OPPENHEIMER STRATEGIC INCOME FUND
Supplement dated September 30, 1994 to the
Prospectus dated February 1, 1994
The Prospectus is amended as follows:
1. The supplement dated February 17, 1994, and the supplement dated
February 1, 1994 for use in the States of Arizona, Texas, Vermont and
Washington, are hereby superceded.
2. The first paragraph on the front cover is deleted and replaced with
the following:
Oppenheimer Strategic Income Fund is a mutual fund that seeks a
high level of current income by investing mainly in debt securities
and by writing covered call options on them. The Fund invests
principally in (1) debt securities of foreign governments and
companies, (2) U.S. government securities, and (3) lower-rated,
high-yield debt securities of U.S. companies, commonly known as
"junk bonds." The Fund may invest some or all of its assets in any
of these three market sectors at any time. When it invests in more
than one sector, the Fund may reduce some of the risks of investing
in only one market sector, which may help to reduce the fluctuations
in its net asset value per share.
The Fund may invest up to 100% of its assets in "junk bonds," or
foreign debt securities rated below investment grade, which are
securities that may be considered to be speculative and involve
greater risks, including risk of default, than higher-rated
securities. The Fund is a diversified portfolio designed for
investors willing to assume additional risk in return for seeking
high current income. You should carefully review the risks
associated with an investment in the Fund. Please refer to "Special
Risks-High Yield Securities" on page 5.
3. The paragraph captioned "Participation Interests" on page 9 is
deleted and replaced with the following:
-- Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan
and are acquired from banks or brokers that have made the loan or
are members of the lending syndicate. No more than 5% of the
Fund's net assets can be invested in participation interest of the
same issuer. The Manager has set certain creditworthiness
standards for issuers of loan participations, and monitors their
creditworthiness. The value of loan participation interests depends
primarily upon the creditworthiness of the borrower, and its ability
to pay interest and principal. Borrowers may have difficulty making
payments. If a borrower fails to make scheduled interest or
principal payments, the Fund could experience a decline in the net
asset value of its shares. Some borrowers may have senior
securities rated as low as "C" by Moody's or "D" by Standard &
Poor's, but may be deemed acceptable credit risks. Participation
interests are subject to the Fund's limitations on investments in
illiquid securities. See "Illiquid and Restricted Securities".
4. The first paragraph under the heading "Hedging with Options and
Futures Contracts" on page 10 is deleted and replaced with the following:
-- Hedging With Options and Futures Contracts. The Fund may buy
and sell options and futures contracts to manage its exposure to
changing interest rates, securities prices and currency exchange
rates. Some of these strategies, such as selling futures, buying
puts and writing calls, hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures,
writing puts and buying calls, tend to increase market exposure. The
Fund may invest in interest rate futures, financial futures, forward
contracts (which may involve "cross-hedging," a technique in which
the Fund hedges changes in currencies other than the currency in
which the security it holds is denominated), interest rate swap
transactions, and call and put options on debt or equity securities,
futures, securities indices and foreign currencies. All of these are
referred to as "hedging instruments."
5. The following is added after "Hedging With Options and Futures
Contracts" under the section entitled "Other Investment Techniques and
Strategies" on page 10:
Derivative Investments. The Fund can invest in a number of
different kinds of "derivative investments." In general, a
"derivative investment" is a specially designed investment whose
performance is linked to the performance of another investment or
security, such as an option, future, index or currency. In the
broadest sense, derivative investments include exchange-traded
options and futures contracts (see "Writing Covered Calls" and
"Hedging with Options and Futures Contracts"). The risks of
investing in derivative investments include not only the ability of
the company issuing the instrument to pay the amount due on the
maturity of the instrument, but also the risk that the underlying
investment or security might not perform the way the Manager
expected it to perform. The performance of derivative investments
may also be influenced by interest rate changes in the U.S. and
abroad. All of this can mean that the Fund will realize less
principal and/or income than expected. Certain derivative
investments held by the Fund may trade in the over-the-counter
market and may be illiquid. See "Illiquid and Restricted
Securities."
Examples of derivative investments the Fund may invest in
include, among others, "index-linked" notes. These are debt
securities of companies that call for payment on the maturity of the
note in different terms than the typical note where the borrower
agrees to pay a fixed sum on the maturity of the note. The payment
on maturity of an index-linked note depends on the performance of
one or more market indices, such as the S & P 500 Index. Further
examples of derivative investments the Fund may invest in include
"debt exchangeable for common stock" of an issuer or "equity-linked
debt securities" of an issuer. At maturity, the principal amount of
the debt security is exchanged for common stock of the issuer or is
payable in an amount based on the issuer's common stock price at the
time of maturity. In either case there is a risk that the amount
payable at maturity will be less than the principal amount of the
debt.
Other examples of derivative investments the Fund may invest in
are currency-indexed securities. These are typically short-term or
intermediate-term debt securities whose maturity values or interest
rates are determined by reference to one or more specified foreign
currencies. Certain currency-indexed securities purchased by the
Fund may have a payout factor tied to a multiple of the movement of
the U.S. dollar (or the foreign currency in which the security is
denominated) against the movement in the U.S. dollar, the foreign
currency, another currency, or an index. Such securities may be
subject to increased principal risk and increased volatility than
comparable securities without a payout factor in excess of one, but
the Manager believes the increased yield justifies the increased
risk.
6. The chart below the section entitled "Comparing the Fund's
Performance to the Market" on page 14 is amended as follows: Under the
caption "Average Annual Total Return of the Fund at 9/30/93," the data for
the 1-year average annual total return for Class A shares is revised to
read "8.19%."
September 30, 1994 PS230
