below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.225.5677
or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

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

         Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:
o             Yields and total returns measure the performance of a hypothetical
              account in the Fund over various periods and do not show the
              performance of each shareholder's account. Your account's
              performance will vary from the model performance data if your
              dividends are received in cash, or you buy or sell shares during
              the period, or you bought your shares at a different time and
              price than the shares used in the model.
o The Fund's performance returns may 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 6/30/05
---------------------------------------------------------------------------------------------------
----------------- --------------------------------------- -----------------------------------------
Class of Shares             Standardized Yield                         Dividend Yield
----------------- --------------------------------------- -----------------------------------------
----------------- ------------------- ------------------- --------------------- -------------------
                       Without              After               Without               After
                        Sales               Sales                Sales                Sales
                        Charge              Charge               Charge               Charge
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class A                 6.53%               6.21%                7.11%                6.77%
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class B                 5.74%                N/A                 6.33%                 N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class C                 5.72%                N/A                 6.31%                 N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class N                 6.12%                N/A                 6.70%                 N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class Y                 6.71%                N/A                 7.29%                 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) are 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 6/30/05
----------------------------------------------------------------------------------------------------------------------
-------------- ------------------------- -----------------------------------------------------------------------------
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 A(1)       72.15%       80.75%        2.73%        7.85%        3.84%        4.85%        5.58%        6.10%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class B(2)       72.53%       72.53%        2.05%        7.05%        3.77%        4.04%        5.61%        5.61%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class C(3)       61.13%       61.13%        6.02%        7.02%        4.04%        4.04%        5.06%        5.06%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class N(4)       21.66%       21.66%        6.32%        7.32%        4.63%        4.63%         N/A          N/A
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class Y(5)       34.93%       34.93%        7.92%        7.92%        4.92%        4.92%        3.96%        3.96%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
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 6/30/05
----------------------------------------------------------------------------------------------------------------
------------------------------------------ --------------------- ------------------------ ----------------------
                                                  1-Year                 5-Years                10-Years
------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions                      0.24%                   0.36%                   1.93%
------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions and                  1.74%                   1.05%                   2.42%
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. The Fund is rated in the high yield bond funds
category.

         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 "NYSE"). The NYSE 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 NYSE, 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.

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 Core 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 Income Fund                               Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Champion Income Fund                              Oppenheimer Principal Protected Main Street Fund
Oppenheimer Convertible Securities Fund                       Oppenheimer Principal Protected Main Street Fund II
Oppenheimer Developing Markets Fund                           Oppenheimer Principal Protected Main Street Fund III
Oppenheimer Disciplined Allocation Fund                       Oppenheimer Quest Balanced Fund
Oppenheimer Discovery Fund                                    Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Dividend Growth 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- & Mid- Cap Value Fund
Oppenheimer High Yield Fund                                   Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund                           Oppenheimer Total Return Bond Fund
Oppenheimer International Diversified Fund                    Oppenheimer U.S. Government Trust
Oppenheimer International Growth Fund                         Oppenheimer Value Fund
Oppenheimer International Small Company Fund                  Limited-Term New York Municipal Fund
Oppenheimer International Value Fund                          Rochester Fund Municipals
Oppenheimer Limited Term California Municipal Fund            Oppenheimer Portfolio Series:

                                                              Active Allocation Fund
                                                              Aggressive Investor Fund
                                                              Conservative Investor Fund
Oppenheimer Limited-Term Government Fund                      Moderate Investor Fund

And the following money market funds:

Oppenheimer Cash Reserves                                     Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc.                           Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust                        Centennial Tax Exempt Trust
Centennial Government 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"), you can reduce the sales
charge rate that applies to your purchases of Class A shares if you purchase
Class A, Class B or Class C shares of the Fund or other Oppenheimer funds during
a 13-month period. The total amount of your purchases of Class A, Class B and
Class C shares will determine the sales charge rate that applies to your Class A
share purchases during that period. You can choose to include purchases that you
made up to 90 days before the date of the Letter. Class A shares of Oppenheimer
Money Market Fund, Inc. and Oppenheimer Cash Reserves on which you have not paid
a sales charge and any Class N shares you purchase, or may have purchased, will
not be counted towards satisfying the purchases specified in a Letter.

         A Letter is an investor's statement in writing to the Distributor of
his or her intention to purchase a specified value of Class A, Class B and Class
C 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 will equal
or exceed the amount specified in the Letter. Purchases made by reinvestment of
dividends or capital gains distributions and purchases made at net asset value
(i.e. without a sales charge) do not count toward satisfying the amount of the
Letter.

         Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that would apply 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 and Class C shares of other Oppenheimer funds acquired
subject to a contingent deferred sales charge, and (c) Class A, Class B or Class
C 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 or Class C 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.

         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 Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent record keeper
that has a contract or special arrangement with Merrill Lynch. If on the date
the plan sponsor signed the Merrill Lynch record keeping service agreement the
plan has less than $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 more than $100,000
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).

Class B, Class C or Class N shares may not be purchased by an investor directly
from the Distributor without the investor designating another registered
broker-dealer.

|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 Retirement Plans with at least 100 eligible employees or $500,000 or more in plan assets,
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 Minimum Balance Fee is automatically deducted from each such Fund account in
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 NYSE on each day that the NYSE 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 NYSE 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 NYSE'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 NYSE members may conduct trading in certain
securities on days on which the NYSE 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 NYSE.

         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 NYSE, 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(R), 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 New York 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(R), 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(R) on the
valuation date. If not, the value shall be the closing bid price on the
principal exchange or on NASDAQ(R) on the valuation date. If the put, call or
future is not traded on an exchange or on NASDAQ(R), 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 NYSE 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 NYSE closes. Normally, the NYSE closes at 4:00 p.m., but may do so earlier
on some days. Additionally, the order must have been transmitted to and received
by the Distributor prior to its close of business that day (normally 5:00 p.m.).

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

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

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

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

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

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

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

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

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

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

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

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

         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 California Tax Exempt Trust                       Centennial New York Tax Exempt Trust
     Centennial Government Trust                                  Centennial Tax Exempt Trust
     Centennial Money Market Trust

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

     The following funds do not offer Class Y shares:
     Limited Term New York Municipal Fund                        Oppenheimer Limited Term California Municipal Fund
     Oppenheimer AMT-Free Municipals                             Oppenheimer Limited Term Municipal Fund
     Oppenheimer AMT-Free New York Municipals                    Oppenheimer New Jersey Municipal Fund
     Oppenheimer Balanced Fund                                   Oppenheimer Pennsylvania Municipal Fund
     Oppenheimer California Municipal Fund                       Oppenheimer Principal Protected Main Street Fund
     Oppenheimer Capital Income Fund                             Oppenheimer Principal Protected Main Street Fund II
     Oppenheimer Cash Reserves                                   Oppenheimer Principal Protected Main Street Fund III
     Oppenheimer Champion Income Fund                            Oppenheimer Quest Capital Value Fund, Inc.
     Oppenheimer Convertible Securities Fund                     Oppenheimer Quest International Value Fund, Inc.
     Oppenheimer Disciplined Allocation Fund                     Oppenheimer Rochester National Municipals
     Oppenheimer Dividend Growth Fund                            Oppenheimer Total Return Bond Fund
     Oppenheimer Gold & Special Minerals Fund

o        Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y shares.
o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares
of any other fund.
o        Class B and Class C shares of Oppenheimer Cash Reserves are generally
         available only by exchange from the same class of shares of other
         Oppenheimer funds or through OppenheimerFunds-sponsored 401(k) plans.
o        Class M shares of Oppenheimer Convertible Securities Fund may be
         exchanged only for Class A shares of other Oppenheimer funds. They may
         not be acquired by exchange of shares of any class of any other
         Oppenheimer funds except Class A shares of Oppenheimer Money Market
         Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
         shares.
o        Class A shares of Oppenheimer funds may be exchanged at net asset value
         for shares of any money market fund offered by the Distributor. Shares
         of any money market fund purchased without a sales charge may be
         exchanged for shares of Oppenheimer funds offered with a sales charge
         upon payment of the sales charge. They may also be used to purchase
         shares of Oppenheimer funds subject to an early withdrawal charge or
         contingent deferred sales charge.
o        Shares of the Fund acquired by reinvestment of dividends or
         distributions from any of the other Oppenheimer funds or from any unit
         investment trust for which reinvestment arrangements have been made
         with the Distributor may be exchanged at net asset value for shares of
         any of the Oppenheimer funds.
o        Shares of Oppenheimer Principal Protected Main Street Fund may be
         exchanged at net asset value for shares of any of the Oppenheimer
         funds. However, shareholders are not permitted to exchange shares of
         other Oppenheimer funds for shares of Oppenheimer Principal Protected
         Main Street Fund until after the expiration of the warranty period
         (8/5/2010).
o        Shares of Oppenheimer Principal Protected Main Street Fund II may be
         exchanged at net asset value for shares of any of the Oppenheimer
         funds. However, shareholders are not permitted to exchange shares of
         other Oppenheimer funds for shares of Oppenheimer Principal Protected
         Main Street Fund II until after the expiration of the warranty period
         (3/3/2011).
o        Shares of Oppenheimer Principal Protected Main Street Fund III 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 III until after the expiration of the warranty period
         (12/16/2011).

         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 Except with respect to the Class B shares described in the next two
paragraphs, the 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 California Municipal Fund,
Limited-Term Government Fund, Limited Term Municipal Fund, Limited Term New York
Municipal Fund and Oppenheimer Senior Floating Rate Fund, the Class B contingent
deferred sales charge is imposed on the acquired shares if they are redeemed
within five years of the initial purchase of the exchanged Class B shares.

o With respect to Class B shares of Cash Reserves that were acquired through the
exchange of Class B shares initially purchased in the Oppenheimer Capital
Preservation Fund, the Class B contingent deferred sales charge is imposed on
the acquired shares if they are redeemed within five years of that initial
purchase.

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.

         |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.
The Fund may be subject to U.S. Federal income tax, and an interest charge, on
certain distributions or gains from the sale of shares of a foreign company
considered to be a PFIC, even if those amounts are paid out as dividends to
shareholders. To avoid imposition of the interest charge, the Fund may elect to
"mark to market" all PFIC shares that it holds at the end of each taxable year.
In that case, any increase or decrease in the value of those shares would be
recognized as ordinary income or as ordinary loss (but only to the extent of
previously recognized "mark-to-market" gains).

         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). Any tax withheld by the Fund is remitted by
the Fund to the U.S. Treasury and all income and any tax withheld is identified
in reports mailed to shareholders in January of each year with a copy sent to
the IRS.

|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.
Any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury and
all income and any tax withheld is identified in reports mailed to shareholders
in March of each year with a copy sent to the IRS.

         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. Any tax withheld by the Fund is remitted by
the Fund to the U.S. Treasury and all income and any tax withheld is identified
in reports mailed to shareholders in January of each year with a copy sent to
the IRS.

         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 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 serves as
the independent registered public accounting firm for the Fund. Deloitte &
Touche LLP audits the Fund's financial statements and performs other related
audit services. Deloitte & Touche LLP also acts as the independent registered
public accounting firm 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.




OPPENHEIMER HIGH YIELD FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TO 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, 2005, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

      We conducted our audits in accordance with 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of June 30, 2005, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. 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, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.

/s/Deloitte & Touche LLP
------------------------------
DELOITTE & TOUCHE LLP

Denver, Colorado
August 15, 2005





OPPENHEIMER HIGH YIELD FUND
STATEMENT OF INVESTMENTS June 30, 2005
--------------------------------------------------------------------------------

                                                   PRINCIPAL               VALUE
                                                      AMOUNT          SEE NOTE 1
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.7%
--------------------------------------------------------------------------------
Goldman Sachs Asset Management CBO Ltd., Sub.
Collateralized Bond Obligations, Series 1A,
Cl. D, 12.54%, 6/13/11 1                        $  2,000,000   $        340,000
--------------------------------------------------------------------------------
Norse CBO Ltd., 9.342% Sub. Bonds, Series 1A,
Cl. C2, 8/13/10 1                                 11,000,000          9,350,000
                                                               -----------------
Total Asset-Backed Securities
(Cost $12,532,941)                                                    9,690,000

--------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--87.8%
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--26.0%
--------------------------------------------------------------------------------
AUTO COMPONENTS--2.4%
Accuride Corp., 8.50% Sr. Unsec. Sub. Nts.,
2/1/15                                             1,465,000          1,439,363
--------------------------------------------------------------------------------
Collins & Aikman Floorcoverings, Inc., 9.75%
Sr. Sub. Nts., Series B, 2/15/10                   1,500,000          1,560,000
--------------------------------------------------------------------------------
Cooper Standard Automotive, Inc., 8.375% Sr.
Unsec. Sub. Nts., 12/15/14                         2,570,000          2,043,150
--------------------------------------------------------------------------------
Dana Corp., 10.125% Nts., 3/15/10                  1,800,000          1,885,072
--------------------------------------------------------------------------------
Dura Operating Corp.:
8.625% Sr. Nts., Series B, 4/15/12                 3,500,000          3,167,500
9% Sr. Sub. Nts., Series B, 5/1/09 [EUR]             200,000            162,766
9% Sr. Unsec. Sub. Nts., Series D, 5/1/09            600,000            420,000
--------------------------------------------------------------------------------
Eagle-Picher, Inc., 9.75% Sr. Nts.,
9/1/13 2,3                                         3,350,000          2,328,250
--------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11                               5,100,000          4,985,250
9% Sr. Nts., 7/1/15 4                              3,670,000          3,624,125
--------------------------------------------------------------------------------
Keystone Automotive Operations, Inc., 9.75%
Sr. Unsec. Sub. Nts., 11/1/13                        900,000            895,500
--------------------------------------------------------------------------------
Metaldyne Corp.:
10% Sr. Nts., 11/1/13 4                            1,500,000          1,237,500
11% Sr. Sub. Nts., 6/15/12                         1,540,000          1,004,850
--------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12          2,600,000          2,665,000
--------------------------------------------------------------------------------
Tenneco Automotive, Inc.:
8.625% Sr. Unsec. Sub. Nts., 11/15/14              4,500,000          4,545,000
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          1,316,250
--------------------------------------------------------------------------------
Visteon Corp., 7% Sr. Unsec. Nts., 3/10/14           900,000            747,000
                                                               -----------------
                                                                     36,637,076

--------------------------------------------------------------------------------
AUTOMOBILES--0.6%
General Motors Acceptance Corp.:
5.125% Nts., 5/9/08                                3,000,000          2,821,608
5.85% Sr. Unsec. Unsub. Nts., 1/14/09              2,500,000          2,345,345
6.875% Nts., 9/15/11                               2,900,000          2,680,229
--------------------------------------------------------------------------------
Navistar International Corp., 6.25% Sr. Nts.,
3/1/12 4                                           1,235,000          1,197,950
                                                               -----------------
                                                                      9,045,132

                                                   PRINCIPAL               VALUE
                                                      AMOUNT          SEE NOTE 1
--------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--7.0%
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts.,
3/15/08                                         $  3,080,000   $      3,033,800
--------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11      1,300,000          1,418,625
--------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub. Nts.,
4/15/12                                            3,000,000          3,273,750
--------------------------------------------------------------------------------
Carrols Corp., 9% Sr. Sub. Nts., 1/15/13 4           770,000            783,475
--------------------------------------------------------------------------------
Domino's, Inc., 8.25% Sr. Unsec. Sub. Nts.,
7/1/11                                             1,932,000          2,067,240
--------------------------------------------------------------------------------
Gaylord Entertainment Co., 8% Sr. Nts.,
11/15/13                                           1,000,000          1,056,250
--------------------------------------------------------------------------------
Intrawest Corp., 7.50% Sr. Unsec. Nts.,
10/15/13                                           2,666,000          2,749,313
--------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Unsec. Sub. Nts., 3/1/14                    4,750,000          4,797,500
9% Sr. Sub. Nts., 3/15/12                          2,200,000          2,403,500
--------------------------------------------------------------------------------
John Q. Hammons Hotels, Inc., 8.875% Sr.
Nts., Series B, 5/15/12                            3,150,000          3,449,250
--------------------------------------------------------------------------------
La Quinta Properties, Inc., 7% Sr. Sec. Nts.,
8/15/12                                            1,300,000          1,350,375
--------------------------------------------------------------------------------
Mandalay Resort Group, 9.375% Sr. Sub. Nts.,
2/15/10                                            3,532,558          3,965,296
--------------------------------------------------------------------------------
MGM Mirage, Inc.:
8.375% Sr. Unsec. Sub. Nts., 2/1/11                6,100,000          6,679,500
9.75% Sr. Unsec. Sub. Nts., 6/1/07                 2,000,000          2,177,500
--------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Nts., 2/15/13 4                         1,240,000          1,258,600
6.375% Sr. Sub. Nts., 7/15/09                      2,200,000          2,255,000
6.875% Sr. Sub. Nts., 2/15/15 4                    1,735,000          1,782,713
8% Sr. Sub. Nts., 4/1/12                           2,050,000          2,203,750
--------------------------------------------------------------------------------
NCL Corp., 11.625% Sr. Nts., 7/15/14 4             2,700,000          2,855,250
--------------------------------------------------------------------------------
Park Place Entertainment Corp.:
7.875% Sr. Sub. Nts., 3/15/10                      3,700,000          4,162,500
9.375% Sr. Unsec. Sub. Nts., 2/15/07                 950,000          1,023,625
--------------------------------------------------------------------------------
Penn National Gaming, Inc.:
6.75% Sr. Sub. Nts., 3/1/15 4                      1,235,000          1,231,913
6.875% Sr. Sub. Nts., 12/1/11                        900,000            927,000
8.875% Sr. Sub. Nts., 3/15/10                        900,000            967,500
--------------------------------------------------------------------------------
Pinnacle Entertainment, Inc., 8.25% Sr.
Unsec. Sub. Nts., 3/15/12                          5,800,000          6,061,000
--------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 8.75% Sr.
Unsub. Nts., 2/2/11                                2,600,000          3,009,500
--------------------------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Unsec. Nts., 2/1/10                     2,100,000          2,058,000
9.625% Sr. Nts., 6/1/14                            2,147,000          2,018,180
9.75% Sr. Nts., 4/15/13                            6,400,000          6,072,000
--------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.,
7.875% Sr. Nts., 5/1/12                            3,550,000          4,020,375
--------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14                 5,300,000          5,432,500
9.875% Sr. Unsec. Sub. Nts., 7/1/10                2,025,000          2,099,986
--------------------------------------------------------------------------------
Sun International Hotels Ltd., 8.875% Sr.
Unsec. Sub. Nts., 8/15/11                          3,200,000          3,440,000
--------------------------------------------------------------------------------
Universal City Development Partners Ltd.,
11.75% Sr. Nts., 4/1/10                            2,700,000          3,111,750
--------------------------------------------------------------------------------
Vail Resorts, Inc., 6.75% Sr. Sub. Nts.,
2/15/14                                            2,700,000          2,754,000



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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued Wynn Las Vegas LLC/Wynn Las Vegas
Capital Corp.:
6.625% Nts., 12/1/14 4                          $  6,800,000    $     6,647,000
6.625% Nts., 12/1/14                               1,700,000          1,661,750
                                                                ----------------
                                                                    106,259,266

--------------------------------------------------------------------------------
HOUSEHOLD DURABLES--2.4%
Beazer Homes USA, Inc., 8.375% Sr. Nts.,
4/15/12                                            3,300,000          3,555,750
--------------------------------------------------------------------------------
Blount, Inc., 8.875% Sr. Sub. Nts.,
8/1/12                                             2,525,000          2,714,375
--------------------------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub. Nts.,
9/15/10                                              800,000            940,594
--------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc.:
7.75% Sr. Unsec. Sub. Nts., 5/15/13                2,250,000          2,351,250
8.875% Sr. Sub. Nts., 4/1/12                       1,500,000          1,631,250
--------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08                     2,750,000          2,995,088
9.50% Sr. Unsec. Sub. Nts., 2/15/11                2,000,000          2,149,000
--------------------------------------------------------------------------------
Meritage Homes Corp., 6.25% Sr. Unsec.
Nts., 3/15/15                                      1,115,000          1,042,525
--------------------------------------------------------------------------------
Sealy Mattress Co., 8.25% Sr. Sub. Nts.,
6/15/14                                            3,200,000          3,248,000
--------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub.
Nts., 4/15/12                                      1,200,000          1,326,000
--------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11           1,750,000          1,890,000
--------------------------------------------------------------------------------
WCI Communities, Inc.:
9.125% Sr. Sub. Nts., 5/1/12                       1,100,000          1,160,500
10.625% Sr. Unsec. Sub. Nts., 2/15/11              4,600,000          4,991,000
--------------------------------------------------------------------------------
William Lyon Homes, Inc., 10.75% Sr.
Nts., 4/1/13                                       2,500,000          2,725,000
--------------------------------------------------------------------------------
Williams Scotsman, Inc., 9.875% Sr.
Unsec. Nts., 6/1/07                                4,100,000          4,120,500
                                                                ----------------
                                                                     36,840,832

--------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Leslie's Poolmart, Inc., 7.75% Sr.
Unsec. Nts., 2/1/13                                1,375,000          1,395,625
--------------------------------------------------------------------------------
MEDIA--11.5%
Adelphia Communications Corp.:
8.125% Sr. Nts., Series B, 7/15/03 2,3             2,000,000          1,740,000
8.375% Sr. Nts., Series B, 2/1/08 2,3              2,700,000          2,362,500
9.875% Sr. Nts., Series B, 3/1/07 2,3              2,200,000          1,919,500
10.25% Sr. Unsec. Nts., 11/1/06 2,3                1,600,000          1,368,000
10.25% Sr. Unsec. Sub. Nts., 6/15/11 2,3           1,200,000          1,083,000
10.875% Sr. Unsec. Nts., 10/1/10 2,3               1,500,000          1,312,500
--------------------------------------------------------------------------------
Allbritton Communications Co., 7.75% Sr.
Unsec. Sub. Nts., 12/15/12                         2,100,000          2,079,000
--------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Unsec. Sub. Nts., 3/1/14                    3,300,000          2,945,250
9.50% Sr. Unsec. Sub. Nts., 2/1/11                 5,299,000          5,226,139
--------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11               3,450,000          3,286,125
10.25% Sr. Unsec. Sub. Nts., Series B,
5/1/09                                             1,350,000          1,356,750

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
MEDIA Continued
Block Communications, Inc., 9.25% Sr. Sub.
Nts., 4/15/09                                   $  1,100,000    $     1,177,000
--------------------------------------------------------------------------------
Cablevision Systems Corp., 8% Sr. Unsec.
Nts., Series B, 4/15/12                            3,400,000          3,349,000
--------------------------------------------------------------------------------
Callahan Nordrhein-Westfalen GmbH, 14.125%
Sr. Nts., 7/15/11 1,2,3 [EUR]                      1,000,000            121,016
--------------------------------------------------------------------------------
Carmike Cinemas, Inc., 7.50% Sr. Sub.
Nts., 2/15/14                                      2,100,000          1,913,625
--------------------------------------------------------------------------------
CBD Media LLC/CBD Finance, Inc., 8.625%
Sr. Sub. Nts., 6/1/11                                700,000            724,500
--------------------------------------------------------------------------------
Charter Communications Holdings II LLC,
10.25% Sr. Unsec. Nts., 9/15/10                    2,300,000          2,337,375
--------------------------------------------------------------------------------
Charter Communications Holdings
LLC/Charter Communications
Holdings Capital Corp.:
0%/11.75% Sr. Unsec. Sub. Disc. Nts.,
5/15/11 5                                         12,700,000          8,477,250
8.375% Sr. Nts., Second Lien, 4/30/14 4           12,100,000         12,100,000
--------------------------------------------------------------------------------
Cinemark USA, Inc., 9% Sr. Unsec. Sub.
Nts., 2/1/13                                       1,800,000          1,858,500
--------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr. Unsec. Disc.
Nts., 3/15/14 5                                    5,700,000          3,819,000
--------------------------------------------------------------------------------
Corus Entertainment, Inc., 8.75% Sr. Sub.
Nts., 3/1/12                                       1,500,000          1,616,250
--------------------------------------------------------------------------------
Dex Media East LLC/Dex Media East Finance
Co., 9.875% Sr. Unsec. Nts., 11/15/09              3,000,000          3,322,500
--------------------------------------------------------------------------------
Dex Media West LLC/Dex Media West Finance
Co.:
5.875% Sr. Nts., 11/15/11                          1,000,000            992,500
8.50% Sr. Nts., 8/15/10                            2,100,000          2,299,500
9.875% Sr. Sub. Nts., 8/15/13                      3,516,000          4,025,820
--------------------------------------------------------------------------------
Dex Media, Inc., 8% Unsec. Nts., 11/15/13         13,125,000         14,010,938
--------------------------------------------------------------------------------
DirecTV Holdings LLC/DirecTV Financing
Co., Inc., 8.375% Sr. Unsec. Nts., 3/15/13         3,904,000          4,343,200
--------------------------------------------------------------------------------
EchoStar DBS Corp., 6.625% Sr. Unsec.
Nts., 10/1/14                                      5,350,000          5,309,875
--------------------------------------------------------------------------------
Emmis Operating Co., 6.875% Sr. Unsec.
Sub. Nts., 5/15/12                                 2,700,000          2,686,500
--------------------------------------------------------------------------------
Entercom Radio LLC/Entercom Capital, Inc.,
7.625% Sr. Unsec. Sub. Nts., 3/1/14                1,500,000          1,571,250
--------------------------------------------------------------------------------
Entravision Communications Corp., 8.125%
Sr. Sub. Nts., 3/15/09                             1,400,000          1,464,750
--------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.75% Sr. Sec.
Nts., 12/1/10                                      5,247,000          4,905,945
--------------------------------------------------------------------------------
Gray Television, Inc., 9.25% Sr. Sub.
Nts., 12/15/11                                     1,750,000          1,907,500
--------------------------------------------------------------------------------
Lamar Media Corp., 7.25% Sr. Unsec. Sub.
Nts., 1/1/13                                       1,000,000          1,060,000
--------------------------------------------------------------------------------
Liberty Media Corp., 5.70% Sr. Unsec.
Nts., 5/15/13                                      1,250,000          1,164,425
--------------------------------------------------------------------------------
Liberty Media Group, 8.50% Debs., 7/15/29          1,250,000          1,266,135
--------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub. Nts.,
5/15/13                                            1,800,000          1,719,000
--------------------------------------------------------------------------------
LodgeNet Entertainment Corp., 9.50% Sr.
Sub. Debs., 6/15/13                                1,350,000          1,478,250
--------------------------------------------------------------------------------
Mediacom LLC/Mediacom Capital Corp., 9.50%
Sr. Unsec. Nts., 1/15/13                           5,147,000          5,159,868
--------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14                       4,700,000          4,529,625
6.875% Sr. Unsec. Sub. Nts., 10/1/13                 700,000            697,375
--------------------------------------------------------------------------------
News America Holdings, Inc., 8.875% Sr.
Debs., 4/26/23                                       400,000            523,974
--------------------------------------------------------------------------------
PanAmSat Corp., 9% Sr. Unsec. Nts., 8/15/14        3,770,000          4,132,863


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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
MEDIA Continued
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13                            $  3,400,000    $     3,425,500
8.875% Sr. Unsec. Nts., 5/15/11                      147,000            154,718
--------------------------------------------------------------------------------
R.H. Donnelley Corp., 6.875% Sr. Nts.,
1/15/13 4                                          1,500,000          1,537,500
--------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I:
8.875% Sr. Nts., 12/15/10 4                        2,600,000          2,853,500
10.875% Sr. Sub. Nts., 12/15/12 4                  3,900,000          4,553,250
--------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec. Sub.
Nts., Series B, 7/1/11                             1,950,000          2,103,563
--------------------------------------------------------------------------------
Rainbow National Services LLC, 8.75% Sr.
Nts., 9/1/12 4                                     2,000,000          2,195,000
--------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Unsec. Sub. Nts., 3/15/12                   6,050,000          6,231,500
8.75% Sr. Sub. Nts., 12/15/11                      1,250,000          1,318,750
--------------------------------------------------------------------------------
Spanish Broadcasting System, Inc.,
9.625% Sr. Unsec. Sub. Nts., 11/1/09               5,000,000          5,256,250
--------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09                        2,050,000          2,142,250
10.875% Sr. Unsec. Nts., Series B,
6/15/09                                            2,400,000          2,304,000
--------------------------------------------------------------------------------
Weekly Reader Corp./CompassLearning,
Inc./ WRC Media, Inc.,
12.75% Sr. Sub. Nts., 11/15/09                     4,000,000          4,255,000
--------------------------------------------------------------------------------
WMG Holdings Corp., 0%/9.50% Sr. Disc.
Nts., 12/15/14 4,5                                 6,427,000          4,466,765
                                                                ----------------
                                                                    173,541,619

--------------------------------------------------------------------------------
SPECIALTY RETAIL--1.0%
Asbury Automotive Group, Inc., 9% Sr.
Sub. Nts., 6/15/12                                 1,400,000          1,438,500
--------------------------------------------------------------------------------
Atlantic Broadband Finance LLC, 9.375%
Sr. Sub. Nts., 1/15/14 4                           1,950,000          1,842,750
--------------------------------------------------------------------------------
AutoNation, Inc., 9% Sr. Unsec. Nts.,
8/1/08                                             3,000,000          3,292,500
--------------------------------------------------------------------------------
Boise Cascade LLC, 7.125% Sr. Sub. Nts.,
10/15/14 4                                         2,300,000          2,271,250
--------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr.
Unsec. Nts., 6/1/12                                1,950,000          1,767,188
--------------------------------------------------------------------------------
Just For Feet, Inc., 11% Sr. Sub. Nts.,
5/1/09 1,2,3                                         700,000                 --
--------------------------------------------------------------------------------
Petco Animal Supplies, Inc., 10.75% Sr.
Sub. Nts., 11/1/11                                 3,500,000          3,920,000
--------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr. Unsec.
Sub. Nts., Series B, 5/1/10                        1,100,000          1,105,500
                                                                ----------------
                                                                     15,637,688

--------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.0%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 4            3,850,000          4,225,375
--------------------------------------------------------------------------------
Levi Strauss & Co.:
7% Unsec. Nts., 11/1/06                            2,350,000          2,361,750
7.73% Sr. Unsec. Unsub. Nts., 4/1/12 6             2,765,000          2,626,750
12.25% Sr. Nts., 12/15/12                          2,800,000          3,073,000
--------------------------------------------------------------------------------
Oxford Industries, Inc., 8.875% Sr.
Nts., 6/1/11                                       1,250,000          1,343,750
--------------------------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10              1,500,000          1,590,000
                                                                ----------------
                                                                     15,220,625

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
CONSUMER STAPLES--3.6%
--------------------------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc., 8.125% Sr.
Sub. Nts., 1/15/12                              $  2,000,000    $     2,150,000
--------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.7%
Great Atlantic & Pacific Tea Co., Inc.
(The), 9.125% Sr. Nts., 12/15/11                     947,000          1,001,453
--------------------------------------------------------------------------------
Jean Coutu Group (PJC), Inc. (The):
7.625% Sr. Unsec. Nts., 8/1/12                       900,000            933,750
8.50% Sr. Sub. Nts., 8/1/14                        4,500,000          4,466,250
--------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10                       2,650,000          2,742,750
9.50% Sr. Sec. Nts., 2/15/11                       1,600,000          1,712,000
                                                                ----------------
                                                                     10,856,203

--------------------------------------------------------------------------------
FOOD PRODUCTS--2.1%
American Seafoods Group LLC, 10.125% Sr.
Sub. Nts., 4/15/10                                 3,500,000          3,753,750
--------------------------------------------------------------------------------
Burns Philp Capital Property Ltd., 9.75%
Sr. Unsec. Sub. Nts., 7/15/12                      1,450,000          1,566,000
--------------------------------------------------------------------------------
Chiquita Brands International, Inc.,
7.50% Sr. Unsec. Nts., 11/1/14                       900,000            841,500
--------------------------------------------------------------------------------
Del Monte Corp.:
6.75% Sr. Sub. Nts., 2/15/15 4                       930,000            953,250
8.625% Sr. Sub. Nts., 12/15/12                     3,300,000          3,646,500
--------------------------------------------------------------------------------
Doane Pet Care Co.:
9.75% Sr. Unsec. Sub. Nts., 5/15/07                1,600,000          1,564,000
10.75% Sr. Nts., 3/1/10                            5,700,000          6,056,250
--------------------------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09                            1,909,000          2,042,630
8.875% Sr. Unsec. Nts., 3/15/11                      475,000            509,438
--------------------------------------------------------------------------------
Hines Nurseries, Inc., 10.25% Sr. Unsec.
Sub. Nts., 10/1/11                                 1,700,000          1,759,500
--------------------------------------------------------------------------------
Pinnacle Foods Holding Corp., 8.25% Sr.
Sub. Nts., 12/1/13                                   750,000            675,000
--------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08               2,240,000          2,340,800
8% Sr. Nts., Series B, 10/15/09                      400,000            434,000
--------------------------------------------------------------------------------
Swift & Co., 10.125% Sr. Nts., 10/1/09             2,500,000          2,737,500
--------------------------------------------------------------------------------
United Biscuits Finance plc, 10.625% Sr.
Sub. Nts., 4/15/11 1 [EUR]                         2,000,000          2,523,174
                                                                ----------------
                                                                     31,403,292

--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.5%
Church & Dwight Co., Inc., 6% Sr. Unsec.
Sub. Nts., 12/15/12                                1,800,000          1,827,000
--------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11                           2,500,000          2,684,375
9.375% Sr. Unsec. Sub. Nts., 6/1/11                3,500,000          3,701,250
                                                                ----------------
                                                                      8,212,625

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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.1%
Elizabeth Arden, Inc., 7.75% Sr. Unsec.
Sub. Nts., 1/15/14                              $  1,250,000    $     1,309,375
--------------------------------------------------------------------------------
TOBACCO--0.1%
R.J. Reynolds Tobacco Holdings, Inc.,
6.50% Nts., 7/15/10 4                              1,240,000          1,243,100
--------------------------------------------------------------------------------
ENERGY--6.8%
--------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.8%
Dresser, Inc., 9.375% Sr. Sub. Nts.,
4/15/11                                            1,200,000          1,269,000
--------------------------------------------------------------------------------
Grant Prideco, Inc., 9% Sr. Unsec. Nts.,
12/15/09                                           1,500,000          1,650,000
--------------------------------------------------------------------------------
Hanover Compressor Co., 8.625% Sr. Nts.,
12/15/10                                           2,500,000          2,656,250
--------------------------------------------------------------------------------
Hanover Equipment Trust 2001A, 8.50% Sr.
Sec. Nts., Series A, 9/1/08                        1,500,000          1,567,500
--------------------------------------------------------------------------------
Petroleum Helicopters, Inc., 9.375% Sr.
Nts., 5/1/09                                       1,500,000          1,586,250
--------------------------------------------------------------------------------
Universal Compression, Inc., 7.25% Sr.
Unsec. Sub. Nts., 5/15/10                          2,500,000          2,625,000
                                                                ----------------
                                                                     11,354,000

--------------------------------------------------------------------------------
OIL & GAS--6.0%
ANR Pipeline Co., 8.875% Sr. Nts.,
3/15/10                                            1,400,000          1,542,699
--------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Nts., 6/15/15 4                         1,400,000          1,442,000
6.875% Sr. Unsec. Nts., 1/15/16                      784,000            821,240
--------------------------------------------------------------------------------
Delta Petroleum Corp., 7% Sr. Nts.,
4/1/15 4                                             755,000            713,475
--------------------------------------------------------------------------------
El Paso Corp., 7.875% Sr. Unsec. Nts.,
6/15/12                                            5,152,000          5,332,320
--------------------------------------------------------------------------------
El Paso Energy Corp., 7.625% Nts.,
7/15/11                                            1,600,000          1,620,000
--------------------------------------------------------------------------------
El Paso Production Holding Co., 7.75%
Sr. Unsec. Nts., 6/1/13                            7,450,000          7,990,125
--------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts., 5/1/14           2,000,000          2,160,000
--------------------------------------------------------------------------------
Frontier Oil Corp., 6.625% Sr. Unsec.
Nts., 10/1/11                                      1,100,000          1,138,500
--------------------------------------------------------------------------------
Newfield Exploration Co.:
6.625% Sr. Unsec. Sub. Nts., 9/1/14                3,200,000          3,368,000
8.375% Sr. Sub. Nts., 8/15/12                      2,850,000          3,127,875
--------------------------------------------------------------------------------
Plains Exploration & Production Co.,
7.125% Sr. Nts., 6/15/14                           1,700,000          1,827,500
--------------------------------------------------------------------------------
Premcor Refining Group, Inc.:
6.75% Sr. Nts., 5/1/14                             3,000,000          3,247,500
9.50% Sr. Nts., 2/1/13                             2,000,000          2,310,000
--------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15                      1,125,000          1,125,000
7.375% Sr. Sub. Nts., 7/15/13                      1,500,000          1,605,000
--------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31                                2,800,000          2,992,590
8% Sr. Unsub. Nts., 3/1/32                         4,800,000          5,483,006
8.875% Sr. Nts., 3/15/10                           1,800,000          1,983,470
--------------------------------------------------------------------------------
Stone Energy Corp.:
6.75% Sr. Unsec. Sub. Nts., 12/15/14                 980,000            957,950
8.25% Sr. Unsec. Sub. Nts., 12/15/11               3,500,000          3,683,750
--------------------------------------------------------------------------------
Teekay Shipping Corp., 8.875% Sr. Nts.,
7/15/11                                            3,175,000          3,639,344


                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
OIL & GAS Continued
Tennessee Gas Pipeline Co., 7.50% Bonds,
4/1/17                                          $ 11,550,000    $    12,851,154
--------------------------------------------------------------------------------
Tesoro Petroleum Corp.:
8% Sr. Sec. Nts., 4/15/08                          2,300,000          2,438,000
9.625% Sr. Sub. Nts., 4/1/12                       1,597,000          1,774,666
--------------------------------------------------------------------------------
Transcontinental Gas Pipe Line Corp.,
8.875% Sr. Unsub. Nts., Series B, 7/15/12          1,200,000          1,434,000
--------------------------------------------------------------------------------
Whiting Petroleum Corp., 7.25% Sr. Sub.
Nts., 5/1/12                                       3,300,000          3,399,000
--------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11                                2,700,000          2,929,500
7.625% Nts., 7/15/19                                 100,000            113,000
8.75% Unsec. Nts., 3/15/32                         6,400,000          7,720,000
--------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc.,
6.50% Nts., 12/1/08 1                                800,000            838,000
                                                                ----------------
                                                                     91,608,664

--------------------------------------------------------------------------------
FINANCIALS--3.0%
--------------------------------------------------------------------------------
CAPITAL MARKETS--0.6%
American Color Graphics, Inc., 10% Sr.
Sec. Nts., 6/15/10                                 1,350,000            978,750
--------------------------------------------------------------------------------
Berry Plastics Corp., 10.75% Sr. Sub.
Nts., 7/15/12                                      6,100,000          6,687,125
--------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc., 12% Sr.
Unsec. Sub. Nts., Series B, 9/30/08 1              3,700,000          1,480,000
                                                                ----------------
                                                                      9,145,875

--------------------------------------------------------------------------------
COMMERCIAL BANKS--0.2%
ABN Amro Bank NV (NY Branch), 4% Sec. Nts.,
11/5/17 1,6                                        2,069,459          1,893,555
--------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 1              78,000             83,850
--------------------------------------------------------------------------------
Western Financial Bank, 9.625% Unsec.
Sub. Debs., 5/15/12                                1,700,000          1,861,500
                                                                ----------------
                                                                      3,838,905

--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.0%
Affinia Group, Inc., 9% Sr. Sub. Nts.,
11/30/14 4                                         1,600,000          1,352,000
--------------------------------------------------------------------------------
American Commercial Lines LLC/American
Commercial Lines Finance
Corp., 9.50% Sr. Nts., 2/15/15 4                   1,005,000          1,065,300
--------------------------------------------------------------------------------
Crystal US Holdings 3 LLC/Crystal US Sub
3 Corp.:
0%/10.50% Sr. Unsec. Disc. Nts., Series
B, 10/1/14 5                                       3,100,000          2,170,000
9.625% Sr. Sub. Nts., 6/15/14                      4,794,000          5,393,250
--------------------------------------------------------------------------------
Global Cash Access LLC/Global Cash
Finance Corp., 8.75% Sr. Sub. Nts., 3/15/12        1,200,000          1,311,000
--------------------------------------------------------------------------------
JSG Funding plc, 7.75% Sr. Sub. Nts.,
4/1/15 4                                           2,470,000          2,037,750
--------------------------------------------------------------------------------
Universal City Florida:
7.96% Sr. Unsec. Nts., 5/1/10 6                      775,000            807,938
8.375% Sr. Unsec. Nts., 5/1/10                       900,000            942,750
                                                                ----------------
                                                                     15,079,988

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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
INSURANCE--0.1%
Texas Gas Transmission Corp., 7.25% Debs.,
7/15/27                                         $  1,000,000    $     1,275,468
--------------------------------------------------------------------------------
REAL ESTATE--1.1%
American Casino & Entertainment Properties
LLC, 7.85% Sr. Sec. Nts., 2/1/12                   1,750,000          1,863,750
--------------------------------------------------------------------------------
Felcor Lodging LP, 9% Sr. Nts., 6/1/11             2,552,000          2,800,820
--------------------------------------------------------------------------------
HMH Properties, Inc., 7.875% Sr. Nts.,
Series B, 8/1/08                                     618,000            630,360
--------------------------------------------------------------------------------
Host Marriott LP, 6.375% Sr. Nts., 3/15/15 4       2,580,000          2,567,100
--------------------------------------------------------------------------------
MeriStar Hospitality Corp.:
9.125% Sr. Unsec. Nts., 1/15/11                    2,797,000          2,950,835
10.50% Sr. Unsec. Nts., 6/15/09                    2,700,000          2,902,500
--------------------------------------------------------------------------------
Trustreet Properties, Inc., 7.50% Sr.
Nts., 4/1/15 4                                     2,215,000          2,275,913
                                                                ----------------
                                                                     15,991,278

--------------------------------------------------------------------------------
HEALTH CARE--6.5%
--------------------------------------------------------------------------------
BIOTECHNOLOGY--0.1%
Titan Petrochemicals Group Ltd., 8.50% Sr.
Unsec. Nts., 3/18/12 4                             2,120,000          1,939,800
--------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.4%
Inverness Medical Innovations, Inc., 8.75%
Sr. Sub. Nts., 2/15/12                             1,100,000          1,097,250
--------------------------------------------------------------------------------
Sybron Dental Specialties, Inc., 8.125%
Sr. Sub. Nts., 6/15/12                             2,200,000          2,365,000
--------------------------------------------------------------------------------
Universal Hospital Services, Inc., 10.125%
Sr. Unsec. Nts., 11/1/11                           2,150,000          2,182,250
                                                                ----------------
                                                                      5,644,500

--------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--5.8%
Alderwoods Group, Inc., 7.75% Sr. Nts.,
9/15/12 4                                          2,800,000          2,985,500
--------------------------------------------------------------------------------
AmeriPath, Inc., 10.50% Sr. Unsec. Sub.
Nts., 4/1/13                                       2,000,000          2,035,000
--------------------------------------------------------------------------------
Beverly Enterprises, Inc., 7.875% Sr. Sub.
Nts., 6/15/14                                      2,300,000          2,518,500
--------------------------------------------------------------------------------
Community Health Systems, Inc., 6.50% Sr.
Unsec. Sub. Nts., 12/15/12                         2,400,000          2,454,000
--------------------------------------------------------------------------------
Coventry Health Care, Inc., 6.125% Sr.
Unsec. Nts., 1/15/15 1                             1,065,000          1,088,963
--------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Nts., 3/15/13 4                         2,320,000          2,407,000
7.25% Sr. Sub. Nts., 3/15/15 4                     2,030,000          2,095,975
--------------------------------------------------------------------------------
Extendicare Health Services, Inc.:
6.875% Sr. Sub. Nts., 5/1/14                         600,000            598,500
9.50% Sr. Unsec. Sub. Nts., 7/1/10                 1,900,000          2,061,500
--------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II,
7.875% Nts., 2/1/08                                2,800,000          2,933,000
--------------------------------------------------------------------------------
Genesis HealthCare Corp., 8% Sr. Sub.
Nts., 10/15/13                                     1,300,000          1,413,750
--------------------------------------------------------------------------------
HCA, Inc.:
6.30% Sr. Unsec. Nts., 10/1/12                     1,200,000          1,234,781
6.375% Nts., 1/15/15                               8,350,000          8,684,902
7.875% Sr. Nts., 2/1/11                            1,000,000          1,102,789
8.75% Sr. Nts., 9/1/10                             2,000,000          2,283,020


                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
HealthSouth Corp.:
7.625% Nts., 6/1/12                             $  3,950,000    $     3,851,250
8.375% Unsec. Nts., 10/1/11                        1,440,000          1,436,400
10.75% Sr. Unsec. Sub. Nts., 10/1/08               1,697,000          1,773,365
--------------------------------------------------------------------------------
Magellan Health Services, Inc.,
9.375% Sr. Unsec. Nts., Series A, 11/15/08         4,435,654          4,746,150
--------------------------------------------------------------------------------
Medquest, Inc., 11.875% Sr. Unsec. Sub.
Nts., Series B, 8/15/12                            3,200,000          3,040,000
--------------------------------------------------------------------------------
National Nephrology Assn., 9% Sr. Sub.
Nts., 11/1/11 4                                      650,000            732,875
--------------------------------------------------------------------------------
NDCHealth Corp., 10.50% Sr. Unsec. Sub.
Nts., 12/1/12                                      4,100,000          4,376,750
--------------------------------------------------------------------------------
PacifiCare Health Systems, Inc., 10.75%
Sr. Unsec. Unsub. Nts., 6/1/09                     2,207,000          2,438,735
--------------------------------------------------------------------------------
Psychiatric Solutions, Inc., 7.75% Sr.
Sub. Nts., 7/15/15 4                               1,220,000          1,224,575
--------------------------------------------------------------------------------
Quintiles Transnational Corp.,
10% Sr. Sub. Nts., 10/1/13                         1,900,000          2,090,000
--------------------------------------------------------------------------------
Rotech Healthcare, Inc., 9.50% Sr. Unsec.
Sub. Nts., 4/1/12                                  2,400,000          2,580,000
--------------------------------------------------------------------------------
Select Medical Corp., 7.625% Sr. Sub.
Nts., 2/1/15 4                                     2,650,000          2,636,750
--------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11                           2,620,000          2,508,650
7.375% Nts., 2/1/13                                  147,000            145,898
9.875% Sr. Nts., 7/1/14                            4,875,000          5,252,813
--------------------------------------------------------------------------------
Triad Hospitals, Inc.:
7% Sr. Nts., 5/15/12                               2,400,000          2,514,000
7% Sr. Sub. Nts., 11/15/13                         5,210,000          5,379,325
--------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12                        2,150,000          2,311,250
10.75% Sr. Unsec. Sub. Nts., 8/15/14               2,550,000          2,792,250
                                                                ----------------
                                                                     87,728,216

--------------------------------------------------------------------------------
PHARMACEUTICALS--0.2%
Valeant Pharmaceuticals International,
Inc., 7% Sr. Nts., 12/15/11                        2,900,000          2,856,500
--------------------------------------------------------------------------------
INDUSTRIALS--8.0%
--------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.3%
Alliant Techsystems, Inc., 8.50% Sr.
Unsec. Sub. Nts., 5/15/11                          2,400,000          2,574,000
--------------------------------------------------------------------------------
BE Aerospace, Inc.:
8% Sr. Unsec. Sub. Nts., Series B, 3/1/08          2,900,000          2,914,500
8.50% Sr. Unsec. Nts., 10/1/10                     1,100,000          1,221,000
8.875% Sr. Unsec. Sub. Nts., 5/1/11                  147,000            154,350
--------------------------------------------------------------------------------
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15                        900,000            877,500
6.125% Sr. Unsec. Sub. Nts., 1/15/14               1,350,000          1,356,750
7.625% Sr. Sub. Nts., 6/15/12                      1,250,000          1,337,500
--------------------------------------------------------------------------------
Rexnord Corp., 10.125% Sr. Unsec. Sub.
Nts., 12/15/12                                     1,900,000          2,090,000
--------------------------------------------------------------------------------
TD Funding Corp., 8.375% Sr.
Sub. Nts., 7/15/11                                 2,800,000          2,982,000
--------------------------------------------------------------------------------
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13                           1,517,000          1,687,663
11% Sr. Sub. Nts., 2/15/13                         1,299,000          1,500,345


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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
Vought Aircraft Industries, Inc.,
8% Sr. Nts., 7/15/11                            $  1,050,000    $     1,044,750
                                                                ----------------
                                                                     19,740,358

--------------------------------------------------------------------------------
AIRLINES--0.3%
AMR Corp., 9% Debs., 8/1/12                        2,000,000          1,580,000
--------------------------------------------------------------------------------
ATA Holdings Corp.:
12.125% Sr. Unsec. Unsub. Nts.,
6/15/10 2,3                                        2,000,000            390,000
13% Sr. Unsec. Nts., 2/1/09 2,3                    6,720,000          1,310,400
--------------------------------------------------------------------------------
Northwest Airlines Corp., 10% Sr.
Unsec. Nts., 2/1/09                                3,850,000          1,694,000
                                                                ----------------
                                                                      4,974,400

--------------------------------------------------------------------------------
BUILDING PRODUCTS--0.5%
Associated Materials, Inc., 9.75%
Sr. Sub. Nts., 4/15/12                             1,500,000          1,560,000
--------------------------------------------------------------------------------
Goodman Global Holding Co., Inc.,
7.875% Sr. Sub. Nts., 12/15/12 4                   1,150,000          1,069,500
--------------------------------------------------------------------------------
Jacuzzi Brands, Inc., 9.625% Sr.
Sec. Nts., 7/1/10                                  1,944,000          2,138,400
--------------------------------------------------------------------------------
Nortek, Inc., 8.50% Sr. Unsec.
Unsub. Nts., 9/1/14                                1,550,000          1,449,250
--------------------------------------------------------------------------------
North America Energy Partners,
Inc., 8.75% Sr. Unsec. Nts., 12/1/11               1,300,000          1,124,500
                                                                ----------------
                                                                      7,341,650

--------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.8%
Allied Waste North America, Inc.:
7.25% Sr. Nts., 3/15/15 4                            850,000            826,625
7.375% Sr. Sec. Nts., Series B, 4/15/14           11,000,000         10,230,000
8.875% Sr. Nts., Series B, 4/1/08                  1,700,000          1,793,500
--------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr.
Sub. Nts., Series B, 11/15/05 1,2,3                2,500,000                 --
--------------------------------------------------------------------------------
Cenveo Corp., 7.875% Sr. Sub. Nts.,
12/1/13                                            4,300,000          4,106,500
--------------------------------------------------------------------------------
Comforce Operating, Inc., 12% Sr.
Nts., Series B, 12/1/07                            2,400,000          2,412,000
--------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13                2,200,000          2,194,500
7.50% Sr. Nts., 5/1/11                             1,350,000          1,412,438
--------------------------------------------------------------------------------
Mail-Well I Corp., 9.625% Sr. Nts.,
3/15/12                                            4,150,000          4,502,750
                                                                ----------------
                                                                     27,478,313

--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.5%
Belden & Blake Corp., 8.75% Sec.
Nts., 7/15/12                                      3,175,000          3,127,375
--------------------------------------------------------------------------------
Dayton Superior Corp., 13% Sr.
Unsec. Sub. Nts., 6/15/09                          1,050,000            929,250
--------------------------------------------------------------------------------
General Cable Corp., 9.50% Sr.
Nts., 11/15/10                                     2,200,000          2,365,000
--------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7% Sr.
Unsec. Debs., 10/15/28                             1,000,000          1,025,824
                                                                ----------------
                                                                      7,447,449

--------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.1%
Great Lakes Dredge & Dock Co.,
7.75% Sr. Unsec. Sub. Nts., 12/15/13               1,800,000          1,372,500


                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
MACHINERY--1.6%
Case New Holland, Inc., 9.25% Sr. Nts.,
8/1/11 4                                        $  1,300,000    $     1,371,500
--------------------------------------------------------------------------------
Douglas Dynamics LLC, 7.75% Sr. Nts.,
1/15/12 4                                          2,000,000          1,970,000
--------------------------------------------------------------------------------
Greenbrier Cos., Inc. (The), 8.375% Sr.
Nts., 5/15/15 4                                    1,945,000          1,988,763
--------------------------------------------------------------------------------
Manitowoc Co., Inc. (The):
7.125% Sr. Nts., 11/1/13                             600,000            630,000
10.50% Sr. Sub. Nts., 8/1/12                       2,174,000          2,467,490
--------------------------------------------------------------------------------
Milacron Escrow Corp., 11.50% Sr. Sec.
Nts., 5/15/11                                      4,700,000          4,958,500
--------------------------------------------------------------------------------
Navistar International Corp., 7.50% Sr.
Nts., 6/15/11                                      2,800,000          2,870,000
--------------------------------------------------------------------------------
NMHG Holding Co., 10% Sr. Nts., 5/15/09            1,600,000          1,688,000
--------------------------------------------------------------------------------
Terex Corp.:
9.25% Sr. Unsec. Sub. Nts., 7/15/11                3,900,000          4,251,000
10.375% Sr. Unsec. Sub. Nts., Series B,
4/1/11                                               500,000            545,000
--------------------------------------------------------------------------------
Trinity Industries, Inc., 6.50% Sr. Nts.,
3/15/14                                            1,950,000          1,950,000
                                                                ----------------
                                                                     24,690,253

--------------------------------------------------------------------------------
MARINE--0.6%
CP Ships Ltd., 10.375% Sr. Nts., 7/15/12           5,000,000          5,625,000
--------------------------------------------------------------------------------
Navigator Gas Transport plc, 10.50% First
Priority Ship Mtg. Nts., 6/30/07 1,2,3             3,324,000          2,908,500
--------------------------------------------------------------------------------
WPO Shipholding Co. LLC, 12% Sr. Sec.
Nts., 7/15/05 1,2,3                                5,000,000             28,000
                                                                ----------------
                                                                      8,561,500

--------------------------------------------------------------------------------
ROAD & RAIL--0.5%
Kansas City Southern Railway Co. (The),
7.50% Sr. Nts., 6/15/09                            2,000,000          2,075,000
--------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16                        1,125,000          1,049,063
7.50% Sr. Unsec. Nts., 11/1/13                     3,093,000          3,062,070
9.625% Sr. Nts., 12/1/12                           2,000,000          2,190,000
                                                                ----------------
                                                                      8,376,133

--------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.6%
United Rentals, Inc., 7% Sr. Sub. Nts.,
2/15/14                                            9,000,000          8,617,500
--------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.2%
Horizon Lines LLC, 9% Nts., 11/1/12 4              2,300,000          2,420,750
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--3.7%
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.7%
Lucent Technologies, Inc., 6.45% Unsec.
Debs., 3/15/29                                     7,500,000          6,750,000
--------------------------------------------------------------------------------
Orion Network Systems, Inc., 12.50% Sr.
Unsub. Disc. Nts., 1/15/07 1,2,3                   5,310,000          2,920,500
                                                                ----------------
                                                                      9,670,500

--------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.1%
Seagate Technology Hdd Holdings, 8% Sr.
Nts., 5/15/09                                      1,700,000          1,816,875


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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.1%
Flextronics International Ltd., 6.25% Sr.
Sub. Nts., 11/15/14                             $  4,750,000   $      4,738,125
--------------------------------------------------------------------------------
Ingram Micro, Inc., 9.875% Sr. Unsec. Sub.
Nts., 8/15/08                                      3,000,000          3,172,500
--------------------------------------------------------------------------------
LCE Acquisition Corp., 9% Sr. Sub. Nts.,
8/1/14 4                                           3,175,000          3,087,688
--------------------------------------------------------------------------------
Sanmina-SCI Corp., 6.75% Sub. Nts., 3/1/13 4       2,370,000          2,275,200
--------------------------------------------------------------------------------
Sensus Metering System, Inc., 8.625% Sr.
Unsec. Sub. Nts., 12/15/13                         4,200,000          3,927,000
                                                                ---------------
                                                                     17,200,513

--------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc., 10.75% Sr.
Nts., 12/15/09 1,2,3 [EUR]                         4,232,751             51,223
--------------------------------------------------------------------------------
NorthPoint Communications Group, Inc.,
12.875% Nts., 2/15/10 1,2,3                        1,040,900                 --
--------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr. Unsec. Nts.,
12/1/06 1,2,3 [EUR]                                1,000,000                 --
                                                                ----------------
                                                                         51,223

--------------------------------------------------------------------------------
IT SERVICES--0.6%
DynCorp International LLC, 9.50% Sr. Sub.
Nts., 2/15/13 4                                    4,665,000          4,361,775
--------------------------------------------------------------------------------
Iron Mountain, Inc., 8.625% Sr. Unsec. Sub.
Nts., 4/1/13                                       2,400,000          2,496,000
--------------------------------------------------------------------------------
Titan Corp. (The), 8% Sr. Sub. Nts., 5/15/11       1,400,000          1,508,500
                                                                ----------------
                                                                      8,366,275

--------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT--1.2%
Advanced Micro Devices, Inc., 7.75% Sr.
Unsec. Nts., 11/1/12                               5,450,000          5,395,500
--------------------------------------------------------------------------------
Amkor Technology, Inc., 9.25% Sr. Unsec.
Sub. Nts., 2/15/08                                 3,500,000          3,377,500
--------------------------------------------------------------------------------
Freescale Semiconductor, Inc., 7.125% Sr.
Unsec. Nts., 7/15/14                               2,300,000          2,484,000
--------------------------------------------------------------------------------
Huntsman International LLC, 7.375% Sr. Sub.
Nts., 1/1/15 4                                     6,350,000          6,302,375
--------------------------------------------------------------------------------
MagnaChip Semiconductor Ltd., 8% Sr. Sub.
Nts., 12/15/14 4                                     586,000            565,490
                                                                ----------------
                                                                     18,124,865

--------------------------------------------------------------------------------
MATERIALS--13.1%
--------------------------------------------------------------------------------
CHEMICALS--4.0%
AEP Industries, Inc., 7.875% Sr. Nts.,
3/15/13 4                                            840,000            846,060
--------------------------------------------------------------------------------
ClimaChem, Inc., 10.75% Sr. Unsec. Nts.,
Series B, 12/1/07 1                                2,000,000          1,340,000
--------------------------------------------------------------------------------
Compass Minerals Group, Inc., 10% Sr. Sub.
Nts., 8/15/11                                        895,000            980,025
--------------------------------------------------------------------------------
Crompton Corp., 9.875% Sr. Nts., 8/1/12            2,800,000          3,262,000
--------------------------------------------------------------------------------
Equistar Chemicals LP/Equistar Funding Corp.:
10.125% Sr. Unsec. Nts., 9/1/08                      147,000            159,863
10.625% Sr. Unsec. Nts., 5/1/11                    4,400,000          4,878,500
--------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc,
10.125% Sr. Unsec. Sub. Nts., 7/1/09               5,572,000          5,760,055
--------------------------------------------------------------------------------
Huntsman International LLC, 9.875% Sr.
Nts., 3/1/09                                       6,100,000          6,557,500
--------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 6                  2,535,000          2,984,963
11.625% Sr. Unsec. Nts., 10/15/10                     95,000            111,744

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
CHEMICALS Continued
IMC Global, Inc.:
7.625% Bonds, 11/1/05 1                         $     24,000    $        24,360
10.875% Sr. Unsec. Nts., 8/1/13                      147,000            173,093
10.875% Sr. Unsec. Nts., Series B, 6/1/08             46,000             51,980
--------------------------------------------------------------------------------
Innophos, Inc., 8.875% Sr. Sub. Nts.,
8/15/14 4                                          3,300,000          3,382,500
--------------------------------------------------------------------------------
ISP Chemco, Inc., 10.25% Sr. Unsec. Sub.
Nts., 7/1/11                                       2,700,000          2,956,500
--------------------------------------------------------------------------------
ISP Holdings, Inc., 10.625% Sr. Sec. Nts.,
12/15/09                                           1,800,000          1,944,000
--------------------------------------------------------------------------------
KI Holdings, Inc., 0%/9.875% Sr. Unsec. Sub.
Disc. Nts., 11/15/14 5                             2,850,000          1,667,250
--------------------------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08                            147,000            157,106
9.50% Sr. Sec. Nts., 12/15/08                        700,000            748,125
9.625% Sr. Sec. Nts., Series A, 5/1/07             2,500,000          2,681,250
9.875% Sec. Nts., Series B, 5/1/07                   269,000            277,070
10.50% Sr. Sec. Nts., 6/1/13                       1,250,000          1,435,938
11.125% Sr. Sec. Nts., 7/15/12                       700,000            798,000
--------------------------------------------------------------------------------
Millennium America, Inc., 9.25% Sr. Unsec.
Sub. Nts., 6/15/08                                   746,000            811,275
--------------------------------------------------------------------------------
PCI Chemicals Canada, 10% Sr. Sec. Nts.,
12/31/08                                             989,550          1,053,871
--------------------------------------------------------------------------------
Pioneer Cos., Inc., 6.99% Sr. Sec. Nts.,
12/31/06 6                                            43,239             43,455
--------------------------------------------------------------------------------
PolyOne Corp.:
8.875% Sr. Unsec. Nts., 5/1/12                     2,600,000          2,580,500
10.625% Sr. Unsec. Nts., 5/15/10                   1,597,000          1,696,813
--------------------------------------------------------------------------------
Resolution Performance Products LLC:
8% Sr. Sec. Nts., 12/15/09                         1,650,000          1,724,250
13.50% Sr. Unsec. Sub. Nts., 11/15/10              1,350,000          1,458,000
--------------------------------------------------------------------------------
Rhodia SA, 10.25% Sr. Unsec. Nts., 6/1/10          2,020,000          2,176,550
--------------------------------------------------------------------------------
Rockwood Specialties Group, Inc.:
7.50% Sr. Sub. Nts., 11/15/14 4                    1,000,000            997,500
10.625% Sr. Unsec. Sub. Nts., 5/15/11                950,000          1,052,125
--------------------------------------------------------------------------------
Royster-Clark, Inc., 10.25% First Mtg. Nts.,
4/1/09 1                                           1,500,000          1,558,755
--------------------------------------------------------------------------------
Sterling Chemicals, Inc., 10% Sr. Sec. Nts.,
12/19/07 1,7                                       2,045,678          2,035,450
--------------------------------------------------------------------------------
Westlake Chemical Corp., 8.75% Sr. Nts.,
7/15/11                                              844,000            922,070
                                                                ----------------
                                                                     61,288,496

--------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.4%
NTK Holdings, Inc., 0%/10.75% Sr. Disc.
Nts., 3/1/14 4,5                                   6,090,000          2,892,750
--------------------------------------------------------------------------------
Texas Industries, Inc., 10.25% Sr. Unsec.
Nts., 6/15/11                                      2,600,000          3,025,750
                                                                ----------------
                                                                      5,918,500

--------------------------------------------------------------------------------
CONTAINERS & PACKAGING--3.6% Crown Euro Holdings SA:
9.50% Sr. Sec. Nts., 3/1/11                        2,800,000          3,108,000
10.875% Sr. Sec. Nts., 3/1/13                      1,400,000          1,652,000


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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
CONTAINERS & PACKAGING Continued
Graham Packaging Co., Inc.:
8.50% Sr. Nts., 10/15/12 4                      $  1,200,000    $     1,218,000
9.875% Sub. Nts., 10/15/14 4                       2,400,000          2,418,000
--------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11                            3,300,000          3,415,500
9.50% Sr. Sub. Nts., 8/15/13                       2,100,000          2,126,250
--------------------------------------------------------------------------------
Jefferson Smurfit Corp.:
7.50% Sr. Unsec. Unsub. Nts., 6/1/13                 650,000            624,000
8.25% Sr. Unsec. Nts., 10/1/12                     2,500,000          2,525,000
--------------------------------------------------------------------------------
MDP Acquisitions plc, 9.625% Sr. Nts.,
10/1/12                                            2,500,000          2,512,500
--------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11                         700,000            747,250
8.25% Sr. Unsec. Nts., 5/15/13                     1,347,000          1,469,914
8.75% Sr. Sec. Nts., 11/15/12                      5,400,000          5,980,500
8.875% Sr. Sec. Nts., 2/15/09                      3,000,000          3,202,500
--------------------------------------------------------------------------------
Pliant Corp.:
11.125% Sr. Sec. Nts., 9/1/09                      1,200,000          1,176,000
11.625% Sr. Sec. Nts., 6/15/09 4,7                 1,404,123          1,509,432
--------------------------------------------------------------------------------
Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14         6,050,000          5,687,000
--------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12                            2,500,000          2,537,500
9.25% Sr. Unsec. Nts., 2/1/08                      1,000,000          1,050,000
9.75% Sr. Unsec. Nts., 2/1/11                      4,000,000          4,250,000
--------------------------------------------------------------------------------
Stone Container Finance Co. of Canada II,
7.375% Sr. Unsec. Nts., 7/15/14                    1,700,000          1,606,500
--------------------------------------------------------------------------------
Tekni-Plex, Inc., 10.875% Sr. Sec. Nts.,
8/15/12 4                                            735,000            797,475
--------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec. Sub. Nts.,
6/15/12                                            5,100,000          4,309,500
                                                                ----------------
                                                                     53,922,821

--------------------------------------------------------------------------------
METALS & MINING--3.3%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12                     4,447,000          3,779,950
7.875% Sr. Unsec. Nts., 2/15/09                      900,000            823,500
--------------------------------------------------------------------------------
Arch Western Finance LLC, 6.75% Sr. Nts.,
7/1/13                                             2,650,000          2,749,375
--------------------------------------------------------------------------------
California Steel Industries, Inc., 6.125%
Sr. Nts., 3/15/14                                  1,500,000          1,402,500
--------------------------------------------------------------------------------
Century Aluminum Co., 7.50% Sr. Unsec.
Nts., 8/15/14                                      2,800,000          2,779,000
--------------------------------------------------------------------------------
Foundation PA Coal Co., 7.25% Sr. Unsec.
Nts., 8/1/14                                       1,900,000          2,004,500
--------------------------------------------------------------------------------
IMCO Recycling, Inc., 10.375% Sr. Sec.
Nts., 10/15/10                                     2,200,000          2,425,500
--------------------------------------------------------------------------------
International Utility Structures, Inc., 13%
Unsec. Sub. Nts., 2/1/08 1,2,3                       814,000                 --
--------------------------------------------------------------------------------
IPSCO, Inc., 8.75% Sr. Nts., 6/1/13                  850,000            953,063
--------------------------------------------------------------------------------
Ispat Inland ULC, 9.75% Sr. Sec. Nts.,
4/1/14                                             4,543,000          5,315,310
--------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75% Sr. Sec.
Nts., 6/1/12                                       2,500,000          2,712,500
--------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 10.875%
Sr. Nts., Series B, 10/15/06 2,3                   2,000,000          1,830,000
--------------------------------------------------------------------------------
Koppers Industry, Inc., 9.875% Sr. Sec.
Nts., 10/15/13                                     2,800,000          3,038,000

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
METALS & MINING Continued
Massey Energy Co., 6.625% Sr. Nts.,
11/15/10                                        $  1,750,000    $     1,811,250
--------------------------------------------------------------------------------
Northwest Pipeline Corp., 8.125% Sr. Nts.,
3/1/10                                               850,000            926,500
--------------------------------------------------------------------------------
Novelis, Inc., 7.25% Sr. Nts., 2/15/15 4           3,750,000          3,782,813
--------------------------------------------------------------------------------
Oregon Steel Mills, Inc., 10% Sr. Nts.,
7/15/09                                            5,750,000          6,224,375
--------------------------------------------------------------------------------
Peabody Energy Corp., 6.875% Sr. Unsec.
Nts., Series B, 3/15/13                            2,500,000          2,662,500
--------------------------------------------------------------------------------
Steel Dynamics, Inc., 9.50% Sr. Nts.,
3/15/09                                            1,500,000          1,601,250
--------------------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr. Nts.,
2/15/12                                              700,000            740,250
--------------------------------------------------------------------------------
United States Steel Corp.:
9.75% Sr. Nts., 5/15/10                            1,514,000          1,642,690
10.75% Sr. Nts., 8/1/08                            1,493,000          1,664,695
                                                                ----------------
                                                                     50,869,521

--------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.8%
Abitibi-Consolidated, Inc., 8.55% Nts.,
8/1/10                                             1,250,000          1,309,375
--------------------------------------------------------------------------------
Appleton Papers, Inc., 8.125% Sr. Nts.,
6/15/11                                            2,250,000          2,205,000
--------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.50% Sr.
Nts., 10/1/13                                      1,000,000          1,025,000
--------------------------------------------------------------------------------
Georgia-Pacific Corp.:
8.125% Sr. Unsec. Nts., 5/15/11                    1,500,000          1,698,750
9.375% Sr. Unsec. Nts., 2/1/13                     3,800,000          4,317,750
--------------------------------------------------------------------------------
Inland Fiber Group LLC, 9.625% Sr. Unsec.
Nts., 11/15/07 1,2,3                               5,400,000          2,403,000
--------------------------------------------------------------------------------
JSG Holding plc, 11.50% Sr. Nts.,
10/1/15 4,7 [EUR]                                    774,809            754,800
--------------------------------------------------------------------------------
Mercer International, Inc., 9.25% Sr.
Nts., 2/15/13                                      2,290,000          1,843,450
--------------------------------------------------------------------------------
Norske Skog Canada Ltd., 7.375% Sr. Unsec.
Nts., 3/1/14                                       1,500,000          1,477,500
--------------------------------------------------------------------------------
Tekni-Plex, Inc.:
8.75% Sr. Sec. Nts., 11/15/13 4                    5,347,000          4,772,198
12.75% Sr. Unsec. Sub. Nts., Series B,
6/15/10                                              900,000            621,000
--------------------------------------------------------------------------------
Tembec Industries, Inc.:
7.75% Sr. Nts., 3/15/12                            2,800,000          2,072,000
8.50% Sr. Unsec. Nts., 2/1/11                        147,000            114,293
--------------------------------------------------------------------------------
Western Forest Products, Inc., 15% Sec.
Nts., 7/28/09 1,7                                  2,294,000          2,385,760
                                                                ----------------
                                                                     26,999,876

--------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--10.5%
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--4.4%
American Tower Corp., 7.125% Sr. Unsec.
Nts., 10/15/12                                     1,500,000          1,593,750
--------------------------------------------------------------------------------
Cincinnati Bell, Inc.:
7% Sr. Nts., 2/15/15 4                             1,230,000          1,208,475
8.375% Sr. Sub. Nts., 1/15/14 4                      970,000            999,100
--------------------------------------------------------------------------------
Citizens Communications Co.:
6.25% Sr. Nts., 1/15/13 4                            670,000            651,575
9.25% Sr. Nts., 5/15/11                              600,000            672,750
--------------------------------------------------------------------------------
Intelsat Bermuda Ltd., 8.625% Sr. Nts.,
1/15/15 4                                          5,135,000          5,443,100

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

                                                   PRINCIPAL              VALUE
                                                      AMOUNT         SEE NOTE 1
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Continued
iPCS, Inc., 7/15/10, Escrow Shares 1            $  1,350,000    $            --
--------------------------------------------------------------------------------
Level 3 Communications, Inc., 9.125% Sr.
Unsec. Nts., 5/1/08                                6,150,000          5,135,250
--------------------------------------------------------------------------------
MCI, Inc.:
6.908% Sr. Unsec. Nts., 5/1/07 6                   2,693,000          2,736,761
7.688% Sr. Unsec. Nts., 5/1/09 6                   2,900,000          3,026,875
--------------------------------------------------------------------------------
PanAmSat Holding Corp., 0%/10.375% Sr.
Unsec. Disc. Nts., 11/1/14 5                       1,250,000            865,625
--------------------------------------------------------------------------------
Pratama Datakom Asia BV, 12.75% Gtd. Nts.,
7/15/05 1,2,3                                      4,000,000            140,000
--------------------------------------------------------------------------------
Qwest Capital Funding, Inc., 7.90% Unsec.
Nts., 8/15/10                                      4,272,000          4,272,000
--------------------------------------------------------------------------------
Qwest Communications International, Inc.,
7.25% Sr. Unsec. Sub. Nts., 2/15/11 6              1,500,000          1,458,750
--------------------------------------------------------------------------------
Qwest Corp.:
8.875% Nts., 3/15/12 4,6                           4,200,000          4,588,500
8.875% Unsec. Unsub. Nts., 3/15/12 6               1,400,000          1,529,500
--------------------------------------------------------------------------------
Qwest Services Corp.:
13.50% Sr. Sec. Sub. Nts., 12/15/10               17,300,000         20,068,000
14% Sr. Sec. Sub. Nts., 12/15/14                   3,800,000          4,626,500
--------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts.,
12/1/07 1,2,3                                      2,300,000                 --
--------------------------------------------------------------------------------
Time Warner Telecom Holdings, Inc., 9.25%
Sr. Nts., 2/15/14 4                                3,195,000          3,099,150
--------------------------------------------------------------------------------
Time Warner Telecom LLC/Time Warner
Telecom, Inc., 9.75% Sr. Nts., 7/15/08             1,800,000          1,818,000
--------------------------------------------------------------------------------
Time Warner Telecom, Inc., 10.125% Sr.
Unsec. Sub. Nts., 2/1/11                           1,150,000          1,155,750
--------------------------------------------------------------------------------
Valor Telecommunications Enterprises LLC,
7.75% Sr. Nts., 2/15/15 4                          1,370,000          1,352,875
                                                                ----------------
                                                                     66,442,286

--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--6.1% Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12                            2,750,000          2,897,813
11% Sr. Unsec. Nts., 7/31/10                         147,000            165,559
12.50% Sr. Unsec. Nts., 2/1/11                     2,200,000          2,497,000
--------------------------------------------------------------------------------
American Cellular Corp., 10% Sr. Nts.,
Series B, 8/1/11                                   1,920,000          1,958,400
--------------------------------------------------------------------------------
American Tower Corp., 7.50% Sr. Nts., 5/1/12       6,450,000          6,917,625
--------------------------------------------------------------------------------
American Tower Escrow Corp., 12.25% Sr.
Sub. Disc. Nts., 8/1/08 8                          4,300,000          3,321,750
--------------------------------------------------------------------------------
AT&T Corp.:
9.05% Sr. Unsec. Nts., 11/15/11 6                  5,459,000          6,318,793
9.75% Sr. Nts., 11/15/31 6                           600,000            783,750
--------------------------------------------------------------------------------
CellNet Data Systems, Inc., Sr. Unsec.
Disc. Nts., 10/1/07 1,2,3                          9,220,000                 --
--------------------------------------------------------------------------------
Centennial Cellular Operating Co.
LLC/Centennial Communications Corp.,
10.125% Sr. Nts., 6/15/13                          7,350,000          8,342,250
--------------------------------------------------------------------------------
Dobson Cellular Systems, Inc., 8.375% Sr.
Sec. Nts., 11/1/11 4                               1,660,000          1,751,300
--------------------------------------------------------------------------------
Dobson Communications Corp., 8.875% Sr.
Nts., 10/1/13                                      3,671,000          3,377,320
--------------------------------------------------------------------------------
IWO Escrow Co., 6.891% Sr. Sec. Nts.,
1/15/12 4,6                                          570,000            568,575
--------------------------------------------------------------------------------
Nextel Communications, Inc., 7.375% Sr.
Nts., 8/1/15                                      11,460,000         12,434,100
--------------------------------------------------------------------------------
Nextel Partners, Inc., 8.125% Sr. Nts.,
7/1/11                                             3,300,000          3,597,000


                                                    PRINCIPAL             VALUE
                                                       AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES Continued
Rogers Wireless, Inc.:
6.375% Sec. Nts., 3/1/14                        $   2,100,000   $     2,147,250
7.50% Sec. Nts., 3/15/15                            2,700,000         2,949,750
8% Sr. Sub. Nts., 12/15/12                          1,400,000         1,515,500
--------------------------------------------------------------------------------
Rural Cellular Corp.:
8.25% Sr. Sec. Nts., 3/15/12                        2,100,000         2,205,000
9.625% Sr. Sub. Nts., Series B, 5/15/08             1,150,000         1,115,500
9.75% Sr. Sub. Nts., 1/15/10                        2,747,000         2,568,445
9.875% Sr. Nts., 2/1/10                             2,200,000         2,282,500
--------------------------------------------------------------------------------
SBA Communications Corp., 8.50% Sr. Unsec.
Nts., Cl. A, 12/1/12                                4,350,000         4,708,875
--------------------------------------------------------------------------------
SBA Telecommunications, Inc./SBA
Communications Corp., 0%/9.75% Sr. Disc.
Nts., 12/15/11 5                                    6,234,000         5,766,450
--------------------------------------------------------------------------------
Triton PCS, Inc., 8.50% Sr. Unsec. Nts.,
6/1/13                                              4,400,000         4,081,000
--------------------------------------------------------------------------------
UbiquiTel Operating Co., 9.875% Sr. Nts.,
3/1/11                                              4,200,000         4,630,500
--------------------------------------------------------------------------------
US Unwired, Inc., 10% Sr. Sec. Nts., 6/15/12        1,625,000         1,815,938
--------------------------------------------------------------------------------
Western Wireless Corp., 9.25% Sr. Unsec.
Nts., 7/15/13                                       1,599,000         1,828,856
                                                                ----------------
                                                                     92,546,799

--------------------------------------------------------------------------------
UTILITIES--6.6%
--------------------------------------------------------------------------------
ELECTRIC UTILITIES--4.9%
AES Corp. (The):
8.375% Sr. Unsec. Unsub. Nts.,3/1/11 1 [GBP]        2,500,000         4,524,036
8.75% Sr. Sec. Nts., 5/15/13 4                      2,700,000         3,030,750
--------------------------------------------------------------------------------
Allegheny Energy, Inc., 7.75% Nts., 8/1/05          1,350,000         1,354,725
--------------------------------------------------------------------------------
Caithness Coso Funding Corp., 9.05% Sr. Sec.
Nts., Series B, 12/15/09                              686,761           739,985
--------------------------------------------------------------------------------
Calpine Corp.:
7.625% Sr. Nts., 4/15/06                              974,000           917,995
8.891% Sr. Sec. Nts., 7/15/07 4,6                   5,786,925         4,976,756
--------------------------------------------------------------------------------
CenterPoint Energy, Inc., 7.25% Sr. Nts.,
Series B, 9/1/10                                    1,200,000         1,332,875
--------------------------------------------------------------------------------
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09                             1,147,000         1,212,953
7.75% Sr. Nts., 8/1/10                              1,400,000         1,512,000
9.875% Sr. Unsec. Nts., 10/15/07                    4,000,000         4,380,000
--------------------------------------------------------------------------------
FPL Energy National Wind Power:
5.608% Nts., 3/10/24 4                              1,190,000         1,217,795
6.125% Nts., 3/25/19 4                                760,000           739,278
--------------------------------------------------------------------------------
Midwest Generation LLC, 8.75% Sr. Sec.
Nts., 5/1/34                                        9,400,000        10,575,000
--------------------------------------------------------------------------------
Mirant Americas Generation LLC, 8.30% Sr.
Unsec. Nts., 5/1/11 2,3                             1,300,000         1,498,250
--------------------------------------------------------------------------------
MSW Energy Holdings II LLC/MSW Energy Finance
Co. II, Inc., 7.375% Sr. Sec. Nts., Series B,
9/1/10                                              3,350,000         3,450,500
--------------------------------------------------------------------------------
MSW Energy Holdings LLC/MSW Energy Finance
Co., Inc., 8.50% Sr. Sec. Nts., 9/1/10              1,300,000         1,381,250
--------------------------------------------------------------------------------
NRG Energy, Inc., 8% Sr. Sec. Nts.,
12/15/13 4                                          5,044,000         5,346,640

STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------
                                                    PRINCIPAL             VALUE
                                                       AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10                    $   4,997,000      $  5,471,715
9.50% Sr. Sec. Nts., 7/15/13                        5,950,000         6,634,250
--------------------------------------------------------------------------------
Teco Energy, Inc., 7.20% Unsec. Unsub. Nts.,
5/1/11                                              2,550,000         2,779,500
--------------------------------------------------------------------------------
Texas Genco LLC, 6.875% Sr. Nts., 12/15/14 4        5,350,000         5,657,625
--------------------------------------------------------------------------------
TXU Corp., 5.55% Nts., 11/15/14 4                   5,325,000         5,191,108
                                                                ----------------
                                                                     73,924,986

--------------------------------------------------------------------------------
GAS UTILITIES--0.0%
SEMCO Energy, Inc., 7.125% Sr. Nts., 5/15/08        1,100,000         1,125,394
--------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--1.6%
AES Red Oak LLC, 8.54% Sr. Sec. Bonds, Series
A, 11/30/19 1                                       3,271,438         3,664,010
--------------------------------------------------------------------------------
Calpine Canada Energy Finance ULC, 8.50% Sr.
Unsec. Nts., 5/1/08                                 6,300,000         4,567,500
--------------------------------------------------------------------------------
Consumers Energy Co., 6.375% Sr. Sec. Nts.,
2/1/08                                                800,000           839,090
--------------------------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts., 4/1/11               2,886,000         2,864,355
8.75% Sr. Nts., 2/15/12                             1,159,000         1,269,105
10.125% Sr. Sec. Nts., 7/15/13 4                    6,200,000         7,037,000
--------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625% Sec.
Pass-Through Certificates,
Series A, 6/30/12                                   2,601,488         2,707,173
--------------------------------------------------------------------------------
NorthWestern Corp., 5.875% Sr. Sec. Nts.,
11/1/14 4                                           1,000,000         1,030,000
                                                                ----------------
                                                                     23,978,233

--------------------------------------------------------------------------------
WATER UTILITIES--0.1%
National Waterworks, Inc., 10.50% Sr. Unsec.
Sub. Nts., Series B, 12/1/12                        1,400,000         1,582,000
                                                                ----------------
Total Corporate Bonds and Notes
(Cost $1,313,710,300)                                             1,331,065,621

                                                       SHARES
--------------------------------------------------------------------------------
PREFERRED STOCKS--1.5%
--------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable,
Non-Vtg. 1,3                                          110,146                --
--------------------------------------------------------------------------------
Doane Pet Care Co., 14.25% Jr. Sub. Exchange
Debs., Non-Vtg. 1,3                                   140,000        11,235,000
--------------------------------------------------------------------------------
Dobson Communications Corp., 6% Cv., Series
F (converts into Dobson Communications Corp.,
Cl. A common stock), Non-Vtg. 4                         2,800           351,400
--------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr.
Redeemable, Non-Vtg. 1,3                                3,738               374
--------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum.
Exchangeable, Series B, Non-Vtg. 1,3                   28,000            35,000
--------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable,
Non-Vtg. 1,3                                                1                --
--------------------------------------------------------------------------------
McLeodUSA, Inc., 2.50% Cv., Series A 3                  6,516             1,564
--------------------------------------------------------------------------------
Pacific & Atlantic Holdings, Inc., 7.50%
Cum. Cv., Series A 1,7                                134,549           259,370
--------------------------------------------------------------------------------
Paxson Communications Corp., 14.25%
Cum. Jr. Exchangeable, Non-Vtg. 1,7                       884         5,704,010
--------------------------------------------------------------------------------
PTV, Inc., 10% Cum., Series A, Non-Vtg.                   192               384
--------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum., Series
B, Non-Vtg. 1,3                                         1,487         1,371,758

                                                                          VALUE
                                                       SHARES        SEE NOTE 1
--------------------------------------------------------------------------------
PREFERRED STOCKS Continued
--------------------------------------------------------------------------------
Sovereign Real Estate Investment Trust,
12% Non-Cum., Series A 1                               26,250       $ 3,812,813
                                                                ----------------

Total Preferred Stocks (Cost $24,667,972)                            22,771,673

--------------------------------------------------------------------------------
COMMON STOCKS--0.8%
--------------------------------------------------------------------------------
Broadwing Corp.                                        10,551            48,746
--------------------------------------------------------------------------------
Cebridge Connections Holding LLC 1,3                    6,613                --
--------------------------------------------------------------------------------
Citigroup, Inc.                                         2,479           114,604
--------------------------------------------------------------------------------
Covad Communications Group, Inc. 3                    132,227           185,118
--------------------------------------------------------------------------------
Dobson Communications Corp., Cl. A 3                  157,019           668,901
--------------------------------------------------------------------------------
Equinix, Inc. 3                                           177             7,671
--------------------------------------------------------------------------------
Globix Corp. 3                                         80,275           198,279
--------------------------------------------------------------------------------
Horizon Natural Resources Co. 1,3                      93,333                --
--------------------------------------------------------------------------------
Huntsman Corp. 3                                       54,796         1,055,179
--------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd. 3              168,429           707,402
--------------------------------------------------------------------------------
iPCS, Inc. 3                                           38,470         1,250,275
--------------------------------------------------------------------------------
Leap Wireless International, Inc. 3                    17,168           476,412
--------------------------------------------------------------------------------
Liberty Global, Inc., Series A 3                       30,141         1,406,680
--------------------------------------------------------------------------------
Magellan Health Services, Inc. 3                       72,415         2,556,974
--------------------------------------------------------------------------------
Manitowoc Co., Inc. (The)                               3,772           154,727
--------------------------------------------------------------------------------
MCI, Inc.                                              24,441           628,378
--------------------------------------------------------------------------------
Orbital Sciences Corp. 3                               14,063           139,224
--------------------------------------------------------------------------------
Pioneer Cos., Inc. 3                                   28,991           637,512
--------------------------------------------------------------------------------
Polymer Group, Inc., Cl. A 3                            8,124           205,131
--------------------------------------------------------------------------------
Prandium, Inc. 1,3,9                                  459,132             2,755
--------------------------------------------------------------------------------
Sterling Chemicals, Inc. 1,3                            3,987           147,519
--------------------------------------------------------------------------------
TVMAX Holdings, Inc. 1,3                               30,000           165,000
--------------------------------------------------------------------------------
Viatel Holding (Bermuda) Ltd. 1,3                      13,172             3,754
--------------------------------------------------------------------------------
Western Forest Products, Inc. 3                       467,777         1,574,910
--------------------------------------------------------------------------------
WRC Media Corp. 1,3                                     9,471               189
--------------------------------------------------------------------------------
XO Communications, Inc. 3                              16,729
                                                                         44,499
                                                                ----------------

Total Common Stocks (Cost $27,603,870)                               12,379,839

                                                        UNITS
--------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
--------------------------------------------------------------------------------
American Tower Corp. Wts., Exp. 8/1/08 3,4              4,300         1,274,350
--------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 1,3                   2,000                --
--------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp.
12/15/07 1,3                                            3,330                --
--------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc. Wts.,
Exp. 9/30/08 1,3                                        4,000                --
--------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08 1,3                7,500                --

STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------
                                                                          VALUE
                                                        UNITS        SEE NOTE 1
--------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATE Continued
--------------------------------------------------------------------------------
e.spire Communications, Inc. Wts., Exp.
11/1/05 1,3                                             2,575   $            26
--------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/09 1,3                1,445                14
--------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp.
9/15/05 1,3                                            50,820                --
--------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd. Wts.:
Exp. 5/16/06 1,3                                       42,243             1,690
Exp. 5/16/06 1,3                                           63                --
--------------------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07 3,4                    7,055                --
--------------------------------------------------------------------------------
iPCS, Inc. Wts., Exp. 6/15/10 1,3                       3,750                --
--------------------------------------------------------------------------------
Long Distance International, Inc. Wts.,
Exp. 4/13/08 3,4                                        2,800                --
--------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts.,
Exp. 1/15/07 1,3                                        3,910                --
--------------------------------------------------------------------------------
McLeodUSA, Inc. Wts., Exp. 4/16/07 3                   14,440                72
--------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 1,3                     5,000                --
--------------------------------------------------------------------------------
Orion Network Systems, Inc. Rts., Exp.
7/8/05 3                                                  916                --
--------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp. 9/19/10 3            100,000            37,000
--------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts., Exp.
12/19/08 1,3                                            6,474            13,595
--------------------------------------------------------------------------------
XO Communications, Inc., Cl. A Wts.,
Exp. 1/16/10 3                                         33,465            11,713
--------------------------------------------------------------------------------
XO Communications, Inc., Cl. B Wts.,
Exp. 1/16/10 3                                         25,098             6,525
--------------------------------------------------------------------------------
XO Communications, Inc., Cl. C Wts.,
Exp. 1/16/10 3                                         25,098             5,250
--------------------------------------------------------------------------------
Ziff Davis Holdings, Inc. Wts.,
Exp. 8/12/12 1,3                                       30,800             3,080
                                                                ----------------
Total Rights, Warrants and Certificates
(Cost $521,029)                                                       1,353,315

                                                    PRINCIPAL
                                                       AMOUNT
--------------------------------------------------------------------------------
STRUCTURED NOTES--1.2%
--------------------------------------------------------------------------------
Dow Jones CDX High Yield Index Pass-Through
Certificates:
Series 3-4, 10.50%, 12/29/09 4,10               $   4,000,000         3,935,000
Series 4-T1, 8.25%, 6/29/10 4,10                   11,880,000        11,939,400
--------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., High Yield
Targeted Return Index
Securities, Series 2004-1, 8.218%, 8/1/15 1,10      2,568,185         2,761,236
                                                                ----------------
Total Structured Notes (Cost $18,658,767)                            18,635,636

--------------------------------------------------------------------------------
MONEY MARKET DEPOSIT--0.1%
--------------------------------------------------------------------------------
JPMorgan Chase, Nassau Branch, 2.716%,
7/1/05 (Cost $1,896,542)                            1,896,542         1,896,542

--------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--6.9%
--------------------------------------------------------------------------------
Undivided interest of 0.62% in joint repurchase agreement (Principal
Amount/Value $193,040,000, with a maturity value of $193,055,711) with DB Alex
Brown LLC, 2.93%, dated 6/30/05, to be repurchased at $1,200,098 on 7/1/05,
collateralized by U.S. Treasury Bonds, 8.125%--9%, 11/15/18--8/15/21
with a value of $196,993,905                        1,200,000         1,200,000


                                                    PRINCIPAL             VALUE
                                                       AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS Continued
--------------------------------------------------------------------------------
Undivided interest of 8.32% in joint repurchase agreement (Principal
Amount/Value $1,234,399,000, with a maturity value of $1,234,508,724) with UBS
Warburg LLC, 3.20%, dated 6/30/05, to be repurchased at $102,698,128 on 7/1/05,
collateralized by Federal Home Loan Mortgage Corp., 5.50%,
2/1/35, with a value of $1,260,871,334          $ 102,689,000   $   102,689,000
                                                                ----------------
Total Joint Repurchase Agreements
(Cost $103,889,000)                                                 103,889,000
--------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST
$1,503,480,421)                                          99.1%    1,501,681,626
--------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES                           0.9        13,915,692
                                                --------------------------------

NET ASSETS                                              100.0%  $ 1,515,597,318
                                                ================================

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

1. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of June 30, 2005 was $67,219,335, which represents
4.44% of the Fund's net assets, of which $2,755 is considered restricted. See
Note 6 of Notes to Financial Statements.

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

3. Non-income producing security.

4. 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 $205,337,225 or 13.55% of the Fund's net
assets as of June 30, 2005.

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

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

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

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

9. 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, 2005. The
aggregate fair value of securities of affiliated companies held by the Fund as
of June 30, 2005 amounts to $2,755. Transactions during the period in which the
issuer was an affiliate are as follows:



                        SHARES       GROSS        GROSS          SHARES        VALUE   DIVIDEND
                 JUNE 30, 2004   ADDITIONS   REDUCTIONS   JUNE 30, 2005   SEE NOTE 1     INCOME
-----------------------------------------------------------------------------------------------

Prandium, Inc.         459,132          --           --         459,132   $    2,755   $     --


10. Interest rate represents a weighted average rate comprised of the interest
rates of the underlying securities.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF ASSETS AND LIABILITIES  June 30, 2005
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $1,498,080,421)                    $ 1,501,678,871
Affiliated companies (cost $5,400,000)                                    2,755
                                                                ----------------
                                                                  1,501,681,626
--------------------------------------------------------------------------------
Cash                                                                    484,600
--------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends                                               27,439,759
Investments sold                                                      6,071,628
Shares of beneficial interest sold                                    1,055,361
Other                                                                    35,301
                                                                ----------------
Total assets                                                      1,536,768,275

--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased                                                14,310,739
Dividends                                                             2,830,371
Shares of beneficial interest redeemed                                2,683,979
Distribution and service plan fees                                      873,414
Transfer and shareholder servicing agent fees                           214,692
Shareholder communications                                              154,057
Trustees' compensation                                                   38,052
Other                                                                    65,653
                                                                ----------------
Total liabilities                                                    21,170,957

--------------------------------------------------------------------------------
NET ASSETS                                                      $ 1,515,597,318
                                                                ================

--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
--------------------------------------------------------------------------------
Par value of shares of beneficial interest                      $       160,739
--------------------------------------------------------------------------------
Additional paid-in capital                                        2,130,818,362
--------------------------------------------------------------------------------
Accumulated net investment loss                                      (4,807,789)
--------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions                                              (608,766,511)
--------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation
of assets and liabilities denominated in foreign currencies          (1,807,483)
                                                                ----------------

NET ASSETS                                                      $ 1,515,597,318
                                                                ================
NET ASSET VALUE PER SHARE
------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,092,260,509 and 115,511,898 shares of beneficial interest outstanding) $9.46
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $9.93
------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $232,046,273 and
24,926,106 shares of beneficial interest outstanding) $9.31
------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $134,452,646 and
14,257,678 shares of beneficial interest outstanding) $9.43
------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $15,973,328 and
1,685,975 shares of beneficial interest outstanding) $9.47
------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $40,864,562 and 4,357,176 shares of beneficial interest outstanding)
$9.38


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  For the Year Ended June 30, 2005
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
Interest                                                        $   130,548,706
--------------------------------------------------------------------------------
Dividends                                                               359,539
                                                                ----------------
Total investment income                                             130,908,245

--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Management fees                                                       9,926,511
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                               2,696,103
Class B                                                               2,786,128
Class C                                                               1,490,963
Class N                                                                  68,758
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                               1,709,174
Class B                                                                 439,599
Class C                                                                 255,966
Class N                                                                  37,713
Class Y                                                                 234,660
--------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                 207,656
Class B                                                                  66,754
Class C                                                                  32,124
Class N                                                                   3,595
Class Y                                                                      85
--------------------------------------------------------------------------------
Trustees' compensation                                                   36,211
--------------------------------------------------------------------------------
Custodian fees and expenses                                              31,809
--------------------------------------------------------------------------------
Other                                                                   100,230
                                                                ----------------
Total expenses                                                       20,124,039
Less reduction to custodian expenses                                    (25,516)
Less waivers and reimbursements of expenses                             (51,390)
                                                                ----------------
Net expenses                                                         20,047,133

--------------------------------------------------------------------------------
NET INVESTMENT INCOME                                               110,861,112

--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
--------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments                                                     $   (36,530,841)
Foreign currency transactions                                         1,038,946
Swap contracts                                                       (1,388,442)
                                                                ----------------
Net realized loss                                                   (36,880,337)
--------------------------------------------------------------------------------
Net change in unrealized depreciation on:
Investments                                                          49,285,614
Translation of assets and liabilities denominated in foreign
currencies                                                             (761,748)
Swap contracts                                                       (2,572,348)
                                                                ----------------
Net change in unrealized depreciation                                45,951,518

--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS            $   119,932,293
                                                                ================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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



YEAR ENDED JUNE 30,                                               2005              2004
-----------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------
OPERATIONS
-----------------------------------------------------------------------------------------
Net investment income                                  $   110,861,112   $   130,707,043
-----------------------------------------------------------------------------------------
Net realized gain (loss)                                   (36,880,337)        7,552,801
-----------------------------------------------------------------------------------------
Net change in unrealized depreciation                       45,951,518        32,370,748
                                                       ----------------------------------
Net increase in net assets resulting from
operations                                                 119,932,293       170,630,592

-----------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                    (79,104,021)      (86,840,525)
Class B                                                    (17,461,746)      (23,983,742)
Class C                                                     (9,342,456)      (11,359,611)
Class N                                                       (915,301)         (757,025)
Class Y                                                     (3,700,700)       (4,327,419)

-----------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A                                                     12,882,345      (106,090,589)
Class B                                                    (73,579,012)      (78,231,133)
Class C                                                    (15,884,269)      (14,771,121)
Class N                                                      7,103,476           565,563
Class Y                                                    (16,599,862)        1,289,210

-----------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------
Total decrease                                             (76,669,253)     (153,875,800)
-----------------------------------------------------------------------------------------
Beginning of period                                      1,592,266,571     1,746,142,371
                                                       ----------------------------------
End of period (including accumulated net
investment loss of $4,807,789 and $2,518,220,
respectively)                                          $ 1,515,597,318   $ 1,592,266,571
                                                       ==================================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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



CLASS A YEAR ENDED JUNE 30,                              2005              2004              2003          2002            2001
----------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $      9.41       $      9.15       $      8.62     $   10.20     $     11.89
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .67 1             .73               .84           .92            1.18
Net realized and unrealized gain (loss)                   .05               .24               .47         (1.44)          (1.59)
                                                  --------------------------------------------------------------------------------
Total from investment operations                          .72               .97              1.31          (.52)           (.41)
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     (.67)             (.71)             (.69)        (1.01)          (1.28)
Tax return of capital distribution                         --                --              (.09)         (.05)             --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          (.67)             (.71)             (.78)        (1.06)          (1.28)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $      9.46       $      9.41       $      9.15     $    8.62     $     10.20
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                       7.85%            10.90%            16.38%        (5.47)%         (3.69)%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $ 1,092,260       $ 1,073,708       $ 1,150,055     $ 858,834     $   962,017
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $ 1,125,060       $ 1,146,751       $   934,227     $ 948,097     $ 1,038,442
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                    7.05%             7.80%             9.54%         9.68%          10.66%
Total expenses                                           1.03% 4,5         1.03% 4,5         1.07% 4       1.10% 4         1.00% 4
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    52%               55%               68%           47%             33%


1. Per share amounts calculated based on the average shares outstanding during
the period.

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 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.

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.

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



CLASS B YEAR ENDED JUNE 30,                                2005              2004              2003           2002           2001
------------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $        9.26       $      9.03       $      8.51      $   10.09     $    11.77
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .59 1             .63               .74            .84           1.10
Net realized and unrealized gain (loss)                     .05               .24               .49          (1.43)         (1.58)
                                                  ----------------------------------------------------------------------------------
Total from investment operations                            .64               .87              1.23           (.59)          (.48)
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.59)             (.64)             (.62)          (.94)         (1.20)
Tax return of capital distribution                           --                --              (.09)          (.05)            --
                                                  ----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                            (.59)             (.64)             (.71)          (.99)         (1.20)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $        9.31       $      9.26       $      9.03      $    8.51     $    10.09
                                                  ==================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                         7.05%             9.86%            15.60%         (6.23)%        (4.37)%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     232,046       $   303,184       $   372,947      $ 338,654     $  386,309
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     279,146       $   347,319       $   321,200      $ 366,869     $  414,648
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      6.27%             7.03%             8.81%          8.93%          9.91%
Total expenses                                             1.80% 4,5         1.80% 4,5         1.84% 4        1.86% 4        1.76% 4
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                      52%               55%               68%            47%            33%


1. Per share amounts calculated based on the average shares outstanding during
the period.

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 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.

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.





CLASS C YEAR ENDED JUNE 30,                              2005              2004              2003          2002           2001
----------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $      9.38       $      9.13       $      8.60     $   10.18     $     11.87
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .60 1             .66               .78           .86            1.11
Net realized and unrealized gain (loss)                   .05               .23               .46         (1.45)          (1.60)
                                                  --------------------------------------------------------------------------------
Total from investment operations                          .65               .89              1.24          (.59)           (.49)
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     (.60)             (.64)             (.62)         (.94)          (1.20)
Tax return of capital distribution                         --                --              (.09)         (.05)             --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          (.60)             (.64)             (.71)         (.99)          (1.20)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $      9.43       $      9.38       $      9.13     $    8.60     $     10.18
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                       7.02%             9.96%            15.55%        (6.08)%         (4.43)%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $   134,453       $   149,505       $   160,713     $ 106,884     $    90,603
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $   149,487       $   166,367       $   120,997     $ 104,882     $    83,776
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                    6.27%             7.03%             8.78%         8.75%           9.90%
Total expenses                                           1.81% 4,5         1.79% 4,5         1.83% 4       1.86% 4         1.76% 4
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    52%               55%               68%           47%             33%


1. Per share amounts calculated based on the average shares outstanding during
the period.

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 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.

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.

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



CLASS N YEAR ENDED JUNE 30,                              2005              2004              2003          2002           2001 1
----------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $      9.43       $      9.17       $      8.63     $   10.20     $    11.33
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .64 2             .70               .80           .96            .41
Net realized and unrealized gain (loss)                   .04               .24               .49         (1.48)         (1.13)
                                                  --------------------------------------------------------------------------------
Total from investment operations                          .68               .94              1.29          (.52)          (.72)
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     (.64)             (.68)             (.66)        (1.00)          (.41)
Tax return of capital distribution                         --                --              (.09)         (.05)            --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          (.64)             (.68)             (.75)        (1.05)          (.41)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $      9.47       $      9.43       $      9.17     $    8.63     $    10.20
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                       7.32%            10.47%            16.08%        (5.53)%        (6.43)%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $    15,973       $     8,894       $     8,324     $   2,396     $      146
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $    13,788       $    10,501       $     4,827     $     799     $       46
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income                                    6.66%             7.41%             9.14%         8.41%         11.47%
Total expenses                                           1.42% 5,6         1.38% 5,6         1.41% 5       1.35% 5        1.04% 5
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    52%               55%               68%           47%            33%


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

2. Per share amounts calculated based on the average shares outstanding during
the period.

3. 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.

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

5. Reduction to custodian expenses less than 0.01%.

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

CLASS Y YEAR ENDED JUNE 30,                               2005              2004             2003          2002             2001
----------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $       9.33      $      9.09       $      8.56     $   10.14     $      11.82
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                      .67 1            .73               .86           .90             1.20
Net realized and unrealized gain (loss)                    .05              .23               .45         (1.41)           (1.59)
                                                  --------------------------------------------------------------------------------
Total from investment operations                           .72              .96              1.31          (.51)            (.39)
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                      (.67)            (.72)             (.69)        (1.02)           (1.29)
Tax return of capital distribution                          --               --              (.09)         (.05)              --
                                                  --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                           (.67)            (.72)             (.78)        (1.07)           (1.29)
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $       9.38      $      9.33       $      9.09     $    8.56     $      10.14
                                                  ================================================================================

----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                        7.92%           10.80%            16.51%        (5.37)%          (3.57)%
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     40,865      $    56,976       $    54,102     $  38,500     $     60,244
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     52,400      $    56,276       $    43,178     $  44,583     $     56,669
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                     7.08%            7.85%             9.63%         9.88%           10.72%
Total expenses                                            1.07%            1.14%             1.34%         1.01%            0.94%
Expenses after payments and waivers and
reduction to custodian expenses                           0.97%            0.98%             0.98%         0.98%             N/A 4
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                     52%              55%               68%           47%              33%


1. Per share amounts calculated based on the average shares outstanding during
the period.

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 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.

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

4. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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's secondary
objective is to seek capital growth when consistent with its primary objective.

      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, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class 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.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Futures contracts traded on a
commodities or futures exchange will be valued at the final settlement price or
official closing price on

the principal exchange as reported by such principal exchange at its trading
session ending at, or most recently prior to, the time when the Fund's assets
are valued. 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 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 Statement of Operations. The Fund records a realized gain or loss
when a structured note is sold or matures. As of June 30, 2005, the market value
of these securities comprised 1.2% of the Fund's net assets and resulted in
unrealized cumulative losses of $23,131.

--------------------------------------------------------------------------------
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, 2005, securities with an aggregate
market value of $25,714,639, representing 1.70% of the Fund's net assets, were
in default.

--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars 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. Foreign exchange rates may be 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

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

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

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.

                                                                 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 1,2,3,4,5        TAX PURPOSES
     --------------------------------------------------------------------------
     $623,387                   $--            $603,646,103          $7,454,730

1. As of June 30, 2005, the Fund had $603,106,885 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, 2005, 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
                               2013     38,113,869
                                      ------------
                               Total  $603,106,885
                                      ============

2. As of June 30, 2005, the Fund had $431,684 of post-October losses available
to offset future realized capital gains, if any. Such losses, if unutilized,
will expire in 2014.

3. The Fund had $107,534 of post-October foreign currency losses which were
deferred.

4. During the fiscal year ended June 30, 2005, the Fund did not utilize any
capital loss carryforward.

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

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, 2005. Net assets of the
Fund were unaffected by the reclassifications.

                              REDUCTION TO
         INCREASE TO       ACCUMULATED NET
         ACCUMULATED NET     REALIZED LOSS
         INVESTMENT LOSS    ON INVESTMENTS
         ---------------------------------
         $2,626,457             $2,626,457

The tax character of distributions paid during the years ended June 30, 2005 and
June 30, 2004 was as follows:

                                       YEAR ENDED       YEAR ENDED
                                    JUNE 30, 2005    JUNE 30, 2004
         ---------------------------------------------------------
         Distributions paid from:
         Ordinary income             $110,524,224    $ 127,268,322

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, 2005 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   $ 1,509,127,669
                                          ================

         Gross unrealized appreciation    $    81,390,589
         Gross unrealized depreciation        (88,845,319)
                                          ----------------
         Net unrealized depreciation      $    (7,454,730)
                                          ================

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

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

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 purchases 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.

--------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts at a rate equal to the Federal
Funds Rate plus 0.50%. The Reduction to Custodian Expenses line item, if
applicable, represents earnings on cash balances maintained by the Fund during
the period. Such interest expense and other custodian fees may be paid with
these earnings.

--------------------------------------------------------------------------------
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 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, 2005        YEAR ENDED JUNE 30, 2004
                                SHARES          AMOUNT          SHARES          AMOUNT
---------------------------------------------------------------------------------------

CLASS A
Sold                        38,389,735   $ 366,629,436      65,440,622   $ 609,447,561
Dividends and/or
distributions reinvested     5,558,232      53,115,827       6,284,592      59,173,057
Redeemed                   (42,566,938)   (406,862,918) 1  (83,219,779)   (774,711,207)
                           ------------------------------------------------------------
Net increase (decrease)      1,381,029   $  12,882,345     (11,494,565)  $(106,090,589)
                           ============================================================

---------------------------------------------------------------------------------------
CLASS B
Sold                         5,983,222   $  56,234,386      10,475,101   $  96,503,159
Dividends and/or
distributions reinvested     1,018,189       9,579,810       1,439,766      13,343,552
Redeemed                   (14,803,057)   (139,393,208) 1  (20,508,450)   (188,077,844)
                           ------------------------------------------------------------
Net decrease                (7,801,646)  $ (73,579,012)     (8,593,583)  $ (78,231,133)
                           ============================================================

---------------------------------------------------------------------------------------
CLASS C
Sold                         4,405,322   $  42,084,078       8,189,437   $  76,360,660
Dividends and/or
distributions reinvested       673,504       6,418,231         805,948       7,573,293
Redeemed                    (6,754,941)    (64,386,578) 1  (10,659,737)    (98,705,074)
                           ------------------------------------------------------------
Net decrease                (1,676,115)  $ (15,884,269)     (1,664,352)  $ (14,771,121)
                           ============================================================

---------------------------------------------------------------------------------------
CLASS N
Sold                         1,306,473   $  12,488,035       1,242,698   $  11,666,882
Dividends and/or
distributions reinvested        86,918         832,537          73,083         691,810
Redeemed                      (650,988)     (6,217,096) 1   (1,279,807)    (11,793,129)
                           ------------------------------------------------------------
Net increase                   742,403   $   7,103,476          35,974   $     565,563
                           ============================================================

---------------------------------------------------------------------------------------
CLASS Y
Sold                         3,233,381   $  30,626,176       3,378,069   $  31,354,635
Dividends and/or
distributions reinvested       390,120       3,698,863         463,551       4,327,419
Redeemed                    (5,371,495)    (50,924,901) 1   (3,690,109)    (34,392,844)
                           ------------------------------------------------------------
Net increase (decrease)     (1,747,994)  $ (16,599,862)        151,511   $   1,289,210
                           ============================================================


1. Net of redemption fees of $28,208, $6,999, $3,748, $346 and $1,314 for Class
A, Class B, Class C, Class N and Class Y, respectively.

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, 2005, were $755,534,209
and $830,601,884, 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, 2005, the Fund paid
$2,631,155 to OFS for services to the Fund.

      Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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 and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of 0.25% per 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, 2005 for Class B, Class C and Class N shares were $13,227,741,
$3,717,622 and $190,592, 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, 2005       $ 478,278        $ 10,421       $ 741,637        $ 39,121         $ 4,826


--------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS 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, 2005, OFS
waived $11, $4, $1, $159 and $51,215 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

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, 2005, the Fund had no outstanding foreign currency
contracts.

--------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES

As of June 30, 2005, investments in securities included issues that are illiquid
or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 10% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities is as follows:

                    ACQUISITION                 VALUATION AS OF       UNREALIZED
SECURITY                  DATES          COST     JUNE 30, 2005     DEPRECIATION
--------------------------------------------------------------------------------
Prandium, Inc.  3/18/99-3/22/99   $ 5,400,000           $ 2,755      $ 5,397,245

--------------------------------------------------------------------------------
7. LITIGATION

A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") including the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.

      The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.

                                   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.

(1) In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees/Directors" 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 only applies to qualified retirement plans and 403(b)(7)
custodial plans after your separation from service in or after the year you
reached age 55. (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. 

                                   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


                                   Appendix C

         OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A
shares(1) 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 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 created or qualified under Sections 401(a) or 401(k) of
              the Internal Revenue Code, 2) non-qualified deferred compensation
              plans, 3) employee benefit plans(3) 4) Group Retirement Plans(4)
              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 $5 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.
|_|           Effective October 1, 2005, taxable accounts established with the
              proceeds of Required Minimum Distributions from Retirement Plans.

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

1.   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
              or unit investment trusts for which reinvestment arrangements have
              been made with the Distributor.
|_|           Shares purchased by certain Retirement Plans that are part of a
              retirement plan or platform offered by banks, broker-dealers,
              financial advisors or insurance companies, or serviced by
              recordkeepers.
|_|           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.
|_| Shares purchased in amounts of less than $5.

2.   Class A shares issued and purchased in the following transactions are not
     subject to sales charges (a dealer concession at the annual rate of 0.25%
     is paid by the Distributor on purchases made within the first 6 months of
     plan establishment):
|_| Retirement Plans that have $5 million or more in plan assets.
|_|      Retirement Plans with a single plan sponsor that have $5 million or more in aggregate assets invested in Oppenheimer funds.

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 (as defined
              in the Internal Revenue Code).
|_|           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 of Class C shares of an Oppenheimer fund in amounts of
              $1 million or more requested in writing by a Retirement Plan
              sponsor and submitted more than 12 months after the Retirement
              Plan's first purchase of Class C shares, if the redemption
              proceeds are invested to purchase Class N shares of one or more
              Oppenheimer funds.
|_|      Distributions(8) 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- & Mid- Cap Value Fund
     Oppenheimer Quest Balanced 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.

         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.

         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.

         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.

         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 Core 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.








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
1234
PX0280.001.1205