<PAGE> 1
OPPENHEIMER CHAMPION INCOME FUND
Annual Report September 30, 1996
[PHOTO]
"We need our
money to
work
as hard as
it can."
[OPPENHEIMERFUNDS LOGO]
<PAGE> 2
NEWS
STANDARDIZED YIELDS
For the 30 Days Ended 9/30/96:(3)
Class A
7.90%
Class B
7.50%
Class C
7.53%
BEAT THE AVERAGE
Cumulative Total Return for the
5-Year Period Ended 9/30/96:
Oppenheimer Champion
Income Fund
Class A (at net asset value)(1)
83.14%
Lipper High Current Yield Average for 63 Funds for the 5-Year Period(4)
79.96%
"THE FUND'S CLASS A SHARES ARE RANKED **** AMONG 956 (3-YEAR) AND 508 (5-YEAR)
TAXABLE BOND FUNDS AS OF 9/30/96 BY MORNINGSTAR MUTUAL FUNDS.(5)
THIS FUND IS FOR PEOPLE WHO WANT HIGH INCOME AND THE POTENTIAL FOR GROWTH.
HOW YOUR FUND IS MANAGED
Oppenheimer Champion Income Fund seeks high current income with a secondary
objective of capital growth. The Fund invests in high-yielding, lower-rated
corporate bonds. These types of securities often offer among the highest income
levels available from any type of fixed-income investment and help provide the
potential for long-term growth.
PERFORMANCE
Total returns at net asset value for the 12 months ended 9/30/96 were 13.28%
for Class A shares and 12.44% for Class C shares. Cumulative total return at
net asset value for Class B shares since inception on 10/2/95 was 12.20%.(1)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1- and 5-year periods ended 9/30/96 and since inception
on 11/16/87 were 7.90%, 11.77% and 12.65%, respectively. For Class B shares,
cumulative total return since inception on 10/2/95 was 7.20%. For Class C
shares, average annual total returns for the 1-year period ended 9/30/96 and
since inception on 12/1/93 were 11.44% and 7.93%, respectively.(2)
OUTLOOK
"We plan to maintain our focus on companies in growth industries like the
energy sector, but are also looking closely at bonds issued by companies in the
telecommunications and cable, hotel and gaming and health care industries."
Ralph Stellmacher, Portfolio Manager
September 30, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. In reviewing the notes that follow on performance
and rankings, please be aware that past performance does not guarantee future
results. Investment return and principal value of an investment in the Fund
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost.
1. Based on the change in net asset value per share for the periods shown,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
2. Class A returns show results of hypothetical investments on 9/30/95, 9/30/91
and 11/16/87 (inception of class), after deducting the current maximum initial
sales charge of 4.75%. The Fund's maximum sales charge rate for Class A shares
was higher during a portion of some of the periods shown, and actual investment
results would be different as a result. Class B returns show results of a
hypothetical investment on 10/2/95 (inception of class), after the deduction of
the applicable contingent deferred sales charge of 5%. Class C returns show
results of hypothetical investments on 9/30/95 and 12/1/93 (inception of
class), after the deduction of the 1% contingent deferred sales charge for the
1-year result. An explanation of the different returns is in the Fund's
prospectus.
3. Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 9/30/96, divided by the
maximum offering price at the end of the period, compounded semiannually and
then annualized. Falling net asset values will tend to artificially raise
yields.
4. Source: Lipper Analytical Services, 9/30/96, an independent mutual fund
monitoring service. The average is shown for comparative purposes only.
Oppenheimer Champion Income Fund is characterized by Lipper as a high current
yield fund. Lipper performance does not take sales charges into consideration.
5. Source: Morningstar Mutual Funds, 9/30/96. Morningstar rankings are based on
risk-adjusted investment return, after considering sales charges and expenses.
Investment return measures a fund's (or class's) 1-, 3-, 5- and 10-year
(depending on the inception of the class or fund) average annual total returns
in excess of 90-day U.S. Treasury bill returns. Risk measures a fund's (or
class's) performance below 90-day U.S. Treasury bill returns. Risk and returns
are combined to produce star rankings, reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest" ranking (top
10%), 4 stars is "above average" (next 22.5%), and 1 star is the lowest (bottom
10%). The 4-star current ranking is a weighted average of the 3- and 5-year
rankings for the class, which were 3 and 5 stars, weighted 40% and 60%,
respectively. The 1-year star ranking is 3 stars, but is not included in the
overall ranking calculations. There were 956 funds ranked in the 1-year period.
Rankings are subject to change. The Fund's Class A, B and C shares have the
same portfolio but different expenses.
2 Oppenheimer Champion Income Fund
<PAGE> 3
[PHOTO]
James C. Swain
Chairman
Oppenheimer
Champion
Income Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Champion
Income Fund
DEAR SHAREHOLDER,
While it's true that earlier this year was difficult for most bond investors,
mainly due to rising interest rates and concerns about inflation, we remain
confident that the general long-term trend is for moderate economic growth and
low inflation, which should help to stabilize and even lower interest rates
over time. Though we still anticipate that interest rates will fluctuate over
the near term, our outlook for the rest of the year remains positive.
During the first six months of this year, investors were concerned that
economic growth appeared to be accelerating. Unemployment was at a six-year
low, industrial production was up, and even retail sales showed unexpected
strength. In addition, because the stock market was performing so well, many
investors felt more prosperous, and sales of big-ticket items such as homes and
cars increased. While much of this data seems to indicate that economic growth
is picking up, we believe that in today's world, faster economic growth may not
necessarily mean higher inflation. In fact, we believe that inflation is likely
to remain under control for the following three reasons: the Federal Reserve's
conservative monetary policy over the last few years; the declining federal
government deficit; and higher corporate productivity that has caused unit
labor costs to grow more slowly than they have in the past.
With the yield on today's 30-year Treasuries hovering just below 7%,
bonds clearly offer a significant value. Typically, the yield on a bond is
compared to the current inflation rate, which is now about 3%. This "spread" of
approximately four percentage points between bond yields and inflation is
considered very generous by historical standards. So, even if interest rates
stay where they are, bonds still would offer significant value for today's
investors. If, on the other hand, interest rates were to fall, as we expect
they will, bond values would appreciate.
Finally, the recent swings in the stock market have captured the
attention of many investors who had their assets invested primarily in stocks
and have given new life to the fixed-income market. The more volatile the stock
market is, the more attractive bonds appear in the portfolios of many
investors, particularly those who are nearing retirement. In addition, because
the prices of bonds are lower, we feel they are a good buy. Given the current
market circumstances, diversifying into other asset classes, rather than
relying solely on equities, may make more sense now than ever before.
Your portfolio managers discuss the outlook for your Fund in the light
of these broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping you reach your investment goals in
the future.
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
- ------------------------- -------------------------------
James C. Swain Bridget A. Macaskill
October 21, 1996
3 Oppenheimer Champion Income Fund
<PAGE> 4
Q + A
[PHOTO]
Q WHAT INVESTMENTS BENEFITED PERFORMANCE?
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
Oppenheimer Champion Income Fund has performed well, finishing 55th out of 143
funds, which placed us in the second quartile of our peer group rated by Lipper
Analytical Services for the entire fiscal year.(1) This has been a good year
for the high yield bond market, overall, and with the exception of March, we
have seen positive total returns at net asset value in each month during 1996.
Of course, investors in high yield bonds are subject to a greater risk that the
issuer will default in its principal or interest payments than investment-grade
bond investors. But over time, we expect the yield premium that high yield
bonds offer will more than compensate for the risks.
[PHOTO]
WHAT INVESTMENTS OR MARKET FACTORS MADE POSITIVE CONTRIBUTIONS TO PERFORMANCE?
Our aggressive positioning in January and February provided the Fund with a
tremendous boost when the high yield market was very strong. Another factor
that helped our performance was the relatively short average maturity of the
portfolio's investments during the first calendar quarter. As interest rates
rose throughout the year, our portfolio was less affected by interest rates as
compared to our competitors.
[PHOTO]
As for specific sectors, we've benefited from our large exposure to
energy bonds. This worked out well for us because higher oil and gas prices
combined with technological advancements improved the profitability of many of
our oil and natural gas investments. Another area that has been a benefit to
the Fund is the cyclical sector, where we have added, during the first calendar
quarter, to our holdings in chemical,
1. Source: Lipper Analytical Services, 9/30/96. Oppenheimer Champion Income
Fund is characterized by Lipper as a high current yield fund. This comparison
does not take sales charges into consideration.
4 Oppenheimer Champion Income Fund
<PAGE> 5
FACING PAGE
Top left: Ralph Stellmacher,
Portfolio Manager
Top right: Scott Scharer, Member
of Fixed Income Investments Team
Bottom: Len Darling, Executive
VP, Director of Fixed Income
Investments
THIS PAGE
Top: Ralph Stellmacher
Bottom: David Negri with Mark
Frank, Members of Fixed Income
Investments Team
A WE'VE BENEFITED FROM OUR LARGE EXPOSURE TO ENERGY BONDS.
paper and forest product companies. Because cyclical stocks tend to rise in
price when the economy shows signs of strength, these investments have been
good performers.(2)
DID ANY INVESTMENT NOT PERFORM AS YOU'D EXPECTED?
Recently, we've been increasing our exposure to high-rated bonds with mixed
results. To the degree that we've made strong purchases, this move has helped
the Fund. But overall, lower-rated bonds have been better performers.
Even though rising interest rates are generally unfavorable for the
bond market, as the economy continues to show signs of improvement--like we've
seen recently--credit risk becomes less of an issue, and many investors are
willing to pay higher prices for those bonds.
[PHOTO]
WHAT AREAS ARE YOU CURRENTLY TARGETING?
We are currently taking profits on holdings in cyclical sectors such as
chemical, paper and forest product areas. We plan to continue a focus on
companies in growth sectors within the telecommunications industry. We will
remain overweighted to the energy sector as we feel these bonds offer strong
portfolio diversification benefits. Finally, we will continue to invest in
companies that are rated strong single B and weak BB.
[PHOTO]
WHAT IS YOUR OUTLOOK FOR THE FUND?
We believe that the high yield market will remain resilient for a number of
reasons. First, high yield bond valuations are attractive. Second, corporate
earnings and economic growth remain healthy, which should sustain a relatively
low default rate among high yield issues. Finally, as other market sectors,
such as equities, show signs of high volatility, the demand for high yielding
fixed-income investments has increased.
2. The Fund's portfolio is subject to change.
5 Oppenheimer Champion Income Fund
<PAGE> 6
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
===============================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--1.7%
- -------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 240, Cl. 2, 10.317%--12.256%, 9/1/23(2) $ 6,939,318 $ 2,397,318
Trust 257, Cl. 2, 15.355%, 2/1/24(2) 1,541,277 534,390
------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6%, 10/15/26(3) 2,200,000 2,182,125
------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1996-C1, Cl. E, 7.51%, 2/1/28(4)(5) 1,513,000 1,182,031
------------------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Multifamily Mtg.
Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(5) 1,250,000 945,703
------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1994-C2, Cl. E, 8%, 4/25/25 472,282 458,557
Series 1995-C1, Cl. F, 6.90%, 2/25/27 388,591 320,588
------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996-C1, Cl. E,
9.18%, 1/20/06 704,000 608,960
------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.849%, 6/25/26(4)(5) 799,806 651,842
------------
Total Mortgage-Backed Obligations (Cost $8,879,903) 9,281,514
===============================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--4.7%
- -------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 8.875%, 11/15/97 (Cost $26,328,125) 25,000,000 25,804,672
===============================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--10.5%
- -------------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of):
New Money Bonds, 6.50%, 10/25/99(4) 116,666 113,167
Sr. Unsec. Unsub. Bonds, 7.625%, 7/5/99 NLG 2,095,000 1,236,711
Treasury Bills, Zero Coupon, 12.117%, 1/17/97(6) ARP 1,000,000 979,375
Treasury Bills, Zero Coupon, 10.156%, 11/15/96(6) ARP 500,000 496,095
Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP 340,000 535,210
------------------------------------------------------------------------------------------------------------------------
Banco Estado Minas Gerais, 8.25%, 2/10/00 1,950,000 1,837,875
------------------------------------------------------------------------------------------------------------------------
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
10.625%, 8/7/06(7) 1,000,000 1,012,500
------------------------------------------------------------------------------------------------------------------------
Banco Nacional de Comercio Exterior SNC International Finance BV Gtd.:
Nts., 8%, 8/5/03 700,000 626,500
Registered Bonds, 11.25%, 5/30/06 2,500,000 2,621,875
------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
Debs., 6%, 9/15/13 750,000 521,250
Nts., Banco Estado Minas Gerais, 7.875%, 2/10/99 1,300,000 1,238,250
------------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, 10%, 3/5/01 DEM 1,064,000 727,580
------------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(7) 4,950,000 1,628,859
Interest Arrears Bonds, 6.688%, 7/28/11(7) 5,340,000 2,456,400
------------------------------------------------------------------------------------------------------------------------
Canada (Government of) Real Return Debs., 4.517%, 12/1/21(8) CAD 5,200,000 3,940,976
------------------------------------------------------------------------------------------------------------------------
Central Bank of Costa Rica Interest Claim Bonds, Series B, 6.344%, 5/21/05(4) 153,481 148,110
------------------------------------------------------------------------------------------------------------------------
Cia Energetica de Sao Paulo Gtd. Unsec. Bonds, 9.25%, 5/10/01 DEM 1,110,000 746,482
------------------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 3,770,000 704,493
8%, 3/15/06 DKK 6,140,000 1,122,839
</TABLE>
6 Oppenheimer Champion Income Fund
<PAGE> 7
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS
(CONTINUED)
Ecuador (Republic of) Disc. Bonds, 6.50%, 2/28/25(4) $ 560,000 $ 348,600
------------------------------------------------------------------------------------------------------------------------
Finland (Republic of) Bonds, 7.25%, 4/18/06 FIM 2,000,000 454,971
------------------------------------------------------------------------------------------------------------------------
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.625%, 12/23/23(4) 1,250,000 965,625
Interest Arrears Bonds, 6.625%, 12/23/05(4) 1,100,000 976,250
------------------------------------------------------------------------------------------------------------------------
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 1,710,000 3,135,690
------------------------------------------------------------------------------------------------------------------------
Italy (Republic of):
Sr. Unsec. Unsub. Global Bonds, 0.777%, 7/26/99(4) JPY 137,000,000 1,236,536
Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%, 7/15/00 ITL 1,795,000,000 1,280,163
------------------------------------------------------------------------------------------------------------------------
New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01 AUD 2,835,000 2,670,761
------------------------------------------------------------------------------------------------------------------------
Norwegian Government Bonds, 9.50%, 10/31/02 NOK 11,645,000 2,061,753
------------------------------------------------------------------------------------------------------------------------
Panama (Republic of):
Debs., 6.629%, 5/10/02(4) 484,615 465,231
Interest Reduction Bonds, 3.50%, 7/17/14(9) 1,825,000 1,147,469
------------------------------------------------------------------------------------------------------------------------
Poland (Republic of) Treasury Bills, Zero Coupon:
21.656%, 10/2/96(6) PLZ 1,440,000 511,883
21.635%, 11/20/96(6) PLZ 2,790,000 968,433
------------------------------------------------------------------------------------------------------------------------
Portugal (Republic of) Gtd. Bonds,
Obrigicion do tes Medio Prazo, 11.875%, 2/23/00 PTE 185,000,000 1,351,494
------------------------------------------------------------------------------------------------------------------------
PT Hutama Karya, Zero Coupon Medium-Term Nts.:
17.514%, 3/19/97(6) IDR 2,600,000,000 1,037,414
17.668%, 3/26/97(6) IDR 2,500,000,000 995,048
------------------------------------------------------------------------------------------------------------------------
Russia (Government of) Interest Nts., 6.547%, 12/29/49(3)(4) 1,600,000 1,029,500
------------------------------------------------------------------------------------------------------------------------
Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK 14,700,000 2,767,033
------------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA Bonds, 13%, 2/5/99 ITL 1,500,000,000 1,031,709
------------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%, 7/14/00 GBP 2,165,000 4,057,480
------------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 10.375%, 1/29/03 DEM 5,145,000 3,562,083
------------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of):
Disc. Bonds, Series DL, 6.625%, 12/18/07(4) 2,000,000 1,660,000
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(4) 825,000 695,578
New Money Bonds, Series B, 6.625%, 12/18/05(4) 1,250,000 1,042,187
Total Foreign Government Obligations (Cost $56,381,425) 58,147,438
===============================================================================================================================
LOAN PARTICIPATIONS--0.8%
- -------------------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation,
Tranche A, 6.625%, 9/4/06(4)(5) 2,000,000 1,392,500
------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) 1989--1990 Integrated
Loan Facility Bonds, 6.563%, 7/1/01(4)(5) 314,319 298,604
------------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing
Agreement Nts., Tranche B, 6.312%, 11/15/04(4)(5) 654,093 546,168
------------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(4) 1,700,000 1,337,156
------------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement,
Tranche B, 1.772%, 9/30/00(4)(5) JPY 126,436,052 1,010,353
-----------
Total Loan Participations (Cost $4,202,881) 4,584,781
</TABLE>
7 Oppenheimer Champion Income Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
===============================================================================================================================
<S> <C> <C>
MUNICIPAL BONDS AND NOTES--0.3%
- -------------------------------------------------------------------------------------------------------------------------------
San Joaquin Hills, California Transportation Corridor Agency
Toll Road Capital Appreciation Revenue Bonds, Jr. Lien,
Zero Coupon, 9%, 1/1/28 (Cost $862,253)(6) $13,500,000 $ 1,406,025
===============================================================================================================================
CORPORATE BONDS AND NOTES--74.5%
- -------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY--11.9%
- -------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--2.0%
Acetex Corp., 9.75% Sr. Sec. Nts., 10/1/03 2,820,000 2,791,800
------------------------------------------------------------------------------------------------------------------------
Arcadian Partner LP, 10.75% Sr. Nts., Series B, 5/1/05 880,000 972,400
------------------------------------------------------------------------------------------------------------------------
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 3,750,000 3,956,250
------------------------------------------------------------------------------------------------------------------------
Terra Industries, Inc., 10.50% Sr. Nts., Series B, 6/15/05 2,630,000 2,820,675
------------------------------------------------------------------------------------------------------------------------
Texas Petrochemicals Corp., 11.125% Sr. Sub. Nts., 7/1/06(10) 515,000 544,612
-----------
11,085,737
- -------------------------------------------------------------------------------------------------------------------------------
CONTAINERS--0.5%
U.S. Can Co., 13.50% Sr. Sub. Nts., 1/15/02 2,500,000 2,656,250
- -------------------------------------------------------------------------------------------------------------------------------
METALS/MINING--1.7%
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03 1,819,000 1,996,352
------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 9.875% Sr. Nts., 2/15/02 1,780,000 1,824,500
------------------------------------------------------------------------------------------------------------------------
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06(10) 5,175,000 5,356,125
------------------------------------------------------------------------------------------------------------------------
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05 325,000 372,937
9,549,914
===============================================================================================================================
PAPER--6.5%
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts., 10/1/05 2,400,000 2,517,000
------------------------------------------------------------------------------------------------------------------------
Asia Pulp & Paper International Finance Co.,
Zero Coupon Asian Currency Nts., 16.551%, 5/15/97(6) IDR 700,000,000 271,314
------------------------------------------------------------------------------------------------------------------------
Buckeye Cellulose Corp.:
8.50% Sr. Sub. Nts., 12/15/05 280,000 273,000
9.25% Sr. Sub. Nts., 9/15/08 4,315,000 4,347,362
------------------------------------------------------------------------------------------------------------------------
Container Corp., 9.75% Gtd. Sr. Nts., 4/1/03 500,000 508,750
------------------------------------------------------------------------------------------------------------------------
Domtar, Inc., 11.25% Debs., 9/15/17(5) 190,000 200,849
------------------------------------------------------------------------------------------------------------------------
Florida Coast Paper Co. LLC,
12.75% First Mtg. Nts., 6/1/03(10) 1,880,000 2,039,800
------------------------------------------------------------------------------------------------------------------------
Gaylord Container Corp.:
11.50% Sr. Nts., 5/15/01 375,000 399,844
12.75% Sr. Sub. Disc. Debs., 5/15/05 3,000,000 3,307,500
------------------------------------------------------------------------------------------------------------------------
Indah Kiat International Finance Co. BV, 12.50% Sr. Sec. Gtd. Nts.,
Series C, 6/15/06 2,540,000 2,755,900
------------------------------------------------------------------------------------------------------------------------
Malette, Inc., 12.25% Sr. Sec. Nts., 7/15/04 1,285,000 1,387,800
------------------------------------------------------------------------------------------------------------------------
QUNO Corp., 9.125% Sr. Nts., 5/15/05 2,050,000 2,070,500
------------------------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts., 2/1/02 1,000,000 1,012,500
------------------------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.25% Sr. Nts., 4/1/06 2,830,000 2,858,300
10.875% Sr. Sub. Nts., 4/1/08 4,135,000 4,093,650
------------------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04 2,750,000 2,980,312
------------------------------------------------------------------------------------------------------------------------
Stone Container Corp.:
10.75% First Mtg. Nts., 10/1/02 2,650,000 2,789,125
9.875% Sr. Nts., 2/1/01 500,000 505,000
------------------------------------------------------------------------------------------------------------------------
Tembec Finance Corp., 9.875% Gtd. Sr. Nts., 9/30/05 1,825,000 1,770,250
-----------
36,088,756
</TABLE>
8 Oppenheimer Champion Income Fund
<PAGE> 9
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STEEL--1.2%
AK Steel Corp., 10.75% Sr. Gtd. Nts., 4/1/04 $1,800,000 $ 1,971,000
------------------------------------------------------------------------------------------------------------------------
Armco, Inc., 8.50% Sinking Fund Debs., 9/1/01 267,000 262,327
------------------------------------------------------------------------------------------------------------------------
Bar Technologies, Inc., 13.50% Gtd. Bonds, 4/1/01 750,000 757,500
------------------------------------------------------------------------------------------------------------------------
Republic Engineered Steels, Inc., 9.875% First Mtg. Nts., 12/15/01 1,350,000 1,299,375
------------------------------------------------------------------------------------------------------------------------
WCI Steel, Inc., 10.50% Sr. Gtd. Nts., Series B, 3/1/02 1,900,000 2,090,000
-----------
6,380,202
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED--13.8%
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--3.2%
Coinstar, Inc., Units (each unit consists of $1,000 principal
amount of 0%/13% Sr. Sub. Disc. Nts., 10/1/06 and one warrant
to purchase seven ordinary shares)(3)(5)(11)(12) 2,025,000 1,391,195
------------------------------------------------------------------------------------------------------------------------
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 9.52%, 5/27/98(6) 4,580,000 3,915,900
------------------------------------------------------------------------------------------------------------------------
E & S Holdings Corp., 10.375% Sr. Sub. Nts., 10/1/06(10) 1,650,000 1,687,125
------------------------------------------------------------------------------------------------------------------------
Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 2,400,000 2,628,000
------------------------------------------------------------------------------------------------------------------------
International Semi-Tech Microelectronics, Inc.,
0%/11.50% Sr. Sec. Disc. Nts., 8/15/03(12) 5,050,000 3,093,125
------------------------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 10.125% Sr. Sub. Nts., 10/1/06(3) 650,000 663,812
------------------------------------------------------------------------------------------------------------------------
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05 960,000 1,017,600
------------------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(10) 3,160,000 3,578,700
-----------
17,975,457
- -------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO--1.4%
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03 2,845,000 3,001,475
------------------------------------------------------------------------------------------------------------------------
Cott Corp., 9.375% Sr. Nts., 7/1/05 3,885,000 3,904,425
------------------------------------------------------------------------------------------------------------------------
Foodbrands America, Inc., 10.75% Sr. Sub. Nts., 5/15/06 815,000 839,450
-----------
7,745,350
- -------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE--3.1%
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 340,000 442,850
------------------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04 5,420,000 5,934,900
------------------------------------------------------------------------------------------------------------------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub. Nts., 7/1/02 2,500,000 2,781,250
------------------------------------------------------------------------------------------------------------------------
Quorum Health Group, Inc., 11.875% Sr. Sub. Nts., 12/15/02 750,000 830,625
------------------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 10.125% Sr. Sub. Nts., 3/1/05 4,750,000 5,171,562
------------------------------------------------------------------------------------------------------------------------
Total Renal Care, Inc., 0%/12% Sr. Sub. Disc. Nts., 8/15/04(12) 1,935,000 2,048,681
------------
17,209,868
- -------------------------------------------------------------------------------------------------------------------------------
HOTEL/GAMING--3.3%
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series A, 11/15/00(5) 275,000 189,750
------------------------------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 10.75% Sr. Sub. Nts., Series B, 9/1/03 1,500,000 1,584,375
------------------------------------------------------------------------------------------------------------------------
California Hotel Finance Corp., 11% Sr. Sub. Nts., 12/1/02 800,000 840,000
------------------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc., Promissory Nts., 8/1/95(13) 7,500 --
------------------------------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A, 11/15/00(5)(13) 100,000 70,000
------------------------------------------------------------------------------------------------------------------------
Empress River Casino Finance Corp., 10.75% Sr. Gtd. Nts., 4/1/02 2,000,000 2,160,000
------------------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 2,500,000 2,478,125
------------------------------------------------------------------------------------------------------------------------
Griffin Gaming & Entertainment, Inc., 8.015% First Mtg.
Non-Recourse Pass-Through Nts., 6/30/00(4) 1,010,000 954,450
</TABLE>
9 Oppenheimer Champion Income Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL/GAMING
(CONTINUED)
HMC Acquisition Properties, Inc., 9% Sr. Nts., 12/15/07 $1,210,000 $ 1,155,550
----------------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B, 5/15/05 2,470,000 2,488,525
----------------------------------------------------------------------------------------------------------------------
Majestic Star Casino LLC (The), 12.75% Sr. Sec. Nts., 5/15/03(10) 1,035,000 1,138,500
----------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts., 11/15/02 2,075,000 2,614,500
----------------------------------------------------------------------------------------------------------------------
Players International, Inc., 10.875% Sr. Nts., 4/15/05 510,000 507,450
----------------------------------------------------------------------------------------------------------------------
Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05 700,000 733,250
----------------------------------------------------------------------------------------------------------------------
Showboat Marina Casino Partnership/Showboat Marina
Finance Corp., 13.50% First Mtg. Nts., 3/15/03 650,000 705,250
----------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03 520,000 507,000
----------------------------------------------------------------------------------------------------------------------
Trump's Castle Funding, Inc., 13.875% Sub. Nts., 11/15/05(14) 46 44
-----------
18,126,769
- -----------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--0.7%
Carrols Corp., 11.50% Sr. Nts., 8/15/03 2,360,000 2,472,100
----------------------------------------------------------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 1,390,000 1,393,475
9.75% Sr. Sub. Nts., 6/1/02 165,000 162,525
-----------
4,028,100
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL--2.1%
Clark-Schwebel, Inc., 10.50% Sr. Nts., 4/15/06(10) 3,200,000 3,328,000
----------------------------------------------------------------------------------------------------------------------
Consoltex Group, Inc., 11% Sr. Sub. Gtd. Nts., Series B, 10/1/03 900,000 886,500
----------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02 526,000 574,655
----------------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa, 13% Sr. Nts., 6/15/01 260,000 286,650
----------------------------------------------------------------------------------------------------------------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 2,800,000 3,038,000
----------------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05 3,370,000 3,386,850
-----------
11,500,655
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY--10.2%
- -----------------------------------------------------------------------------------------------------------------------------
AmeriGas Partners LP, 10.125% Sr. Nts., 4/15/07 320,000 334,800
----------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
10.50% Sr. Nts., 6/1/02 3,200,000 3,404,000
9.125% Sr. Nts., 4/15/06 2,215,000 2,203,925
----------------------------------------------------------------------------------------------------------------------
DeepTech International, Inc., 12% Sr. Sec. Nts., 12/15/00 2,402,000 2,438,030
----------------------------------------------------------------------------------------------------------------------
Falcon Drilling Co., Inc.:
8.875% Sr. Nts., Series B, 3/15/03 4,900,000 4,838,750
9.75% Sr. Nts., Series B, 1/15/01 400,000 410,000
----------------------------------------------------------------------------------------------------------------------
Ferrellgas LP/Ferrellgas Finance Corp., 10% Sr. Nts., 8/1/01 1,400,000 1,456,000
----------------------------------------------------------------------------------------------------------------------
Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., 6/15/06(10) 2,190,000 2,206,425
----------------------------------------------------------------------------------------------------------------------
Gerrity Oil & Gas Corp., 11.75% Sr. Sub. Nts., 7/15/04 3,750,000 4,017,187
----------------------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 4,090,000 4,182,025
----------------------------------------------------------------------------------------------------------------------
Mariner Energy, Inc., 10.50% Sr. Sub. Nts., 8/1/06(10) 3,415,000 3,534,525
----------------------------------------------------------------------------------------------------------------------
Maxus Energy Corp., 11.50% Debs., 11/15/15 500,000 522,500
----------------------------------------------------------------------------------------------------------------------
Mesa Operating Co.:
0%/11.625% Gtd. Sr. Sub. Disc. Nts., 7/1/06(12) 5,840,000 3,766,800
10.625% Gtd. Sr. Sub. Nts., 7/1/06 1,260,000 1,330,875
</TABLE>
10 Oppenheimer Champion Income Fund
<PAGE> 11
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY
(CONTINUED)
Nuevo Energy Co., 12.50% Sr. Sub. Nts., 6/15/02 $ 560,000 $ 604,800
----------------------------------------------------------------------------------------------------------------------
OPI International, Inc., 12.875% Sr. Gtd. Nts., 7/15/02 1,225,000 1,353,625
----------------------------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05 1,376,000 1,522,200
9.375% Sub. Debs., 2/1/06 1,770,000 1,692,562
----------------------------------------------------------------------------------------------------------------------
Santa Fe Energy Resources, Inc., 11% Sr. Sub. Debs., 5/15/04 3,330,000 3,696,300
----------------------------------------------------------------------------------------------------------------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02 3,845,000 4,094,925
----------------------------------------------------------------------------------------------------------------------
Triton Energy Corp.:
0%/9.75% Sr. Sub. Disc. Nts., 12/15/00(12) 2,400,000 2,436,000
Zero Coupon Sr. Sub. Disc. Nts., 10.394%, 11/1/97(6) 3,200,000 2,968,000
----------------------------------------------------------------------------------------------------------------------
United Meridian Corp., 10.375% Sr. Sub. Nts., 10/15/05 1,100,000 1,174,250
----------------------------------------------------------------------------------------------------------------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05 2,435,000 2,416,737
-----------
56,605,241
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--4.1%
- -----------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS--1.1%
First Nationwide Escrow Corp., 10.625% Sr. Sub. Nts., 10/1/03(10) 1,950,000 2,040,188
----------------------------------------------------------------------------------------------------------------------
First Nationwide Holdings, Inc., 9.125% Sr. Sub. Nts., 1/15/03 1,800,000 1,777,500
----------------------------------------------------------------------------------------------------------------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03 1,600,000 1,678,500
----------------------------------------------------------------------------------------------------------------------
Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(3)(6) THB 5,000,000 194,952
----------------------------------------------------------------------------------------------------------------------
Siam Commercial Bank Public Ltd., Zero Coupon Debs.,
10.581%, 11/18/96(3)(6) THB 7,800,000 302,500
-----------
5,993,640
- -----------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--1.0%
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02(5) 348,179 384,738
----------------------------------------------------------------------------------------------------------------------
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 4,010,000 4,050,100
----------------------------------------------------------------------------------------------------------------------
GPA Holland BV, 8.94% Medium-Term Nts., Series C, 2/16/99 700,000 710,500
----------------------------------------------------------------------------------------------------------------------
Lomas Financial Corp., 9% Cv. Sr. Nts., 10/31/03(5)(13) 600,000 123,000
-----------
5,268,338
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE--2.0%
American Life Holding Co., 11.25% Sr. Sub. Nts., 9/15/04 2,220,000 2,514,150
----------------------------------------------------------------------------------------------------------------------
Chartwell Re Holdings Corp., 10.25% Sr. Nts., 3/1/04 477,000 506,216
----------------------------------------------------------------------------------------------------------------------
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02 3,000,000 3,281,250
----------------------------------------------------------------------------------------------------------------------
Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 3,750,000 3,829,688
----------------------------------------------------------------------------------------------------------------------
Terra Nova Insurance (UK) Holdings PLC, 10.75% Sr. Nts., 7/1/05 720,000 808,442
-----------
10,939,746
- -----------------------------------------------------------------------------------------------------------------------------
HOUSING RELATED--1.7%
- -----------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS--0.7%
American Standard, Inc.:
0%/10.50% Sr. Sub. Disc. Debs., 6/1/05(12) 2,075,000 1,914,188
10.875% Sr. Nts., 5/15/99 1,000,000 1,070,000
----------------------------------------------------------------------------------------------------------------------
Building Materials Corp., 0%/11.75% Sr. Deferred Coupon Nts., Series B, 7/1/04(12) 750,000 607,500
----------------------------------------------------------------------------------------------------------------------
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03 60,000 59,400
-----------
3,651,088
</TABLE>
11 Oppenheimer Champion Income Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOMEBUILDERS/
REAL ESTATE--1.0%
First Place Tower, Inc.:
9.22% First Mtg. Bonds, 12/15/05 CAD 375,500 $ 298,380
Units (each unit consists of one $10 principal amount of 8.50%
cv. sub. debs., 12/15/15 and 40 common shares)(11) CAD 225,830 294,247
----------------------------------------------------------------------------------------------------------------------
NVR, Inc., 11% Sr. Gtd. Nts., 4/15/03 900,000 936,000
----------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts., Series B, 4/1/02 1,375,000 1,464,375
----------------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 2,200,000 1,771,000
----------------------------------------------------------------------------------------------------------------------
U.S. Home Corp., 9.75% Sr. Nts., 6/15/03 760,000 763,800
-----------
5,527,802
- -----------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--3.1%
- -----------------------------------------------------------------------------------------------------------------------------
AEROSPACE/ELECTRONICS/
COMPUTERS--1.1%
Businessland, Inc., 5.50% Sub. Debs., 3/1/07(5) 805,000 483,000
----------------------------------------------------------------------------------------------------------------------
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01 3,420,000 3,608,100
----------------------------------------------------------------------------------------------------------------------
UNC, Inc., 11% Sr. Sub. Nts., 6/1/06(10) 2,000,000 2,090,000
-----------
6,181,100
- -----------------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE--2.0%
Aftermarket Technology Corp., 12% Sr. Sub. Nts., Series B, 8/1/04 1,650,000 1,806,750
----------------------------------------------------------------------------------------------------------------------
Foamex LP/Foamex Capital Corp., 9.50% Sr. Sec. Nts., 6/1/00 200,000 203,000
----------------------------------------------------------------------------------------------------------------------
Hayes Wheels International, Inc., 11% Sr. Sub. Nts., 7/15/06 3,775,000 4,001,500
----------------------------------------------------------------------------------------------------------------------
JPS Automotive Products Corp., 11.125% Sr. Nts., 6/15/01 300,000 310,500
----------------------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 2,725,000 2,854,438
----------------------------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 975,000 950,625
----------------------------------------------------------------------------------------------------------------------
SPX Corp., 11.75% Sr. Sub. Nts., 6/1/02 950,000 1,047,375
-----------
11,174,188
- -----------------------------------------------------------------------------------------------------------------------------
MEDIA--11.6%
- -----------------------------------------------------------------------------------------------------------------------------
BROADCASTING--3.2%
American Radio Systems Corp., 9% Sr. Sub. Nts., 2/1/06 1,500,000 1,453,125
----------------------------------------------------------------------------------------------------------------------
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05 1,450,000 1,460,875
----------------------------------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.375% Sr. Sub. Nts., Series A, 12/1/05 1,050,000 1,023,750
----------------------------------------------------------------------------------------------------------------------
New World Communications Group Holding Corp.,
Zero Coupon Sr. Disc. Nts., Series B, 11.457%, 6/15/99(6) 1,030,000 824,000
----------------------------------------------------------------------------------------------------------------------
Outlet Broadcasting, Inc., 10.875% Sr. Sub. Nts., 7/15/03 1,000,000 1,109,206
----------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 5,345,000 5,665,700
----------------------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., 10.75% Sr. Sub. Nts., 5/15/06 1,575,000 1,649,813
----------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 2,430,000 2,454,300
----------------------------------------------------------------------------------------------------------------------
Univision Television Group, Inc., 11.75% Sr. Sub. Nts., 1/15/01 500,000 532,500
----------------------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 9% Sr. Sub. Nts., 1/15/06 1,500,000 1,417,500
-----------
17,590,769
- -----------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--5.4%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04(12) 2,453,211 1,846,041
----------------------------------------------------------------------------------------------------------------------
Australis Media Ltd., Units (each unit consists of $1,000 principal
amount of 0%/14% Sr. Sub. Disc. Nts., 5/15/03 and one warrant to
purchase 57.721 ordinary shares)(11)(12) 1,100,000 665,500
----------------------------------------------------------------------------------------------------------------------
Bell Cablemedia PLC:
0%/11.875% Sr. Disc. Nts., 9/15/05(12) 4,830,000 3,308,550
0%/11.95% Sr. Disc. Nts., 7/15/04(12) 2,800,000 2,149,000
</TABLE>
12 Oppenheimer Champion Income Fund
<PAGE> 13
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CABLE TELEVISION
(CONTINUED)
Cablevision Industries Corp., 9.25% Sr. Debs., Series B, 4/1/08 $ 400,000 $ 412,000
----------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.:
10.75% Sr. Sub. Debs., 4/1/04 1,700,000 1,761,625
9.875% Sr. Sub. Debs., 2/15/13 215,000 209,625
9.875% Sr. Sub. Nts., 5/15/06 410,000 412,050
----------------------------------------------------------------------------------------------------------------------
Century Communications Corp., 11.875% Sr. Sub. Debs., 10/15/03 700,000 751,625
----------------------------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 11% Sr. Sub. Debs., 6/1/07 270,000 305,384
----------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(12) 3,375,000 2,674,688
----------------------------------------------------------------------------------------------------------------------
International CableTel, Inc.:
0%/10.875% Sr. Deferred Coupon Nts., 10/15/03(12) 160,000 122,000
0%/11.50% Sr. Deferred Coupon Nts., Series A, 2/1/06(12) 2,150,000 1,295,375
0%/12.75% Sr. Deferred Coupon Nts., 4/15/05(12) 3,448,000 2,336,020
----------------------------------------------------------------------------------------------------------------------
People's Choice TV Corp.:
0%/13.125% Sr. Disc. Nts., 6/1/04(12) 1,770,000 1,097,400
Units (each unit consists of $1,000 principal amount of 0%/13.125%
Sr. Disc. Nts., 6/1/04 and one warrant to purchase 1.427 shares
of common stock)(11)(12) 950,000 591,375
----------------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd., 11% Sr. Sub. Gtd. Debs., 12/1/15 1,200,000 1,236,000
----------------------------------------------------------------------------------------------------------------------
TeleWest PLC:
0%/11% Sr. Disc. Debs., 10/1/07(12) 4,395,000 2,834,775
9.625% Sr. Debs., 10/1/06 1,500,000 1,496,250
----------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 1,575,000 1,749,634
----------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc.:
0%/14% Sr. Disc. Nts., 5/15/06(10)(12) 1,749,000 944,460
Zero Coupon Sr. Sec. Disc. Nts., Series B, 12%, 11/15/99(6) 1,410,000 987,000
Zero Coupon Sr. Sec. Disc. Nts., 12.50%, 11/15/99(6) 925,000 647,500
-----------
29,833,877
- -----------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA--1.5%
Ackerley Communications, Inc., 10.75% Sr. Sec. Nts., Series A, 10/1/03 2,800,000 2,940,000
----------------------------------------------------------------------------------------------------------------------
Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 835,000 795,338
----------------------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 10.125% Sr. Gtd. Debs., 10/15/12 700,000 789,399
----------------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp.:
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(12) 3,930,000 3,576,300
9.75% Sr. Sec. Nts., 8/1/00 400,000 424,000
-----------
8,525,037
- -----------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT/FILM--0.3%
Imax Corp., 7% Sr. Nts., 3/1/01(9) 1,700,000 1,666,000
- -----------------------------------------------------------------------------------------------------------------------------
PUBLISHING/PRINTING--1.2%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(12) 4,070,000 2,869,350
----------------------------------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 9.25% Sr. Sub. Gtd. Nts., 2/1/06 1,870,000 1,823,250
----------------------------------------------------------------------------------------------------------------------
K-III Communications Corp., 10.625% Sr. Sec. Nts., 5/1/02 2,100,000 2,199,750
-----------
6,892,350
- -----------------------------------------------------------------------------------------------------------------------------
OTHER--2.0%
- -----------------------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL--0.2%
Mid-American Waste Systems, Inc., 12.25% Sr. Sub. Nts., 2/15/03(5)(13) 1,900,000 1,187,500
</TABLE>
13 Oppenheimer Champion Income Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICES--1.8%
Borg-Warner Security Corp., 9.125% Sr. Sub. Nts., 5/1/03 $3,000,000 $ 2,906,250
----------------------------------------------------------------------------------------------------------------------
Imo Industries, Inc., 11.75% Sr. Sub. Nts., 5/1/06(10) 2,250,000 2,351,250
----------------------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc.:
0%/13.625% Sr. Disc. Nts., 6/30/05(12) 4,750,000 4,251,250
6.75% Cv. Sr. Sub. Nts., 9/15/03 595,000 584,959
-----------
10,093,709
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL--3.3%
- -----------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAILING--0.6%
Brylane LP/Brylane Capital Corp., 10% Sr. Sub. Nts., Series B, 9/1/03 1,000,000 1,005,000
----------------------------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 1,485,000 1,509,131
----------------------------------------------------------------------------------------------------------------------
United Stationers Supply Co., 12.75% Sr. Sub. Nts., 5/1/05 900,000 981,000
-----------
3,495,131
- -----------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS--2.7%
Grand Union Co., 12% Sr. Nts., 9/1/04 5,082,000 5,151,878
----------------------------------------------------------------------------------------------------------------------
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03(14) 2,155,000 2,165,775
----------------------------------------------------------------------------------------------------------------------
Penn Traffic Co., 11.50% Sr. Nts., 4/15/06 1,590,000 1,419,075
----------------------------------------------------------------------------------------------------------------------
Purity Supreme, Inc., 11.75% Sr. Sec. Nts., Series B, 8/1/99 275,000 294,282
----------------------------------------------------------------------------------------------------------------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 2,835,000 2,898,788
10.45% Sr. Nts., 6/15/04 2,980,000 3,047,050
-----------
14,976,848
- -----------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.6%
- -----------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.3%
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 1,500,000 1,601,250
- -----------------------------------------------------------------------------------------------------------------------------
RAILROADS--0.4%
Transtar Holdings LP/Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(12) 3,200,000 2,420,000
- -----------------------------------------------------------------------------------------------------------------------------
SHIPPING--0.9%
Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04 2,850,000 3,063,750
----------------------------------------------------------------------------------------------------------------------
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts., 7/1/04 1,480,000 1,733,450
-----------
4,797,200
- -----------------------------------------------------------------------------------------------------------------------------
UTILITIES--11.2%
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.7%
CalEnergy Co., Inc.:
0%/10.25% Sr. Disc. Nts., 1/15/04(12) 3,860,000 3,946,850
9.50% Sr. Nts., 9/15/06(10) 900,000 914,625
----------------------------------------------------------------------------------------------------------------------
Centragas Natural Gas Transmission System, 10.65% Sr. Sec. Bonds, 12/1/10(10) 482,634 511,441
----------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 4,000,000 4,140,000
-----------
9,512,916
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--9.5%
360 Communications Co.:
7.125% Sr. Nts., 3/1/03 550,000 533,507
7.50% Sr. Nts., 3/1/06 550,000 527,558
----------------------------------------------------------------------------------------------------------------------
A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05 3,015,000 2,999,925
----------------------------------------------------------------------------------------------------------------------
American Communications Services, Inc.:
0%/12.75% Sr. Disc. Nts., 4/1/06(12) 1,650,000 882,750
0%/13% Sr. Disc. Nts., 11/1/05(12) 725,000 416,875
----------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/13% Sr. Disc. Nts., 6/15/05(5)(12) 500,000 313,750
</TABLE>
14 Oppenheimer Champion Income Fund
<PAGE> 15
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS
(CONTINUED)
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.249%, 8/15/00(6) $6,335,000 $ 4,038,563
----------------------------------------------------------------------------------------------------------------------
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03(12) 2,250,000 1,912,500
----------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(12) 2,000,000 1,240,000
----------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts., 2/15/01 2,000,000 2,200,000
----------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(10)(12) 407,000 345,278
----------------------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Bonds, 12/15/05(12) 3,256,000 1,847,780
----------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone LP/Horizon Finance Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(12) 3,888,000 3,756,780
----------------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts., 4/15/03(10)(12) 855,000 525,825
----------------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp., 0%/14% Sr. Disc. Nts., 5/15/02(12) 850,000 293,250
----------------------------------------------------------------------------------------------------------------------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(12) 435,000 270,788
0%/13.50% Sr. Disc. Nts., 9/15/05(12) 4,360,000 2,937,550
----------------------------------------------------------------------------------------------------------------------
MFS Communications Co., Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04(12) 5,930,000 5,010,850
----------------------------------------------------------------------------------------------------------------------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06(10) 3,045,000 3,189,638
----------------------------------------------------------------------------------------------------------------------
Petersburg Long Distance, Inc.:
9% Cv. Sub. Nts., 6/1/06(10) 200,000 238,000
Units (each unit consists of $1,000 principal amount of 0%/14% Sr. Disc. Nts.,
6/1/04 and one warrant to purchase 34 ordinary shares)(11)(12) 1,450,000 1,189,000
----------------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(12) 4,060,000 3,308,900
0%/14% Sr. Sub. Disc. Nts., 11/15/01(12) 460,000 433,550
----------------------------------------------------------------------------------------------------------------------
Rogers Cantel, Inc., 9.375% Sr. Sec. Debs., 6/1/08 3,000,000 2,992,500
----------------------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp.,
0%/12.50% Sr. Disc. Nts., 8/15/06(12) 3,210,000 1,897,913
----------------------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc.:
0%/11.125% Sr. Disc. Nts., 7/1/07(12) 8,350,000 5,385,750
9.875% Sr. Nts., 7/1/06 625,000 644,531
----------------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 14% Sr. Nts., 11/1/04 500,000 568,750
----------------------------------------------------------------------------------------------------------------------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 6/1/06 2,790,000 2,866,725
------------
52,768,786
------------
Total Corporate Bonds and Notes (Cost $401,441,675) 413,049,574
</TABLE>
<TABLE>
<CAPTION>
Shares
=============================================================================================================================
<S> <C> <C>
COMMON STOCKS--0.3%
- -----------------------------------------------------------------------------------------------------------------------------
Capstone Capital Corp. 222 4,662
----------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A(15) 1,895 51,639
----------------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I.(5) 75 75,375
----------------------------------------------------------------------------------------------------------------------
Equitable Bag, Inc.(5)(15) 2,261 5,652
----------------------------------------------------------------------------------------------------------------------
Finlay Enterprises, Inc.(15) 2,333 29,162
----------------------------------------------------------------------------------------------------------------------
Grand Union Co.(15) 1,767 11,265
----------------------------------------------------------------------------------------------------------------------
Hollywood Casino Corp.(15) 10,000 48,750
----------------------------------------------------------------------------------------------------------------------
Kash 'N Karry Food Stores, Inc.(15) 4,500 110,531
----------------------------------------------------------------------------------------------------------------------
New World Communications Group, Inc., Cl. A(15) 2,001 46,273
----------------------------------------------------------------------------------------------------------------------
Omnipoint Corp.(5)(15) 50,000 1,383,438
----------------------------------------------------------------------------------------------------------------------
Triangle Wire & Cable, Inc.(5)(15) 9,500 9,500
-----------
Total Common Stocks (Cost $1,159,540) 1,776,247
</TABLE>
15 Oppenheimer Champion Income Fund
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
=============================================================================================================================
<S> <C> <C>
PREFERRED STOCKS--1.5%
- -----------------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.:
11.125% Exchangeable Preferred Stock, Series M(14) 4,170 $ 406,575
8.50% Cum. Cv., Series I 44,000 1,083,500
----------------------------------------------------------------------------------------------------------------------
California Federal Bank, 10.625% Non-Cum., Series B 5,040 555,660
----------------------------------------------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv. Sr. Preferred Stock, Series C(5)(14) 110,000 1,144,000
----------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 11.40% Series A Preferred Stock(14) 14,250 1,638,750
----------------------------------------------------------------------------------------------------------------------
Fidelity Federal Bank, 12% Non-Cum. Exchangeable
Perpetual Preferred Stock, Series A 20,000 555,000
----------------------------------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum. 11,700 1,325,025
----------------------------------------------------------------------------------------------------------------------
K-III Communications Corp., $11.625 Exchangeable, Series B(14) 8,185 820,578
----------------------------------------------------------------------------------------------------------------------
SDW Holdings Corp., 15% Cum. Sr. Exchangeable Preferred Stock(5)(15) 28,120 984,200
-----------
Total Preferred Stocks (Cost $7,757,314) 8,513,288
</TABLE>
<TABLE>
<CAPTION>
UNITS
=============================================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.3%
- -----------------------------------------------------------------------------------------------------------------------------
American Communications Services, Inc. Wts., Exp. 11/05(5) 725 50,750
----------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts.:
Exp. 6/99 5,500 24,750
Exp. 8/00(5) 850 19,550
----------------------------------------------------------------------------------------------------------------------
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series AG-7A(5) 6,200 62
Litigation Trust(5) 19,829 198
----------------------------------------------------------------------------------------------------------------------
Australis Media Ltd. Wts., Exp. 5/00 190 1
----------------------------------------------------------------------------------------------------------------------
Becker Gaming, Inc. Wts., Exp. 11/00(5) 12,500 3,125
----------------------------------------------------------------------------------------------------------------------
Casino America, Inc. Wts., Exp. 11/96 1,631 --
----------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc. Wts., Exp. 6/05(10) 4,000 63,000
----------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc. Wts., Exp. 8/03(5) 5,120 89,600
----------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(5) 2,000 10,000
----------------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc.:
Cl. C Wts., Exp. 12/99 6,741 85,948
Cl. D Wts., Exp. 12/01 6,741 87,633
----------------------------------------------------------------------------------------------------------------------
Furniture Brands International, Inc., Series 1 Wts., Exp. 8/99 14,540 103,598
----------------------------------------------------------------------------------------------------------------------
Gaylord Container Corp. Wts., Exp. 11/02 1,174 8,512
----------------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(5) 855 8,550
----------------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02(5) 1,600 --
----------------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc. Wts., Exp. 9/05(5) 17,655 278,066
----------------------------------------------------------------------------------------------------------------------
Jewel Recovery LP, Participation Units of Limited Partners' Interest 1,985 --
----------------------------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00(5) 8,000 221,350
----------------------------------------------------------------------------------------------------------------------
People's Choice TV Corp. Wts., Exp. 6/00(5) 1,770 1,770
----------------------------------------------------------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/03(5) 28,000 224,000
Exp. 6/05 15,200 205,200
----------------------------------------------------------------------------------------------------------------------
SDW Holdings Corp., Cl. B Wts., Exp. 12/06(5) 2,812 36,556
----------------------------------------------------------------------------------------------------------------------
Terex Corp. Rts., Exp. 7/97(5) 300 30
----------------------------------------------------------------------------------------------------------------------
Trizec Corp. Wts., Exp. 7/99 1,985 3,133
-----------
Total Rights, Warrants and Certificates (Cost $293,790) 1,525,382
</TABLE>
16 Oppenheimer Champion Income Fund
<PAGE> 17
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
=============================================================================================================================
<S> <C> <C>
STRUCTURED INSTRUMENTS--2.5%
- -----------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, New York Branch:
14% CD Linked Nts., 12/17/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit) $ 1,000,000 $ 984,400
6.28% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97 500,000 490,125
----------------------------------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates of
Greek Drachma and European Currency Unit) 2,300,000 2,271,020
17% CD Linked Nts., 4/2/97 (indexed to the Russian Federation GKO,
Zero Coupon, 3/26/97) 2,000,000 1,988,000
----------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.516%, 4/28/97(6) CZK 26,000,000 908,501
----------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Zero Coupon Chilean Peso Linked Nts., 11.813%, 6/23/97(6) 1,000,000 908,100
Zero Coupon Chilean Peso Linked Nts., 11.741%, 6/24/97(6) 2,000,000 1,815,600
Zero Coupon Indian Rupee Linked Nts., 15.672%, 12/20/96(6) 250,000 241,275
----------------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.,
12.61%--12.886%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(6) 1,900,000 1,846,990
----------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts., 6/20/97
(indexed to the closing Nikkei 225 Index on 1/23/97, 5 yr. & 3 mos.
Japanese Yen Swap rate & New Zealand Dollar) 1,100,000 1,088,835
----------------------------------------------------------------------------------------------------------------------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater of
Cetes Option Amount or USD LIBOR Option Amount, 11/27/96) 900,000 1,096,125
-----------
Total Structured Instruments (Cost $13,535,800) 13,638,971
</TABLE>
<TABLE>
<CAPTION>
DATE STRIKE CONTRACTS
=============================================================================================================================
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED--0.0%
- -----------------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.125 2,400 7,200
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.75 2,400 6,000
Interest Arrears Bonds, 6.688%,
7/28/11 Put Opt. 10/96 $40.875 2,600 1
----------------------------------------------------------------------------------------------------------------------
Interest Arrears Bonds, 6.688%,
7/28/11 Put Opt. 10/96 $41.375 2,600 10
Italy (Republic of) Treasury Bonds,
Buoni del Tesoro Poliennali,
9.50%, 5/1/01 Put Opt. 7/97 $99.96 2,029 14,004
----------------------------------------------------------------------------------------------------------------------
Swiss Franc Put Opt. 10/96 1.22 CHF 6,327,868 168,897
-----------
Total Put Options Purchased (Cost $336,085) 196,112
</TABLE>
17 Oppenheimer Champion Income Fund
<PAGE> 18
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
==============================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENT--0.8%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc., 5.62%, dated 9/30/96,
to be repurchased at $4,400,687 on 10/1/96, collateralized by U.S. Treasury
Bonds, 6.75%, 8/15/26, with a value of $4,330,975 and U.S. Treasury Nts.,
6.125%, 5/15/98, with a value of $161,827 (Cost $4,400,000) $4,400,000 $ 4,400,000
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $525,578,792) 97.9% 542,324,004
- -----------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 2.1 11,881,399
---------- ------------
NET ASSETS 100.0% $554,205,403
========== ============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
ARP --Argentine Peso IEP --Irish Punt
AUD --Australian Dollar ITL --Italian Lira
CAD --Canadian Dollar JPY --Japanese Yen
CHF --Swiss Franc NLG --Netherlands Guilder
CZK --Czech Koruna NOK --Norwegian Krone
DEM --German Deutsche Mark PLZ --Polish Zloty
DKK --Danish Krone PTE --Portuguese Escudo
FIM --Finnish Markka SEK --Swedish Krona
GBP --British Pound Sterling THB --Thai Baht
IDR --Indonesian Rupiah
2. 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.
3. When-issued security to be delivered and settled after September 30,
1996.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid--See Note 8 of Notes to
Financial Statements.
6. For zero coupon bonds, the interest rate shown is the effective yield
on the date of purchase.
7. A sufficient amount of securities has been designated to cover
outstanding written call options, as follows:
<TABLE>
<CAPTION>
FACE SUBJECT EXPIRATION EXERCISE PREMIUM MARKET VALUE
TO CALL DATE PRICE RECEIVED SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Banco Hipotecario Nacional
(Argentina) Medium-Term Nts., 10.625%, 8/7/06 1,000,000 8/00 $100.00 $ 9,200 $ 16,000
- --------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 2,400,000 12/96 32.75 18,000 61,200
- --------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 2,400,000 12/96 32.125 13,680 64,800
- --------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of) Interest
Arrears Bonds, 6.688%, 7/28/11 2,600,000 11/96 45.375 16,900 29,900
- --------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of) Interest
Arrears Bonds, 6.688%, 7/28/11 2,600,000 11/96 45.188 16,900 32,500
------- --------
$74,680 $204,400
======= ========
</TABLE>
8. Indexed instrument for which the principal amount and/or interest due
at maturity is affected by the relative value of a foreign index.
9. Represents the current interest rate for an increasing rate security.
10. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the
Board of Trustees. These securities amount to $36,627,517 or 6.61% of
the Fund's net assets, at September 30, 1996.
11. 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, face amount disclosed
represents total underlying principal.
12. Denotes a step bond: a zero coupon bond that converts to a fixed
rate of interest at a designated future date.
13. Non-income producing--issuer is in default of interest payment.
14. Interest or dividend is paid in kind.
15. Non-income producing security.
See accompanying Notes to Financial Statements.
18 Oppenheimer Champion Income Fund
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
<S> <C>
=============================================================================================================================
ASSETS
Investments, at value (cost $525,578,792)--see accompanying statement $542,324,004
----------------------------------------------------------------------------------------------------------------------
Cash 1,472,594
----------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5 34,717
----------------------------------------------------------------------------------------------------------------------
Receivables:
Interest, dividends and principal paydowns 11,967,057
Investments sold 8,113,530
Shares of beneficial interest sold 3,845,276
Closed forward foreign currency exchange contracts 149,931
----------------------------------------------------------------------------------------------------------------------
Other 17,449
------------
Total assets 567,924,558
=============================================================================================================================
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts--Note 5 910
----------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $74,680)--
see accompanying statement--Note 6 204,400
----------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $5,692,885 purchased on a when-issued basis)--Note 1 10,724,741
Dividends 1,170,110
Shares of beneficial interest redeemed 974,384
Distribution and service plan fees 316,803
Closed forward foreign currency exchange contracts 83,461
Transfer and shareholder servicing agent fees 13,720
Other 230,626
------------
Total liabilities 13,719,155
=============================================================================================================================
NET ASSETS $554,205,403
============
=============================================================================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $538,658,915
----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 27,701
----------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (1,122,029)
----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 16,640,816
------------
Net assets $554,205,403
============
=============================================================================================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $359,208,323 and 27,808,390 shares of beneficial interest outstanding) $12.92
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $13.56
----------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $82,052,059 and 6,357,778 shares of beneficial interest outstanding) $12.91
----------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $112,945,021 and 8,751,748 shares of beneficial interest outstanding) $12.91
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Champion Income Fund
<PAGE> 20
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
<S> <C>
=============================================================================================================================
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $21,619) $42,991,935
----------------------------------------------------------------------------------------------------------------------
Dividends 346,267
-----------
Total income 43,338,202
=============================================================================================================================
EXPENSES
Management fees--Note 4 2,902,865
----------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 748,429
Class B 328,699
Class C 893,787
----------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 625,256
----------------------------------------------------------------------------------------------------------------------
Shareholder reports 258,126
----------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 82,041
----------------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 33,588
Class B 27,624
Class C 15,770
----------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 20,760
----------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 4,069
----------------------------------------------------------------------------------------------------------------------
Other 33,940
------------
Total expenses 5,974,954
=============================================================================================================================
NET INVESTMENT INCOME 37,363,248
=============================================================================================================================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised) 5,010,482
Closing of futures contracts (1,620,086)
Closing and expiration of options written (103,292)
Foreign currency transactions (459,552)
------------
Net realized gain 2,827,552
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 12,313,659
Translation of assets and liabilities denominated in foreign currencies (2,916)
------------
Net change 12,310,743
------------
Net realized and unrealized gain 15,138,295
=============================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $52,501,543
============
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Champion Income Fund
<PAGE> 21
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1996 1995
=============================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $37,363,248 $20,637,843
----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 2,827,552 (2,898,856)
----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 12,310,743 7,212,069
----------- -----------
Net increase in net assets resulting from operations 52,501,543 24,951,056
=============================================================================================================================
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends from net investment income:
Class A (27,408,362) (17,271,188)
Class B (2,625,608) --
Class C (7,329,215) (3,335,380)
----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (26,483)
Class C -- (4,572)
=============================================================================================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 93,320,881 91,132,115
Class B 80,797,723 --
Class C 44,878,194 36,376,191
=============================================================================================================================
NET ASSETS
Total increase 234,135,156 131,821,739
----------------------------------------------------------------------------------------------------------------------
Beginning of period 320,070,247 188,248,508
------------ ------------
End of period (including undistributed net investment income of
$27,701 and $83,753,respectively) $554,205,403 $320,070,247
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer Champion Income Fund
<PAGE> 22
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------- ---------
PERIOD ENDED
YEAR ENDED SEPTEMBER 30, SEPT. 30,
1996 1995 1994 1993 1992 1996(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.47 $12.32 $12.90 $12.26 $11.49 $12.47
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income 1.15 1.05 1.10 1.22 1.41 1.03
Net realized and unrealized
gain (loss) .44 .14 (.38) .64 .77 .44
------ ------ ------ ------ ------ ------
Total income from investment
operations 1.59 1.19 .72 1.86 2.18 1.47
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (1.14) (1.04) (1.10) (1.22) (1.41) (1.03)
Dividends in excess of net
investment income -- -- (.01) -- -- --
Distributions in excess of net
realized gain -- -- (.19) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (1.14) (1.04) (1.30) (1.22) (1.41) (1.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.92 $12.47 $12.32 $12.90 $12.26 $12.91
====== ====== ====== ====== ====== ======
====================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 13.28% 10.09% 5.61% 15.92% 19.94% 12.20%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $359,208 $255,139 $160,505 $104,465 $47,125 $82,052
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $305,638 $204,917 $135,431 $ 73,334 $28,270 $33,189
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.97% 8.45% 8.49% 9.52% 11.60% 7.90%(5)
Expenses 1.17% 1.18% 1.22% 1.24% 1.35% 1.97%(5)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 95.0% 72.5% 108.0% 116.2% 121.5% 95.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994(1)
=======================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $12.46 $12.32 $13.13
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income 1.06 .95 .75
Net realized and unrealized
gain (loss) .44 .13 (.60)
------ ------ ------
Total income from investment
operations 1.50 1.08 .15
- -------------------------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (1.05) (.94) (.77)
Dividends in excess of net
investment income -- -- -- (3)
Distributions in excess of net
realized gain -- -- (.19)
Total dividends and distributions
to shareholders (1.05) (.94) (.96)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.91 $12.46 $12.32
====== ====== ======
=======================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 12.44% 9.16% 1.11%
=======================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $112,945 $64,932 $27,743
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 89,416 $43,584 $13,693
Ratios to average net assets:
Net investment income 8.19% 7.63% 7.24%(5)
Expenses 1.93% 1.95% 1.94%(5)
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 95.0% 72.5% 108.0%
</TABLE>
1. For the period from December 1, 1993 (inception of offering)
to September 30, 1994.
2. For the period from October 2, 1995 to September 30, 1996.
3. Less than $.005 per share.
4. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of
offering), with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one
full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one
year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities)
for the period ended September 30, 1996 were $590,516,268 and
$380,018,484, respectively.
See accompanying Notes to Financial Statements.
22 Oppenheimer Champion Income Fund
<PAGE> 23
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 a diversified,
open-end management investment company. The Fund's investment
objective is to seek a high level of current income primarily
through investing in a diversified portfolio of high yield fixed
income securities. The Fund's investment adviser is
OppenheimerFunds, Inc. (the Manager). The Fund offers Class A,
Class B and Class C shares. Class A shares are sold with a
front-end sales charge. Class B and Class C shares may be subject
to a contingent deferred sales charge. All three classes of
shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution
and/or service plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to
matters affecting a single class. 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.
------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the
close of the New York Stock Exchange on each trading day. Listed
and unlisted securities for which such information is regularly
reported are valued at the last sale price of the day or, in the
absence of sales, at values based on the closing bid or the last
sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Such
securities which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the
quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures
established by the Board of Trustees to determine fair value in
good faith. Short-term "money market type" debt securities having
a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to
maturity of any premium or discount. Forward foreign currency
exchange contracts are valued based on the closing prices of the
forward currency contract rates in the London foreign exchange
markets on a daily basis as provided by a reliable bank or
dealer. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the
absence of any transactions that day, the value is based upon the
last sale price on the prior trading date if it is within the
spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
------------------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment
for securities that have been purchased by the Fund on a forward
commitment or when-issued basis can take place a month or more
after the transaction date. During this period, such securities
do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund
maintains, in a segregated account with its custodian, assets
with a market value equal to the amount of its purchase
commitments. The purchase of securities on a when-issued or
forward commitment basis may increase the volatility of the
Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of
September 30, 1996, the Fund had entered into outstanding
when-issued or forward commitments of $5,692,885.
In connection with its ability to purchase
securities on a when-issued or forward commitment basis, the Fund
may enter into mortgage "dollar-rolls" in which the Fund sells
securities for delivery in the current month and simultaneously
contracts with the same counterparty to repurchase similar (same
type coupon and maturity) but not identical securities on a
specified future date. The Fund records each dollar-roll as a
sale and a new purchase transaction.
------------------------------------------------------------------
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. At September 30,
1996, securities with an aggregate market value of $1,380,500,
representing 0.25% of the Fund's net assets, were in default.
23 Oppenheimer Champion Income Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
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 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.
------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve
Book Entry System or to have segregated within the custodian's
vault, all securities held as collateral for repurchase
agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of
purchase. If the seller of the agreement defaults and the value
of the collateral declines, or if the seller enters an insolvency
proceeding, realization of the value of the collateral by the
Fund may be delayed or limited.
------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income,
expenses (other than those attributable to a specific class) and
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 loss
carryovers, to shareholders. Therefore, no federal income or
excise tax provision is required. At September 30, 1996, the Fund
had available for federal income tax purposes an unused capital
loss carryover of approximately $511,000, which expires in 2003.
------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare
dividends separately for Class A, Class B and Class C shares from
net investment income each day the New York Stock Exchange is
open for business and pay such dividends monthly. Distributions
from net realized gains on investments, if any, will be declared
at least once each year.
------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERs. Net investment
income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of the
distributions made during the 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 dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income
or realized gain (loss) was recorded by the Fund.
During the year ended September 30, 1996, the Fund
adjusted the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax
regulations. During the year ended September 30, 1996, amounts
have been reclassified to reflect a decrease in undistributed net
investment income of $56,115. Accumulated net realized loss on
investments was decreased by the same amount.
------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend
income is recorded on the ex-dividend date. Discount on
securities purchased is amortized over the life of the respective
securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the
ex-dividend date, at the current market value of the underlying
security. Interest on payment-in-kind debt instruments is accrued
as income at the coupon rate and a market adjustment is made
periodically.
The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those
estimates.
24 Oppenheimer Champion Income Fund
<PAGE> 25
================================================================================
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value
shares of beneficial interest of each class. Transactions in
shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996(1) YEAR ENDED SEPTEMBER 30, 1995
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 13,390,615 $170,144,406 13,552,963 $166,240,526
Dividends and distributions reinvested 1,445,851 18,398,126 941,789 11,588,722
Redeemed (7,492,035) (95,221,651) (7,056,6892) (86,697,133)
---------- ------------ ----------- ------------
Net increase 7,344,431 $ 93,320,881 7,438,063 $ 91,132,115
========== ============ =========== ============
----------------------------------------------------------------------------------------------------------------------
Class B:
Sold 6,824,247 $ 86,737,093 -- $ --
Dividends and distributions reinvested 132,964 1,694,762 -- --
Redeemed (599,433) (7,634,132) -- --
---------- ------------ ----------- ------------
Net increase 6,357,778 $ 80,797,723 -- $ --
========== ============ =========== ============
----------------------------------------------------------------------------------------------------------------------
Class C:
Sold 4,628,427 $ 58,715,116 3,640,178 $ 44,736,101
Dividends and distributions reinvested 401,746 5,108,872 176,650 2,175,061
Redeemed (1,490,391) (18,945,794) (856,281) (10,534,971)
---------- ------------ ----------- ------------
Net increase 3,539,782 $ 44,878,194 2,960,547 $ 36,376,191
========== ============ =========== ============
</TABLE>
1. For the year ended September 30, 1996 for Class A and Class C
shares and for the period from October 2, 1995 (inception of
offering) to September 30, 1996 for Class B shares.
================================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments
and options written of $16,615,492 was composed of gross
appreciation of $20,896,547, and gross depreciation of
$4,281,055.
================================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
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% on the first $250 million of average annual net
assets, 0.65% on the next $250 million, 0.60% on the next $500
million and 0.55% on net assets in excess of $1 billion. The
Manager has agreed to reimburse the Fund if aggregate expenses
(with specified exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses.
For the year ended September 30, 1996, commissions
(sales charges paid by investors) on sales of Class A shares
totaled $2,709,849, of which $693,681 was retained by
OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI
on sales of the Fund's Class B and Class C shares totaled
$2,801,916 and $680,794, of which $38,875 and $7,587,
respectively, was paid to an affiliated broker/dealer. During the
year ended September 30, 1996, OFDI received contingent deferred
sales charges of $59,676 and $40,138, respectively, upon
redemption of Class B and Class C shares, as reimbursement for
sales commissions advanced by OFDI at the time of sale of such
shares.
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and shareholder servicing agent for the
Fund, and for other registered investment companies. OFS's total
costs of providing such services are allocated ratably to these
companies.
The Fund has adopted a Service Plan for Class A
shares to reimburse OFDI for a portion of its costs incurred in
connection with the personal service and maintenance of accounts
that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee
to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and
maintenance of accounts of their customers that hold Class A
shares. During the year ended September 30, 1996, OFDI paid
$28,869 to an affiliated broker/dealer as reimbursement for Class
A personal service and maintenance expenses.
25 Oppenheimer Champion Income Fund
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
The Fund has adopted a compensation type Distribution and Service
Plan for Class B shares to compensate OFDI for its services and
costs in distributing Class B shares and servicing accounts.
Under the Plan, the Fund pays OFDI an annual asset-based sales
charge of 0.75% per year on Class B shares. OFDI also receives a
service fee of 0.25% per year to compensate dealers for providing
personal services for accounts that hold Class B shares. Both
fees are computed on the average annual net assets of Class B
shares, determined as of the close of each regular business day.
If the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales
charge to OFDI for certain expenses it incurred before the Plan
was terminated. During the year ended September 30, 1996, OFDI
retained $323,036 as compensation for Class B sales commissions
and service fee advances, as well as financing costs. As of
September 30, 1996, OFDI had incurred unreimbursed expenses of
$3,224,469 for Class B.
The Fund has adopted a reimbursement type
Distribution and Service Plan for Class C shares to reimburse
OFDI for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class C
shares. OFDI also receives a service fee of 0.25% per year to
reimburse dealers for providing personal services for accounts
that hold Class C shares. Both fees are computed on the average
annual net assets of Class C shares, determined as of the close
of each regular business day. If the Plan is terminated by the
Fund, the Board of Trustees may allow the Fund to continue
payments of the asset-based sales charge to OFDI for certain
expenses it incurred before the Plan was terminated. During the
year ended September 30, 1996, OFDI paid $7,548 to an affiliated
broker/dealer as reimbursement for Class C personal service and
maintenance expenses and retained $507,536 as reimbursement for
Class C sales commissions and service fee advances, as well as
financing costs. As of September 30, 1996, OFDI had incurred
unreimbursed expenses of $1,300,506 for Class C.
================================================================================
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract)
is a commitment to purchase or sell a foreign currency at a
future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage
foreign currency risks. They may also be used to tactically shift
portfolio currency risk. The Fund generally enters into forward
contracts as a hedge upon the purchase or sale of a security
denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing
prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a
reliable bank or dealer. The Fund will realize a gain or loss
upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net
exposure on outstanding forward contracts are noted in the
Statement of Investments where applicable. Unrealized
appreciation or depreciation on forward contracts is reported in
the Statement of Assets and Liabilities. Realized gains and
losses are reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
Risks include the potential inability of the
counterparty to meet the terms of the contract and unanticipated
movements in the value of a foreign currency relative to the U.S.
dollar.
At September 30, 1996, the Fund had outstanding forward contracts
to purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT VALUATION AS OF UNREALIZED UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE AMOUNT (000S) SEPTEMBER 30, 1996 APPRECIATION DEPRECIATION
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Danish Krone (DKK) 10/2/96 4,139 DKK $ 706,760 $ -- $ 910
========== ------- -------
CONTRACTS TO SELL
--------------------------------------------------------------------------------------------------------------------
Finnish Markka (FIM) 10/2/96--12/2/96 9,352 FIM $2,050,213 $ 7,822 $ --
Japanese Yen (JPY) 10/28/96 72,000 JPY 648,176 21,430 --
Swedish Krona (SEK) 11/1/96 10,070 SEK 1,519,465 5,045 --
SwissFranc (CHF) 1/3/97 1,250 CHF 1,006,987 420 --
---------- ------- -------
$5,224,841 34,717 --
========== ------- -------
Total Unrealized Appreciation and Depreciation $34,717 $ 910
======= =======
</TABLE>
26 Oppenheimer Champion Income Fund
<PAGE> 27
================================================================================
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in
order to gain exposure to or protect against changes in 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 increase in interest rates and the resulting negative
effect on the value of fixed rate portfolio securities. The Fund
may also purchase futures contracts to gain exposure to changes
in interest rates 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 in an amount
(initial margin) 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 expired.
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.
================================================================================
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and
covered call options on portfolio securities in order to produce
incremental earnings or protect against changes in the value of
portfolio securities.
The Fund generally purchases put options or writes
covered call options to hedge against adverse movements in the
value of portfolio holdings. When an option is written, the Fund
receives a premium and becomes obligated to sell or purchase the
underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale
price on the principal exchange on which the option is traded and
unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss upon the expiration or closing of the
option transaction. When an option is exercised, the proceeds on
sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or
call option is adjusted by the amount of premium received or
paid.
Securities designated to cover outstanding call
options are noted in the Statement of Investments where
applicable. Shares subject to call, expiration date, exercise
price, premium received and market value are detailed in a
footnote to the Statement of Investments. Options written are
reported as a liability in the Statement of Assets and
Liabilities. Gains and losses are reported in the Statement of
Operations.
The risk in writing a call option is that the Fund
gives up the opportunity for profit if the market price of the
security increases and the option is exercised. The risk in
writing a put option is that the Fund may incur a loss if the
market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a
premium whether or not the option is exercised. The Fund also has
the additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Written call option activity for the year ended September 30,
1996 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
------------------------------ ------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPTIONS PREMIUMS OPTIONS PREMIUMS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
September 30, 1995 -- $ -- -- $ --
Options written 13,277,948 268,958 1,734 60,012
Options closed or expired (12,307,448) (186,398) (1,734) (60,012)
Options exercised (959,500) (7,880) -- --
----------- --------- ------ --------
Options outstanding at
September 30, 1996 11,000 $ 74,680 -- $ --
=========== ========= ====== ========
</TABLE>
27 Oppenheimer Champion Income Fund
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
8. ILLIQUID AND RESTRICTED
SECURITIES
At September 30, 1996, 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 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 from time to
time) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional
investors, are not subject to that limit. The aggregate value of
illiquid or restricted securities subject to this limitation at
September 30, 1996 was $16,671,756 which represents 3.01% of the
Fund's net assets. Information concerning restricted securities
is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPT. 30, 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona Charlie's Inc., 12% First Mtg. Nts.,
Series A, 11/15/00 11/18/93 $ 100.00 $ 69.00
------------------------------------------------------------------------------------------------------------
Becker Gaming, Inc. Wts., Exp. 11/00 11/18/93 2.00 0.25
------------------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts.,
Series A, 11/15/00 11/18/93 87.50 70.00
------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I.:
14% Sub. Nts., 6/10/02 7/28/92 100.50 110.50
Common Stock 4/14/92 1,000.00 1,005.00
------------------------------------------------------------------------------------------------------------
Triangle Wire & Cable, Inc. Common Stock 5/2/94 9.50 1.00
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain
unregistered securities are determined to be liquid and are not
included within the 10% limitation specified above.
28 Oppenheimer Champion Income Fund
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders of Oppenheimer Champion
Income Fund:
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of
Oppenheimer Champion Income Fund as of September 30, 1996, the
related statement of operations for the year then ended, the
statements of changes in net assets for the years ended September
30, 1996 and 1995, and the financial highlights for the period
October 1, 1991 to September 30, 1996. 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
generally accepted auditing standards. 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 at September 30, 1996 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, such financial statements and
financial highlights present fairly, in all material respects,
the financial position of Oppenheimer Champion Income Fund at
September 30, 1996, the results of its operations, the changes in
its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1996
29 Oppenheimer Champion Income Fund
<PAGE> 30
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 1997, shareholders will receive information regarding
all dividends and distributions paid to them by the Fund during
calendar year 1996. Regulations of the U.S. Treasury Department
require the Fund to report this information to the Internal
Revenue Service.
Dividends paid by the Fund during the fiscal year
ended September 30, 1996 which are not designated as capital gain
distributions should be multiplied by 0.82% to arrive at the net
amount eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist
shareholders in reporting distributions received from the Fund to
the Internal Revenue Service. Because of the complexity of the
federal regulations which may affect your individual tax return
and the many variations in state and local tax regulations, we
recommend that you consult your tax adviser for specific
guidance.
30 Oppenheimer Champion Income Fund
<PAGE> 31
OPPENHEIMER CHAMPION INCOME FUND
================================================================================
OFFICERS AND TRUSTEES
James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Trustee and President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
George C. Bowen, Vice President, Treasurer and Assistant
Secretary
Andrew J. Donohue, Vice President and Secretary
Ralph W. Stellmacher, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
================================================================================
INVESTMENT ADVISER
OppenheimerFunds, Inc.
================================================================================
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
================================================================================
TRANSFER AND SHAREHOLDER
SERVICING AGENT
OppenheimerFunds Services
================================================================================
CUSTODIAN OF
PORTFOLIO SECURITIES
The Bank of New York
================================================================================
INDEPENDENT AUDITORS
Deloitte & Touche LLP
================================================================================
LEGAL COUNSEL
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Oppenheimer
Champion Income Fund. This report must be preceded or accompanied
by a Prospectus of Oppenheimer Champion Income Fund. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of
any bank, are not guaranteed by any bank, and are not insured by
the FDIC or any other agency, and involve investment risks,
including possible loss of the principal amount invested.
31 Oppenheimer Champion Income Fund
<PAGE> 32
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RA0190.001.0996 November 30, 1996
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You can count on us whenever you need assistance. That's why the
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