497

497 1 pspsai.htm PROSPECTUS AND SAI 497

Oppenheimer
Champion Income Fund

Prospectus dated November 22, 2002

Oppenheimer Champion Income Fund is a
mutual fund. It seeks high current
income by investing mainly in
high-yield, lower-rated fixed-income
securities as its primary goal. The
Fund secondarily seeks capital growth
when consistent with its main goal.
This Prospectus contains important
information about the Fund's
objectives, its investment policies,
strategies and risks. It also contains
important information about how to buy
and sell shares of the Fund and other
account features. Please read this
Prospectus carefully before you invest
and keep it for future reference
about your account.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.

(logo) OppenheimerFunds
The Right Way to Invest

CONTENTS

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ABOUT THE FUND

The Fund's Investment Objectives and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed

ABOUT YOUR ACCOUNT

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

Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Website
Retirement Plans

How to Sell Shares
By Wire
By Mail
By Telephone
By Checkwriting

How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights

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

The Fund's Investment Objectives and Strategies

What ARE the Fund's Investment ObjectiveS? The Fund's primary objective is to
seek a high level of current income by investing in a diversified portfolio of
high-yield, lower-rated, fixed-income securities that the Fund's investment
Manager, OppenheimerFunds, Inc., believes do not involve undue risk. The Fund's
secondary objective is to seek capital growth when consistent with its primary
objective.

What Does the Fund Mainly Invest In? The Fund invests mainly in a variety of
high-yield fixed-income debt securities of domestic and foreign issuers for high
current income. These securities primarily include: o Lower-grade bonds and
notes of corporate issuers o Foreign corporate and government bonds
o "Structured" notes

Under normal market conditions, the Fund invests at least 60% of its total
assets in high-yield, lower-grade, fixed-income securities, commonly called
"junk bonds." Lower-grade debt securities are those rated below "Baa" by Moody's
Investors Service ("Moody's") or lower than "BBB" by Standard & Poor's Rating
Services ("S&P") or comparable ratings by other nationally-recognized rating
organizations (or, in the case of unrated securities, determined by the Manager
to be comparable to securities rated below investment grade). See Appendix A to
the Statement of Additional Information for a description of the bond ratings.

The remainder of the Fund's assets may be held in other debt securities,
cash or cash equivalents, in rights or warrants, or invested in common stocks
and other equity securities when the Manager believes those are consistent with
the Fund's objectives. Investments in high-yield securities and equity
securities may provide opportunities for capital growth while also providing
income to the Fund.

The Fund's foreign investments currently focus on debt securities of
issuers in developed markets. The Fund also uses certain derivative investments,
primarily "structured notes," to try to enhance income or to try to manage
investment risks. These investments are more fully explained in "About the
Fund's Investments," below.

How Do the Portfolio Managers Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the Fund's portfolio managers analyze the
overall investment opportunities and risks in different market sectors,
industries and countries. The overall strategy is to build a broadly diversified
portfolio of debt securities to help moderate the special risks of investing in
high-yield debt instruments. The portfolio managers currently use a "bottom up"
approach, focusing on the performance of individual securities before
considering industry trends. They evaluate an issuer's liquidity, financial
strength and earnings power and also consider the factors below (which may vary
in particular cases and may change over time), looking for:
o Changes in the business cycle that might affect corporate profits, o Corporate
sectors that in the portfolio managers' views are currently
undervalued in the marketplace,
o Issuers with earnings growth rates that are faster than the growth rate
of the overall economy,
o Securities or sectors that will help the overall diversification of the
portfolio, and
o Issuers with improvements in relative cash flows and liquidity to help
them meet their obligations.

Who Is the Fund Designed For? The Fund is designed primarily for investors
seeking high current income from a fund that invests mainly in lower-grade
domestic and foreign debt securities. Those investors should be willing to
assume the greater risks of short-term share price fluctuations that are typical
for a fund that invests mainly in high-yield domestic and foreign fixed-income
debt securities, which also have special credit risks. Since the Fund's income
level will fluctuate, it is not designed for investors needing an assured level
of current income. The Fund is intended to be a long-term investment and may be
appropriate as a part of a retirement plan portfolio. The Fund is not a complete
investment program.

Main Risks of Investing in the Fund

All investments have risks to some degree. The Fund's investments are subject to
changes in their value from a number of factors, described below. There is also
the risk that poor security selection by the Manager will cause the Fund to
underperform other funds having similar objectives.

Credit Risk. Debt securities are subject to credit risk. Credit risk is the risk
that the issuer of a security might not make interest and principal payments on
the security as they become due. If the issuer fails to pay interest, the Fund's
income might be reduced, and if the issuer fails to repay principal, the value
of that security and of the Fund's shares might be reduced. High-yield,
lower-grade debt securities are especially subject to risks of default. A
downgrade in an issuer's credit rating or other adverse news about an issuer can
reduce a security's market value.

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

While investment-grade securities are subject to risks of non-payment of
interest and principal, generally, higher yielding lower-grade bonds,
whether rated or unrated, have greater risks than investment-grade
securities. The market for lower-grade securities may be less liquid,
especially during times of general economic distress, and therefore they
may be harder to value and to sell at an acceptable price.

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

Risks of Foreign Investing. The Fund can invest up to 100% of its assets in
foreign securities. It can buy securities of governments and companies in both
developed markets and emerging markets. The Fund currently does not intend to
invest more than 25% of its net assets in foreign securities but may invest
significant amounts of its assets in those securities. While foreign securities
offer special investment opportunities, they are subject to special risks that
can reduce the Fund's share prices and returns.

The change in value of a foreign currency against the U.S. dollar will
affect the U.S. dollar value of securities denominated in that foreign currency.
Currency rate changes can also affect the distributions the Fund makes from the
income it receives from foreign securities. Foreign investing can result in
higher transaction and operating costs for the Fund. Foreign issuers are not
subject to the same accounting and disclosure requirements that U.S. companies
are subject to. The value of foreign investments may be affected by exchange
control regulations, expropriation or nationalization of a company's assets,
foreign taxes, delays in settlement of transactions, changes in governmental
economic or monetary policy in the U.S. or abroad, or other political and
economic factors.

Risks of Derivative Investments. The Fund can use derivatives to seek increased
income or to try to hedge investment and interest rate risks. In general terms,
a derivative investment is an investment contract whose value depends on (or is
derived from) the value of an underlying asset, interest rate or index. Options,
futures, interest rate swaps, structured notes, and mortgage-related securities
are examples of derivatives the Fund can use.

If the issuer of the derivative does not pay the amount due, the Fund can
lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, might not perform the
way the Manager expected it to perform. If that happens, the Fund's share prices
could decline and the Fund could receive less income than expected or its hedge
might be unsuccessful. Some derivatives may be illiquid, making it difficult to
sell them at an acceptable price. The Fund has limits on the amount of
particular types of derivatives it can hold. However, using derivatives can
cause the Fund to lose money on its investment and/or increase the volatility of
its share prices.

How Risky is the Fund Overall? The risks described above collectively form the
overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and prices of its shares. These risks
mean that you can lose money by investing in the Fund. When you redeem your
shares, they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its objectives.

In the short term, the values of high-yield debt securities can fluctuate
substantially because of interest rate changes and perceptions about the
high-yield market among investors. Foreign debt securities can be volatile, and
the price of the Fund's shares can go up and down substantially because of
events affecting foreign markets or issuers. Defaults by issuers of lower-grade
securities could reduce the Fund's income and share prices.

Debt securities are subject to credit and interest rate risks that can
affect their values and the share prices of the Fund. In the OppenheimerFunds
spectrum, the Fund is likely to be more volatile and has more risks than funds
that focus on investing in U.S. government securities and investment-grade
bonds.

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An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
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The Fund's Past Performance

The bar chart and table below show one measure of the risks of investing in the
Fund, by showing the Fund's performance (for its Class A shares) from year to
year for the last 10 calendar years and by showing how the average annual total
returns of the Fund's shares, both before and after taxes, compare to those of
broad-based market indices.

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

Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]

Sales charges and taxes are not included in the calculations of return in this
bar chart, and if those charges and taxes were included, the returns may be less
than those shown.
For the period from 1/1/02 through 9/30/02, the cumulative return (not
annualized) before taxes for Class A shares was -8.11%. During the period shown
in the bar chart, the highest return (not annualized) before taxes for a
calendar quarter was 8.62% (1st Qtr'93) and the lowest return (not annualized)
before taxes for a calendar quarter was -6.46% (3rd Qtr'98).

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

Average Annual Total Returns 1 Year 5 Years 10 Years
r life of
for the periods ended December 31, (olass, if
2001 c less)

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Class A Shares (inception 11/16/87)
Return Before Taxes
Return After Taxes on
Distributions -3.19% 2.10% 7.35%
Return After Taxes on -6.94% -1.77% 3.43%
Distributions and Sale of Fund -1.94% -0.16% 4.04%
Shares

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Merrill Lynch High Yield Master 6.20% 3.95% 8.26%1
Index (reflects
no deduction for fees, expenses or
taxes)

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Lehman Brothers. Corporate Bond 10.40% 7.22% 7.68%1
Index (reflects
no deduction for fees, expenses or
taxes)

Class N Shares (inception 3/1/01) N/A2 N/A N/A

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1 From 12/31/91.

2 Because this is a new class of shares, return data for the period specified is
not available. The Fund's average annual total returns include the applicable
sales charge: for Class A, the current maximum initial sales charge of 4.75%;
for Class B, the contingent deferred sales charges of 5% (1-year) and 2% (5
years); and for Class C, the 1% contingent deferred sales charge for the 1-year
period. Because Class B shares convert to Class A shares 72 months after
purchase, Class B "life-of-class" performance does not include any contingent
deferred sales charge and uses Class A performance for the period after
conversion. The returns measure the performance of a hypothetical account and
assume that all dividends and capital gains distributions have been reinvested
in additional shares. The performance of the Fund's Class A shares is compared
to the Merrill Lynch High Yield Master Index, an unmanaged index of
below-investment-grade debt securities of U.S. corporate issuers, and the Lehman
Brothers Corporate Bond Index, an index of non-convertible U.S. investment-grade
corporate bonds. The indices performance includes reinvestment of income but
does not reflect transaction costs. The Fund's investments vary from the
securities in the indices.

Fees and Expenses of the Fund

The following tables are provided to help you understand the fees and expenses
you may pay if you buy and hold shares of the Fund. The Fund pays a variety of
expenses directly for management of its assets, administration, distribution of
its shares and other services. Those expenses are subtracted from the Fund's
assets to calculate the Fund's net asset values per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other transaction
expenses directly, such as sales charges. The numbers below are based on the
Fund's expenses during its fiscal year ended September 30, 2002.

Shareholder Fees (charges paid directly from your investment):

Class A Class B Class C Class N
Shares Shares Shares Shares
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Maximum Sales Charge (Load) on 4.75% None None None
Purchases (as % of offering
price)
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Maximum Deferred Sales Charge None1 5%2 1%3 1%4
(Load) (as % of the lower of the original offering price or redemption proceeds)
--------------------------------
1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for certain retirement plan accounts) of Class A
shares. See "How to Buy Shares" for details. 2. Applies to redemptions in first
year after purchase. The contingent deferred sales charge declines to 1% in the
sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase. 4. Applies to shares
redeemed within 18 months of a retirement plan's first purchase of Class N
shares.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)

-------------------------------
Class A Class B Class C Class N
Shares Shares Shares Shares
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Management Fees 0.61% 0.61% 0.61% 0.61%
-------------------------------------------------------------------------------
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Distribution and/or Service 0.24% 1.00% 1.00% 0.50%
(12b-1) Fees

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Other Expenses 0.29% 0.28% 0.28% 0.25%

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Total Annual Operating 1.14% 1.89% 1.89% 1.36%
Expenses

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Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial fees, and accounting and legal expenses that the Fund pays. The
Transfer Agent has voluntarily undertaken to the Fund to limit the transfer
agent fees to 0.35% of average daily net assets per fiscal year for all classes.
That undertaking may be amended or withdrawn at any time. For the Fund's fiscal
year ended September 30, 2002, the transfer agent fees did not exceed the
expense limitation described above. For a portion of the Fund's prior fiscal
year, the Class N 12b-1 fee was 0.25% and actual Class N 12b-1 fees paid by he
Fund during that period was 0.49%.

Examples. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.

The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:

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If shares are redeemed: 1 Year 3 Years 5 Years 10 Years

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Class A Shares $586 $820 $1,073 $1,795

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Class B Shares $692 $894 $1,221 $1,8371

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Class C Shares $292 $594 $1,021 $2,212

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Class N Shares $238 $431 $745 $1,635

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

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If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:

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Class A Shares $586 $820 $1,073 $1,795

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Class B Shares $192 $594 $1,021 $1,8371

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Class C Shares $192 $594 $1,021 $2,212

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Class N Shares $138 $431 $745 $1,635

---------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B, Class C or Class N contingent deferred sales charges. In
the second example, the Class A expenses include the sales charge, but Class B,
Class C and Class N expenses do not include the contingent deferred sales
charges.
1. Class B expenses for years 7 through 10 are based on Class A expenses, since
Class B shares automatically convert to Class A after 6 years.

About the Fund's Investments

The Fund's Principal Investment Policies. The allocation of the Fund's portfolio
among different types of investments will vary over time based upon the
Manager's evaluation of economic and market trends. However, under normal market
conditions, the Fund emphasizes investments in high-yield, lower-grade,
fixed-income securities. The Fund has no requirements as to the range of
maturities of the debt securities it can buy or as to the market capitalization
of the issuers of those securities.

------------------------------------
What Is A "Debt" Security? A debt security is essentially a loan by the buyer to
the issuer of the debt security. The issuer promises to pay back the principal
amount of the loan and normally pays interest, at a fixed or variable rate, on
the debt while it is outstanding.
------------------------------------

The Manager does not rely solely on ratings of debt securities by rating
organizations when selecting investments for the Fund. The Fund can buy unrated
securities. The Manager assigns a rating to an unrated security that is
equivalent to what the Manager believes are comparable rated securities.

The Fund can invest some of its assets in other types of debt securities,
as well as common stocks and other equity securities of foreign and U.S.
companies when consistent with the Fund's goals. The Fund's portfolio might not
always include all of the different types of investments described below. The
Statement of Additional Information contains more detailed information about the
Fund's investment policies and risks.

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

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

High-Yield, Lower-Grade Debt Securities. The Fund mainly buys lower-grade,
high-yield, fixed-income securities of U.S. and foreign issuers, including
bonds, debentures, notes, preferred stocks, loan participation interests and
structured notes, and asset-backed securities, among others, to seek high
current income. There are no limits on the amount of the Fund's assets that can
be invested in debt securities rated below investment grade.

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. While securities rated "Baa" by
Moody's or "BBB" by S&P are considered "investment grade," they have some
speculative characteristics.

Foreign Securities. The Fund can buy a variety of debt securities issued by
foreign governments and companies, as well as "supra-national" entities, such as
the World Bank. They include bonds, debentures and notes, including derivative
investments. The Fund buys foreign currency only in connection with the purchase
and sale of foreign securities and not for speculation.

Special Risks of Emerging Markets. The Fund can buy securities in emerging and
developing markets. They may offer special investment opportunities but
investments in these countries present risks not found in more mature
markets. Those securities might be more difficult to sell at an acceptable
price and their prices may be more volatile than securities of issuers in
more developed markets. Settlements of trades may be subject to greater
delays so that the Fund may not receive the proceeds of a sale of a
security on a timely basis.

Derivative Investments. The Fund can invest in a number of different kinds of
"derivative" investments. Options, futures, interest rate swaps, structured
notes, and mortgage-related securities are "derivative investments" the Fund can
use. In addition to using some derivatives to hedge investment risks, the Fund
can use other derivative investments because they offer the potential for
increased income and principal value. Some derivative investments held by the
Fund may be illiquid.

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

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

CAN THE FUND'S INVESTMENT OBJECTIVES AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies are those that cannot be changed without the
approval of a majority of the Fund's outstanding voting shares. The Fund's
objectives are fundamental policies. Investment restrictions that are
fundamental policies are listed in the Statement of Additional Information. An
investment policy or technique is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.

OTHER INVESTMENT STRATEGIES. To seek its investment objectives, the Fund can
also use some or all the investment techniques and strategies described below.
The Fund might not always use all of them. These techniques have risks, although
some are designed to help reduce overall investment or market risks.

Common Stocks and Other Equity Securities. The Fund can invest in common stocks
and other equity securities, including warrants and rights, preferred
stock and convertible securities, when consistent with the Fund's
objectives.

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

o Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. To the extent that the
Fund invests in equity securities, the value of the Fund's portfolio
will be affected by changes in the stock markets. Market risk can
affect the Fund's net asset values per share, which will fluctuate as
the values of the Fund's portfolio securities change. The prices of
individual stocks do not all move in the same direction uniformly or at
the same time. Different stock markets may behave differently from each
other.

Other factors can affect a particular stock's price, such as poor earnings
reports by the issuer, loss of major customers, major litigation against
the issuer, or changes in government regulations affecting the issuer or
its industry. When interest rates rise, the value of preferred stock
having a fixed dividend rate tends to fall.

Other Derivative Investments. In addition to purchasing structured notes, the
Fund can use other types of derivative investments to seek its
objectives.

o Mortgage-Related Securities. The Fund can buy interests in pools of
residential or commercial mortgages, in the form of collateralized
mortgage obligations ("CMOs") and other "pass-through" mortgage
securities. They may be issued or guaranteed by the U.S. government or
its agencies and instrumentalities or by private issuers. CMOs that are
U.S. government securities have collateral to secure payment of
interest and principal. They may be issued in different series, each
having different interest rates and maturities. The collateral is
either in the form of mortgage pass-through certificates issued or
guaranteed by a U.S. government agency or instrumentality or mortgage
loans insured by a U.S. government agency.

The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying
mortgages. Changes in interest rates may cause the rate of expected
prepayments of those mortgages to change. In general, prepayments increase
when general interest rates fall and decrease when interest rates rise.

If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. Additionally, the Fund might have to reinvest the prepayment
proceeds in other securities paying interest at lower rates, which could
reduce the Fund's yield. The impact of prepayments on the price of a
security may be difficult to predict and may increase the volatility of
the price. Additionally, the Fund may buy mortgage-related securities at a
premium. Accelerated prepayments on those securities could cause the Fund
to lose a portion of its principal investment represented by the premium
the Fund paid.

When interest rates rise rapidly, and if prepayments occur more slowly
than expected, a short- or medium-term CMO can in effect become a
long-term security, subject to greater fluctuations in value. These
prepayment risks can make the prices of CMOs very volatile when interest
rates change. The prices of longer-term debt securities tend to fluctuate
more than those of shorter-term debt securities. That volatility will
affect the Fund's share prices.

o Private-Issuer Mortgage-Backed Securities. CMOs and other
mortgage-related securities issued by private issuers are not U.S.
government securities, and are subject to greater credit risks than
mortgage-related securities that are U.S. government securities. The
Fund can invest in mortgage-backed securities issued by private
issuers. Primarily these include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks,
savings and loans, mortgage bankers and other non-governmental issuers.
Private issuer mortgage-backed securities are subject to the credit
risks of the issuers (as well as interest rate risks and prepayment
risks), although in some cases they may be supported by insurance or
guarantees.

o Zero-Coupon and "Stripped" Securities. The Fund can buy government and
corporate zero-coupon bonds that pay no interest. They are issued at a
substantial discount from their face value. The Fund also can buy
"stripped" securities that are the separate income or principal
components of a debt security. Some CMOs or other mortgage-related
securities may be stripped, with each component having a different
proportion of principal or interest payments. One class might receive
all the interest and the other all the principal payments.

Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-bearing securities. The
Fund may have to pay out the imputed income on zero-coupon securities
without receiving the actual cash currently.

The values of interest-only and principal-only mortgage-related securities
are also very sensitive to prepayments of underlying mortgages and changes
in interest rates. When prepayments tend to fall, the timing of the cash
flows to these securities increases, making them more sensitive to changes
in interest rates. The market for some of these securities may be limited,
making it difficult for the Fund to dispose of its holdings at an
acceptable price.

Participation Interests in Loans. These securities represent an undivided
fractional interest in a loan obligation by a borrower. They are typically
purchased from banks or dealers that have made the loan or are members of
the loan syndicate. The loans may be to foreign or U.S. companies. They
are subject to the risk of default by the borrower as well as credit risks
of the servicing agent of the participation interest, which can cause the
Fund to lose money on its investment. The Fund can also buy interests in
trusts and other entities that hold loan obligations. In that case the
Fund will be subject to the trust's credit risks. The Fund does not invest
more than 5% of its net assets in participation interests of any one
borrower.

Hedging. The Fund can buy and sell futures contracts, put and call options and
forward contracts. These are all referred to as "hedging instruments." The
Fund is not required to use hedging instruments to seek its objectives.
The Fund will not use hedging instruments for speculative purposes, and
has limits on its use of them.

The Fund could buy and sell options, futures and forward contracts for a
number of purposes. It might do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute
for purchasing individual securities. It might do so to try to manage its
exposure to changing interest rates. The Fund can use forward contracts
and currency options to try to manage foreign currency risks on the Fund's
foreign investments.

Hedging has risks. Options trading involves the payment of premiums and
has special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price. In writing a put, there is a risk that the Fund may be required to
buy the underlying security at a disadvantageous price. If the Manager
used a hedging instrument at the wrong time or judged market conditions
incorrectly, the strategy could reduce the Fund's return. The Fund could
also experience losses if it could not close out a position because of an
illiquid market.

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

"When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis and may purchase or sell securities on
a "delayed-delivery" basis. These terms refer to securities that have been
created and for which a market exists, but which are not available for
immediate delivery. There might be a risk of loss to the Fund if the value
of the security declines prior to the settlement date.

Illiquid and Restricted Securities. Investments may be illiquid because they do
not have an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is
one that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of 1933. The
Fund will not invest more than 10% of its net assets in illiquid or
restricted securities. The Board can increase that limit to 15%. That
percentage limitation is not a fundamental policy. Certain restricted
securities that are eligible for resale to qualified institutional
purchasers may not be subject to that limit. The Manager monitors holdings
of illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity.

Portfolio Turnover. The Fund may engage in short-term trading to try to achieve
its objectives. Portfolio turnover affects brokerage costs, although the
Fund does not pay for brokerage on most of its portfolio transactions. If
the Fund realizes capital gains when it sells its portfolio investments,
it must generally pay those gains out to shareholders, increasing their
taxable distributions. The Financial Highlights table at the end of this
Prospectus shows the Fund's portfolio turnover rates during prior fiscal
years.

Temporary Defensive and Interim Investments. In times of unstable adverse market
or economic conditions, the Fund can invest up to 100% of its assets in
temporary investments that are inconsistent with the Funds' principal
investment strategies. Generally they would be cash or cash equivalents,
such as U.S. Treasury Bills and other short-term U.S. government
obligations or high-grade commercial paper. The Fund can also hold these
types of securities pending the investment of proceeds from the sale of
Fund shares or portfolio securities or to meet anticipated redemptions of
Fund shares. To the extent the Fund invests defensively in these
securities, it might not achieve its investment objectives.

How the Fund Is Managed

THE MANAGER. The Manager chooses the Fund's investment program and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Trustees, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.

The Manager has been an investment advisor since January 1960. The Manager
and its subsidiaries and controlled affiliates managed more than $120 billion in
assets as of September 30, 2002, including other Oppenheimer funds with more
than 7 million shareholder accounts. The Manager is located at 498 Seventh
Avenue, New York, New York 10018.

Portfolio Managers. The portfolio managers of the Fund are David P. Negri,
Thomas P. Reedy and Dimitrois Kourkoulakos. They are the persons
principally responsible for the day-to-day management of the Fund's
investments, Messrs. Negri and Reedy since October 1998 and Mr.
Kourkoulakos since June 2002. All are Vice Presidents of the Fund and
Messrs. Reedy and Kourkoulakos are Vice Presidents and Mr. Negri is
Senior Vice President of the Manager. They also serve as officers and
portfolio managers for other Oppenheimer funds.

Advisory Fees. Under the Fund's investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's
assets grow: 0.70% of the first $250 million of average annual net assets
of the Fund, 0.65% of the next $250 million, 0.60% of the next $500
million, and 0.55% of average annual net assets in excess of $1 billion.
The Fund's management fee for its last fiscal year ended September 30,
2002 was 0.61% of average annual net assets for each class of shares.

ABOUT your account

How to Buy Shares

You can buy shares several ways, as described below. The Fund's Distributor,
OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept
purchase (and redemption) orders. The Distributor, in its sole discretion,
may reject any purchase order for the Fund's shares.

BuyingShares Through Your Dealer. You can buy shares through any dealer, broker
or financial institution that has a sales agreement with the Distributor.
Your dealer will place your order with the Distributor on your behalf.

BuyingShares Through the Distributor. Complete an OppenheimerFunds new account
application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If
you don't list a dealer on the application, the Distributor will act as
your agent in buying the shares. However, we recommend that you discuss
your investment with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.225.5677 to notify the Distributor of the wire and to receive
further instructions.

o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
you pay for shares by electronic funds transfers from your bank
account. Shares are purchased for your account by a transfer of money
from your bank account through the Automated Clearing House (ACH)
system. You can provide those instructions automatically, under an
Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to
"AccountLink," below for more details.

o Buying Shares Through Asset Builder Plans. You may purchase shares of the
Fund automatically each month from your account at a bank or other
financial institution under an Asset Builder Plan with AccountLink.
Details are in the Asset Builder application and the Statement of
Additional Information.

WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
If you establish one of the many types of retirement plan accounts that
OppenheimerFunds offers, more fully described below under "Special
Investor Services," you can start your account with as little as $500.
By using an Asset Builder Plan or Automatic Exchange Plan (details are in the
Statement of Additional Information), or government allotment plan, you
can make subsequent investments (after making the initial investment of
$500) for as little as $50. For any type of account established under one
of these plans prior to November 1, 2002, the minimum additional
investment will remain $25.

o The minimum investment requirement does not apply to reinvesting dividends
from the Fund or other Oppenheimer funds (a list of them appears in the
Statement of Additional Information, or you can ask your dealer or call
the Transfer Agent), or reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.

AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado, or after any agent appointed by the
Distributor receives the order.

Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., Eastern time,
but may close earlier on some days. All references to time in this
Prospectus mean "Eastern time."

The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. To determine net asset value, the Fund's Board
of Trustees has established procedures to value the Fund's securities, in
general, based on market value. The Board has adopted special procedures
for valuing illiquid and restricted securities and obligations for which
market values cannot be readily obtained. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S.
holidays, the values of some of the Fund's foreign investments may change
on days when investors cannot buy or redeem Fund shares.

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

The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.

BuyingThrough a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's
close of business on a regular business day (normally 5:00 P.M.) to
receive that day's offering price, unless your dealer has made alternative
arrangements with the Distributor. Otherwise, the order will receive the
next offering price that is determined.

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WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
------------------------------------------------------------------------------
------------------------------------------------------------------------------

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Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or lesser amounts for
certain retirement plans). The amount of that sales charge will vary
depending on the amount you invest. The sales charge rates are listed in
"How Can You Buy Class A Shares?" below.
------------------------------------------------------------------------------

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Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within 6 years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
------------------------------------------------------------------------------
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Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you
sell your shares within 12 months of buying them, you will normally pay a
contingent deferred sales charge of 1.0%, as described in "How Can You Buy
Class C Shares?" below.
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Class N Shares. If you buy Class N shares (available only through certain
retirement plans), you pay no sales charge at the time of purchase, but
you will pay an annual asset-based sales charge. If you sell your shares
within 18 months of the retirement plan's first purchase of Class N
shares, you may pay a contingent deferred sales charge of 1.0%, as
described in "How Can You Buy Class N Shares?" below.
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WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your investment
results over time.

The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares and
not a combination of shares of different classes. Of course, these examples are
based on approximations of the effects of current sales charges and expenses
projected over time, and do not detail all of the considerations in selecting a
class of shares. You should analyze your options carefully with your financial
advisor before making that choice.

How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will
also depend on how much you plan to invest. For example, the reduced sales
charges available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your investment,
compared to the effect over time of higher class-based expenses on shares
of Class B, Class C or Class N. For retirement plans that qualify to
purchase Class N shares, Class N shares will generally be more
advantageous than Class B and Class C shares.

o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six years, as well as the effect of the
Class B asset-based sales charge on the investment return for that class
in the short-term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there is no
initial sales charge on Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding them one year.

However, if you plan to invest more than $100,000 for the shorter term,
then as your investment horizon increases toward six years, Class C shares
might not be as advantageous as Class A shares. That is because the annual
asset-based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales charge
available for larger purchases of Class A shares.

And for non-retirement plan investors who invest $1 million or more, in
most cases Class A shares will be the most advantageous choice, no matter
how long you intend to hold your shares. For that reason, the Distributor
normally will not accept purchase orders of $500,000 or more of Class B
shares or $1 million or more of Class C shares from a single investor.

o Investing for the Longer Term. If you are investing less than $100,000 for
the longer- term, for example for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
appropriate.

Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B, Class C and Class N
shareholders. Other features may not be advisable (because of the effect
of the contingent deferred sales charge) for Class B, Class C and Class N
shareholders. Therefore, you should carefully review how you plan to use
your investment account before deciding which class of shares to buy.

Additionally, the dividends payable to Class B, Class C and Class N
shareholders will be reduced by the additional expenses borne by those
classes that are not borne by Class A shares, such as the Class B, Class C
and Class N asset-based sales charge described below and in the Statement
of Additional Information. Share certificates are only available for Class
A shares. If you are considering using your shares as collateral for a
loan, that may be a factor to consider.

How Do Share Classes Affect Payments to Your Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B, Class C
and Class N contingent deferred sales charges and asset-based sales
charges have the same purpose as the front-end sales charge on sales of
Class A shares: to compensate the Distributor for concessions and expenses
it pays to dealers and financial institutions for selling shares. The
Distributor may pay additional compensation from its own resources to
securities dealers or financial institutions based upon the value of
shares of the Fund owned by the dealer or financial institution for its
own account or for its customers.

SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that a special condition
applies.

HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. Out of the amount you invest, the Fund receives the net
asset value to invest for your account.

The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated to
your dealer as a concession. The Distributor reserves the right to reallow the
entire concession to dealers. The current sales charge rates and concessions
paid to dealers and brokers are as follows:

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Amount of Purchase Front-End Sales Front-End Sales Concession As
Charge As a Charge As a
Percentage of Percentage of Net Percentage of
Offering Price Amount Invested Offering Price

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Less than $50,000 4.75% 4.98% 4.00%
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$50,000 or more but 4.50% 4.71% 3.75%
less than $100,000
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$100,000 or more but 3.50% 3.63% 2.75%
less than $250,000
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$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
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$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
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Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.

Class A Contingent Deferred Sales Charge. There is no initial sales charge on
purchases of Class A shares of any one or more of the Oppenheimer funds
aggregating $1 million or more, or for certain purchases by particular
types of retirement plans that were permitted to purchase such shares
prior to March 1, 2001 ("grandfathered retirement accounts"). Retirement
plans are not permitted to make initial purchases of Class A shares
subject to a contingent deferred sales charge. The Distributor pays
dealers of record concessions in an amount equal to 1.0% of purchases of
$1 million or more other than by grandfathered retirement accounts. For
grandfathered retirement accounts, the concession is 0.75% of the first
$2.5 million of purchases plus 0.25% of purchases in excess of $2.5
million. In either case, the concession will not be paid on purchases of
shares by exchange or that were previously subject to a front-end sales
charge and dealer concession.

If you redeem any of those shares within an 18-month "holding period"
measured from the beginning of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent deferred
sales charge") may be deducted from the redemption proceeds. That sales
charge will be equal to 1.0% of the lesser of:
o the aggregate net asset value of the redeemed shares at the time of
redemption (excluding shares purchased by reinvestment of dividends or
capital gain distributions) or
o the original net asset value of the redeemed shares.

The Class A contingent deferred sales charge will not exceed the aggregate
amount of the concessions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds you made that were
subject to the Class A contingent deferred sales charge.

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

HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within six years from the beginning of the calendar month of their purchase, a
contingent deferred sales charge will be deducted from the redemption proceeds.
The Class B contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.

The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule for the Class B contingent deferred sales
charge holding period:

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Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Purchase Order was Accepted Redemptions in That Year
(As % of Amount Subject to Charge)
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0 - 1 5.0%
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1 - 2 4.0%
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2 - 3 3.0%
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3 - 4 3.0%
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4 - 5 2.0%
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5 - 6 1.0%
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More than 6 None

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In the table, a "year" is a 12-month period. In applying the contingent deferred
sales charge, all purchases are considered to have been made on the first
regular business day of the month in which the purchase was made.

Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. This conversion feature
relieves Class B shareholders of the asset-based sales charge that applies
to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value
of the two classes, and no sales load or other charge is imposed. When any
Class B shares that you hold convert, any other Class B shares that were
acquired by reinvesting dividends and distributions on the converted
shares will also convert to Class A shares. For further information on the
conversion feature and its tax implications, see "Class B Conversion" in
the Statement of Additional Information.

How Can you Buy Class C Shares? Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are redeemed
within a holding period of 12 months from the beginning of the calendar month of
their purchase, a contingent deferred sales charge of 1.0% will be deducted from
the redemption proceeds. The Class C contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.

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

A contingent deferred sales charge of 1.0% will be imposed upon the
redemption of Class N shares, if: o The group retirement plan is terminated or
Class N shares of all
Oppenheimer funds are terminated as an investment option of the plan and
Class N shares are redeemed within 18 months after the plan's first
purchase of Class N shares of any Oppenheimer fund, or
o With respect to an IRA or 403(b) plan, Class N shares are redeemed within
18 months of the plan's first purchase of Class N shares of any
Oppenheimer fund.

Retirement plans that offer Class N shares may impose charges on plan
participant accounts. The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than the time those
orders must be received by the Distributor or Transfer Agent in Colorado) and
the special account features applicable to purchasers of those other classes of
shares described elsewhere in this prospectus do not apply to Class N shares
offered through a group retirement plan. Instructions for buying, selling,
exchanging or transferring Class N shares offered through a group retirement
plan must be submitted by the plan, not by plan participants for whose benefit
the shares are held.

DISTRIBUTION AND SERVICE (12b-1) PLANS.

Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. With respect to
Class A shares subject to a Class A contingent deferred sales charge
purchased by grandfathered retirement accounts, the Distributor pays the
0.25% service fee to dealers in advance for the first year after the
shares are sold by the dealer. After the shares have been held for a year,
the Distributor pays the service fee to dealers on a quarterly basis.

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 pay the Distributor for its services and costs in distributing
Class B, Class C and Class N shares and servicing accounts. Under the
plans, the Fund pays the Distributor an annual asset-based sales charge of
0.75% on Class B and Class C shares and 0.25% on Class N shares. The
Distributor also receives a service fee of 0.25% per year under the Class
B, Class C and Class N plans.

The asset-based sales charge and service fees increase Class B and Class C
expenses by 1.0% and increase Class N expenses by 0.50% of the net assets
per year of the respective class. Because these fees are paid out of the
Fund's assets on an on-going basis, over time these fees will increase the
cost of your investment and may cost you more than other types of sales
charges.

The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B, Class C or Class N
shares. The Distributor pays the 0.25% service fees to dealers in advance
for the first year after the shares are sold by the dealer. After the
shares have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis. The Distributor retains the service fees for
accounts for which it renders the required personal services.

The Distributor currently pays a sales concession of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class B shares is
therefore 4.00% of the purchase price. The Distributor retains the Class B
asset-based sales charge. See the Statement of Additional Information for
exceptions.

The Distributor currently pays a sales concession of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class C shares is
therefore 1.0% of the purchase price. The Distributor pays the asset-based
sales charge as an ongoing concession to the dealer on Class C shares that
have been outstanding for a year or more. See the Statement of Additional
Information for exceptions.

The Distributor currently pays a sales concession of 0.75% of the purchase
price of Class N shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class N shares is
therefore 1.0% of the purchase price. The Distributor retains the
asset-based sales charge on Class N shares. See the Statement of
Additional Information for exceptions.

Special Investor Services

ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.

You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1.800.225.5677. The purchase payment
will be debited from your bank account.

AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions and proper documentation to the Transfer
Agent. AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer representative of record
unless and until the Transfer Agent receives written instructions terminating or
changing those privileges. After you establish AccountLink for your account, any
change of bank account information must be made by signature-guaranteed
instructions to the Transfer Agent signed by all shareholders who own the
account.

PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
PhoneLink number, 1.800.225.5677. Purchasing Shares. You may purchase shares in
amounts up to $100,000 by
phone, by calling 1.800.225.5677. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these
purchases.

Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling the
PhoneLink number and the Fund will send the proceeds directly to your
AccountLink bank account. Please refer to "How to Sell Shares," below for
details.

CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.225.5677 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.

OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund, as
well as your account balance, on the OppenheimerFunds Internet website, at
www.oppenheimerfunds.com. Additionally, shareholders listed in the account
registration (and the dealer of record) may request certain account transactions
through a special section of that website. To perform account transactions or
obtain account information online, you must first obtain a user I.D. and
password on that website. If you do not want to have Internet account
transaction capability for your account, please call the Transfer Agent at
1.800.225.5677. At times, the website may be inaccessible or its transaction
features may be unavailable.

AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.

REINVESTMENT PRIVILEGE If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to six months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C or Class N shares. You must be
sure to ask the Distributor for this privilege when you send your payment.

RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs and rollover IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k)Plans. These are special retirement plans for businesses. Pension and
Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.

How to Sell Shares

You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your order
is received in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter, by wire, by using the Fund's checkwriting
privilege, or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special situation,
such as due to the death of the owner or from a retirement plan account, please
call the Transfer Agent first, at 1.800.225.5677, for assistance.

Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem more than $100,000 and receive a check o The redemption
check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your
account statement
o Shares are being transferred to a Fund account with a different owner
or name
o Shares are being redeemed by someone (such as an Executor) other than the
owners.

Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities
or government securities, or
o a U.S. national securities exchange, a registered securities
association or a clearing agency.
If you are signing on behalf of a corporation, partnership or other
business or as a fiduciary, you must also include your title in the
signature.

Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.

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

Checkwriting. To write checks against your Fund account, request that privilege
on your account application, or contact the Transfer Agent for signature cards.
They must be signed (with a signature guarantee) by all owners of the account
and returned to the Transfer Agent so that checks can be sent to you to use.
Shareholders with joint accounts can elect in writing to have checks paid over
the signature of one owner. If you previously signed a signature card to
establish checkwriting in another Oppenheimer fund, simply call 1.800.225.5677
to request checkwriting for an account in this Fund with the same registration
as the other account. o Checks can be written to the order of whomever you wish,
but may not be

cashed at the bank the checks are payable through or the Fund's custodian
bank.
o Checkwriting privileges are not available for accounts holding shares that
are subject to a contingent deferred sales charge.

o Checks must be written for at least $500. Checks written below the stated
amount on the check will not be accepted. However, if you have existing
checks indicating a $100 minimum, you may still use them for amounts of
$100 or more.

o Checks cannot be paid if they are written for more than your account
value. Remember, your shares fluctuate in value and you should not write a
check close to the total account value.
o You may not write a check that would require the Fund to redeem shares
that were purchased by check or Asset Builder Plan payments within the
prior 10 days.
o Don't use your checks if you changed your Fund account number, until you
receive new checks.

HOWDO you SELL SHARES BY MAIL? Write a letter of instruction that includes: o
Your name o The Fund's name o Your Fund account number (from your account
statement) o The dollar amount or number of shares to be redeemed o Any
special payment instructions o Any share certificates for the shares you are
selling o The signatures of all registered owners exactly as the account is
registered, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.

Use the following address for Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231

HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone.

o To redeem shares through a service representative or automatically on
PhoneLink, call 1.800.225.5677.

Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.

Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by
telephone in any seven-day period. The check must be payable to all owners
of record of the shares and must be sent to the address on the account
statement. This service is not available within 30 days of changing the
address on an account.

Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.

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

CAN YOU SELL SHARES THROUGH your DEALER? The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.

HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares
subject to a Class A, Class B, Class C or Class N contingent deferred sales
charge and redeem any of those shares during the applicable holding period for
the class of shares, the contingent deferred sales charge will be deducted from
the redemption proceeds (unless you are eligible for a waiver of that sales
charge based on the categories listed in Appendix C to the Statement of
Additional Information and you advise the Transfer Agent of your eligibility for
the waiver when you place your redemption request.)

A contingent deferred sales charge will be based on the lesser of the net
asset value of the redeemed shares at the time of redemption or the original net
asset value. A contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net
asset value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or

o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a contingent deferred sales charge applies to a

redemption, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for the holding period that applies to the class, and 3.
shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange shares
of the Fund for shares of other Oppenheimer funds. However, if you exchange them
within the applicable contingent deferred sales charge holding period, the
holding period will carry over to the fund whose shares you acquire. Similarly,
if you acquire shares of this Fund by exchanging shares of another Oppenheimer
fund that are still subject to a contingent deferred sales charge holding
period, that holding period will carry over to this Fund.

How to Exchange Shares

Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of both funds must offer the exchange privilege. o You
must hold the shares you buy when you establish your account for at
least seven days before you can exchange them. After the account is open
seven days, you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund whose shares
you purchase by exchange.

o Before exchanging into a fund, you must obtain and read its prospectus.
Shares of a particular class of the Fund may be exchanged only for

shares of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another fund. In
some cases, sales charges may be imposed on exchange transactions. For tax
purposes, exchanges of shares involve a sale of the shares of the fund you own
and a purchase of the shares of the other fund, which may result in a capital
gain or loss. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.

You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1.800.225.5677. That list can change from time to time.

HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or
by telephone:

Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.

Telephone Exchange Requests. Telephone exchange requests may be made either by
calling a service representative or by using PhoneLink for automated
exchanges by calling 1.800.225.5677. Telephone exchanges may be made only
between accounts that are registered with the same name(s) and address.
Shares held under certificates may not be exchanged by telephone.

ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by the same day exchange.
o The interests of the Fund's long-term shareholders and its ability to
manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market
fluctuations--also known as "market timing." When large dollar amounts
are involved, the Fund may have difficulty implementing long-term
investment strategies, because it cannot predict how much cash it will
have to invest. Market timing also may force the Fund to sell portfolio
securities at disadvantageous times to raise the cash needed to buy a
market timer's Fund shares. These factors may hurt the Fund's
performance and its shareholders. When the Manager believes frequent
trading would have a disruptive effect on the Fund's ability to manage
its investments, the Manager and the Fund may reject purchase orders
and exchanges into the Fund by any person, group or account that the
Manager believes to be a market timer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. The Fund will provide you notice whenever it is required to do so by
applicable law, but it may impose changes at any time for emergency
purposes.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will
be exchanged.

Shareholder Account Rules and Policies

More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information. A
$12 annual fee is assessed on any account valued at less than $500. The fee
is automatically deducted from accounts annually on or about the second to
last business day of September. See the Statement of Additional
Information, or visit the OppenheimerFunds website, to learn how you can
avoid this fee and for circumstances when this fee will not be assessed.

The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is in
the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. The Fund will
provide you notice whenever it is required to do so by applicable law. If
an account has more than one owner, the Fund and the Transfer Agent may
rely on the instructions of any one owner. Telephone privileges apply to
each owner of the account and the dealer representative of record for the
account unless the Transfer Agent receives cancellation instructions from
an owner of the account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients by participating in
NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of
the Fund if the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
check, or through AccountLink or by Federal Funds wire (as elected by the
shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name
of a broker-dealer, payment will normally be forwarded within three
business days after redemption.

The Transfer Agent may delay processing any type of redemption payment as
described under "How to Sell Shares" for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much as
10 days from the date the shares were purchased. That delay may be avoided
if you purchase shares by Federal Funds wire or certified check, or
arrange with your bank to provide telephone or written assurance to the
Transfer Agent that your purchase payment has cleared.

Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped. In some cases, involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report and
annual notice of the Fund's privacy policy to shareholders having the same
last name and address on the Fund's records. The consolidation of these
mailings, called householding, benefits the Fund through reduced mailing
expense.

If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.225.5677. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses, reports and privacy
notices will be sent to you commencing within 30 days after the Transfer
Agent receives your request to stop householding.

Dividends, Capital Gains and Taxes

Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income on each regular business day and to pay those
dividends to shareholders monthly on a date selected by the Board of Trustees.
Daily dividends will not be declared or paid on newly purchased shares until
Federal Funds are available to the Fund from the purchase payment for shares.
Dividends and distributions paid to Class A shares will generally be higher than
dividends for Class B, Class C and Class N shares, which normally have higher
expenses than Class A shares. The Fund has no fixed dividend rate and cannot
guarantee that it will pay any dividends or distributions.

Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.

WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.

TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.

Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.

Avoid "Buying a Dividend." If you buy shares on or just before the Fund declares
a capital gains distribution, you will pay the full price for the shares
and then receive a portion of the price back as a taxable capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share prices
fluctuate, you may have a capital gain or loss when you sell or exchange
your shares. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. In certain cases, distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders.

This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.

Financial Highlights

The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP, the
Fund's independent auditors, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request.

FINANCIAL HIGHLIGHTS

CLASS A YEAR ENDED SEPTEMBER 30, 2002 2001 2000 1999 1998
=============================================================================================
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------

Net asset value, beginning of period $ 9.00 $11.00 $ 11.84 $ 12.18 $ 13.49
---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .77 1.03 1.15 1.10 1.09
Net realized and unrealized loss (.95) (1.97) (.76) (.25) (1.11)
------------------------------------------------
Total from investment operations (.18) (.94) .39 .85 (.02)
---------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.77) (1.06) (1.15) (1.10) (1.05)
Tax return of capital distribution -- -- -- -- (.04)
Distributions from net realized gain -- -- (.08) (.09) (.20)
------------------------------------------------
Total dividends and/or distributions
to shareholders (.77) (1.06) (1.23) (1.19) (1.29)
---------------------------------------------------------------------------------------------
Net asset value, end of period $8.05 $ 9.00 $11.00 $11.84 $12.18
================================================

=============================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (2.49)% (9.19)% 3.42% 7.15% (0.49)%
---------------------------------------------------------------------------------------------

=============================================================================================
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $659,017 $670,207 $672,817 $675,395 $572,354
---------------------------------------------------------------------------------------------
Average net assets (in thousands) $718,443 $696,332 $681,335 $644,839 $567,689
---------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 8.57% 10.14% 10.02% 9.01% 8.18%
Expenses 1.14% 1.07% 1.05% 1.06% 1.06%(3)
---------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 47% 34% 47% 100%

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

35 | OPPENHEIMER CHAMPION INCOME FUND

FINANCIAL HIGHLIGHTS Continued

CLASS B YEAR ENDED SEPTEMBER 30, 2002 2001 2000 1999 1998
=============================================================================================
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------

Net asset value, beginning of period $ 8.99 $10.98 $ 11.83 $ 12.17 $ 13.48
---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .70 .96 1.06 1.01 .99
Net realized and unrealized loss (.95) (1.97) (.77) (.25) (1.11)
------------------------------------------------
Total from investment operations (.25) (1.01) .29 .76 (.12)
---------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.70) (.98) (1.06) (1.01) (.95)
Tax return of capital distribution -- -- -- -- (.04)
Distributions from net realized gain -- -- (.08) (.09) (.20)
------------------------------------------------
Total dividends and/or distributions
to shareholders (.70) (.98) (1.14) (1.10) (1.19)
---------------------------------------------------------------------------------------------
Net asset value, end of period $8.04 $8.99 $10.98 $11.83 $12.17
================================================

=============================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (3.23)% (9.81)% 2.54% 6.36% (1.25)%
---------------------------------------------------------------------------------------------
=============================================================================================
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $432,009 $515,270 $534,309 $530,619 $388,572
---------------------------------------------------------------------------------------------
Average net assets (in thousands) $508,625 $540,165 $534,106 $475,049 $326,804
---------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 7.85% 9.40% 9.25% 8.25% 7.42%
Expenses 1.89% 1.82% 1.80% 1.81% 1.81%(3)
---------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 47% 34% 47% 100%

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

36 | OPPENHEIMER CHAMPION INCOME FUND

CLASS C YEAR ENDED SEPTEMBER 30, 2002 2001 2000 1999 1998
=============================================================================================
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------

Net asset value, beginning of period $ 8.99 $10.98 $ 11.83 $ 12.17 $ 13.48
---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .70 .96 1.06 1.01 .99
Net realized and unrealized loss (.95) (1.97) (.77) (.25) (1.11)
------------------------------------------------
Total from investment operations (.25) (1.01) .29 .76 (.12)
---------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.70) (.98) (1.06) (1.01) (.95)
Tax return of capital distribution -- -- -- -- (.04)
Distributions from net realized gain -- -- (.08) (.09) (.20)
------------------------------------------------
Total dividends and/or distributions
to shareholders (.70) (.98) (1.14) (1.10) (1.19)
---------------------------------------------------------------------------------------------
Net asset value, end of period $8.04 $ 8.99 $10.98 $11.83 $12.17
================================================

=============================================================================================
TOTAL RETURN, AT NET ASSET VALUE(1) (3.23)% (9.82)% 2.52% 6.35% (1.25)%
---------------------------------------------------------------------------------------------

=============================================================================================
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $180,131 $192,898 $211,809 $252,277 $224,439
---------------------------------------------------------------------------------------------
Average net assets (in thousands) $200,233 $208,439 $230,954 $246,416 $210,338
---------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 7.83% 9.40% 9.23% 8.25% 7.42%
Expenses 1.89% 1.82% 1.80% 1.81% 1.81%(3)
---------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 47% 34% 47% 100%

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

3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

37 | Oppenheimer Champion Income Fund

FINANCIAL HIGHLIGHTS Continued

CLASS N YEAR ENDED SEPTEMBER 30, 2002 2001(1)
=======================================================================================
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------

Net asset value, beginning of period $ 9.00 $10.75
---------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .73 .57
Net realized and unrealized loss (.93) (1.75)
------------------
Total from investment operations (.20) (1.18)
---------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.75) (.57)
Tax return of capital distribution -- --
Distributions from net realized gain -- --
------------------
Total dividends and/or distributions
to shareholders (.75) (.57)
---------------------------------------------------------------------------------------
Net asset value, end of period $8.05 $9.00
==================

=======================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) (2.71)% (11.29)%
---------------------------------------------------------------------------------------

=======================================================================================
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $6,126 $1,017
---------------------------------------------------------------------------------------
Average net assets (in thousands) $3,398 $ 330
---------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 8.04% 9.72%
Expenses 1.36% 1.07%
---------------------------------------------------------------------------------------
Portfolio turnover rate 62% 47%

1. For the period from March 1, 2001 (inception of offering) to September 30,
2001.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not annualized
for periods of less than one full year.
3. Annualized for periods of less than one full year.

INFORMATION AND SERVICES

For More Information on Oppenheimer Champion Income Fund The following
additional information about the Fund is available without charge upon request:

STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.

How to Get More Information

You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and other
information about the Fund or your account:

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

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

On the Internet: You can send us a request by e-mail or read
or down-load documents on the
OppenheimerFunds website:
www.oppenheimerfunds.com

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

Information about the Fund including the Statement of Additional Information can
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1.202.942.8090. Reports and other information about the Fund
are available on the EDGAR database on the SEC's Internet website at
www.sec.gov. Copies may be obtained after payment of a duplicating fee by
electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102. No one has
been authorized to provide any information about the Fund or to make any
representations about the Fund other than what is contained in this Prospectus.
This Prospectus is not an offer to sell shares of the Fund, nor a solicitation
of an offer to buy shares of the Fund, to any person in any state or other
jurisdiction where it is unlawful to make such an offer.

The Fund's SEC File No.: 811-5281 The Fund's shares are distributed by:
PR0190.001.1102 [logo] OppenheimerFunds Distributor, Inc.
Printed on recycled paper

Appendix to Prospectus of
Oppenheimer Champion Income Fund

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

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

Calendar Annual
Year Total
Ended Returns

12/31/92 16.25%
12/31/93 21.37%
12/31/94 -0.12%
12/31/95 14.69%
12/31/96 13.40%
12/31/97 11.91%
12/31/98 0.44%
12/31/99 6.58%
12/31/00 -4.34%
12/31/01 1.64%

Oppenheimer Champion Income Fund

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

Statement of Additional Information dated November 22, 2002

This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated November 22, 2002. 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 website at
www.oppenheimerfunds.com.

Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks
The Fund's Investment Policies...................................
Other Investment Techniques and Strategies.......................
Investment Restrictions..........................................
How the Fund is Managed .............................................
Organization and History.............................................
Trustees and Officers of the Fund................................
The Manager......................................................
Brokerage Policies of the Fund.......................................
Distribution and Service Plans.......................................
Performance of the Fund..............................................

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

Financial Information About the Fund

Auditors' Report.......................................................
Financial Statements.................................................

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

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

Additional Information About the Fund's Investment Policies and Risks

The investment 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") 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 60% or
more of its 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, 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 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.

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| 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 below), common stocks,
rights and warrants, and securities convertible into common stock. Certain
equity securities may be selected because they may provide dividend income.

o 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.

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

|X| 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 (also referred to as "mortgage
dollar rolls"). 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 inshort- short-term instruments, such as repurchase agreements. The
income from those investments, plus the fees from the forward roll transaction,
are expected to generate income to the Fund in excess of the yield on the
securities that have been sold.

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

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

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

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

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

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

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

o Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association 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 Maes 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 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.

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

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

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

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

|X| Other Zero-Coupon Securities. The Fund may buy zero-coupon and delayed
interest securities, and "stripped" securities of corporations and of foreign
government issuers. These are similar in structure to zero-coupon and "stripped"
U.S. government securities, but in the case of foreign government securities may
or may not be backed by the "full faith and credit" of the issuing foreign
government. Zero-coupon securities issued by foreign governments and by
corporations will be subject to greater credit risks than U.S. government
zero-coupon securities.

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

|X| "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 days. There is no limit
on the amount of the Fund's net assets that may be subject to repurchase
agreements having maturities of seven days or less.

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

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

|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 days and participation interests that do not have puts exercisable within
seven days.

|X| Loans of Portfolio Securities. To raise cash for liquidity or income
purposes, the Fund can lend its portfolio securities to brokers, dealers and
other types of financial institutions approved by the Fund's Board of Trustees.
These loans are limited to not more than 25% of the value of the Fund's net
assets. The Fund currently does not intend to engage in loans of securities, but
if it does so, such loans will not likely exceed 5% of the Fund's total assets.

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

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

|X| Derivatives. The Fund 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.

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 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.

The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within five 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 can buy and sell
exchange-traded and over-the-counter put options and call options, including
index options, securities options, currency options, commodities options and
options on the types of futures described above. If the Fund sells a call
option, it must be covered. That means the Fund must own the security subject to
the call while the call is outstanding, or, for certain types of calls, the call
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 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 (i.e.,
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
market-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. Then
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 in 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 buy and sell exchange-traded and
over-the-counter put options and call options, including index options,
securities options, currency options, commodities options and options on the
types of futures described above. 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 in 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. 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 Calls and Puts. The Fund can buy and sell
exchange-traded and over-the-counter put options and call options, including
index options, securities options, currency options, commodities options and
options on 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 exchange-traded and over-the-counter put options and call options,
including index options, securities options, currency options, commodities
options and options on futures. 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.

oForward 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 can enter into swaps only on
securities that it owns. The Fund will not enter into swaps with respect to more
than 25% of its total assets. . Also, the Fund will identify on its books liquid
assets (such as cash or U.S. government securities) to cover any amounts it
could owe under swaps that exceed the amounts it is entitled to receive, and it
will adjust that amount daily, as needed.

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

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

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

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

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

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

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

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 borrow only from banks and/or affiliated investment
companies and only as a temporary measure for extraordinary or emergency
purposes. The Fund cannot make any investment at a time during which its
borrowings exceed 5% of the value of its assets. With respect to this
fundamental policy, the Fund can borrow only if it maintains a 300% ratio of
assets to borrowings at all times in the manner set forth in the Investment
Company Act of 1940.

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, provided
that no such loan may be made if, as a result, the aggregate of such loans would
exceed 33 1/3% of the value of its total assets (taken at market value at the
time of such loans), 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, subject to the restrictions and limitations on
such investments specified in the Prospectus and this Statement of Additional
Information.

o The Fund cannot underwrite the securities of other issuers. A permitted
exception is in case it is determined 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, reverse repurchase agreements, 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. 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. This is not a fundamental policy.

How the Fund Is Managed

Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in 1987.

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.

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

The Fund currently has four classes of shares: Class A, Class B, Class C
and Class N. All classes invest in the same investment portfolio. Only
retirement plans may purchase Class N shares. Each class of shares: o has its
own dividends and distributions, o pays certain expenses which may be different
for the different

classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and
o votes as a class on matters that affect that class alone.

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

|X|Meetings of Shareholders. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold,
regular annual meetings of shareholders. The Fund will hold meetings when
required to do so by the Investment Company Act or other applicable law. It will
also do so when a shareholder meeting is called by the Trustees or upon proper
request of the shareholders.

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

|X| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability

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

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

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

The Board of Trustees has an Audit Committee and a Review Committee. The
members of the Audit Committee are Edward L. Cameron (Chairman), William L.
Armstrong, George C. Bowen and Robert J. Malone. The Audit Committee held 7
meetings during the fiscal year ended September 30, 2002. The Audit Committee
furnishes the Board with recommendations regarding the selection of the Fund's
independent auditors. Other main functions of the Audit Committee include, but
are not limited to: (i) reviewing the scope and results of audits and the audit
fees charged; (ii) reviewing reports from the Fund's independent auditors
regarding the Fund's internal accounting procedures and controls; and (iii)
establishing a separate line of communication between the Fund's independent
auditors and its independent Trustees.

The Audit Committee's functions include selecting and nominating, to the
full Board, nominees for election as Trustees, and selecting and nominating
Independent Trustees for election. The Audit Committee may, but need not,
consider the advice and recommendation of the Manager and its affiliates in
selecting nominees. The full Board elects new trustees except for those
instances when a shareholder vote is required.

To date, the Committee has been able to identify from its own resources an
ample number of qualified candidates. Nonetheless, shareholders may submit names
of individuals, accompanied by complete and properly supported resumes, for the
Audit Committee's consideration by mailing such information to the Committee in
care of the Fund. The Committee may consider such persons at such time as it
meets to consider possible nominees. The Committee, however, reserves sole
discretion to determine the candidates to present to the Board and/or
shareholders when it meets for the purpose considering potential nominees.

The members of the Review Committee are Jon S. Fossel (Chairman), Robert
G. Avis, Sam Freedman, Beverly Hamilton and F. William Marshall, Jr. The Review
Committee held 7 meetings during the fiscal year ended September 30, 2002. Among
other functions, the Review Committee reviews reports and makes recommendations
to the Board concerning the fees paid to the Fund's transfer agent and the
services provided to the Fund by the transfer agent. The Review Committee also
reviews the Fund's investment performance and policies and procedures adopted by
the Fund to comply with Investment Company Act and other applicable law.

Trustees and Officers of the Fund. theirprincipal occupations and business
affiliations during the past five years are listedunderExcept for Mr. Murphy,
each of the Trustees is an "Independent Trustee," as defined in the Investment
Company Act. Mr. Murphy is an "Interested Trustee," because he is affiliated
with the Manager by virtue of his positions as an officer and director of the
Manager, and as a shareholder of its parent company. Mr. Murphy was elected as a
Trustee of the Fund with the understanding that in the event he ceases to be the
chief executive officer of the Manager, he will resign as a trustee of the Fund
and the other Board II Funds (defined below) for which he is a trustee or
director.

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

Oppenheimer Cash Reserves Oppenheimer Select Managers
Oppenheimer Senior Floating Rate
Oppenheimer Champion Income Fund Fund
Oppenheimer Capital Income Fund Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund Oppenheimer Variable Account Funds
Oppenheimer Integrity Funds Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund Centennial America Fund, L. P.
Centennial California Tax Exempt
Oppenheimer Main Street Funds, Inc. 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 Real Asset Fund Centennial Tax Exempt Trust

Present or former officers, directors, trustees and employees (and their
immediate family members) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees are permitted to
purchase Class A shares of the Fund and the other Oppenheimer funds at net asset
value without sales charge. The sales charges on Class A shares is waived for
that group because of the economies of sales efforts realized by the
Distributor.

Messrs. Mses.Murphy, Masterson, Molleur, Vottiero, Wixted, Zack, Negri,
Reddy and Kourkoulakos, and Mses. Bechtolt, Feld and Ives who are officers of
the Fund, respectively hold the same offices with one or more of the other Board
II Funds as with the Fund. As of October 29, 2002, the Trustees and officers of
the ownedFund, as a group, owned of record or beneficially less than 1% of each
class of shares of the Fund. The foregoing statement does not reflect ownership
of shares held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under that plan by the
officers of the Fund listed above. In addition, each Independent Trustee, and
his family members, do not own securities of either the Manager or Distributor
of the Board II Funds or any person directly or indirectly controlling,
controlled by or under common control with the Manager or Distributor.

Affiliated Transactions and Material Business Relationships. In 2000, Mr. Swain
sold 93,000 shares of Oppenheimer Acquisition Company ("OAC") (the Manager's
parent holding company), for a cash payment of $4,278,930 and surrendered for
cancellation 60,000 options to MassMutual for a cash payment of $2,569,800. In
2001, Mr. Swain surrendered for cancellation 60,000 options to MassMutual for a
cash payment of $2,700,600.

Mr. Swain has reported that he sold a residential property to Mr. Freedman
on October 23, 2001 for $1.2 million. An independent appraisal of the property
supported the sale price.

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,
until his or her resignation, retirement, death or removal. Ms. Beverly Hamilton
and Mr. Robert Malone were elected to the Board II Funds effective June 1, 2002
and therefore did not hold shares of Board II Funds during the calendar year
ended December 31, 2001.

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

Independent Trustees

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

Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Beneficially
Owned in
Years; Range of Any of the
Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer
with Fund, Trustee; BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex Owned in Overseen
Age Currently Overseen by Trustee the Fund by Trustee

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

As of December 31,
2001

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

HarbourView

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

James C. Swain, Formerly Chief Executive Officer (until $0 Over
Chairman and August 27, 2002) of the Board II Funds, $100,000
Trustee since 1987 Vice Chairman (until January 2, 2002) of
Age: 69 the Manager and President and a director
(until 1997) of Centennial Asset Management Corporation (a
wholly-owned investment advisory subsidiary of the Manager).
Oversees 41 portfolios in the OppenheimerFunds complex.

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

William L. Chairman of the following private $0 $50,001-
Armstrong, mortgage banking companies: Cherry Creek $100,000
Trustee since 1999 Mortgage Company (since 1991),
Age: 65 Centennial State Mortgage Company (since
1994), The El Paso Mortgage Company (since 1993), Transland
Financial Services, Inc. (since 1997); Chairman of the
following private companies: Great Frontier Insurance
(insurance agency) (since 1995) and Ambassador Media
Corporation (since 1984); a director of the following public
companies: Storage Technology Corporation (computer
equipment company) (since 1991), Helmerich & Payne, Inc.
(oil and gas drilling/production company) (since 1992),
UNUMProvident (insurance company) (since 1991). Formerly
Director of International Family Entertainment (television
channel) (1992-1997) and Natec Resources, Inc. (air
pollution control equipment and services company)
(1991-1995), Frontier Real Estate, Inc. (residential real
estate brokerage) (1994-1999), and Frontier Title (title
insurance agency) (1995-June 1999); a U.S. Senator (January
1979-January 1991). Oversees 41 portfolios in the
OppenheimerFunds complex.

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

Robert G. Avis, Formerly, Director and President of A.G. $0 Over
Trustee since 1993 Edwards Capital, Inc. (General Partner $100,000
Age: 71 of private equity funds) (until February
2001); Chairman, President and Chief
Executive Officer of A.G. Edwards
Capital, Inc. (until March 2000); Vice
Chairman and Director of A.G. Edwards,
Inc. and Vice Chairman of A.G. Edwards &
Sons, Inc. (its brokerage company
subsidiary) (until March 1999); Chairman
of A.G. Edwards Trust Company and A.G.E.
Asset Management (investment advisor)
(until March 1999); and a Director
(until March 2000) of A.G. Edwards &
Sons and A.G. Edwards Trust Company.
Oversees 41 portfolios in the
OppenheimerFunds complex.

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

George C. Bowen, Formerly (until April 1999): Senior Vice $50,001-$10Over0
Trustee since 1998 President (from September 1987) and $100,000
Age: 66 Treasurer (from March 1985) of the
Manager; Vice President (from June 1983) and Treasurer
(since March 1985) of OppenheimerFunds Distributor, Inc. (a
subsidiary of the Manager); Senior Vice President (since
February 1992), Treasurer (since July 1991) Assistant
Secretary and a director (since December 1991) of Centennial
Asset Management Corporation; Vice President (since October
1989) and Treasurer (since April 1986) of HarbourView Asset
Management Corporation (an investment advisory subsidiary of
the Manager); President, Treasurer and a director (June
1989-January 1990) of Centennial Capital Corporation (an
investment advisory subsidiary of the Manager); Vice
President and Treasurer (since August 1978) and Secretary
(since April 1981) of Shareholder Services, Inc. (a transfer
agent subsidiary of the Manager); Vice President, Treasurer
and Secretary (since November 1989) of Shareholder Financial
Services, Inc. (a transfer agent subsidiary of the Manager);
Assistant Treasurer (since March 1998) of Oppenheimer
Acquisition Corp. (the Manager's parent corporation);
Treasurer (since November 1989) of Oppenheimer Partnership
Holdings, Inc. (a holding company subsidiary of the
Manager); Vice President and Treasurer (since July 1996) of
Oppenheimer Real Asset Management, Inc. (an investment
advisory subsidiary of the Manager); Chief Executive Officer
and director (since March 1996) of MultiSource Services,
Inc. (a broker-dealer subsidiary of the Manager); Treasurer
(since October 1997) of OppenheimerFunds International Ltd.
and Oppenheimer Millennium Funds plc (offshore fund
management subsidiaries of the Manager). Oversees 41
portfolios in the OppenheimerFunds complex.

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

Edward L. Cameron, A member of The Life Guard of Mount $0 $50,001-
Trustee since 1999 Vernon, George Washington's home (since $100,000
Age: 64 June 2000). Formerly (March 2001 - May
2002) Director of Genetic ID, Inc. and its subsidiaries (a
privately held biotech company); a partner with
PricewaterhouseCoopers LLP (from 1974-1999) (an accounting
firm) and Chairman (from 1994-1998), Price Waterhouse LLP
Global Investment Management Industry Services Group.
Oversees 41 portfolios in the OppenheimerFunds complex.

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

Jon S. Fossel, Chairman and Director (since 1998) of $0 $50,001-
Trustee since 1990 Rocky Mountain Elk Foundation (a $100,000
Age: 60 not-for-profit foundation); and a
director (since October 1999) of P.R.
Pharmaceuticals (a privately held
company) and UNUMProvident (an insurance
company) (since June 1, 2002). Formerly,
Chairman and a director (until October
1996) and President and Chief Executive
Officer (until October 1995) of the
Manager; President, Chief Executive
Officer and a director of Oppenheimer
Acquisition Corp., Shareholder Services,
Inc,. and Shareholder Financial
Services, Inc. (until October 1995).
Oversees 41 portfolios in the
OppenheimerFunds complex.

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

Formerly (until October 1994)

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

Sam Freedman, A trustee or director of other $0 Over
Trustee since 1996 Oppenheimer funds. Formerly (until $100,000
Age: 62 October 1994) Mr. Freedman held several
positions in subsidiary or affiliated
companies of the Manager. Oversees 41
portfolios in the OppenheimerFunds
complex.

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

Beverly L. Trustee (since 1996) of MassMutual N/A N/A
Hamilton, Institutional Funds and of MML Series
Trustee since 2002 Investment Fund (open-end investment
Age: 56 companies); Director of MML Services
(since April 1987) and America Funds Emerging Markets Growth
Fund (since October 1991) (both are investment companies),
The California Endowment (a philanthropy organization)
(since April 2002), and Community Hospital of Monterey
Peninsula, (since February 2002); a trustee (since February
2000) of Monterey International Studies (an educational
organization), and an advisor to Unilever (Holland)'s
pension fund and to Credit Suisse First Boston's Sprout
venture capital unit. Mrs. Hamilton also is a member of the
investment committees of the Rockefeller Foundation, the
University of Michigan and Hartford Hospital. Formerly,
President (February 1991-April 2000) ARCO Investment
Management Company. Oversees 40 portfolios in the
OppenheimerFunds complex.

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

Chairman
and Chief Executive Officer

of OppenheimerFunds Services, Chairman,
Chief Executive Officer and a director of

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

Robert J. Malone, Director (since 2001) of Jones N/A N/A
Trustee since 2002 Knowledge, Inc. (a privately held
Age: 58 company), U.S. Exploration, Inc., (since
1997), Colorado UpLIFT (a non-profit organization) (since
1986) and a trustee of the Gallagher Family Foundation
(since 2000). Formerly, Chairman of U.S. Bank (a subsidiary
of U.S. Bancorp and formerly Colorado National Bank,) (July
1996-April 1, 1999) and a director of Commercial Assets,
Inc. (1993-2000). Oversees 40 portfolios in the
OppenheimerFunds complex.

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

Director

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

F. William Trustee (since 1996) of MassMutual $0 $50,001-
Marshall, Jr., Institutional Funds and of MML Series $100,000
Trustee since 2000 Investment Fund (open-end investment
Age: 60 companies); Trustee and Chairman (since
May 1987) of the investment committee for the Worcester
Polytech Institute; President and Treasurer (since January
1999) of the SIS Fund (a private not for profit charitable
organization); Trustee (since 1995) of the Springfield
Library and Museum Association; Trustee (since 1996) of the
Community Music School of Springfield; Member of the
investment committee of the Community Foundation of Western
Massachusetts (since 1998). Formerly, Chairman (January
1999-July 1999) of SIS & Family Bank, F.S.B. (formerly SIS
Bank); President, Chief Executive Officer and Director (May
1993-December 1998) of SIS Bankcorp, Inc. and SIS Bank
(formerly Springfield Institution for Savings) and Executive
Vice President (January 1999-July 1999) of Peoples Heritage
Financial Group, Inc. Oversees 41 portfolios in the
OppenheimerFunds complex.

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

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

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

Interested Trustee and Officer

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

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

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

As of December 31,
2001

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

John V. Murphy, Chairman, Chief Executive Officer and $0 Over
President and director (since June 2001) and President $100,000
Trustee since 2001 (since September 2000) of the Manager;
Age: 53 President and a director or trustee of
other Oppenheimer funds; President and a director (since July
2001) of Oppenheimer Acquisition Corp. and of Oppenheimer
Partnership Holdings, Inc.; a director (since November 2001)
of OppenheimerFunds Distributor, Inc.; Chairman and a
director (since July 2001) of Shareholder Services, Inc. and
of Shareholder Financial Services, Inc.; President and a
director (since July 2001) of OppenheimerFunds Legacy Program
(a charitable trust program established by the Manager); a
director of the following investment advisory subsidiaries of
OppenheimerFunds, Inc.: OFI Institutional Asset Management,
Inc. and Centennial Asset Management Corporation (since
November 2001), HarbourView Asset Management Corporation and
OFI Private Investments, Inc. (since July 2001); President
(since November 1, 2001) and a director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; a director (since
November 2001) of Trinity Investment Management Corp. and
Tremont Advisers, Inc. (investment advisory affiliates of the
Manager); Executive Vice President (since February 1997) of
Massachusetts Mutual Life Insurance Company (the Manager's
parent company); a director (since June 1995) of DBL
Acquisition Corporation; formerly, Chief Operating Officer
(September 2000-June 2001) of the Manager; President and
trustee (November 1999-November 2001) of MML Series
Investment Fund and MassMutual Institutional Funds (open-end
investment companies); a director (September 1999-August
2000) of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August 2000)
of MML Bay State Life Insurance Company; a director (June
1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings
Bank (a wholly-owned subsidiary of Emerald Isle Bancorp).
Oversees 69 portfolios in the OppenheimerFunds complex.

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

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

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

Officers of the Fund

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

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

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

David P. Negri, Senior Vice President of the Manager (since May 1998) and
Vice President and of HarbourView Asset Management Corporation (since April
Portfolio Manager 1999); an officer of 9 portfolios in the OppenheimerFunds
since 1997 complex; formerly Vice President of the Manager (July 1988
Age: 48 - May 1998).

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

Thomas P. Reedy, Vice President of the Manager (since June 1993) and of
Vice President and HarbourView Asset Management Corporation (since April
Portfolio Manager 1999); an officer of 3 portfolios in the OppenheimerFunds
since 1998 complex; formerly a fixed income analyst of the Manager
Age: 40 (1986 - 1993).

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

Dimitrios Kourkoulakos, Vice President of the Manager (since December 2001); an
Vice President and officer of 3 portfolios in the OppenheimerFunds complex;
Portfolio Manager formerly a High Yield Analyst (1998 - 2001) and a since 2002
Securities Analyst (1995 - 1998) of the Manager.
Age: 36

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

Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of
Treasurer, Principal the Manager; Treasurer (since March 1999) of HarbourView
Financial and Asset Management Corporation, Shareholder Services, Inc.,
Accounting Officer Oppenheimer Real Asset Management Corporation, Shareholder
since 1999 Financial Services, Inc., Oppenheimer Partnership Holdings,
Age: 43 Inc., OFI Private Investments, Inc. (since March 2000),
OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since May 2000) and OFI
Institutional Asset Management, Inc. (since November
2000); Treasurer and Chief Financial Officer (since May
2000) of Oppenheimer Trust Company (a trust company
subsidiary of the Manager); Assistant Treasurer (since
March 1999) of Oppenheimer Acquisition Corp. and
OppenheimerFunds Legacy Program (since April 2000);
formerly Principal and Chief Operating Officer (March
1995-March 1999), Bankers Trust Company-Mutual Fund
Services Division. An officer of 85 portfolios in the
OppenheimerFunds complex.

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

Philip Vottiero, Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer 2002; formerly Vice President/Corporate Accounting of the
since 2002 Manager (July 1999-March 2002) prior to which he was Chief
Age: 39 Financial Officer at Sovlink Corporation (April 1996-June
1999). An officer of 85 portfolios in the
OppenheimerFunds complex.

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

Connie Bechtolt, Assistant Vice President of the Manager (since September
Assistant Treasurer 1998); formerly Manager/Fund Accounting (September
since 2002 1994-September 1998) of the Manager. An officer of 85
Age: 39 portfolios in the OppenheimerFunds complex.

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

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

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

Philip T. Masterson, Vice President and Assistant Counsel of the Manager (since
Assistant Secretary July 1998); formerly, an associate with Davis, Graham, &
since 2002 Stubbs LLP (January 1997-June 1998). An officer of 85 Age: 38
portfolios in the OppenheimerFunds complex.

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

Denis R. Molleur, Vice President and Senior Counsel of the Manager (since
Assistant Secretary July 1999); formerly a Vice President and Associate Counsel
since 2001 of the Manager (September 1995-July 1999). An officer of 82
Age: 45 portfolios in the OppenheimerFunds complex.

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

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

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

Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998) of
Assistant Secretary the Manager; Vice President (since 1999) of
since 2001 OppenheimerFunds Distributor, Inc.; Vice President and
Age: 37 Assistant Secretary (since 1999) of Shareholder Services,
Inc.; Assistant Secretary (since December 2001) of
OppenheimerFunds Legacy Program and Shareholder Financial
Services, Inc.; formerly Assistant Vice President and
Assistant Counsel of the Manager (August 1997-June 1998);
Assistant Counsel of the Manager (August 1994-August 1997).
An officer of 85 portfolios in the OppenheimerFunds complex.

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

? |X| Remuneration of Trustees. The officers of the Fund and one Trustee of the
Fund (Mr. Murphy) are affiliated with the Manager and receive no salary or fee
from the Fund. The remaining Trustees of the Fund received the compensation
shown below from the Fund with respect to the Fund's fiscal year ended September
30, 2002. Mr. Swain was affiliated with the Manager until January 1, 2002. The
compensation from all of the Board II Funds (including the Fund) represents
compensation received as a director, trustee, managing general partner or member
of a committee of the Board during the calendar year 2001.

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

Trustee Name and Other Fund Aggregate Total Compensation
All Oppenheimer
From nds For Which
Fuidual Serves As
Position(s) (as applicable) Compensation Indivee/Director For
Fifrom Fund for Trustndar Year Ended
scal Year Ended Cale 12/31/01
9/30/021 (41 Funds)

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

James C. Swain $4,125 $02
Chairman of the Board of Trustees

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

William L. Armstrong $2,437 $78,865
Audit Committee Member

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

Robert G. Avis $2,455 $79,452
Review Committee Member

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

George C. Bowen $2,346 $75,936
Audit Committee Member

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

Edward L. Cameron $2,342 $75,794
Audit Committee Chairman

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

Jon S. Fossel $2,601 $84,177
Review Committee Chairman

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

Sam Freedman $2,577 $83,402
Review Committee Member

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

Beverly Hamilton $906 $03
Review Committee Member

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

C. Howard Kast4 $2,027 $87,452

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

Robert M. Kirchner4 $1,841 $79,452

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

Robert J. Malone $9065 $03
Audit Committee Member

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

F. William Marshall, Jr. $2,161 $69,922
Review Committee Member

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

Ned M. Steel 6 $1,236 $60,000

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

William A. Baker6 $464 $60,000

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

1. Aggregate compensation from the Fund includes fees and deferred compensation,
if any. 2. Mr. Swain became an Independent Trustee effective 1/2/02, prior to
which he did not receive compensation from any of the Board II Funds. 3. Mrs.
Hamilton and Mr. Malone were elected as Trustees of the Board II Funds effective
6/1/02 and therefore did not receive compensation from any of the Board II Funds
during the calendar year 2001. They serve as Trustees/Directors for 40 funds.
4. Messrs. Kast and Kirchner retired as Trustees from the Board II Funds
effective 7/1/02. 5. Aggregate compensation from the Fund includes $906 deferred
under Deferred Compensation Plan described below.
6. Effective 7/1/00, Messrs. Baker and Steel resigned as Trustees of the Board
II Funds and subsequently became Trustees Emeritus. Effective 6/1/02, Mr. Steel
is no longer Trustee Emeritus. Mr. Baker passed away on 12/11/01.

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

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

|X| Major Shareholders. As of October 29, 2002, the only persons who owned
of record or were known by the Fund to own beneficially 5% or more of any class
of the Fund's outstanding shares were:

Charles Schwab & Co Inc., 101 Montgomery Street San Francisco, California
94104, which owned 17,074,598.68 Class A shares (representing
approximately 21.05% of the Class A shares then outstanding), which it
advised the Fund it held for the benefit of its customers.

Merrill, Lynch, Pierce, Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246, which owned 2,906,898.72 Class C shares
(representing approximately 13.00% of the Class C shares then
outstanding), which it advised the Fund that it held for the benefit of
its customers.

Sterling Trust Company TR Grand Vehicle Works Holding C, 1380 Lawrence
St., Suite 1400, Denver, Colorado 80204-2060, which owned 39,401.70
(representing approximately 5.02% of the Class N shares then outstanding).

NFSC FEBO #KIT-000132, NFSFMTC Rollover IRA, FBO Robert W. Hall, 5767
Crystal Bay West Dr., Plainfield, Indiana 46168, which owned 39,390.55
(representing approximately 5.02% of the Class N shares then outstanding).

FISERV Securities Inc., FAO 51508608, One Commerce Square, 2005 Market
Street, Suite 1200, Philadelphia, Pennsylvania 19103, which owned
122.738.18 (representing approximately 15.64% of the Class N shares then
outstanding).

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

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

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

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

-------------------------------------------------------------------
Fiscal Year ended Management Fees Paid to OppenheimerFunds,
9/30: Inc.
-------------------------------------------------------------------
--------------------------------------------------------------------------------
2000 $8,836,979
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2001 $8,818,045
--------------------------------------------------------------------------------
-------------------------------------------------------------------

2002 $8,745,387

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

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 in
connection with matters to which the investment advisory agreement relates.

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

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

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

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

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

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

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

Brokerage Policies of the Fund

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

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

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

Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates. Other funds advised by the Manager have investment
policies similar to those of the Fund. Those other funds may purchase or sell
the same securities as the Fund at the same time as the Fund, which could affect
the supply and price of the securities. If two or more funds advised by the
Manager purchase the same security on the same day from the same dealer, the
transactions under those combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each account.

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

The investment advisory agreement permits the Manager to allocate
brokerage for research services. The investment research services provided by a
particular broker may be useful only to one or more of the advisory accounts of
the Manager and its affiliates. The investment research received for the
commissions on 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 concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.

The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the
amount of such commissions was reasonably related to the value or benefit of
such services.
-------------------------------------------------------------------------------
Fiscal Year Ended 9/30: Total Brokerage Commissions Paid by the Fund1
-------------------------------------------------------------------------------
---------------------------------------------------------------------------------
2000 $89,148
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------

2001 $129,913

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

2002 $35,5772

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

1. Amounts do not include spreads or commissions on principal transactions on a
net trade basis. 2. In the fiscal year ended 9/30/02, the amount of transactions
directed to brokers for research services was $3,163,430 and the amount of the
commissions paid to broker-dealers for those services was $6,600.

Distribution and Service Plans

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

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

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

Fiscal Aggregate Class A
Front-End
Year Front-End Sales Sales Charges
Ended Charges on Retained by
9/30: Class A Shares Distributor1

2002 $1,666,875 $447,224

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

1. Includes amounts retained by a broker-dealer that is an affiliate or a parent
of the Distributor.

-----------------------------------------------------------------------------
Fiscal Concessions on Concessions on Concessions on Concessions on
Year Class A Shares Class B Shares Class C Shares Class N Shares
Ended Advanced by Advanced by Advanced by Advanced by
9/30: Distributor1 Distributor1 Distributor1 Distributor1
-----------------------------------------------------------------------------
------------------------------------------------------------------------------
2000 $241,836 $5,294,841 $429,470 N/A
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2001 $243,492 $5,189,622 $579,142 $9,7562
------------------------------------------------------------------------------
-----------------------------------------------------------------------------

2002 $125,209 $2,578,269 $434,602 $50,3102

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

1. The Distributor advances concession payments to dealers for certain sales of
Class A shares and for sales of Class B, Class C and Class N shares from its own
resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.

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

Fiscal Class A Class B Class C Class N
Contingent Contingent Contingent Contingent
Year Deferred Sales Deferred Sales Deferred Sales Deferred Sales
Ended Charges Charges Charges Charges
9/30 Retained by Retained by Retained by Retained by
Distributor Distributor Distributor Distributor

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

2002 $23,279 $1,584,507 $49,736 $2,579

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

Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class.

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

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

Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of 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 after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the Plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each Class, voting separately by class.

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

|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. While the plan
permits the Board to authorize payments to the Distributor to reimburse itself
for services under the plan, the Board has not yet done so. The Distributor
makes payments to plan recipients quarterly at an annual rate not to exceed
0.25% of the average annual net assets consisting of Class A shares held in the
accounts of the recipients or their customers. With respect to purchases of
Class A shares subject to a contingent deferred sales charge by certain
retirement plans that purchased such shares prior to March 1, 2001
("grandfathered retirement accounts"), the Distributor currently intends to pay
the service fee to Recipients in advance for the first year after the shares are
purchased. After the first year shares are outstanding, the Distributor makes
service fee payments to Recipients quarterly on those shares. The advance
payment is based on the net asset value of shares sold. Shares purchased by
exchange do not qualify for the advance service fee payment. If Class A shares
purchased by grandfathered retirement accounts are redeemed during the first
year after their purchase, the Recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance
payment of the service fee made on those shares.

For the fiscal period ended September 30, 2002, payments under the Class A
Plan totaled $1,730,631, all of which was paid by the Distributor to recipients.
That included $86,735 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 from the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.

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

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

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, effective November 1,
2001 the service fee, increases Class N expenses by 0.50% of the net assets per
year of the respective class.

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

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

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

The Distributor's actual expenses in selling Class B, Class C 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 Year Ended 9/30/02

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

Class: Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Payments Retained by Expenses Of Net Assets
Under Plan Distributor Under Plan Of Class

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

Class B Plan $5,088,482 $4,041,2751 $25,340,437 5.87%

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

Class C Plan $2,002,675 $470,2972 $6,263,970 3.48%

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

Class N Plan $16,642 $15,6553 $122,480 2.00%

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

1. Includes $38,945 paid to an affiliate of the Distributor's parent company. 2.
Includes $36,263 paid to an affiliate of the Distributor's parent company. 3.
Includes $96 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "standardized yield,"
"dividend yield," "average annual total return," "cumulative total return,"
"average annual total return at net asset value" and "total return at net asset
value." An explanation of how yields and total returns are calculated is set
forth below. The charts below show the Fund's performance for 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 Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown for the one-, five- and 10-year periods
(or the life of the class, if less) ending as of the most recently ended
calendar quarter prior to the publication of the advertisement (or its
submission for publication). Certain types of yields may also be shown, provided
that they are accompanied by standardized average annual total returns.

Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:
o Yields and total returns measure the performance of a hypothetical account in
the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.
o The Fund's performance returns do not reflect the effect of taxes on dividends
and capital gains distributions. o An investment in the Fund is not insured by
the FDIC or any other government agency.
o The principal value of the Fund's shares, and its yields and total returns are
not guaranteed and normally will fluctuate on a daily basis. o When an
investor's shares are redeemed, they may be worth more or less than their
original cost.
o Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future yields or returns.

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

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

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

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

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

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

The symbols above represent the following factors:

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

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

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

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

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

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

The Fund's Yields for the 30-Day Periods Ended 9/30/02

Without After Without After
Sales Charge Sales Charge Sales Charge Sales Charge

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

Class A 10.12% 9.63% 8.72% 8.31%

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

Class B 9.37% N/A 7.98% N/A

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

Class C 9.41% N/A 8.01% N/A

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

Class N 10.04% N/A 8.61% 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, 10 years). An average annual total
return shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However, average
annual total returns do not show actual year-by-year performance. The Fund uses
standardized calculations for its total returns as prescribed by the SEC. The
methodology is discussed below.

In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the one-year period. For Class N shares, the 1%
contingent deferred sales charge is deducted for returns for the one-year and
life of class periods. Class N total returns may also be calculated for the
periods prior to March 1, 2001 (the inception date for Class N shares), based on
the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1 fees.

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

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

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

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

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

-----------

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. 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 9/30/02

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

Class of Cumulative Total Average Annual Total Returns
Shares Returns (10 years
or life-of-class)

Class A1 61.82% 69.89% -7.12% -2.49% -1.44% -0.48% 4.93% 5.44%

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

Class B 20.20%2 20.20%2 -7.71% -3.23% -1.48% -1.23% 2.67%2 2.67%2

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

Class C 31.92%3 31.92%3 -4.12% -3.23% -1.24% -1.24% 3.19%3 3.19%3

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

Class N -13.70%4 -13.70%4 -3.61% -2.71% -8.90%4 -8.90%4 N/A N/A

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

1. Inception of Class A: 11/16/87 2. Inception of Class B: 10/2/95 3. Inception
of Class C: 12/1/93 4. Inception of Class N: 3/1/01

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

Average Annual Total Returns for Class A Shares1 (After Sales Charge)
For the Periods Ended 9/30/02

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

10 years
1 year 5 years (or life of
class)

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

After Taxes on Distributions -10.20% -5.13% 1.13%

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

After Taxes on Distributions and -4.22% -2.74% 2.17%
Redemption
of Fund Shares

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

1. Inception of Class A shares: 11/16/87

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.

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

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

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

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

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

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

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

ABOUT your account

How to Buy Shares

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

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

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

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

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

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

Oppenheimer Bond Fund Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New York Municipal Fund
Oppenheimer Capital Preservation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Quest Balanced Value Fund

Oppenheimer Quest Capital Value Fund,
Oppenheimer Champion Income Fund Inc.

Oppenheimer Quest Global Value Fund,
Oppenheimer Convertible Securities Fund Inc.
Oppenheimer Developing Markets Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Discovery Fund Oppenheimer Real Asset Fund
Oppenheimer Rochester National
Oppenheimer Emerging Growth Fund Municipals
Oppenheimer Emerging Technologies Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Enterprise Fund Oppenheimer Small Cap Value Fund
Oppenheimer Europe Fund Oppenheimer Strategic Income Fund
Oppenheimer Global Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Global Growth & Income Fund Oppenheimer Trinity Core Fund

Oppenheimer Trinity Large Cap Growth
Oppenheimer Gold & Special Minerals Fund Fund

Oppenheimer Growth Fund Oppenheimer Trinity Value Fund Oppenheimer High Yield
Fund Oppenheimer U.S. Government Trust Oppenheimer International Bond Fund
Oppenheimer Value Fund Oppenheimer International Growth Fund Limited-Term New
York Municipal Fund Oppenheimer International Small Company Fund Rochester Fund
Municipals Oppenheimer Limited-Term Government Fund OSM1- Gartmore Millennium
Growth Fund II Oppenheimer Limited Term Municipal Fund OSM1 - Jennison Growth
Fund Oppenheimer Main Street Growth & Income OSM1 - Mercury Advisors S&P 500
Index Fund Fund

OSM1 - Mercury Advisors Focus Growth
Oppenheimer Main Street Opportunity Fund Fund

Oppenheimer Main Street Small Cap Fund OSM1 - QM Active Balanced Fund
Oppenheimer MidCap Fund OSM1 - Salomon Brothers All Cap Fund Oppenheimer
Multiple Strategies Fund And the following money market funds:

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

1"OSM" stands for Oppenheimer Select
Managers

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

o Equity securities traded on a U.S.
securities exchange or on Nasdaq(R)are
valued as follows:
(1) if last sale information is
regularly reported, they
are valued at the last
reported sale price on
the principal exchange on
which they are traded or
on Nasdaq, as applicable,
on that day, or

(2) if last sale information is not
available on a valuation
date, they are valued at
the last reported sale
price preceding the
valuation date if it is
within the spread of the
closing "bid" and "asked"
prices on the valuation
date or, if not, at the
closing "bid" price on
the valuation date.
o Equity securities traded on a foreign securities exchange generally are valued
in one of the following ways: (1) at the last sale price available
to the pricing service
approved by the Board of
Trustees, or
(2) at the last sale price obtained
by the Manager from the report of the principal exchange on which
the security is traded at its last trading session on or
immediately before the valuation date, or
(3) at the mean between the "bid"
and "asked" prices
obtained from the
principal exchange on
which the security is
traded or, on the basis
of reasonable inquiry,
from two market makers in
the security.
o Long-term debt securities having a remaining maturity in excess of 60 days are
valued based on the mean between the "bid" and "asked" prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or obtained
by the Manager from two active market makers in the security on the basis of
reasonable inquiry. o The following securities are valued at the mean between
the "bid" and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or obtained by the Manager from two active market
makers in the security on the basis of reasonable inquiry: (1) debt instruments
that have a
maturity of more than 397 days
when issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or
less.
o The following securities are valued at cost, adjusted for amortization of
premiums and accretion of discounts:
(1) money market debt securities
held by a non-money
market fund that had a
maturity of less than 397
days when issued that
have a remaining maturity
of 60 days or less, and
(2) debt instruments held by a money market fund that have a
remaining maturity of 397 days or less.
o Securities (including restricted securities) not having readily-available
market quotations are valued at fair value determined under the Board's
procedures. If the Manager is unable to locate two market makers willing to give
quotes, a security may be priced at the mean between the "bid" and "asked"
prices provided by a single active market maker (which in certain cases may be
the "bid" price if no "asked" price is available).

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

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

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

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

How to Sell Shares

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

Checkwriting. When a check is presented to United Missouri Bank (the "Bank") for
clearance, the Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the check.
This enables the shareholder to continue receiving dividends on those shares
until the check is presented to the Fund. Checks may not be presented for
payment at the offices of the Bank or the Fund's custodian. 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
and Class N shares. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.

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

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

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

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

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

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

Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial
plans, 401(k) plans or pension or profit-sharing plans should be addressed to
"Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its
address listed in "How To Sell Shares" in the Prospectus or on the back cover of
this Statement of Additional Information. The request must:

(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

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

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

o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
shares of any other fund.

o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
generally available only by exchange from the same class of shares of
other Oppenheimer funds or through OppenheimerFunds-sponsored 401(k)
plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be
acquired by exchange of shares of any class of any other Oppenheimer funds
except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.

o Class X shares of Limited Term New York Municipal Fund may be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may be
made to Class X shares.

o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves
or Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available
by exchange of shares of Oppenheimer Money Market Fund or Class A shares
of Oppenheimer Cash Reserves.
o Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund and
Oppenheimer Select Managers QM Active Balanced Fund are only available to
retirement plans and are available only by exchange from the same class of
shares of other Oppenheimer funds held by retirement plans.
o Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares of
any money market fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon payment
of the sales charge. They may also be used to purchase shares of
Oppenheimer funds subject to an early withdrawal charge or contingent
deferred sales charge.
o Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 30 days
prior to that purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial sales charge or
contingent deferred sales charge. To qualify for that privilege, the
investor or the investor's dealer must notify the Distributor of
eligibility for this privilege at the time the shares of Oppenheimer Money
Market Fund, Inc. are purchased. If requested, they must supply proof of
entitlement to this privilege.
o Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust
for which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the Oppenheimer
funds.

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

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

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

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

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

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

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

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

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

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

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

|X| Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.

|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.

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

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

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

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Information About the Fund

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

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

The Custodian. JP 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 Auditors. Deloitte & Touche LLP are the independent auditors of the
Fund. They audit the Fund's financial statements and perform other related audit
services. They also act as auditors for the Manager and for certain other funds
advised by the Manager and its affiliates.

INDEPENDENT AUDITORS' REPORT

================================================================================
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER CHAMPION INCOME FUND:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Champion Income Fund, including the statement of investments, as of
September 30, 2002, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of September 30, 2002, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Champion Income Fund as of September 30, 2002, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America.

/s/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP

Denver, Colorado
October 25, 2002

STATEMENT OF INVESTMENTS September 30, 2002

PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
======================================================================================

ASSET-BACKED SECURITIES--0.3%
--------------------------------------------------------------------------------------
Consumer Credit Reference Index Securities Program,
Credit Card Asset-Backed Certificates, Series 2002-B,
Cl. FX, 10.421%, 3/22/07(1) $ 3,000,000 $ 3,157,500
--------------------------------------------------------------------------------------
Goldman Sachs Asset Management CBO Ltd., Sub.
Collateralized Bond Obligations, Series 1A,
Cl. D, 12.54%, 6/13/11(2) 2,000,000 300,000
--------------------------------------------------------------------------------------
NC Finance Trust, Collateralized Mtg. Obligations,
Series 1999-I, Cl. ECFD, 8.75%, 12/25/28(1) 588,857 347,425
---------------
Total Asset-Backed Securities (Cost $5,571,547) 3,804,925

======================================================================================
CORPORATE LOANS--0.0%
Telergy, Inc., Sr. Sec. Credit Facilities Term Loan,
11.111%, 1/1/02(1,2,3) (Cost $3,866,575) 3,945,448 19,727

======================================================================================
MORTGAGE-BACKED OBLIGATIONS--2.7%
AMRESCO Commercial Mortgage Funding I Corp., Multiclass Mtg.
Pass-Through Certificates:
Series 1997- C1, Cl. G, 7%, 6/17/29(4) 150,000 143,311
Series 1997- C1, Cl. H, 7%, 6/17/29(4) 360,000 328,922
--------------------------------------------------------------------------------------
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1997-D4, Cl. B1, 7.525%, 4/14/29 333,000 299,808
Series 1997-D4, Cl. B2, 7.525%, 4/14/29 333,000 282,608
Series 1997-D4, Cl. B3, 7.525%, 4/14/29 1,834,000 1,464,621
Series 1997-D5, Cl. B2, 6.93%, 2/14/43(5) 3,800,000 855,000
--------------------------------------------------------------------------------------
CBA Mortgage Corp., Commercial Mtg. Pass-Through Certificates,
Series 1993-C1, Cl. E, 6.72%, 12/25/03(4) 622,000 620,931
--------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Commercial Mtg.
Interest-Only Certificates, Series 2002-C KP1, Cl. AX,
12.062%, 12/15/35(1,6) 74,111,490 1,064,093
--------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates:
Series 1997-CHL1, Cl. D, 8.126%, 4/29/39(1,5) 750,000 766,289
Series 1997-CHL1, Cl. E, 8.126%, 4/29/39(1,5) 4,000,000 3,455,000
--------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust,
Commercial Mtg. Pass-Through Certificates:
Series 1997-C2, Cl. F, 7.50%, 11/18/29 3,400,000 3,058,672
Series 1997-C2, Cl. G, 7.50%, 11/18/29 2,000,000 1,745,625
--------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Mtg. Pass-Through
Certificates, Series 1997-C2, Cl. F, 6.75%, 4/15/29 2,000,000 1,199,453
--------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp., Commercial
Interest-Only Mtg. Obligations, Series 1999-PLS1, Cl. X,
14.004%, 2/15/32(1,6) 66,616,875 1,199,104
--------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Pass-Through Certificates, Series 1995-C1, Cl. E,
9.274%, 7/25/10(1,5) 2,324,100 2,496,955
--------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1996-C1, Cl. E, 7.428%, 2/15/28(1,5) 1,100,000 1,107,475
Series 1997-C1, Cl. F, 6.85%, 2/15/20(1) 680,000 673,200
Series 1997-HF1, Cl. F, 6.86%, 2/15/10(4) 225,000 218,642
Series 1997-RR, Cl. D, 7.741%, 4/30/39(4,5) 4,150,224 3,943,361
Series 1997-RR, Cl. E, 7.723%, 4/30/39(4,5) 400,022 330,825
Series 1997-RR, Cl. F, 7.494%, 4/30/39(4,5) 7,400,399 5,156,875
Series 1997-XL1, Cl. G, 7.695%, 10/3/30(4) 1,200,000 1,175,889

11 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
======================================================================================

MORTGAGE-BACKED OBLIGATIONS Continued
Mortgage Capital Funding, Inc., Commercial Mtg. Pass-Through Certificates:
Series 1996-MC1, Cl. G, 7.15%, 6/15/06(1) $ 2,500,000 $ 2,517,969
Series 1997-MC1, Cl. F, 7.452%, 5/20/07(4) 600,000 583,548
---------------
Total Mortgage-Backed Obligations (Cost $36,781,567) 34,688,176

======================================================================================
CORPORATE BONDS AND NOTES--82.6%
--------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--28.3%
--------------------------------------------------------------------------------------
AUTO COMPONENTS--2.5%
Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07(2,3) 1,125,000 258,750
--------------------------------------------------------------------------------------
Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub.
Nts., 2/15/10(4) 2,800,000 2,856,000
--------------------------------------------------------------------------------------
Collins & Aikman Products Co., 10.75% Sr. Nts., 12/31/11 2,000,000 1,920,000
--------------------------------------------------------------------------------------
Dana Corp.:
9% Unsec. Nts., 8/15/11 4,050,000 3,817,125
10.125% Sr. Nts., 3/15/10(4) 2,000,000 1,960,000
--------------------------------------------------------------------------------------
Delco Remy International, Inc., 11% Sr. Unsec.
Sub. Nts., 5/1/09 1,000,000 645,000
--------------------------------------------------------------------------------------
Dura Operating Corp.:
8.625% Sr. Nts., Series B, 4/15/12 1,500,000 1,492,500
9% Sr. Sub. Nts., Series B, 5/1/09 [EUR] 1,700,000 1,562,502
9% Sr. Unsec. Sub. Nts., Series D, 5/1/09 8,200,000 7,605,500
---------------------------------------------------------------------------------------
Exide Corp., 10% Sr. Unsec. Nts., 4/15/05(2,3) 2,800,000 434,000
--------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co., 7.857% Nts., 8/15/11 1,000,000 835,280
--------------------------------------------------------------------------------------
Lear Corp., 8.11% Sr. Unsec. Nts., Series B, 5/15/09 900,000 936,000
--------------------------------------------------------------------------------------
Metaldyne Corp., 11% Sr. Sub. Nts., 6/15/12(4) 3,450,000 2,984,250
--------------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 3,900,000 3,997,500
---------------
31,304,407

--------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--8.6%
Ameristar Casinos, Inc., 10.75% Sr. Unsec. Sub.
Nts., 2/15/09 1,000,000 1,102,500
--------------------------------------------------------------------------------------
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08 1,675,000 427,125
--------------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 1,900,000 1,957,000
--------------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 3,200,000 3,344,000
--------------------------------------------------------------------------------------
Buffets, Inc., 11.25% Sr. Sub. Nts., 7/15/10(4) 1,000,000 1,025,000
--------------------------------------------------------------------------------------
Capital Gaming International, Inc., 11.50% Promissory
Nts., 8/1/1995(1,2,3) 7,500 --
--------------------------------------------------------------------------------------
Choctaw Resort Development Enterprise, 9.25% Sr. Unsec.
Nts., 4/1/09 3,000,000 3,120,000
--------------------------------------------------------------------------------------
Coast Hotels & Casinos, Inc., 9.50% Sr. Unsec. Sub.
Nts., 4/1/09 5,000,000 5,250,000
--------------------------------------------------------------------------------------
Family Restaurants, Inc., 10.875% Sr. Sub. Disc.
Nts., 2/1/04(1,2) 400,000 4,500
--------------------------------------------------------------------------------------
Florida Panthers Holdings, Inc., 9.875% Sr. Sub.
Nts., 4/15/09 4,100,000 4,248,625
--------------------------------------------------------------------------------------
Hollywood Casino Corp., 11.25% Sr. Sec. Nts., 5/1/07 4,850,000 5,286,500
--------------------------------------------------------------------------------------
Hollywood Park, Inc., 9.25% Sr. Unsec. Sub. Nts.,
Series B, 2/15/07 2,100,000 1,837,500
--------------------------------------------------------------------------------------
Horseshoe Gaming LLC, 8.625% Sr. Sub. Nts., 5/15/09 4,000,000 4,200,000
--------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts., 8/15/08 7,000,000 7,035,000
--------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 9% Sr. Sub. Nts., 3/15/12 4,400,000 4,543,000
--------------------------------------------------------------------------------------

12 | OPPENHEIMER CHAMPION INCOME FUND

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

HOTELS, RESTAURANTS & LEISURE Continued
John Q. Hammons Hotels, Inc., 8.875% Sr. Nts.,
Series B, 5/15/12 $ 4,600,000 $ 4,450,500
--------------------------------------------------------------------------------------
Jupiters Ltd., 8.50% Sr. Unsec. Nts., 3/1/06 3,725,000 3,762,250
--------------------------------------------------------------------------------------
Mandalay Resort Group:
9.375% Sr. Sub. Nts., 2/15/10 1,000,000 1,055,000
10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 4,000,000 4,330,000
--------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.375% Sr. Unsec. Sub. Nts., 2/1/11 5,500,000 5,720,000
--------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
8% Sr. Sub. Nts., 4/1/12 1,300,000 1,339,000
8.375% Sr. Sub. Nts., 7/1/11 3,000,000 3,090,000
8.75% Sr. Unsec. Sub. Nts., 1/1/09 4,850,000 5,080,375
--------------------------------------------------------------------------------------
Park Place Entertainment Corp., 7.875% Sr. Sub.
Nts., 3/15/10 7,500,000 7,612,500
--------------------------------------------------------------------------------------
Penn National Gaming, Inc., 8.875% Sr. Sub. Nts., 3/15/10 2,200,000 2,222,000
--------------------------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts., 3/15/08(1,2,3) 3,900,000 --
--------------------------------------------------------------------------------------
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts., 4/1/08(7) 3,470,000 2,862,750
9.75% Sr. Nts., 6/15/07 3,750,000 3,300,000
--------------------------------------------------------------------------------------
Prime Hospitality Corp., 8.375% Sr. Sub. Nts., 5/1/12 3,200,000 3,056,000
--------------------------------------------------------------------------------------
Six Flags, Inc., 8.875% Sr. Nts., 2/1/10 4,500,000 3,712,500
--------------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc., 7.875%
Nts., 5/1/12(4) 2,550,000 2,492,625
--------------------------------------------------------------------------------------
Station Casinos, Inc.:
9.75% Sr. Sub. Nts., 4/15/07(1) 3,400,000 3,545,860
9.875% Sr. Unsec. Sub. Nts., 7/1/10 1,700,000 1,831,750
--------------------------------------------------------------------------------------
Sun International Hotels Ltd., 8.875% Sr. Sub. Unsec.
Nts., 8/15/11 3,500,000 3,526,250
--------------------------------------------------------------------------------------
Vail Resorts, Inc., 8.75% Sr. Unsec. Sub. Nts., 5/15/09 2,750,000 2,818,750
--------------------------------------------------------------------------------------
Venetian Casino Resort LLC/Las Vegas Sands, Inc., 11%
Bonds, 6/15/10(4) 1,100,000 1,083,500
---------------
110,272,360

--------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--3.2%
Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 2,800,000 2,814,000
--------------------------------------------------------------------------------------
D.R. Horton, Inc.:
7.875% Sr. Nts., 8/15/11 3,900,000 3,773,250
9.375% Sr. Unsec. Sub. Nts., 3/15/11 400,000 387,000
9.75% Sr. Sub. Nts., 9/15/10 600,000 592,500
--------------------------------------------------------------------------------------
Del Webb Corp., 10.25% Sr. Unsec. Sub. Nts., 2/15/10 3,500,000 3,850,000
--------------------------------------------------------------------------------------
Interface, Inc., 10.375% Sr. Nts., 2/1/10 1,500,000 1,520,625
--------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub.
Nts., 4/1/12 3,500,000 3,132,500
--------------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 1,550,000 1,534,500
9.50% Sr. Unsec. Sub. Nts., 2/15/11 2,800,000 2,856,000
--------------------------------------------------------------------------------------
Meritage Corp., 9.75% Sr. Unsec. Nts., 6/1/11 1,000,000 1,007,500
--------------------------------------------------------------------------------------
Metromedia International Group, Inc., 10.50% Sr. Unsec.
Disc. Nts., 9/30/07(1,2) 6,650,958 1,363,446
--------------------------------------------------------------------------------------
Salton, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/05 4,800,000 4,440,000
--------------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 2,000,000 1,900,000
--------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 3,500,000 3,465,000

13 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

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

HOUSEHOLD DURABLES Continued
WCI Communities, Inc.:
9.125% Sr. Sub. Nts., 5/1/12 $ 2,800,000 $ 2,569,000
10.625% Sr. Unsec. Sub. Nts., 2/15/11 1,800,000 1,759,500
--------------------------------------------------------------------------------------
Williams Scotsman, Inc., 9.875% Sr. Unsec. Nts., 6/1/07 5,000,000 4,275,000
---------------
41,239,821

--------------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.8%
Amazon.com, Inc., 0%/10% Sr. Unsec. Disc.
Nts., 5/1/08(7) 11,500,000 10,666,250
--------------------------------------------------------------------------------------
MEDIA--10.1%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09(2) 1,740,000 635,100
8.125% Sr. Nts., Series B, 7/15/03(2) 5,000,000 1,850,000
10.25% Sr. Unsec. Nts., 11/1/06(2) 3,800,000 1,387,000
10.25% Sr. Unsec. Sub. Nts., 6/15/11(2) 600,000 222,000
10.875% Sr. Unsec. Nts., 10/1/10(2) 1,300,000 474,500
--------------------------------------------------------------------------------------
Allbritton Communications Co., 8.875% Sr. Sub. Nts.,
Series B, 2/1/08 1,250,000 1,281,250
--------------------------------------------------------------------------------------
AMC Entertainment, Inc., 9.50% Sr. Unsec. Sub.
Nts., 2/1/11 8,000,000 7,000,000
--------------------------------------------------------------------------------------
AOL Time Warner, Inc., 6.875% Nts., 5/1/12 11,400,000 10,395,067
--------------------------------------------------------------------------------------
Block Communications, Inc., 9.25% Sr. Sub. Nts., 4/15/09 1,500,000 1,507,500
--------------------------------------------------------------------------------------
British Sky Broadcasting Group plc, 8.20% Sr. Unsec.
Nts., 7/15/09 300,000 304,971
--------------------------------------------------------------------------------------
Carmike Cinemas, Inc., 10.375% Gtd. Sr. Sub. Nts.,
Series B, 2/1/09 6,750,000 6,176,250
--------------------------------------------------------------------------------------
Charter Communications Holdings LLC/
Charter Communications Holdings Capital Corp.:
0%/9.92% Sr. Unsec. Disc. Nts., 4/1/11(7) 5,250,000 2,467,500
0%/11.75% Sr. Unsec. Sub. Disc. Nts., 5/15/11(7) 4,000,000 1,420,000
8.25% Sr. Unsec. Nts., 4/1/07 2,000,000 1,240,000
8.625% Sr. Unsec. Nts., 4/1/09 5,950,000 3,689,000
9.625% Sr. Unsec. Sub. Nts., 11/15/09 2,500,000 1,537,500
10% Sr. Nts., 4/1/09 2,700,000 1,687,500
10.75% Sr. Unsec. Nts., 10/1/09 1,000,000 635,000
11.125% Sr. Unsec. Nts., 1/15/11 2,000,000 1,270,000
--------------------------------------------------------------------------------------
Cinemark USA, Inc., 9.625% Sr. Sub. Nts.,
Series B, 8/1/08 1,000,000 940,000
--------------------------------------------------------------------------------------
Classic Cable, Inc.:
9.375% Sr. Sub. Nts., Series B, 8/1/09(2,3) 500,000 75,000
10.50% Sr. Sub. Nts., 3/1/10(2,3) 5,175,000 776,250
--------------------------------------------------------------------------------------
Comcast Cable Communications, Inc., 6.75% Sr. Unsub.
Nts., 1/30/11 9,100,000 8,478,716
--------------------------------------------------------------------------------------
Corus Entertainment, Inc., 8.75% Sr. Sub. Nts., 3/1/12 1,800,000 1,840,500
--------------------------------------------------------------------------------------
Cox Communications, Inc., 7.75% Sr. Nts., 11/1/10 1,900,000 1,969,464
--------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr. Unsec. Unsub. Nts.,
Series B, 4/1/11 10,750,000 8,600,000
--------------------------------------------------------------------------------------
Cumulus Media, Inc., 10.375% Sr. Unsec. Sub. Nts., 7/1/08 1,900,000 2,014,000
--------------------------------------------------------------------------------------
Diva Systems Corp., 0%/12.625% Sr. Disc. Nts.,
Series B, 3/1/08(1,2,3,7) 2,400,000 36,000
--------------------------------------------------------------------------------------
EchoStar Broadband Corp., 10.375% Sr. Unsec.
Nts., 10/1/07 5,700,000 5,671,500
--------------------------------------------------------------------------------------
EchoStar DBS Corp.:
9.125% Sr. Nts., 1/15/09(4) 2,500,000 2,362,500
9.375% Sr. Unsec. Nts., 2/1/09 7,400,000 7,141,000
--------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts.,
Series B, 3/15/09 2,250,000 2,295,000
--------------------------------------------------------------------------------------
Entercom Radio LLC/Entercom Capital, Inc., 7.625% Sr. Unsec.
Sub. Nts., 3/1/14 1,500,000 1,567,500
--------------------------------------------------------------------------------------

14 | OPPENHEIMER CHAMPION INCOME FUND

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

MEDIA Continued
Entravision Communications Corp., 8.125% Sr. Sub.
Nts., 3/15/09 $ 3,000,000 $ 3,075,000
--------------------------------------------------------------------------------------
Gray Television, Inc., 9.25% Sr. Sub. Nts., 12/15/11 1,750,000 1,793,750
--------------------------------------------------------------------------------------
Insight Communications Co., Inc., 0%/12.25% Sr. Disc.
Nts., 2/15/11(7) 4,000,000 1,480,000
--------------------------------------------------------------------------------------
Insight Midwest LP/Insight Capital, Inc., 9.75% Sr.
Nts., 10/1/09 750,000 663,750
--------------------------------------------------------------------------------------
Lamar Advertising Co., 9.625% Sr. Unsec. Sub.
Nts., 12/1/06 2,500,000 2,593,750
--------------------------------------------------------------------------------------
Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec.
Nts., 1/15/13 1,400,000 1,148,000
--------------------------------------------------------------------------------------
PanAmSat Corp., 8.50% Sr. Nts., 2/1/12(4) 6,000,000 4,830,000
--------------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts.,
Series B, 7/1/11 1,450,000 1,522,500
--------------------------------------------------------------------------------------
Regal Cinemas, Inc., 9.375% Sr. Sub. Nts.,
Series B, 2/1/12 3,850,000 3,965,500
--------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Sub. Nts., 3/15/12 6,250,000 6,312,500
8.75% Sr. Sub. Nts., 12/15/11 1,250,000 1,296,875
9% Sr. Unsec. Sub. Nts., 7/15/07 1,500,000 1,552,500
--------------------------------------------------------------------------------------
Spanish Broadcasting System, Inc., 9.625% Sr. Unsec.
Sub. Nts., 11/1/09 4,750,000 4,868,750
--------------------------------------------------------------------------------------
United Pan-Europe Communications NV:
0%/13.375% Sr. Unsec. Disc. Nts., Series B,
11/1/09(2,3,7) 4,800,000 144,000
10.875% Sr. Unsec. Nts., Series B, 8/1/09(2) 3,600,000 126,000
11.25% Sr. Nts., Series B, 11/1/09(2) [EUR] 3,000,000 103,771
--------------------------------------------------------------------------------------
World Color Press, Inc., 7.75% Sr. Unsec.
Sub. Nts., 2/15/09 1,500,000 1,524,806
--------------------------------------------------------------------------------------
WRC Media, Inc./Weekly Reader Corp./Compass Learning Corp.,
12.75% Sr. Sub. Nts., 11/15/09 3,000,000 2,805,000
---------------
128,754,020

--------------------------------------------------------------------------------------
MULTILINE RETAIL--0.4%
J. C. Penney Co., Inc., 7.60% Nts., 4/1/07 1,600,000 1,545,730
--------------------------------------------------------------------------------------
Saks, Inc.:
8.25% Sr. Unsec. Nts., 11/15/08 1,500,000 1,387,500
9.875% Nts., 10/1/11 2,300,000 2,265,500
---------------
5,198,730

--------------------------------------------------------------------------------------
SPECIALTY RETAIL--2.1%
Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 4,500,000 4,072,500
--------------------------------------------------------------------------------------
AutoNation, Inc., 9% Sr. Unsec. Nts., 8/1/08 2,500,000 2,575,000
--------------------------------------------------------------------------------------
CSK Auto, Inc., 12% Sr. Unsec. Nts., 6/15/06 6,500,000 6,914,375
--------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 9.125% Sr. Unsec.
Sub. Nts., 5/1/08 2,000,000 1,650,000
--------------------------------------------------------------------------------------
Finlay Enterprises, Inc., 9% Debs., 5/1/08 3,500,000 3,255,000
--------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08 1,025,000 978,875
--------------------------------------------------------------------------------------
Petco Animal Supplies, Inc., 10.75% Sr. Sub.
Nts., 11/1/11 3,000,000 3,240,000
--------------------------------------------------------------------------------------
United Rentals (North America), Inc., 10.75% Sr. Unsec.
Nts., 4/15/08 4,050,000 3,888,000
--------------------------------------------------------------------------------------
United Rentals, Inc., 9.25% Sr. Unsec. Sub. Nts.,
Series B, 1/15/09 100,000 83,500
---------------
26,657,250

15 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

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

TEXTILES & APPAREL--0.6%
Galey & Lord, Inc., 9.125% Sr. Unsec. Sub.
Nts., 3/1/08(2,3) $ 2,400,000 $ 408,000
--------------------------------------------------------------------------------------
Levi Strauss & Co.:
6.80% Nts., 11/1/03 4,300,000 3,805,500
11.625% Sr. Unsec. Nts., 1/15/08 500,000 402,500
--------------------------------------------------------------------------------------
Polymer Group, Inc., 9% Sr. Unsec. Sub. Nts.,
Series B, 7/1/07(2) 1,000,000 205,000
--------------------------------------------------------------------------------------
Russell Corp., 9.25% Sr. Nts., 5/1/10(4) 2,000,000 2,070,000
---------------
6,891,000

--------------------------------------------------------------------------------------
CONSUMER STAPLES--5.2%
--------------------------------------------------------------------------------------
BEVERAGES--0.6%
Canandaigua Brands, Inc., 8.50% Sr. Unsec. Sub.
Nts., 3/1/09 1,500,000 1,537,500
--------------------------------------------------------------------------------------
Constellation Brands, Inc., 8.125% Sr. Sub. Nts., 1/15/12 2,000,000 2,050,000
--------------------------------------------------------------------------------------
Packaged Ice, Inc., 9.75% Sr. Unsec. Nts.,
Series B, 2/1/05 5,075,000 3,983,875
---------------
7,571,375

--------------------------------------------------------------------------------------
FOOD & DRUG RETAILING--0.9%
B&G Foods, Inc., 9.625% Sr. Sub. Nts., 8/1/07 4,000,000 4,090,000
--------------------------------------------------------------------------------------
Fleming Cos., Inc.:
10.125% Sr. Unsec. Nts., 4/1/08 2,600,000 2,041,000
10.625% Sr. Unsec. Sub. Nts., Series D, 7/31/07 400,000 234,000
--------------------------------------------------------------------------------------
Great Atlantic & Pacific Tea Co., Inc. (The), 9.125%
Sr. Nts., 12/15/11 700,000 521,500
--------------------------------------------------------------------------------------
Ingles Markets, Inc., 8.875% Sr. Unsec. Sub.
Nts., 12/1/11 1,000,000 915,000
--------------------------------------------------------------------------------------
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07 1,875,000 1,621,875
--------------------------------------------------------------------------------------
Pathmark Stores, Inc., 8.75% Sr. Sub. Nts., 2/1/12 2,000,000 1,860,000
--------------------------------------------------------------------------------------

11,283,375

--------------------------------------------------------------------------------------
FOOD PRODUCTS--2.0%
American Seafood Group LLC, 10.125% Sr. Sub.
Nts., 4/15/10(4) 3,500,000 3,491,250
--------------------------------------------------------------------------------------
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08 2,200,000 1,267,750
--------------------------------------------------------------------------------------
Burns Philp Capital Pty Ltd., 9.75% Sr. Sub.
Nts., 7/15/12(4) 3,650,000 3,640,875
--------------------------------------------------------------------------------------
Doane Pet Care Co., 9.75% Sr. Unsec. Sub. Nts., 5/15/07 1,000,000 865,000
--------------------------------------------------------------------------------------
Dole Food Co., Inc., 7.25% Sr. Nts., 5/1/09 5,000,000 4,505,815
--------------------------------------------------------------------------------------
Michael Foods, Inc., 11.75% Sr. Unsec. Sub. Nts., 4/1/11 2,000,000 2,210,000
--------------------------------------------------------------------------------------
New World Pasta Co., 9.25% Sr. Nts., 2/15/09 800,000 761,000
--------------------------------------------------------------------------------------
Smithfield Foods, Inc., 8% Sr. Nts., Series B, 10/15/09 1,700,000 1,683,000
--------------------------------------------------------------------------------------
Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub.
Nts., 11/15/07(1) 2,000,000 1,850,000
--------------------------------------------------------------------------------------
Swift & Co., 10.125% Sr. Nts., 10/1/09(4) 2,500,000 2,331,250
--------------------------------------------------------------------------------------
United Biscuits Finance plc:
10.625% Sr. Sub. Nts., 4/15/11 [EUR] 1,000,000 1,097,013
10.75% Sr. Sub. Nts., 4/15/111 [GBP] 1,000,000 1,745,586
---------------
25,448,539

16 | OPPENHEIMER CHAMPION INCOME FUND

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

HOUSEHOLD PRODUCTS--1.7%
AKI Holdings Corp., 0%/13.50% Sr. Disc.
Debs., 7/1/09(7) $ 1,350,000 $ 1,086,750
--------------------------------------------------------------------------------------
AKI, Inc., 10.50% Sr. Unsec. Nts., 7/1/08 3,600,000 3,474,000
--------------------------------------------------------------------------------------
Armkel LLC/Armkel Finance, Inc., 9.50% Sr. Sub.
Nts., 8/15/09 2,500,000 2,650,000
--------------------------------------------------------------------------------------
Holmes Products Corp.:
9.875% Sr. Sub. Nts., Series C, 11/15/07 1,000,000 595,000
9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07 2,575,000 1,532,125
---------------------------------------------------------------------------------------
Johnsondiversey, Inc., 9.625% Sr. Sub. Nts., 5/15/12(4) 1,200,000 1,203,000
--------------------------------------------------------------------------------------
Pennzoil-Quaker State Co.:
6.75% Nts., 4/1/09 1,000,000 1,128,673
10% Sr. Nts., 11/1/08 3,000,000 3,566,250
--------------------------------------------------------------------------------------
Playtex Products, Inc., 9.375% Sr. Unsec. Sub.
Nts., 6/1/11 2,000,000 2,145,000
--------------------------------------------------------------------------------------
Revlon Consumer Products Corp.:
9% Sr. Nts., 11/1/06 1,000,000 575,000
12% Sr. Sec. Nts., 12/1/05 4,900,000 4,434,500
--------------------------------------------------------------------------------------
Styling Technology Corp., 10.875% Sr. Unsec. Sub.
Nts., 7/1/08(1,2,3) 2,815,000 --
---------------
22,390,298

--------------------------------------------------------------------------------------
ENERGY--6.0%
--------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--2.6%
BRL Universal Equipment Corp., 8.875% Sr. Sec.
Nts., 2/15/08 2,250,000 2,306,250
--------------------------------------------------------------------------------------
Clark Refining & Marketing, Inc., 8.875% Sr. Sub.
Nts., 11/15/07 600,000 513,000
--------------------------------------------------------------------------------------
Dresser, Inc., 9.375% Sr. Sub. Nts., 4/15/11 1,200,000 1,170,000
--------------------------------------------------------------------------------------
Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts.,
Series B, 2/15/08(1) 1,985,000 506,175
--------------------------------------------------------------------------------------
Hanover Equipment Trust, 8.50% Sr. Sec. Nts.,
Trust 2001, Cl. A, 9/1/08(4) 1,500,000 1,402,500
--------------------------------------------------------------------------------------
Hornbeck-Leevac Marine Services, Inc., 10.625%
Sr. Nts., 8/1/08 7,000,000 7,350,000
--------------------------------------------------------------------------------------
Lone Star Technologies, Inc., 9% Sr. Sub. Nts., 6/1/11 2,000,000 1,770,000
--------------------------------------------------------------------------------------
Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08 5,800,000 5,046,000
--------------------------------------------------------------------------------------
Petroleum Helicopters, Inc., 9.375% Sr. Nts., 5/1/09 1,500,000 1,556,250
--------------------------------------------------------------------------------------
SESI LLC, 8.875% Sr. Unsec. Nts., 5/15/11(1) 2,000,000 2,025,000
--------------------------------------------------------------------------------------
Trico Marine Services, Inc., 8.875% Sr. Nts., 5/15/12(4) 1,200,000 1,038,000
--------------------------------------------------------------------------------------
Universal Compression Holdings, Inc., 0%/9.875% Sr. Disc.
Nts., 2/15/08(7) 8,000,000 7,960,000
---------------
32,643,175

--------------------------------------------------------------------------------------
OIL & GAS--3.4%
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07 2,000,000 1,670,000
--------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
8.125% Sr. Unsec. Nts., 4/1/11 1,000,000 1,005,000
8.375% Sr. Unsec. Nts., 11/1/08 3,900,000 3,943,875
9% Sr. Nts., 8/15/12(4) 1,500,000 1,548,750
--------------------------------------------------------------------------------------
Forest Oil Corp.:
7.75% Sr. Nts., 5/1/14 2,800,000 2,800,000
10.50% Sr. Unsec. Sub. Nts., 1/15/06 1,250,000 1,337,500
--------------------------------------------------------------------------------------
Frontier Oil Corp., 11.75% Sr. Nts., 11/15/09 5,600,000 5,712,000
--------------------------------------------------------------------------------------
Giant Industries, Inc., 11% Sr. Sub. Nts., 5/15/12 600,000 423,000
--------------------------------------------------------------------------------------
Newfield Exploration Co., 8.375% Sr. Sub. Nts., 8/15/12 2,800,000 2,972,875

17 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

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

OIL & GAS Continued
Pioneer Natural Resources Co., 7.50% Sr.
Nts., 4/15/12 $ 3,000,000 $ 3,161,154
--------------------------------------------------------------------------------------
Pogo Producing Co., 8.75% Sr. Sub. Nts.,
Series B, 5/15/07 1,000,000 1,042,500
--------------------------------------------------------------------------------------
RAM Energy, Inc., 11.50% Sr. Unsec. Nts., 2/15/08 12,000,000 3,630,000
--------------------------------------------------------------------------------------
Stone Energy Corp.:
8.25% Sr. Unsec. Sub. Nts., 12/15/11 3,700,000 3,811,000
8.75% Sr. Sub. Nts., 9/15/07 2,405,000 2,513,225
--------------------------------------------------------------------------------------
Teekay Shipping Corp., 8.875% Sr. Nts., 7/15/11 3,000,000 3,120,000
--------------------------------------------------------------------------------------
Westport Resources Corp., 8.25% Sr. Unsec. Sub.
Nts., 11/1/11 3,000,000 3,105,000
--------------------------------------------------------------------------------------
XTO Energy, Inc., 7.50% Sr. Nts., 4/15/12 2,000,000 2,110,000
---------------
43,905,879

--------------------------------------------------------------------------------------
FINANCIALS--4.1%
--------------------------------------------------------------------------------------
BANKS--0.9%
Bank Plus Corp., 12% Sr. Nts., 7/18/07(1) 578,000 621,350
--------------------------------------------------------------------------------------
Brand Scaffold Services, Inc., 10.25% Sr. Unsec.
Nts., 2/15/08 4,000,000 4,336,000
--------------------------------------------------------------------------------------
Decrane Aircraft Holdings, Inc., 12% Sr. Unsec.
Sub. Nts., Series B, 9/30/08 3,450,000 2,811,750
--------------------------------------------------------------------------------------
Western Financial Bank, 9.625% Unsec. Sub. Debs.,
5/15/12 4,000,000 3,820,000
---------------
11,589,100
DIVERSIFIED FINANCIALS--0.9%
AmeriCredit Corp., 9.875% Sr. Nts., 4/15/06(1) 3,000,000 2,160,000
--------------------------------------------------------------------------------------
AMRESCO, Inc., 9.875% Sr. Sub. Nts., Series 98-A,
3/15/05(2,3) 4,000,000 900,000
--------------------------------------------------------------------------------------
Berry Plastics Corp., 10.75% Sr. Sub. Nts., 7/15/12 2,800,000 2,898,000
--------------------------------------------------------------------------------------
Finova Group, Inc. (The), 7.50% Nts., 11/15/09 4,800,000 1,488,000
--------------------------------------------------------------------------------------
IPC Acquisition Corp., 11.50% Sr. Sub. Nts., 12/15/09 2,000,000 1,710,000
--------------------------------------------------------------------------------------
LaBranche & Co., Inc., 12% Sr. Unsec. Sub. Nts., 3/2/07 2,500,000 2,687,500
---------------
11,843,500

--------------------------------------------------------------------------------------
INSURANCE--0.1%
Conseco, Inc., 10.75% Sr. Unsec. Nts., 6/15/09(2,4) 1,000,000 225,000
--------------------------------------------------------------------------------------
Parametric RE Ltd., 6.423% Nts., 11/19/07(4,5) 600,000 603,540
---------------
828,540

--------------------------------------------------------------------------------------
REAL ESTATE--2.2%
Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07 350,000 281,750
--------------------------------------------------------------------------------------
CB Richard Ellis Services, Inc., 11.25% Sr. Unsec.
Sub. Nts., 6/15/11 500,000 445,000
--------------------------------------------------------------------------------------
Corrections Corp. of America, 9.875% Sr. Nts., 5/1/09(4) 1,500,000 1,558,125
--------------------------------------------------------------------------------------
Felcor Lodging LP:
8.50% Sr. Nts., 6/1/11 3,394,000 3,198,845
9.50% Sr. Unsec. Nts., 9/15/08 2,000,000 1,995,000
--------------------------------------------------------------------------------------
HMH Properties, Inc., 7.875% Sr. Nts., Series B, 8/1/08 3,100,000 2,914,000
--------------------------------------------------------------------------------------
Host Marriott LP, 9.50% Sr. Nts., 1/15/07 4,300,000 4,310,750
--------------------------------------------------------------------------------------
IStar Financial, Inc., 8.75% Sr. Unsec. Nts., 8/15/08 1,700,000 1,767,228

18 | OPPENHEIMER CHAMPION INCOME FUND

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

REAL ESTATE Continued
MeriStar Hospitality Corp.:
8.75% Sr. Unsec. Sub. Nts., 8/15/07 $ 600,000 $ 483,000
9.125% Sr. Unsec. Nts., 1/15/11 1,950,000 1,745,250
--------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 9.75% Sr.
Sec. Nts., Series B, 4/1/08(1) 8,000,000 7,960,000
--------------------------------------------------------------------------------------
Ventas Realty LP, 9% Sr. Nts., 5/1/12 1,600,000 1,660,000
---------------
28,318,948

--------------------------------------------------------------------------------------
HEALTH CARE--3.9%
--------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.2%
Sybron Dental Specialties, Inc., 8.125% Sr. Sub.
Nts., 6/15/12(4) 2,500,000 2,493,750
--------------------------------------------------------------------------------------
Vanguard Health Systems, Inc., 9.75% Sr. Unsec.
Sub. Nts., 8/1/11 550,000 544,500
---------------
3,038,250

--------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--3.6%
AdvancePCS, Inc., 8.50% Sr. Unsec. Nts., 4/1/08 1,500,000 1,518,750
--------------------------------------------------------------------------------------
Beverly Enterprises, Inc., 9.625% Sr. Unsec.
Nts., 4/15/09 3,875,000 3,255,000
--------------------------------------------------------------------------------------
Extendicare Health Services, Inc., 9.50% Sr.
Nts., 7/1/10(4) 2,200,000 2,233,000
--------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II, 7.875%
Nts., 2/1/08 3,500,000 2,896,250
--------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust IV, 7.875% Trust
Preferred Nts., 6/15/11 1,650,000 1,353,000
--------------------------------------------------------------------------------------
Hanger Orthopedic Group, Inc., 10.375% Sr. Nts., 2/15/09 1,250,000 1,325,000
--------------------------------------------------------------------------------------
Healthsouth Corp., 7.625% Nts., 6/1/12(4) 6,800,000 4,760,000
--------------------------------------------------------------------------------------
InSight Health Services Corp., 9.875% Sr. Sub.
Nts., 11/1/11 2,000,000 1,940,000
--------------------------------------------------------------------------------------
Magellan Health Services, Inc., 9.375% Sr.
Nts., 11/15/07(4) 2,300,000 1,506,500
--------------------------------------------------------------------------------------
Medquest, Inc., 11.875% Sr. Sub. Nts., 8/15/12(4) 3,500,000 3,482,500
--------------------------------------------------------------------------------------
PacifiCare Health Systems, Inc., 10.75% Sr. Unsec.
Unsub. Nts., 6/1/09 2,400,000 2,382,000
--------------------------------------------------------------------------------------
Rotech Healthcare, Inc., 9.50% Sr. Sub. Nts., 4/1/12(4) 1,400,000 1,319,500
--------------------------------------------------------------------------------------
Select Medical Corp., 9.50% Sr. Unsec. Sub. Nts., 6/15/09 500,000 502,500
--------------------------------------------------------------------------------------
Stewart Enterprises, Inc., 10.75% Sr. Unsec. Sub.
Nts., 7/1/08 4,800,000 5,280,000
--------------------------------------------------------------------------------------
Triad Hospitals, Inc., 8.75% Sr. Unsec. Nts.,
Series B, 5/1/09 3,850,000 4,090,625
--------------------------------------------------------------------------------------
Unilab Corp., 12.75% Sr. Sub. Nts., 10/1/09(1) 2,000,000 2,320,000
--------------------------------------------------------------------------------------
US Oncology, Inc., 9.625% Sr. Sub. Nts., 2/1/12 500,000 497,500
--------------------------------------------------------------------------------------
Vicar Operating, Inc., 9.875% Sr. Sub. Nts., 12/1/09 5,000,000 5,375,000
---------------
46,037,125

--------------------------------------------------------------------------------------
PHARMACEUTICALS--0.1%
aaiPharma, Inc., 11% Sr. Sub. Nts., 4/1/10 850,000 731,000
-------------------------------------------------------------------------------------
INDUSTRIALS--11.4%
--------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.4%
Alliant Techsystems, Inc., 8.50% Sr. Unsec. Sub.
Nts., 5/15/11 2,400,000 2,562,000
--------------------------------------------------------------------------------------
American Plumbing & Mechanical, Inc., 11.625% Sr. Sub. Nts.,
Series B, 10/15/08 3,600,000 1,998,000
--------------------------------------------------------------------------------------
BE Aerospace, Inc., 8.875% Sr. Unsec. Sub. Nts., 5/1/11 5,200,000 3,822,000
--------------------------------------------------------------------------------------
Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09 2,500,000 2,437,500

19 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

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

AEROSPACE & DEFENSE Continued
L-3 Communications Corp., 7.625% Sr. Sub.
Nts., 6/15/12(4) $ 4,950,000 $ 5,148,000
--------------------------------------------------------------------------------------
SC International Services, Inc., 9.25% Sr. Sub. Nts.,
Series B, 9/1/07 1,000,000 580,000
--------------------------------------------------------------------------------------
TransDigm, Inc., 10.375% Sr. Sub. Nts., 12/1/08 1,300,000 1,339,000
---------------
17,886,500

--------------------------------------------------------------------------------------
AIR FREIGHT & COURIERS--0.1%
Atlas Air, Inc., 9.375% Sr. Unsec. Nts., 11/15/06 2,000,000 730,000
--------------------------------------------------------------------------------------
AIRLINES--0.4%
America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05 2,000,000 1,012,500
--------------------------------------------------------------------------------------
Amtran, Inc.:
9.625% Nts., 12/15/05 1,800,000 729,000
10.50% Sr. Nts., 8/1/04 7,700,000 3,118,500
---------------
4,860,000

--------------------------------------------------------------------------------------
BUILDING PRODUCTS--0.7%
Associated Materials, Inc., 9.75% Sr. Sub. Nts.,
4/15/12(4) 2,000,000 2,060,000
--------------------------------------------------------------------------------------
Nortek, Inc.:
9.125% Sr. Unsec. Nts., Series B, 9/1/07 3,400,000 3,434,000
9.25% Sr. Nts., Series B, 3/15/07 3,000,000 3,037,500
9.875% Sr. Unsec. Sub. Nts., 6/15/11 1,000,000 975,000
---------------
9,506,500

--------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--3.6%
Allied Waste North America, Inc.:
8.50% Sr. Sub. Nts., 12/1/08 11,200,000 10,696,000
8.875% Sr. Nts., Series B, 4/1/08 7,200,000 7,020,000
--------------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr. Sub. Nts.,
Series B, 11/15/05(1,2,3) 1,500,000 22,500
--------------------------------------------------------------------------------------
Buhrmann US, Inc., 12.25% Sr. Unsec. Sub. Nts., 11/1/09 2,000,000 2,020,000
--------------------------------------------------------------------------------------
Coinmach Corp., 9% Sr. Nts., 2/1/10 2,250,000 2,334,375
--------------------------------------------------------------------------------------
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07(1) 2,150,000 2,225,250
--------------------------------------------------------------------------------------
Hydrochem Industrial Services, Inc., 10.375% Sr.
Sub. Nts., 8/1/07(1) 2,000,000 1,510,000
--------------------------------------------------------------------------------------
Iron Mountain, Inc., 8.625% Sr. Unsec. Sub. Nts., 4/1/13 6,500,000 6,532,500
--------------------------------------------------------------------------------------
IT Group, Inc., 11.25% Sr. Unsec. Sub. Nts.,
Series B, 4/1/09(1,2,3) 3,300,000 4,125
--------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.50% Sr.
Sub. Nts., 2/15/09 6,000,000 5,730,000
--------------------------------------------------------------------------------------
Mail-Well, Inc., 9.625% Sr. Nts., 3/15/12(4) 2,150,000 1,494,250
--------------------------------------------------------------------------------------
Protection One, Inc./Protection One Alarm Monitoring, Inc.,
7.375% Sr. Unsec. Nts., 8/15/05 2,400,000 2,112,000
--------------------------------------------------------------------------------------
Stericycle, Inc., 12.375% Sr. Unsec. Sub. Nts.,
Series B, 11/15/09 2,125,000 2,433,125
--------------------------------------------------------------------------------------
Synagro Technologies, Inc., 9.50% Sr. Sub. Nts., 4/1/09 1,800,000 1,872,000
---------------
46,006,125

--------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.3%
Integrated Electrical Services, Inc., 9.375% Sr. Sub.
Nts., Series C, 2/1/09 1,000,000 892,500
--------------------------------------------------------------------------------------
URS Corp., 11.50% Sr. Nts., 9/15/09(4) 3,050,000 2,790,750
---------------
3,683,250

20 | OPPENHEIMER CHAMPION INCOME FUND

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

ELECTRICAL EQUIPMENT--0.1%
Dayton Superior Corp., 13% Sr. Unsec. Sub.
Nts., 6/15/09 $ 1,500,000 $ 1,282,500
--------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.5%
Great Lakes Dredge & Dock Corp., 11.25% Sr. Unsec.
Sub. Nts., 8/15/08 6,445,000 6,678,631
--------------------------------------------------------------------------------------
Norse CBO Ltd., 9.342% Sub. Bonds, Series 1A,
Cl. C2, 8/13/10(1) 7,500,000 3,600,000
--------------------------------------------------------------------------------------
Tyco International Group SA, 6.375% Nts., 10/15/11 10,400,000 8,544,536
---------------
18,823,167

--------------------------------------------------------------------------------------
MACHINERY--2.4%
Actuant Corp., 13% Sr. Sub. Nts., 5/1/09 1,606,000 1,862,960
--------------------------------------------------------------------------------------
AGCO Corp., 9.50% Sr. Unsec. Nts., 5/1/08 5,600,000 5,908,000
--------------------------------------------------------------------------------------
Blount, Inc., 13% Sr. Sub. Nts., 8/1/09 2,250,000 1,338,750
--------------------------------------------------------------------------------------
Eagle-Picher Industries, Inc., 9.375% Sr. Unsec.
Sub. Nts., 3/1/08(1) 1,500,000 1,147,500
--------------------------------------------------------------------------------------
International Wire Group, Inc., 11.75% Sr. Sub.
Nts., Series B, 6/1/05 3,720,000 2,380,800
--------------------------------------------------------------------------------------
Jordan Industries, Inc., 10.375% Sr. Nts.,
Series B, 8/1/07(1) 250,000 138,750
--------------------------------------------------------------------------------------
Joy Global, Inc., 8.75% Sr. Sub. Nts., Series B, 3/15/12 1,700,000 1,725,500
--------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The), 10.50% Sr. Sub. Nts.,
8/1/12(4) 3,350,000 3,517,500
--------------------------------------------------------------------------------------
NMHG Holding Co., 10% Sr. Nts., 5/15/09 1,900,000 1,928,500
--------------------------------------------------------------------------------------
Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts.,
Series B, 6/15/07 3,385,000 3,266,525
--------------------------------------------------------------------------------------
Terex Corp.:
8.875% Sr. Unsec. Sub. Nts., 4/1/08 400,000 382,000
9.25% Sr. Unsec. Sub. Nts., 7/15/11 3,000,000 2,940,000
10.375% Sr. Unsec. Sub. Nts., Series B, 4/1/11 2,000,000 2,030,000
--------------------------------------------------------------------------------------
Wolverine Tube, Inc., 10.50% Sr. Nts., 4/1/09 2,000,000 1,910,000
---------------
30,476,785

--------------------------------------------------------------------------------------
MARINE--0.6%
CP Ships Ltd., 10.375% Sr. Nts., 7/15/12(4) 4,600,000 4,784,000
--------------------------------------------------------------------------------------
Millenium Seacarriers, Inc., Units (each unit consists
of $1,000 principal amount of 12% first priority ship
mtg. sr. sec. nts., 7/15/05 and one warrant to purchase
five shares of common stock)(1,2,3,12) 3,500,000 1,820,000
--------------------------------------------------------------------------------------
Navigator Gas Transport plc, 10.50% First Priority Ship
Mtg. Nts., 6/30/07(4) 3,800,000 1,425,000
---------------
8,029,000

--------------------------------------------------------------------------------------
ROAD & RAIL--0.2%
Kansas City Southern Railway Co. (The), 7.50% Sr.
Nts., 6/15/09 2,800,000 2,842,000
--------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE--0.1%
Budget Group, Inc., 9.125% Sr. Unsec. Nts., 4/1/06(2,3) 4,600,000 874,000
--------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--2.4%
--------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.1%
CellNet Data Systems, Inc., 0%/14% Sr. Unsec. Disc.
Nts., 10/1/07(1,2,3,7) 4,749,000 --
--------------------------------------------------------------------------------------
Orion Network Systems, Inc., 12.50% Sr. Disc.
Nts., 1/15/07 3,315,000 916,597
---------------
916,597

21 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

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

COMPUTERS & PERIPHERALS--0.1%
Seagate Technology Hdd Holdings, 8% Sr. Nts.,
5/15/09(4) $ 1,700,000 $ 1,589,500
--------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.2%
ChipPAC International Co. Ltd., 12.75% Sr. Unsec.
Sub. Nts., Series B, 8/1/09 1,500,000 1,470,000
--------------------------------------------------------------------------------------
Communications & Power Industries, Inc., 12% Sr.
Sub. Nts., Series B, 8/1/05(1) 802,000 669,670
--------------------------------------------------------------------------------------
Fisher Scientific International, Inc.:
8.125% Sr. Sub. Nts., 5/1/12 3,000,000 3,060,000
9% Sr. Unsec. Sub. Nts., 2/1/08 4,190,000 4,326,175
9% Sr. Unsec. Sub. Nts., 2/1/08 1,060,000 1,094,450
--------------------------------------------------------------------------------------
Flextronics International Ltd., 9.875% Sr. Unsec.
Sub. Nts., 7/1/10 800,000 800,000
--------------------------------------------------------------------------------------
Ingram Micro, Inc., 9.875% Sr. Unsec. Sub. Nts., 8/15/08 4,000,000 4,120,000
--------------------------------------------------------------------------------------
Insilco Corp., 12% Sr. Sub. Nts., 8/15/07(2,3) 6,500,000 162,500
---------------
15,702,795

--------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.2%
Equinix, Inc., 13% Sr. Unsec. Nts., 12/1/07(1,2,3) 5,000,000 725,000
--------------------------------------------------------------------------------------
Exodus Communications, Inc., 10.75% Sr. Nts.,
12/15/09(1,2,3) [EUR] 4,000,000 158,128
--------------------------------------------------------------------------------------
FirstWorld Communications, Inc., 0%/13% Sr. Disc.
Nts., 4/15/08(1,2,3,7) 4,750,000 451,250
--------------------------------------------------------------------------------------
Globix Corp., 12.50% Sr. Unsec. Nts., 2/1/10(2) 2,000,000 370,000
--------------------------------------------------------------------------------------
PSINet, Inc.:
10.50% Sr. Unsec. Nts., 12/1/06(2,3) [EUR] 3,250,000 305,138
11% Sr. Nts., 8/1/09(1,2,3) 2,150,000 228,437
---------------
2,237,953

--------------------------------------------------------------------------------------
IT CONSULTING & SERVICES--0.0%
Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07 1,080,000 604,800
--------------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.1%
ASAT Finance LLC, 12.50% Sr. Unsec. Nts., 11/1/06 1,300,000 884,000
--------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--0.7%
Amkor Technology, Inc.:
9.25% Sr. Unsec. Nts., 5/1/06 1,200,000 834,000
9.25% Sr. Unsec. Sub. Nts., 2/15/08 300,000 207,000
--------------------------------------------------------------------------------------
Fairchild Semiconductor Corp.:
10.375% Sr. Unsec. Nts., 10/1/07 3,325,000 3,441,375
10.50% Sr. Unsec. Sub. Nts., 2/1/09 3,750,000 3,918,750
---------------
8,401,125

--------------------------------------------------------------------------------------
MATERIALS--11.7%
--------------------------------------------------------------------------------------
CHEMICALS--3.7%
Applied Extrusion Technologies, Inc., 10.75% Sr. Nts.,
Series B, 7/1/11 2,500,000 1,837,500
--------------------------------------------------------------------------------------
Avecia Group plc, 11% Sr. Unsec. Nts., 7/1/09 4,000,000 3,860,000
--------------------------------------------------------------------------------------
ClimaChem, Inc., 10.75% Sr. Unsec. Nts.,
Series B, 12/1/07 2,000,000 850,000
--------------------------------------------------------------------------------------
Compass Minerals Group, Inc., 10% Sr. Sub. Nts., 8/15/11 5,250,000 5,591,250
--------------------------------------------------------------------------------------
Equistar Chemicals LP, 8.75% Sr. Unsec. Nts., 2/15/09 2,000,000 1,712,368
--------------------------------------------------------------------------------------
Huntsman Corp./ICI Chemical Co. plc:
10.125% Sr. Unsec. Sub. Nts., 7/1/09 [EUR] 400,000 308,349
Zero Coupon Sr. Unsec. Disc. Nts., 13.09%, 12/31/09(9) 2,400,000 540,000

22 | OPPENHEIMER CHAMPION INCOME FUND

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

CHEMICALS Continued
Huntsman International LLC, 9.875% Sr. Nts., 3/1/09(4) $ 2,300,000 $ 2,311,500
--------------------------------------------------------------------------------------
ISP Chemco, Inc., 10.25% Sr. Unsec. Sub. Nts., 7/1/11 3,500,000 3,500,000
--------------------------------------------------------------------------------------
ISP Holdings, Inc., 10.625% Sr. Sec. Nts., 12/15/09 1,800,000 1,629,000
--------------------------------------------------------------------------------------
Lyondell Chemical Co.:
9.50% Sec. Nts., 12/15/08 1,300,000 1,179,750
9.625% Sr. Sec. Nts., Series A, 5/1/07 2,900,000 2,689,750
9.875% Sec. Nts., Series B, 5/1/07 5,850,000 5,425,875
--------------------------------------------------------------------------------------
Noveon, Inc., 11% Sr. Unsec. Sub. Nts., Series B, 2/28/11 3,800,000 4,123,000
--------------------------------------------------------------------------------------
OM Group, Inc., 9.25% Sr. Sub. Nts., 12/15/11 3,000,000 2,970,000
--------------------------------------------------------------------------------------
PCI Chemicals Canada, 10% Sr. Sec. Nts., 12/31/08 891,021 619,260
--------------------------------------------------------------------------------------
Pioneer Cos., Inc., 5.298% Sr. Sec. Nts., 12/31/06(5) 297,007 200,480
--------------------------------------------------------------------------------------
Royster-Clark, Inc., 10.25% First Mtg. Nts., 4/1/09 1,250,000 875,000
--------------------------------------------------------------------------------------
Sterling Chemicals, Inc.:
11.75% Sr. Unsec. Sub. Nts., 8/15/06(2,3) 4,500,000 607,500
12.375% Sr. Sec. Nts., Series B, 7/15/06(2,3) 5,100,000 5,176,500
--------------------------------------------------------------------------------------
Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03(1) 1,075,000 1,080,375
---------------
47,087,457

--------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--3.3%
Ball Corp.:
7.75% Sr. Unsec. Nts., 8/1/06 1,500,000 1,546,875
8.25% Sr. Unsec. Sub. Nts., 8/1/08 2,100,000 2,165,625
--------------------------------------------------------------------------------------
Graphic Packaging Corp., 8.625% Sub. Nts., 2/15/12 2,500,000 2,525,000
--------------------------------------------------------------------------------------
Jefferson Smurfit Corp., 8.25% Sr. Nts., 10/1/12(4) 2,300,000 2,300,000
--------------------------------------------------------------------------------------
Longview Fibre Co., 10% Sr. Sub. Nts., 1/15/09 1,500,000 1,545,000
--------------------------------------------------------------------------------------
MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12(4) 2,800,000 2,779,000
--------------------------------------------------------------------------------------
Owens-Brockway Glass Container, Inc., 8.875% Sr.
Sec. Nts., 2/15/09 2,700,000 2,727,000
--------------------------------------------------------------------------------------
Packaging Corp. of America, 9.625% Sr. Unsec.
Sub. Nts., 4/1/09 1,750,000 1,885,625
--------------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07 2,500,000 2,562,500
10.875% Sr. Sub. Nts., 4/1/08 4,450,000 4,472,250
--------------------------------------------------------------------------------------
Silgan Holdings, Inc., 9% Sr. Sub. Debs., 6/1/09(4) 1,500,000 1,556,250
--------------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12(4) 4,150,000 4,150,000
9.25% Sr. Unsec. Nts., 2/1/08 3,000,000 3,105,000
9.75% Sr. Unsec. Nts., 2/1/11 4,000,000 4,180,000
--------------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Sub. Nts., 6/15/12(4) 4,400,000 4,334,000
---------------
41,834,125

--------------------------------------------------------------------------------------
METALS & MINING--3.1%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12(4) 4,000,000 3,980,000
7.875% Sr. Unsec. Nts., 2/15/09 2,000,000 2,000,000
--------------------------------------------------------------------------------------
Better Minerals & Aggregates Co., 13% Sr. Unsec.
Sub. Nts., 9/15/09 600,000 511,500
--------------------------------------------------------------------------------------
California Steel Industries Corp., 8.50% Sr. Unsec.
Nts., Series B, 4/1/09 2,300,000 2,323,000
--------------------------------------------------------------------------------------

23 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

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

METALS & MINING Continued
Centaur Mining & Exploration Ltd., 11% Sr.
Nts., 12/1/07(1,2) $ 2,325,000 $ 34,875
--------------------------------------------------------------------------------------
Century Aluminum Co., 11.75% Sr. Sec. Nts., 4/15/08 2,700,000 2,605,500
--------------------------------------------------------------------------------------
Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts.,
Series B, 5/15/08 2,300,625 1,552,922
--------------------------------------------------------------------------------------
International Utility Structures, Inc., 13% Unsec.
Sub. Nts., 2/1/08(1) 433,000 97,425
--------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 2,500,000 2,450,000
--------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp.:
10.875% Sr. Nts., Series B, 10/15/06(2) 3,000,000 2,070,000
12.75% Sr. Sub. Nts., 2/1/03(2,3) 6,200,000 775,000
--------------------------------------------------------------------------------------
Metallurg Holdings, Inc., 0%/12.75% Sr. Disc.
Nts., 7/15/08(7) 1,500,000 682,500
--------------------------------------------------------------------------------------
Metallurg, Inc., 11% Sr. Nts., 12/1/07 5,745,000 4,911,975
--------------------------------------------------------------------------------------
National Steel Corp., 9.875% First Mtg. Bonds,
Series D, 3/1/09(2,3) 9,500,000 3,301,250
--------------------------------------------------------------------------------------
Oregon Steel Mills, Inc., 10% Nts., 7/15/09(4) 2,800,000 2,814,000
--------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts.,
Series B, 5/15/08 3,780,000 3,978,450
--------------------------------------------------------------------------------------
Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09(4) 1,500,000 1,522,500
--------------------------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 1,900,000 1,814,500
--------------------------------------------------------------------------------------
United States Steel LLC, 10.75% Sr. Nts., 8/1/08 2,000,000 1,980,000
---------------
39,405,397

--------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.6%
Ainsworth Lumber Co. Ltd.:
12.50% Sr. Nts., 7/15/07(10) 4,000,000 4,140,000
13.875% Sr. Sec. Nts., 7/15/07 3,000,000 3,225,000
--------------------------------------------------------------------------------------
Doman Industries Ltd., 8.75% Sr. Nts., 3/15/04(2) 9,300,000 1,906,500
--------------------------------------------------------------------------------------
Georgia-Pacific Corp., 8.125% Sr. Unsec. Nts., 5/15/11 5,900,000 4,926,801
--------------------------------------------------------------------------------------
Louisiana-Pacific Corp., 10.875% Sr. Sub. Nts., 11/15/08 1,500,000 1,567,500
--------------------------------------------------------------------------------------
Tembec Industries, Inc., 7.75% Sr. Nts., 3/15/12 4,000,000 3,840,000
--------------------------------------------------------------------------------------
U.S. Timberlands Co. LP, 9.625% Sr. Nts., 11/15/07 3,300,000 1,732,500
---------------
21,338,301

--------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--5.9%
--------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.7%
360networks, Inc.:
13% Sr. Unsec. Nts., 5/1/08(1,2,3) [EUR] 1,700,000 84
13% Sr. Unsec. Nts., 5/1/08(1,2,3) 2,000,000 200
--------------------------------------------------------------------------------------
COLO.com, Inc., 13.875% Sr. Nts., 3/15/10(1,2,3) 3,300,000 49,500
--------------------------------------------------------------------------------------
Comcast UK Cable Partner Ltd., 11.20% Sr. Unsec.
Disc. Debs., 11/15/07 1,600,000 1,306,000
--------------------------------------------------------------------------------------
Concentric Network Corp., 12.75% Sr. Unsec. Nts.,
12/15/07(1,2,3) 2,225,000 22,250
--------------------------------------------------------------------------------------
Diamond Cable Communications plc, 11.75% Sr. Disc.
Nts., 12/15/05(2) 7,000,000 945,000
--------------------------------------------------------------------------------------
Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08(2) 800,000 644,000
--------------------------------------------------------------------------------------
Focal Communications Corp.:
0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(7) 1,300,000 58,500
11.875% Sr. Unsec. Nts., Series B, 1/15/10 800,000 76,000
--------------------------------------------------------------------------------------
Intermedia Communications, Inc., 0%/12.25% Sr. Disc.
Nts., Series B, 3/1/09(2,3,7) 2,500,000 212,500
--------------------------------------------------------------------------------------

24 | OPPENHEIMER CHAMPION INCOME FUND

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

DIVERSIFIED TELECOMMUNICATION SERVICES Continued
KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec.
Disc. Nts., 2/15/08(1,2,3,7) $ 6,900,000 $ 103,500
--------------------------------------------------------------------------------------
KPNQwest BV, 8.875% Sr. Nts., 2/1/08(1,2) [EUR] 2,000,000 4,942
--------------------------------------------------------------------------------------
Level 3 Communications, Inc.:
0%/10.50% Sr. Disc. Nts., 12/1/08(7) 10,800,000 3,510,000
0%/12.875% Sr. Unsec. Disc. Nts., 3/15/10(7) 2,000,000 490,000
9.125% Sr. Unsec. Nts., 5/1/08 1,000,000 525,000
--------------------------------------------------------------------------------------
Metromedia Fiber Network, Inc., 10% Sr. Unsec. Nts.,
Series B, 11/15/08(1,2) 3,000,000 26,250
--------------------------------------------------------------------------------------
NorthPoint Communications Group, Inc., 12.875%
Nts., 2/15/10(2,3) 1,900,000 313,500
--------------------------------------------------------------------------------------
Ntelos, Inc., 13% Sr. Nts., 8/15/10(1) 3,000,000 1,155,000
--------------------------------------------------------------------------------------
NTL Communications Corp.:
0%/9.75% Sr. Unsec. Nts., Series B, 4/15/09(2,3,7) [GBP] 13,150,000 2,274,766
9.875% Sr. Unsec. Nts., Series B, 11/15/09(2) [EUR] 4,000,000 563,331
--------------------------------------------------------------------------------------
NTL, Inc., 0%/10.75% Sr. Unsec. Unsub. Nts.,
Series B, 4/1/08(2,3,7) [GBP] 300,000 61,331
--------------------------------------------------------------------------------------
Pratama Datakom Asia BV, 12.75% Gtd. Nts., 7/15/05(1,2) 4,000,000 130,000
--------------------------------------------------------------------------------------
Qwest Corp., 8.875% Nts., 3/15/12(4) 2,000,000 1,750,000
--------------------------------------------------------------------------------------
RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10 971,000 199,055
--------------------------------------------------------------------------------------
Sprint Capital Corp., 8.375% Nts., 3/15/12 6,400,000 4,479,539
--------------------------------------------------------------------------------------
Tele1 Europe BV, 11.875% Sr. Nts., 12/1/09(2) [EUR] 2,100,000 243,863
--------------------------------------------------------------------------------------
Telewest Communications plc:
0%/9.25% Sr. Disc. Nts., 4/15/09(2,7) 4,500,000 731,250
0%/9.875% Sr. Disc. Nts., 4/15/09(1,2,7) [GBP] 3,500,000 798,095
11.25% Sr. Nts., 11/1/08(2,3) 2,800,000 504,000
--------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07(1,2,3) 2,250,000 225
--------------------------------------------------------------------------------------
Time Warner Telecom LLC/Time Warner Telecom, Inc.,
9.75% Sr. Nts., 7/15/08 1,000,000 435,000
--------------------------------------------------------------------------------------
Viatel, Inc., 11.25% Sr. Sec. Nts., 4/15/08(1,2,3) 3,200,000 1,600
--------------------------------------------------------------------------------------
Winstar Communications, Inc., 12.75% Sr. Nts.,
4/15/10(1,2,3) 4,500,000 450
--------------------------------------------------------------------------------------
XO Communications, Inc.:
9% Sr. Unsec. Nts., 3/15/08(1,2,3) 1,700,000 17,000
9.625% Sr. Nts., 10/1/07(1,2) 3,000,000 30,000
10.75% Sr. Unsec. Nts., 11/15/08(1,2) 4,500,000 45,000
---------------
21,706,731

--------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--4.2%
Alamosa Delaware, Inc., 12.50% Sr. Unsec. Nts., 2/1/11 2,200,000 407,000
--------------------------------------------------------------------------------------
American Cellular Corp., 9.50% Sr. Sub. Nts., 10/15/09(2) 5,500,000 742,500
--------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.875% Sr. Unsec.
Nts., 3/1/11 1,100,000 848,430
--------------------------------------------------------------------------------------
Crown Castle International Corp.:
0%/10.375% Sr. Disc. Nts., 5/15/11(7) 2,000,000 870,000
0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(7) 5,635,000 3,859,975
--------------------------------------------------------------------------------------
CTI Holdings SA, 0%/11.50% Sr. Deferred Coupon Nts.,
4/15/08(1,2,3,7) 2,525,000 138,875
--------------------------------------------------------------------------------------
IPCS, Inc., 0%/14% Sr. Unsec. Disc. Nts., 7/15/10(7) 800,000 44,000
--------------------------------------------------------------------------------------
Leap Wireless International, Inc.:
0%/14.50% Sr. Unsec. Disc. Nts., 4/15/10(2,7) 2,900,000 130,500
12.50% Sr. Nts., 4/15/10(2) 2,800,000 273,000

25 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

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

WIRELESS TELECOMMUNICATION SERVICES Continued
Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts., Series B,
10/15/07(1,2,7) [CAD] $ 2,500,000 $ 19,701
0%/12% Sr. Unsec. Disc. Nts., 6/1/09(2,7) 3,300,000 33,000
--------------------------------------------------------------------------------------
Millicom International Cellular SA, 13.50% Sr.
Disc. Nts., 6/1/06 1,300,000 357,500
--------------------------------------------------------------------------------------
Nextel Communications, Inc.:
9.375% Sr. Unsec. Nts., 11/15/09 13,050,000 9,983,250
10.65% Sr. Disc. Nts., 9/15/07 1,000,000 840,000
12% Sr. Unsec. Nts., 11/1/08 1,000,000 845,000
--------------------------------------------------------------------------------------
Nextel Partners, Inc.:
0%/14% Sr. Disc. Nts., 2/1/09(7) 2,850,000 1,496,250
11% Sr. Unsec. Nts., 3/15/10 1,000,000 665,000
--------------------------------------------------------------------------------------
Omnipoint Corp., 11.50% Sr. Nts., 9/15/09(4) 9,900,000 10,444,500
--------------------------------------------------------------------------------------
Orbcomm Global LP (Escrow) 2,890,000 --
--------------------------------------------------------------------------------------
Rural Cellular Corp., 9.625% Sr. Sub. Nts.,
Series B, 5/15/08 800,000 428,000
--------------------------------------------------------------------------------------
SBA Communications Corp., 0%/12% Sr. Unsec.
Disc. Nts., 3/1/08(7) 11,845,000 6,100,175
--------------------------------------------------------------------------------------
Spectrasite Holdings, Inc.:
0%/11.25% Sr. Unsec. Disc. Nts., 4/15/09(7) 2,000,000 360,000
0%/12% Sr. Disc. Nts., 7/15/08(7) 3,800,000 722,000
0%/12.875% Sr. Unsec. Disc. Nts., Series B, 3/15/10(7) 1,000,000 160,000
--------------------------------------------------------------------------------------
TeleCorp PCS, Inc.:
0%/11.625% Sr. Unsec. Sub. Disc. Nts., 4/15/09(7,11) 2,097,000 1,541,295
10.625% Sr. Unsec. Sub. Nts., 7/15/10 3,926,000 3,474,510
--------------------------------------------------------------------------------------
Tritel PCS, Inc.:
0%/12.75% Sr. Unsec. Sub. Disc. Nts., 5/15/09(7) 2,916,000 2,172,420
10.375% Sr. Sub. Nts., 1/15/11 5,117,000 4,477,375
--------------------------------------------------------------------------------------
Triton PCS, Inc.:
8.75% Sr. Unsec. Sub. Nts., 11/15/11 1,850,000 1,230,250
9.375% Sr. Unsec. Sub. Nts., 2/1/11 2,300,000 1,575,500
--------------------------------------------------------------------------------------
US Unwired, Inc., 0%/13.375% Sr. Unsec. Sub. Disc. Nts.,
Series B, 11/1/09(7) 4,850,000 266,750
---------------
54,506,756

--------------------------------------------------------------------------------------
UTILITIES--3.7%
--------------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.8%
AES Drax Holdings Ltd., 10.41% Sr. Sec. Sub. Nts.,
Series B, 12/31/20 5,500,000 3,877,500
--------------------------------------------------------------------------------------
Caithness Coso Funding Corp., 9.05% Sr. Sec. Nts.,
Series B, 12/15/09 1,456,886 1,405,894
--------------------------------------------------------------------------------------
Calpine Corp., 8.50% Sr. Unsec. Nts., 2/15/11 20,550,000 8,528,250
--------------------------------------------------------------------------------------
CMS Energy Corp., 9.875% Sr. Unsec. Nts., 10/15/07 5,200,000 4,268,732
--------------------------------------------------------------------------------------
CMS Panhandle Holding Co.:
6.125% Sr. Nts., 3/15/04 2,900,000 2,788,965
7% Sr. Nts., 7/15/29 600,000 448,988
--------------------------------------------------------------------------------------
Edison Mission Energy, 10% Sr. Unsec. Nts., 8/15/08 1,350,000 627,750
--------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Sec. Nts.,
Series E, 5/1/11 1,000,000 1,057,066
--------------------------------------------------------------------------------------
Empresa Electrica del Norte Grande SA, 10.50% Sr.
Debs., 6/15/05(1,2,3) 3,800,000 1,377,500
--------------------------------------------------------------------------------------
Messer Griesheim Holding AG, 10.375% Sr. Nts.,
6/1/11 [EUR] 1,500,000 1,538,042
--------------------------------------------------------------------------------------
Mirant Americas Generation LLC, 8.30% Sr. Unsec.
Nts., 5/1/11 2,400,000 1,236,000
--------------------------------------------------------------------------------------
Panhandle Eastern Pipe Line Co., 8.25% Sr. Nts.,
Series B, 4/1/10 900,000 821,123

26 | OPPENHEIMER CHAMPION INCOME FUND

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

ELECTRIC UTILITIES Continued
Southern California Edison Co., 7.20% Nts., 11/3/03 $ 5,000,000 $ 4,987,500
--------------------------------------------------------------------------------------
Westar Energy, Inc., 9.75% Sr. Unsec. Nts., 5/15/07 3,250,000 3,122,304
---------------
36,085,614

--------------------------------------------------------------------------------------
GAS UTILITIES--0.7%
AmeriGas Partners LP/AmeriGas Eagle Finance Corp.,
8.875% Sr. Unsec. Nts., 5/20/11(11) 2,800,000 2,898,000
--------------------------------------------------------------------------------------
Leviathan Gas Pipeline Partners LP/Leviathan Finance Corp.,
10.375% Sr. Unsec. Sub. Nts., Series B, 6/1/09 2,150,000 2,203,750
--------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 7.125% Nts., 9/1/11 6,100,000 3,812,500
---------------
8,914,250

--------------------------------------------------------------------------------------
MULTI-UTILITIES--0.2%
Consumers Energy Co.:
6.25% Nts., 9/15/06 1,100,000 1,044,196
6.375% Sr. Sec. Nts., 2/1/08 800,000 743,409
--------------------------------------------------------------------------------------
Dynegy Holdings, Inc., 8.75% Sr. Nts., 2/15/12 400,000 126,000
--------------------------------------------------------------------------------------
Texas Gas Transmission Corp., 7.25% Debs., 7/15/27 1,000,000 785,000
---------------
2,698,605
---------------
Total Corporate Bonds and Notes (Cost $1,302,990,739) 1,055,526,775

SHARES
======================================================================================
PREFERRED STOCKS--1.2%
--------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg.(1,10) 137,443 1,374
--------------------------------------------------------------------------------------
BankUnited Capital Trust, 10.25% Capital Securities,
12/31/26(1) 750,000 736,875
--------------------------------------------------------------------------------------
CSC Holdings, Inc., 11.125% Cum., Series M, Non-Vtg. 6,829 449,007
--------------------------------------------------------------------------------------
Doane Pet Care Co., 14.25% Jr. Sub. Debs., Non-Vtg.(1,3) 100,000 3,525,000
--------------------------------------------------------------------------------------
Dobson Communications Corp.:
12.25% Sr. Exchangeable, Non-Vtg.(10) 3,354 851,077
13% Sr. Exchangeable, Non-Vtg.(10) 8,858 2,325,225
--------------------------------------------------------------------------------------
e.spire Communications, Inc., 12.75% Jr. Redeemable,
Non-Vtg.(1,3,10) 721 72
--------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable,
Series B, Non-Vtg.(3) 15,000 333,750
--------------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv., Series C, Non-Vtg.(1) 64,997 64,997
--------------------------------------------------------------------------------------
Global Crossing Holdings Ltd., 10.50% Sr. Exchangeable,
Non-Vtg.(1,10) 21,050 --
--------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg.(1,3,10) 3,727 56
--------------------------------------------------------------------------------------
McLeodUSA, Inc., 2.50% Cv., Series A(3) 13,033 19,550
--------------------------------------------------------------------------------------
Nebco Evans Holdings, Inc., 11.25% Sr. Redeemable
Exchangeable, Non-Vtg.(1,3,10) 30,310 --
--------------------------------------------------------------------------------------
Nextel Communications, Inc., 13% Cum., Series D, Non-Vtg.(3,10) 2 137
--------------------------------------------------------------------------------------
Paxson Communications Corp., 13.25% Cum. Jr.
Exchangeable, Non-Vtg.(10) 470 2,538,000
--------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg.(10) 8,250 1,505,625
--------------------------------------------------------------------------------------
SF Holdings Group, Inc., 13.75% Exchangeable, Non-Vtg.(1) 1 1,025
--------------------------------------------------------------------------------------
Sovereign Real Estate Investment Trust, 12% Non-Cum.,
Series A(1) 26,250 2,841,563
--------------------------------------------------------------------------------------
Supermarkets General Holdings Corp., $3.52
Exchangeable(1,3,10) 22,624 226
--------------------------------------------------------------------------------------

27 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

MARKET VALUE
SHARES SEE NOTE 1
======================================================================================

PREFERRED STOCKS Continued
--------------------------------------------------------------------------------------
WorldCom, Inc., 7% Cum. Cv., Series F(1) 100,000 $ 5,000
---------------
Total Preferred Stocks (Cost $48,571,039) 15,198,559

======================================================================================
COMMON STOCKS--0.6%
--------------------------------------------------------------------------------------
Adelphia Business Solutions, Inc.(3) 1,605 56
--------------------------------------------------------------------------------------
Chesapeake Energy Corp. 600,000 3,960,000
--------------------------------------------------------------------------------------
Covad Communications Group, Inc.(3) 132,227 194,374
--------------------------------------------------------------------------------------
Financial Select Sector SPDR Fund 105,000 2,170,350
--------------------------------------------------------------------------------------
Geotek Communications, Inc., Series B (Escrowed)(1,3) 1,665 --
--------------------------------------------------------------------------------------
Horizon Natural Resources Co.(1,3) 66,667 16,667
--------------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd.(3) 79,703 68,544
--------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 6,325 172,989
--------------------------------------------------------------------------------------
Pioneer Cos., Inc.(1,3) 57,620 216,075
--------------------------------------------------------------------------------------
Prandium, Inc.(3,8) 323,326 307,160
--------------------------------------------------------------------------------------
Premier Holdings Ltd.(1,3) 288,828 --
--------------------------------------------------------------------------------------
Siena Holdings, Inc.(1,3) 17,058 21,664
--------------------------------------------------------------------------------------
TVMAX Holdings, Inc.(1,3) 50,000 200,000
--------------------------------------------------------------------------------------
WRC Media Corp.(1,3) 8,794 88
---------------
Total Common Stocks (Cost $17,840,673) 7,327,967

UNITS
======================================================================================
RIGHTS, WARRANTS AND CERTIFICATES--0.1%
--------------------------------------------------------------------------------------
ASAT Finance LLC Wts., Exp. 11/1/06(1,3) 2,000 2,750
--------------------------------------------------------------------------------------
Charles River Laboratories International, Inc. Wts.,
Exp. 10/1/09(1,3) 4,500 832,500
--------------------------------------------------------------------------------------
Chesapeake Energy Corp. Wts.:
Exp. 1/23/03(1,3) 58,503 --
Exp. 1/23/03(1,3) 30,983 --
Exp. 5/1/05(1,3) 13,281 --
Exp. 9/1/04(1,3) 91,000 --
--------------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10(1,3) 3,300 33
--------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07(1,3) 2,320 23
--------------------------------------------------------------------------------------
Covergent Communications, Inc. Wts., Exp. 4/1/08(1,3) 5,000 50
--------------------------------------------------------------------------------------
Decrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08(1,3) 3,450 --
--------------------------------------------------------------------------------------
Diva Systems Corp. Wts., Exp. 3/1/08(1,3) 6,000 60
--------------------------------------------------------------------------------------
e.spire Communications, Inc. Wts., Exp. 11/1/05(1,3) 725 7
--------------------------------------------------------------------------------------
Equinix, Inc. Wts., Exp. 12/1/07(1,3) 5,000 50
--------------------------------------------------------------------------------------
Golden State Bancorp, Inc. Litigation Wts. (3) 58,176 63,412
--------------------------------------------------------------------------------------
Grand Union Co. Wts., Exp. 8/17/03(1,3) 94 --
--------------------------------------------------------------------------------------
Horizon PCS, Inc. Wts., Exp. 10/1/10(1,3) 6,700 335
--------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/15/05(1,3) 17,655 176
--------------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd. Wts.:
Exp. 5/16/06(3) 19,990 799
Exp. 5/16/06(1,3) 30 1

28 | OPPENHEIMER CHAMPION INCOME FUND

MARKET VALUE
UNITS SEE NOTE 1
======================================================================================

RIGHTS, WARRANTS AND CERTIFICATES Continued
--------------------------------------------------------------------------------------
Insilco Corp. Wts., Exp. 8/15/07(1,3) 3,390 $ 34
--------------------------------------------------------------------------------------
International Utility Structures, Inc. Wts., Exp. 2/1/03(3) 300 --
--------------------------------------------------------------------------------------
Internet Commerce & Communications, Inc. Wts.,
Exp. 7/3/03(3,4) 12,145 --
--------------------------------------------------------------------------------------
IPCS, Inc. Wts., Exp. 6/15/10(1,3) 3,600 1,350
--------------------------------------------------------------------------------------
KMC Telecom Holdings, Inc. Wts., Exp. 4/15/08(1,3) 7,885 79
--------------------------------------------------------------------------------------
Leap Wireless International, Inc. Wts., Exp. 4/15/10(1,3) 2,000 750
--------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/13/08(1,3) 1,390 --
--------------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts., Exp. 1/15/07(1,3) 2,565 26
--------------------------------------------------------------------------------------
McLeodUSA, Inc. Wts., Exp. 4/16/07(1,3) 28,880 289
--------------------------------------------------------------------------------------
Millenium Seacarriers, Inc. Wts., Exp. 7/15/05(1,3) 3,200 32
--------------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10(1,3) 5,000 8,125
--------------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp. 9/19/10(3) 100,000 139,000
--------------------------------------------------------------------------------------
PLD Telekom, Inc. Wts., Exp. 6/1/06
(cv. into Metromedia International Group, Inc.)(1,3) 3,500 35
--------------------------------------------------------------------------------------
PLD Telekom, Inc., 14% Sr. Cv. Disc. Nts. Wts., Exp. 3/31/03
(cv. into Metromedia International Group, Inc.)(1,3) 3,500 35
--------------------------------------------------------------------------------------
PLD Telekom, Inc., 9% Cv. Sub. Nts. Wts., Exp. 3/31/03
(cv. into Metromedia International Group, Inc.)(1,3) 200 2
--------------------------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/1/03(1,3) 28,000 --
Exp. 6/30/05(1,3) 15,200 --
--------------------------------------------------------------------------------------
R&B Falcon Corp. Wts., Exp. 5/1/09(3,4) 7,000 248,325
--------------------------------------------------------------------------------------
Republic Technologies International LLC Wts.,
Exp. 7/15/09(1,3) 3,000 30
--------------------------------------------------------------------------------------
Telergy, Inc. Wts., Exp. 9/25/10(1,3) 8,078 81
--------------------------------------------------------------------------------------
Telus Corp. Wts., Exp. 9/15/05(1,3) 2,159 540
---------------
Total Rights, Warrants and Certificates (Cost $751,235) 1,298,929

PRINCIPAL
AMOUNT
======================================================================================
STRUCTURED NOTES--4.3%
--------------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The), High Yield Index Linked Nts.:
2.70%, 4/15/03 $10,000,000 10,254,000
2.70%, 4/15/03 5,000,000 5,153,000
--------------------------------------------------------------------------------------
JPMorgan Chase Bank, Credit Linked Trust Certificates,
8.75%, 5/15/07 43,120,000 39,670,400
---------------
Total Structured Notes (Cost $55,832,527) 55,077,400

29 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF INVESTMENTS Continued

PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
======================================================================================

JOINT REPURCHASE AGREEMENTS--5.5%
--------------------------------------------------------------------------------------
Undivided interest of 17.68% in joint repurchase agreement with DB Alex Brown
LLC, 1.85%, dated 9/30/02, to be repurchased at $70,676,632 on 10/1/02,
collateralized by U.S. Treasury Bonds, 8.75%--12%, 8/15/13--5/15/17, with a
value of $407,924,442
(Cost $70,673,000) $ 70,673,000 $ 70,673,000

--------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,542,878,902) 97.3% 1,243,615,458
--------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.7 33,667,888
------------------------------
NET ASSETS 100.0% $1,277,283,346
==============================

FOOTNOTES TO STATEMENT OF INVESTMENTS

PRINCIPAL AMOUNT IS REPORTED IN U.S. DOLLARS, EXCEPT FOR THOSE DENOTED IN THE
FOLLOWING CURRENCIES:
CAD Canadian Dollar
EUR Euro
GBP British Pound Sterling

1. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
2. Issuer is in default.
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 $128,002,794 or 10.02% of the Fund's net
assets as of September 30, 2002.
5. Represents the current interest rate for a variable or increasing rate
security.
6. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows.
7. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
8. 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 September 30,
2002. The aggregate fair value of securities of affiliated companies held by the
Fund as of September 30, 2002 amounts to $307,160. Transactions during the
period in which the issuer was an affiliate are as follows:

SHARES SHARES
SEPTEMBER 30, GROSS GROSS SEPTEMBER 30, UNREALIZED
2001 ADDITIONS REDUCTIONS 2002 DEPRECIATION
----------------------------------------------------------------------------------------
STOCKS AND/OR WARRANTS

Prandium, Inc. -- 323,326 -- 323,326 $3,496,140

9. Zero coupon bond reflects effective yield on the date of purchase.
10. Interest or dividend is paid-in-kind.
11. Securities with an aggregate market value of $3,816,750 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
12. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units, which
represent debt securities, principal amount disclosed represents total
underlying principal.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

30 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF ASSETS AND LIABILITIES September 30, 2002

===================================================================================
ASSETS
-----------------------------------------------------------------------------------

Investments, at value -- see accompanying statement:
Unaffiliated companies (cost $1,539,075,602) $1,243,308,298
Affiliated companies (cost $3,803,300) 307,160
---------------
1,243,615,458
-----------------------------------------------------------------------------------
Cash foreign currencies (cost $2,292,856) 2,292,856
-----------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 31,271,247
Investments sold 11,355,119
Shares of beneficial interest sold 1,737,664
Other 3,751
---------------
Total assets 1,290,276,095

===================================================================================
LIABILITIES
-----------------------------------------------------------------------------------
Bank overdraft 110,880
-----------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 6,210,654
Investments purchased 2,774,319
Dividends 2,297,054
Distribution and service plan fees 825,349
Transfer and shareholder servicing agent fees 413,880
Shareholder reports 278,513
Daily variation on futures contracts 25,750
Trustees' compensation 2,183
Other 54,167
---------------
Total liabilities 12,992,749

===================================================================================
NET ASSETS $1,277,283,346
===============

===================================================================================
COMPOSITION OF NET ASSETS
-----------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 158,846
-----------------------------------------------------------------------------------
Additional paid-in capital 1,946,502,113
-----------------------------------------------------------------------------------
Undistributed net investment income 696,928
-----------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (370,797,548)
-----------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets
and liabilities denominated in foreign currencies (299,276,993)
---------------
NET ASSETS $1,277,283,346
===============

31 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF ASSETS AND LIABILITIES Continued

======================================================================================
NET ASSET VALUE PER SHARE
--------------------------------------------------------------------------------------

Class A Shares:
Net asset value and redemption price per share (based on net assets of
$659,017,194 and 81,910,441 shares of beneficial interest outstanding) $8.05
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $8.45
--------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $432,008,810
and 53,760,586 shares of beneficial interest outstanding) $8.04
--------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $180,131,439
and 22,414,241 shares of beneficial interest outstanding) $8.04
--------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $6,125,903
and 761,151 shares of beneficial interest outstanding) $8.05

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

32 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENT OF OPERATIONS For the Year Ended September 30, 2002

===================================================================================
INVESTMENT INCOME
-----------------------------------------------------------------------------------

Interest $ 135,031,786
-----------------------------------------------------------------------------------
Dividends 3,984,761
---------------
Total investment income 139,016,547

===================================================================================
EXPENSES
-----------------------------------------------------------------------------------
Management fees 8,745,387
-----------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,730,631
Class B 5,088,482
Class C 2,002,675
Class N 16,642
-----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,722,631
Class B 1,187,924
Class C 460,142
Class N 7,078
-----------------------------------------------------------------------------------
Shareholder reports 491,141
-----------------------------------------------------------------------------------
Trustees' compensation 28,424
-----------------------------------------------------------------------------------
Custodian fees and expenses 19,949
-----------------------------------------------------------------------------------
Other 90,078
---------------
Total expenses 21,591,184
Less reduction to custodian expenses (9,118)
---------------
Net expenses 21,582,066

===================================================================================
NET INVESTMENT INCOME 117,434,481

===================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
-----------------------------------------------------------------------------------
Net realized loss on:
Investments (216,375,876)
Closing of futures contracts (2,373,388)
Foreign currency transactions (4,761,482)
---------------
Net realized loss (223,510,746)
-----------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 58,916,253
Translation of assets and liabilities denominated in foreign currencies 7,893,067
---------------
Net change 66,809,320
---------------
Net realized and unrealized loss (156,701,426)

===================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (39,266,945)
===============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

33 | OPPENHEIMER CHAMPION INCOME FUND

STATEMENTS OF CHANGES IN NET ASSETS

YEAR ENDED SEPTEMBER 30, 2002 2001
=====================================================================================

OPERATIONS
-------------------------------------------------------------------------------------
Net investment income $ 117,434,481 $ 140,980,686
-------------------------------------------------------------------------------------
Net realized loss (223,510,746) (100,462,613)
-------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 66,809,320 (187,780,265)
-------------------------------
Net decrease in net assets resulting from operations (39,266,945) (147,262,192)

=====================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (61,569,881) (72,235,016)
Class B (39,918,096) (51,508,631)
Class C (15,672,850) (19,872,190)
Class N (273,099) (18,804)

=====================================================================================
BENEFICIAL INTEREST TRANSACTIONS
-------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Class A 69,529,774 137,019,128
Class B (30,002,711) 90,127,744
Class C 9,354,626 23,103,128
Class N 5,710,405 1,104,309

=====================================================================================
NET ASSETS
-------------------------------------------------------------------------------------
Total decrease (102,108,777) (39,542,524)
-------------------------------------------------------------------------------------
Beginning of period 1,379,392,123 1,418,934,647
-------------------------------
End of period [including undistributed net investment
income of $696,928 and $4,316,199, respectively] $1,277,283,346 $1,379,392,123
===============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

34 | OPPENHEIMER CHAMPION INCOME FUND

FINANCIAL HIGHLIGHTS

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

35 | OPPENHEIMER CHAMPION INCOME FUND

FINANCIAL HIGHLIGHTS Continued

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

36 | OPPENHEIMER CHAMPION INCOME FUND

Net asset value, beginning of period $ 8.99 $10.98 $ 11.83 $ 12.17 $ 13.48
---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .70 .96 1.06 1.01 .99
Net realized and unrealized loss (.95) (1.97) (.77) (.25) (1.11)
------------------------------------------------
Total from investment operations (.25) (1.01) .29 .76 (.12)
---------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.70) (.98) (1.06) (1.01) (.95)
Tax return of capital distribution -- -- -- -- (.04)
Distributions from net realized gain -- -- (.08) (.09) (.20)
------------------------------------------------
Total dividends and/or distributions
to shareholders (.70) (.98) (1.14) (1.10) (1.19)
---------------------------------------------------------------------------------------------
Net asset value, end of period $8.04 $ 8.99 $10.98 $11.83 $12.17
================================================

=============================================================================================
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $180,131 $192,898 $211,809 $252,277 $224,439
---------------------------------------------------------------------------------------------
Average net assets (in thousands) $200,233 $208,439 $230,954 $246,416 $210,338
---------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
Net investment income 7.83% 9.40% 9.23% 8.25% 7.42%
Expenses 1.89% 1.82% 1.80% 1.81% 1.81%(3)
---------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 47% 34% 47% 100%

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

3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

37 | Oppenheimer Champion Income Fund

FINANCIAL HIGHLIGHTS Continued

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

38 | OPPENHEIMER CHAMPION INCOME FUND

NOTES TO FINANCIAL STATEMENTS

================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Champion Income Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek a high level of current income by
investing in a diversified portfolio of high-yield, lower-rated, fixed-income
securities that the Fund's investment Manager, OppenheimerFunds, Inc. (the
Manager), believes do not involve undue risk.
The Fund offers Class A, Class B, Class C and Class N shares. Class A shares
are sold at their offering price, which is normally net asset value plus a
front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges. Earnings, net assets and
net asset value per share may differ by minor amounts due to each class having
its own expenses directly attributable to that class. Classes A, B, C and N
have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.

--------------------------------------------------------------------------------
SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. In the absence of a sale, the security is valued at the last
sale price on the prior trading day, if it is within the spread of the closing
bid and asked prices, and if not, at the closing bid price. Securities
(including restricted securities) for which quotations are not readily
available are valued primarily using dealer-supplied valuations, a portfolio
pricing service authorized by the Board of Trustees, or at their fair value.
Fair value is determined in good faith under consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).

--------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values and
redemption prices are linked to the market value of specific securities. The
structured notes are leveraged, which increases the Fund's exposure to changes
in prices of the underlying securities and increases the volatility of each
note's market value relative to the change in the underlying security prices.
The Fund also invests in "index-linked" notes whose principal and/or interest
payments depend on the performance of an underlying index. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying financial statements. The Fund records a realized gain or loss
when a structured note is sold or matures. As of September 30, 2002, the market
value of these securities comprised 4.3% of the Fund's net assets, and resulted
in unrealized losses in the current period of $755,127.

39 | OPPENHEIMER CHAMPION INCOME FUND

NOTES TO FINANCIAL STATEMENTS Continued

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and
risk of 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 September 30, 2002,
securities with an aggregate market value of $39,378,460, representing 3.08% of
the Fund's net assets, were in default.

--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains
and losses in the Fund's Statement of Operations.

--------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. The Fund, along with other affiliated funds of the
Manager, may transfer uninvested cash balances into one or more joint
repurchase agreement accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities
pledged as collateral for repurchase agreements are held by a custodian bank
until the agreements mature. Each agreement requires that the market value of
the collateral be sufficient to cover payments of interest and principal;
however, in the event of default by the other party to the agreement, retention
of the collateral may be subject to legal proceedings.

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

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

40 | OPPENHEIMER CHAMPION INCOME FUND

As of September 30, 2002, the Fund had available for federal income tax
purposes unused capital loss carryforwards as follows:

EXPIRING
----------------------
2008 $ 19,623,850
2009 30,381,616
2010 94,306,197
------------
TOTAL $144,311,663
============

As of September 30, 2002, the Fund had approximately $202,476,000 of
post-October losses available to offset future capital gains, if any. Such
losses, if unutilized, will expire in 2011. Additionally, the Fund had
approximately $3,946,000 of post-October foreign currency losses which were
deferred.

--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.

--------------------------------------------------------------------------------
CLASSIFICATION OF DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes primarily because of paydown gains and losses and the
recognition of certain foreign currency gains (losses) as ordinary income
(loss) for tax purposes. The character of dividends and distributions made
during the fiscal year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax purposes.
Also, due to timing of dividends and distributions, the fiscal year in which
amounts are distributed may differ from the fiscal year in which the income or
net realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended September 30, 2002, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $3,619,826. Accumulated net
realized loss on investments was decreased by the same amount. Net assets of
the Fund were unaffected by the reclassifications.

The tax character of distributions paid during the years ended September 30,
2002 and September 30, 2001 was as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2001
--------------------------------------------------------
Distributions paid from:
Ordinary income $117,433,926 $143,634,641
Long-term capital gain -- --
Return of capital -- --
--------------------------------
Total $117,433,926 $143,634,641
================================

41 | OPPENHEIMER CHAMPION INCOME FUND

NOTES TO FINANCIAL STATEMENTS Continued

================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
As of September 30, 2002, the components of distributable earnings on a tax
basis were as follows:
Undistributed net investment income $ 696,928
Accumulated net realized loss (370,797,548)
Net unrealized depreciation (299,276,993)
--------------
Total $(669,377,613)
==============

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

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

--------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

42 | OPPENHEIMER CHAMPION INCOME FUND

================================================================================
2. 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 YEAR ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2001(1)
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------
CLASS A

Sold 36,530,526 $ 328,727,660 39,442,915 $ 401,578,105
Dividends and/or
distributions reinvested 5,249,245 46,643,037 5,325,482 53,601,798
Redeemed (34,366,220) (305,840,923) (31,454,613) (318,160,775)
--------------------------------------------------------
Net increase 7,413,551 $ 69,529,774 13,313,784 $ 137,019,128
========================================================

-----------------------------------------------------------------------------------
CLASS B
Sold 10,914,263 $ 98,367,207 17,664,312 $ 180,719,544
Dividends and/or
distributions reinvested 2,828,236 25,139,668 3,179,559 31,963,856
Redeemed (17,326,173) (153,509,586) (12,144,439) (122,555,656)
--------------------------------------------------------
Net increase (decrease) (3,583,674) $ (30,002,711) 8,699,432 $ 90,127,744
========================================================

-----------------------------------------------------------------------------------
CLASS C
Sold 7,409,566 $ 66,622,378 7,983,980 $ 81,736,328
Dividends and/or
distributions reinvested 1,043,139 9,249,907 1,120,545 11,271,825
Redeemed (7,504,307) (66,517,659) (6,920,960) (69,905,025)
--------------------------------------------------------
Net increase 948,398 $ 9,354,626 2,183,565 $ 23,103,128
========================================================

-----------------------------------------------------------------------------------
CLASS N
Sold 693,111 $ 6,113,908 111,244 $ 1,087,923
Dividends and/or
distributions reinvested 31,332 271,416 2,062 18,751
Redeemed (76,351) (674,919) (247) (2,365)
--------------------------------------------------------
Net increase 648,092 $ 5,710,405 113,059 $ 1,104,309
========================================================

1. For the year ended September 30, 2001, for Class A, B and C shares and for
the period from March 1, 2001 (inception of offering) to September 30, 2001,
for Class N shares.

================================================================================
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended September 30, 2002, were
$882,451,846 and $771,273,240, respectively.

As of September 30, 2002, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $1,563,206,786 was composed
of:

Gross unrealized appreciation $ 34,967,506
Gross unrealized depreciation (354,558,834)
---------------
Net unrealized depreciation $ (319,591,328)
===============

43 | OPPENHEIMER CHAMPION INCOME FUND

NOTES TO FINANCIAL STATEMENTS Continued

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

================================================================================
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee of
0.70% of the first $250 million of average annual net assets of the Fund, 0.65%
of the next $250 million, 0.60% of the next $500 million, and 0.55% of average
annual net assets in excess of $1 billion.

--------------------------------------------------------------------------------
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 $22.50 per account fee.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees for all classes, up to an annual rate of 0.35% of average net assets per
class. This undertaking may be amended or withdrawn at any time.

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

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

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

AGGREGATE CLASS A CONCESSIONS CONCESSIONS CONCESSIONS CONCESSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C ON CLASS N
SALES CHARGES SALES CHARGES SHARES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
-------------------------------------------------------------------------------------------------------------

September 30, 2002 $1,666,875 $447,224 $125,209 $2,578,269 $434,602 $50,310

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

CLASS A CLASS B CLASS C CLASS N
CONTINGENT CONTINGENT CONTINGENT CONTINGENT
DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
-------------------------------------------------------------------------------
September 30, 2002 $23,279 $1,584,507 $49,736 $2,579

44 | OPPENHEIMER CHAMPION INCOME FUND

--------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class
A Shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. For the year ended September 30, 2002, payments
under the Class A Plan totaled $1,730,631, all of which were paid by the
Distributor to recipients, and included $86,735 paid to an affiliate of the
Manager. Any unreimbursed expenses the Distributor incurs with respect to Class
A shares in any fiscal year cannot be recovered in subsequent years.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Fund has adopted Distribution and Service Plans for Class B, Class C and Class
N shares. Under the plans, the Fund pays the Distributor an annual asset-based
sales charge of 0.75% per year on Class B shares and on Class C shares and the
Fund pays the Distributor an annual asset-based sales charge of 0.25% per year
on Class N shares. The Distributor also receives a service fee of 0.25% per
year under each plan.

Distribution fees paid to the Distributor for the year ended September 30,
2002, were as follows:

DISTRIBUTOR'S
DISTRIBUTOR'S AGGREGATE
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
------------------------------------------------------------------------------
Class B Plan $5,088,482 $4,041,275 $25,340,437 5.87%
Class C Plan 2,002,675 470,297 6,263,970 3.48
Class N Plan 16,642 15,655 122,480 2.00

================================================================================
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into
foreign currency contracts for operational purposes and to seek to protect
against adverse exchange rate fluctuations. Risks to the Fund include the
potential inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates as provided
by a reliable bank, dealer or pricing service. Unrealized appreciation and
depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.

45 | OPPENHEIMER CHAMPION INCOME FUND

NOTES TO FINANCIAL STATEMENTS Continued

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

As of September 30, 2002, the Fund had outstanding futures contracts as
follows:
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE CONTRACTS SEPTEMBER 30, 2002 DEPRECIATION
-------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
S&P 500 Index 12/19/02 10 $2,037,500 $180,950

46 | OPPENHEIMER CHAMPION INCOME FUND

================================================================================
7. ILLIQUID OR RESTRICTED SECURITIES
As of September 30, 2002, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may also
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Fund intends to
invest no more than 10% of its net assets (determined at the time of purchase
and reviewed periodically) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limitation. The aggregate value of illiquid
or restricted securities subject to this limitation as of September 30, 2002
was $67,254,186, which represents 5.27% of the Fund's net assets, of which zero
is considered restricted. Information concerning restricted securities is as
follows:

VALUATION AS OF UNREALIZED
SECURITY ACQUISITION DATES COST PER UNIT SEPTEMBER 30, 2002 DEPRECIATION
------------------------------------------------------------------------------------------

STOCKS AND/OR WARRANTS
Geotek Communications, Inc.,
Series B (Escrowed) 1/4/01 $6,660 $-- $6,660

================================================================================
8. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.45%. Borrowings are payable within 30 days after
such loan is executed. The Fund also pays a commitment fee equal to its pro
rata share of the average unutilized amount of the credit facility at a rate of
0.08% per annum.
The Fund had no borrowings outstanding during the year ended or at
September 30, 2002.

Appendix A

RATINGS DEFINITIONS

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

Moody's Investors Service, Inc.

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

Long-Term (Taxable) Bond Ratings

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

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

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

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

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

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

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

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

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

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.

Short-Term Ratings - Taxable Debt

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

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

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

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

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

Standard & Poor's Rating Services

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

Long-Term Credit Ratings

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

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

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

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

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

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

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

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

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

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

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

Short-Term Issue Credit Ratings

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

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

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

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

C: Currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.

D: In payment default. Payments on the obligation have not been made on the due
date. The rating may also be used if a bankruptcy petition has been filed or
similar actions jeopardize payments on the obligation.

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

International Long-Term Credit Ratings

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

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

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

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

Speculative Grade:

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

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

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

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

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

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

International Short-Term Credit Ratings

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.

Appendix B

Industry Classifications

Aerospace & Defense Household Products
Air Freight & Couriers Industrial Conglomerates
Airlines Insurance
Auto Components Internet & Catalog Retail
Automobiles Internet Software & Services
Banks Information Technology Consulting &
Services
Beverages Leisure Equipment & Products Biotechnology Machinery Building Products
Marine Chemicals Media Commercial Services & Supplies Metals & Mining
Communications Equipment Multiline Retail Computers & Peripherals
Multi-Utilities Construction & Engineering Office Electronics Construction
Materials Oil & Gas Containers & Packaging Paper & Forest Products Distributors
Personal Products Diversified Financials Pharmaceuticals Diversified
Telecommunication Services Real Estate Electric Utilities Road & Rail Electrical
Equipment Semiconductor Equipment & Products Electronic Equipment & Instruments
Software Energy Equipment & Services Specialty Retail Food & Drug Retailing
Textiles & Apparel 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
shares2 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.3 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.

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

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

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

Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request. 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."6 This waiver
provision applies to: |_| Purchases of Class A shares aggregating $1 million or
more. |_| Purchases of Class A shares by a Retirement Plan that was permitted
to purchase such shares at net asset value but subject to a contingent
deferred sales charge prior to March 1, 2001. That included plans
(other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
costing $500,000 or more, 2) had at the time of purchase 100 or more
eligible employees or total plan assets of $500,000 or more, or 3)
certified to the Distributor that it projects to have annual plan
purchases of $200,000 or more.

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

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

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

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

Class A shares purchased by the following investors are not subject to any Class
A sales charges (and no concessions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.

|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
relatives by virtue of a remarriage (step-children, step-parents,
etc.) are included.

|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
|_| Employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that
have entered into sales arrangements with such dealers or brokers
(and which are identified as such to the Distributor) or with the
Distributor. The purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients. Those clients may be charged a
transaction fee by their dealer, broker, bank or advisor for the
purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) who
buy shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements . Each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for those
persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this
arrangement) and persons who are directors or trustees of the company
or trust which is the beneficial owner of such accounts.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.

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

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

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

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

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

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

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.
Thecontingent deferred sales charges are generally not waived following
the death or disability of a grantor or trustee for a trust account.
The contingent deferred sales charges will only be waived in the
limited case of the death of the trustee of a grantor trust or
revocable living trust for which the trustee is also the sole
beneficiary. The death or disability must have occurred after the
account was established, and for disability you must provide evidence
of a determination of disability by the Social Security Administration.

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

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

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

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

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

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

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

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

The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
Oppenheimer U. S. Government Trust,
Oppenheimer Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund

are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:

Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities Account CMIA LifeSpan Capital
Appreciation Account Connecticut Mutual Income Account CMIA LifeSpan Balanced
Account Connecticut Mutual Growth Account CMIA Diversified Income Account

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

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

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

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

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

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

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

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

In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
1) by the estate of a deceased shareholder;
2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
3) for retirement distributions (or loans) to participants or beneficiaries
from retirement plans qualified under Sections 401(a) or 403(b)(7)of the
Code, or from IRAs, deferred compensation plans created under Section 457
of the Code, or other employee benefit plans;
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.

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

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

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

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

Oppenheimer Champion Income Fund

Internet Website:
WWW.OPPENHEIMERFUNDS.COM

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

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

Transfer Agent
OppenheimerFunds Services

P.O. Box 5270 Denver, Colorado 80217 1.800.CALL.OPP (225.5677)

Custodian Bank

JP Morgan Chase Bank
4 Chase Metro Center
Brooklyn, New York 11245

Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202

Counsel to the Fund

Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202

Counsel to the Independent Trustees
Mayer, Brown, Rowe & Maw
1675 Broadway
New York, New York 10019-5820

1234

PX0190.001.1102

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

11 This provision does not apply to loans from 403(b)(7) custodial plans and
loans from the OppenheimerFunds-sponsored Single K retirement plan. 12 This
provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.