<PAGE> 1
OPPENHEIMER STRATEGIC INCOME FUND
Annual Report September 30, 1996
[PHOTO]
"We want
our money to
work hard,
but we're
concerned
about risk."
[OPPENHEIMERFUNDS LOGO]
<PAGE> 2
NEWS
STANDARDIZED YIELDS
For the 30 Days Ended 9/30/96:(3)
Class A
7.60%
Class B
7.21%
Class C
7.20%
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.(4)
THIS FUND IS FOR PEOPLE WHO WANT HIGH INCOME FROM AN INVESTMENT THAT'S
STRATEGICALLY DESIGNED TO LOWER RISK.
HOW YOUR FUND IS MANAGED
Oppenheimer Strategic Income Fund seeks high current income by strategically
allocating its assets among three sectors: U.S. government issues, foreign
fixed-income securities and higher-yielding, lower-rated corporate bonds.
Strategic investing gives the Fund's managers the flexibility to shift assets
among three fixed-income sectors to capitalize on worldwide investment
opportunities. At the same time, allocating the Fund's assets among three
distinct fixed-income sectors can provide the diversification necessary to
lower risk.
PERFORMANCE
Total returns at net asset value for the 12 months ended 9/30/96 for Class A, B
and C shares were 13.06%, 12.19% and 11.96%, respectively.(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 10/16/89 were 7.69%, 8.82% and 10.19%, respectively. For Class B shares,
average annual total returns for the 1-year period ended 9/30/96 and since
inception on 11/30/92 were 7.19% and 8.87%, respectively. For Class C shares,
average annual total returns for the 1-year period ended 9/30/96 and since
inception on 5/26/95 were 10.96% and 11.25%, respectively.(2)
OUTLOOK
"Our outlook is very positive. We will continue to monitor interest rates and
worldwide economic growth and adjust the Fund's portfolio as needed in
accordance to shifts we see in these areas."
David Negri and Art Steinmetz, Portfolio Managers
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 period 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 10/16/89 (inception of class), after deducting the current maximum initial
sales charge of 4.75%. Class B returns show results of hypothetical investments
on 9/30/95 and 11/30/92 (inception of class), after the deduction of the
applicable contingent deferred sales charge of 5% (1-year) and 3% (since
inception). Class C returns show results of hypothetical investments on 9/30/95
and 5/26/95 (inception of class), after the deduction of the 1% contingent
deferred sales charge for the 1-year result. An explanation of the different
total 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: 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 5-star current ranking is a weighted average of the 3- and 5-year
rankings for the class, which were 4 and 5 stars, weighted 40% and 60%,
respectively. The 1-year star rankings is 5, but is not included in the overall
ranking calculation. 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 Strategic Income Fund
<PAGE> 3
[PHOTO]
James C. Swain
Chairman
Oppenheimer
Strategic Income Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Strategic 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 Strategic Income Fund
<PAGE> 4
Q WHAT INVESTMENTS BENEFITED PERFORMANCE?
Q+A
[PHOTO]
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
HOW HAS THE FUND PERFORMED OVER THE PAST YEAR?
The Fund performed very well. This Fund was designed to take advantage of
opportunities that are offered in three primary fixed--income sectors--high
yield, U.S. government and international bonds--which tend to perform
independently of one another, reducing the risk associated with investing in
a single sector of the bond market. This is a strategy that has continued to
work well for us. As a result, the Fund was in the second quartile of its peer
group, ranked 19th out of 49 funds rated by Lipper Analytical Services.(1)
[PHOTO]
WHAT INVESTMENTS OR MARKET CONDITIONS MADE POSITIVE CONTRIBUTIONS TO
PERFORMANCE?
On the whole, the bonds that performed best over the past year were those that
were more credit-oriented rather than interest-rate sensitive. For example, our
holdings in emerging international markets were the best performers, followed by
high yield corporate bonds. While our allocation to emerging market bonds is
relatively small--comprising only about 15% of the Fund's total assets--their
returns have, at times, exceeded other investments within the portfolio by a
ratio of five to one. When you combine this success with that of our high yield
corporate bond holdings--approximately 30% of the Fund's portfolio--the two add
up to very positive results for the Fund. Of course, investors in high yield
bonds are subject to greater risk that the issuer will default on principal or
interest payments. And foreign investments entail greater risk and expenses,
including adverse currency fluctuations. But over time, we expect that the
long-term returns will more than compensate for temporary risks.
[PHOTO]
Internationally, we've seen good performance out of some of the
higher--yielding
1. Source: Lipper Analytical Services, 9/30/96. Oppenheimer Strategic Income
Fund is characterized by Lipper as a multi-sector fund. Lipper does not take
sales charges into consideration.
4 Oppenheimer Strategic Income Fund
<PAGE> 5
FACING PAGE
Top left: David Negri,
Portfolio Manager, with Mark Frank,
Member of Fixed Income Investments Team
Top right: Art Steinmetz, Portfolio Manager
Bottom: Len Darling, Executive VP,
Director of Fixed Income Investments
THIS PAGE
Top: Ashwin Vasan, Member of
Fixed Income Investments Team
Bottom: Bill Linden, Member of
Fixed Income Investments Team
A BONDS THAT WERE MORE CREDIT-ORIENTED PERFORMED THE BEST.
debt from select foreign countries, particularly Italy and Australia. Because
our investments in these countries have reached what we feel are peak values, we
have begun to take profits and have shifted those assets into the Spanish and
Canadian markets, respectively.(2)
WERE THERE ANY FACTORS THAT LIMITED PERFORMANCE OVER THE PERIOD?
As the yield on the benchmark 30-year U.S. Treasury bond moved from 6% in
January to about 7% in March, the U.S. government portion of the Fund did not
perform as well as expected. Interest rate fluctuations in the U.S. Treasury
market over the period have caused bonds to become increasingly volatile. In
response, we have decreased some of our holdings in U.S. Treasuries and
increased our holdings in mortgage-backed securities, which tend to outperform
when interest rates are rising.
WHAT AREAS ARE YOU CURRENTLY TARGETING?
As emerging markets enter a more mature phase in their economic cycle
characterized by slower growth, we are monitoring the yield potential rather
than price appreciation potential of our investments in these markets. This has
led us to look more closely at short-term money market instruments in local
currencies of foreign countries. While they have no price appreciation
potential, they do offer attractive yields. And because they are short-term
instruments, we would be able to quickly move out of those investments, if
necessary, without experiencing large price movements.
Additionally, we cut back on some of our holdings in the media and
broadcast cable sector--an area where we feel our investments are fully
valued--and have shifted those assets into the energy sector. Because the energy
sector typically offers lower risk and higher-quality issues, our expansion in
this area has helped build more quality into the portfolio.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Our outlook is very positive. We will continue to monitor interest rates and
worldwide economic growth and adjust the Fund's portfolio as needed in
accordance to shifts we see in these areas. We feel our strategy of focusing on
yield while seeking lower risk through diversification will allow the Fund to
take advantage of the upcoming market environment.
2. The Fund's portfolio is subject to change.
5 Oppenheimer Strategic Income Fund
<PAGE> 6
FINANCIALS
CONTENTS
<TABLE>
<S> <C>
STATEMENT OF INVESTMENTS 7
STATEMENT OF ASSETS AND LIABILITIES 29
STATEMENT OF OPERATIONS 30
STATEMENTS OF CHANGES IN NET ASSETS 31
FINANCIAL HIGHLIGHTS 32
NOTES TO FINANCIAL STATEMENTS 34
INDEPENDENT AUDITORS' REPORT 41
FEDERAL INCOME TAX INFORMATION 42
</TABLE>
6 Oppenheimer Strategic Income Fund
<PAGE> 7
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
=================================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--30.4%
- ---------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--26.7%
- ---------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--19.9%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, gtd. Multiclass Mtg.
Participation Certificates, Series 1455, Cl. J, 7.50%, 12/15/22 $ 25,027,500 $ 24,706,647
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, Series 176, Cl. F, 8.95%, 3/15/20 4,527,155 4,541,281
Gtd. Multiclass Mtg. Participation Certificates, 7.50%, 5/1/26 108,341,745 107,240,994
Interest-Only Stripped Mtg.-Backed Security, Trust 177, Cl. B,
5.99%--15.387%, 7/15/26(2) 237,241,207 87,816,317
-------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 3/1/26- 6/1/26 50,153,670 47,116,256
7%, 9/1/25-5/1/26 166,109,322 160,338,177
7.50%, 10/15/11-10/15/26(3) 160,000,000 160,505,150
7.50%, 6/1/24-8/1/26 192,242,557 190,271,894
8%, 10/15/26(3) 55,300,000 55,783,875
8.50%, 10/15/26(3) 175,000,000 179,485,250
Series 1994-83, Cl. Z, 7.50%, 6/25/24 37,294,545 33,273,448
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1992-103, Cl. JB, 10.50%, 11/25/20 38,755,000 43,223,839
Trust 1990-18, Cl. K, 9.60%, 3/25/20 10,100,000 11,286,750
Interest-Only Stripped Mtg.-Backed Security:
Trust 215, Cl. 2, 10.349%--12.685%, 4/1/23(2) 108,239,114 36,040,243
Trust 222, Cl. 2, 7.833%--10.615%, 6/1/23(2) 177,965,866 60,536,204
Trust 240, Cl. 2, 9.122%--13.741%, 9/1/23-9/1/25(2) 101,974,354 35,228,954
Trust 257, Cl. 2, 9.772%, 2/1/24(2) 3,425,062 1,187,533
Trust 258, Cl. 2, 10.475%, 3/1/24(2) 30,909,785 10,185,740
-------------
1,248,768,552
- ---------------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--6.8%
Government National Mortgage Assn.:
13%, 10/15/15 38,790,638 46,476,034
13.50%, 6/15/15 49,713,061 60,339,228
7.50%, 10/15/26(3) 160,000,000 158,000,000
7.50%, 11/15/25-1/15/26 33,681,631 33,294,090
8%, 10/15/26(3) 100,000,000 100,938,000
8%, 5/15/26 14,807,814 14,962,261
-------------------------------------------------------------------------------------------------------------------------
U.S. Department of Veterans Affairs, Interest-Only Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Vendee Mtg. Trust:
Series 1992-2, Cl. IO, 16.566%, 9/1/22(2) 169,527,909 7,383,735
Series 1995-2B, Cl. 2-IO, 21.735%, 6/1/25(2) 16,410,847 609,637
Series 1995-3, Cl. 1-IO, 20.407%, 9/1/25(2) 379,145,331 7,034,923
-------------
429,037,908
- ---------------------------------------------------------------------------------------------------------------------------------
PRIVATE--3.7%
- ---------------------------------------------------------------------------------------------------------------------------------
AGRICULTURAL--0.2%
Prudential Agricultural Credit, Inc., Farmer Mac Agricultural
Real Estate Trust Sr. Sub. Mtg. Pass-Through Certificates, Series 1992-2:
Cl. B2, 9.216%, 1/15/03(4)(5) 6,076,820 5,420,713
Cl. B3, 9.475%, 4/15/09(4)(5) 7,462,190 5,865,982
-------------
11,286,695
</TABLE>
7 Oppenheimer Strategic Income Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL--2.9%
CBA Mortgage Corp., Mtg. Pass-Through Certificates,
Series 1993-C1, Cl. F, 7.773%, 12/25/03(4)(5) $14,300,000 $ 11,028,875
-------------------------------------------------------------------------------------------------------------------------
Citicorp Mortgage Securities, Inc., Sub. Bonds, Series 1993-5:
Cl. B3, 7%, 4/25/23(5) 1,629,234 1,234,145
Cl. B4, 7%, 4/25/23(5) 1,439,820 172,778
-------------------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates, Cl. 1E-1, 11%, 2/15/02(5) 15,000,000 14,654,685
-------------------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1994-C1:
Cl. 2-D, 8.70%, 9/25/25(5) 2,500,000 2,612,500
Cl. 2-E, 8.70%, 9/25/25(5) 2,500,000 2,588,281
Cl. 2-G, 8.70%, 9/25/25(5) 4,870,000 4,921,744
-------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through
Certificates, Series 1995-C2, Cl. D, 8.221%, 6/15/21(4) 3,676,455 3,668,988
-------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1:
Cl. E, 7.51%, 2/1/28(4)(5) 9,365,000 7,316,406
Cl. F, 7.51%, 2/1/28(4)(5) 13,360,980 8,567,728
-------------------------------------------------------------------------------------------------------------------------
Nomura Asset Securities Corp., Commercial Mtg. Pass-Through
Certificates, Series 1995-MD4:
Cl. A-4, 7.384%, 8/13/29 5,000,000 4,725,000
Cl. A-5, 7.384%, 8/13/29 20,000,000 18,134,375
-------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. C, 8.25%, 12/25/20 1,630,166 1,648,761
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 9,768,842 9,816,160
Series 1993-C1, Cl. B, 8.75%, 5/25/24 8,172,000 8,339,271
Series 1993-C1, Cl. D, 9.45%, 5/25/24 6,597,507 6,770,692
Series 1993-C1, Cl. E, 9.50%, 5/25/24 1,233,140 1,232,370
Series 1993-C2, Cl. E, 8.50%, 3/25/25 1,090,435 1,082,939
Series 1994-C1, Cl. C, 8%, 6/25/26 8,000,000 8,086,250
Series 1994-C1, Cl. E, 8%, 6/25/26 6,222,093 5,469,123
Series 1994-C2, Cl. D, 8%, 4/25/25 1,907,782 1,918,514
Series 1994-C2, Cl. E, 8%, 4/25/25 18,216,609 17,687,189
Series 1994-C2, Cl. G, 8%, 4/25/25 3,564,148 3,065,725
Series 1995-C1, Cl. F, 6.90%, 2/25/27 11,985,745 9,888,240
-------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII,
Series 1996-C1, Cl. E, 9.18%, 1/20/06 4,550,000 3,935,750
-------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through Certificates:
Series 1995-C4, Cl. E, 8.849%, 6/25/26(4)(5) 9,453,000 7,704,195
Series 1996-CFL, Cl. D, 7.034%, 2/25/28 14,220,000 13,722,300
------------
179,992,984
</TABLE>
8 Oppenheimer Strategic Income Fund
<PAGE> 9
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MULTI-FAMILY--0.4%
ACP Mortgage LP, Cl. E, 7.389%, 2/25/28(4)(6) $ 2,610,966 $ 2,015,748
-------------------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp.:
Series 1993-11, Cl. B1, 6.25%, 1/25/09 1,314,090 1,195,720
Series 1993-11, Cl. B3, 6.25%, 2/25/09(6) 770,068 259,537
Series 1993-12, Cl. B1, 6.625%, 2/25/24 3,500,000 3,122,930
-------------------------------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(5) 9,700,000 7,338,656
-------------------------------------------------------------------------------------------------------------------------
Multifamily Capital Access One, Inc., Series 1, Cl. D, 10.47%, 1/15/24(4)(5) 3,576,000 3,154,702
-------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1991--M6, Cl. B4, 7.103%, 6/25/21(4) 8,286,081 8,102,234
Series 1992--M4, Cl. B, 7.20%, 9/25/21 2,453,632 2,454,016
-------------
27,643,543
- ---------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--0.2%
Prudential Home Mortgage Securities Corp., Sub. Fixed Rate Mtg.
Securities, Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1995--A, Cl. B2, 8.684%, 3/28/25(4)(5) 5,376,387 5,379,748
-------------------------------------------------------------------------------------------------------------------------
Ryland Mortgage Securities Corp., Sub. Bonds,
Series 1993--3, Cl. B2, 6.713%, 8/25/08(6) 1,272,025 1,195,008
-------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Series 1996--B, Cl. 1, 7.136%, 4/25/26 14,952,635 8,747,292
-------------
15,322,048
-------------
Total Mortgage-Backed Obligations (Cost $1,894,427,044) 1,912,051,730
=================================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--8.9%
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
11.625%, 11/15/02 11,579,000 14,513,546
11.875%, 11/15/03(7)(8) 91,700,000 118,550,850
13.125%, 5/15/01(8) 41,500,000 52,432,631
13.375%, 8/15/01 62,000,000 79,650,587
7.875%, 2/15/21 30,000,000 32,756,250
8.125%, 8/15/21 58,000,000 65,050,590
STRIPS, Zero Coupon, 7.56%, 11/15/18(9) 50,000,000 10,323,494
STRIPS, Zero Coupon, 6.425%, 8/15/22(9) 50,000,000 8,000,343
-------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6%, 2/15/26(8) 97,820,000 86,050,972
6.375%, 5/15/99 1,000,000 1,003,125
7.375%, 11/15/97(7) 8,500,000 8,635,464
7.50%, 10/31/99 1,000,000 1,032,812
8.75%, 10/15/97(7)(8) 80,300,000 82,658,812
-------------
Total U.S. Government Obligations (Cost $573,079,943) 560,659,476
</TABLE>
9 Oppenheimer Strategic Income Fund
<PAGE> 10
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
=================================================================================================================================
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS--31.6%
- ---------------------------------------------------------------------------------------------------------------------------------
ARGENTINA--2.2%
Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas, Series I, 5.461%, 4/1/01(4)(10) $ 65,278,388 $ 59,523,511
Past Due Interest Bonds, Series L, 6.625%, 3/31/05(4) 47,541,450 39,875,391
Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP 2,575,000 4,053,429
-------------------------------------------------------------------------------------------------------------------------
Banco de Galicia y Buenos Aires SA Sr. Unsec. Nts., 9.387%, 4/15/99(4) 11,018,000 11,217,701
-------------------------------------------------------------------------------------------------------------------------
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
10.625%, 8/7/06 15,000,000 15,187,500
-------------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Sr. Unsec. Unsub.:
Medium-Term Nts., 11.50%, 10/19/98 950,000 986,219
Nts., 11.50%, 10/19/98(6) 5,000,000 5,209,375
-------------
136,053,126
- ---------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--3.7%
Australia (Commonwealth of) Bonds:
10%, 2/15/06 AUD 63,335,000 57,465,886
9.50%, 8/15/03 AUD 2,940,000 2,559,806
-------------------------------------------------------------------------------------------------------------------------
First Australia National Mortgage Acceptance Corp. Ltd. Bonds,
Series 17, 15%, 7/15/02 AUD 1,840,000 1,763,872
-------------------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp.:
Exchangeable Gtd. Nts., 8%, 8/14/01 AUD 80,413,000 65,136,637
Gtd. Nts., 8%, 5/14/03 AUD 33,090,000 26,559,490
Gtd. Nts., 10.50%, 5/15/03 AUD 220,000 199,179
-------------------------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds, 10.25%, 11/15/06 AUD 73,100,000 67,116,069
-------------------------------------------------------------------------------------------------------------------------
Western Australia Treasury Corp. Gtd. Bonds, 10%, 7/15/05 AUD 16,790,000 15,047,323
-------------
235,848,262
- ---------------------------------------------------------------------------------------------------------------------------------
BRAZIL--1.4%
Banco Estado Minas Gerais:
8.25%, 2/10/00 11,800,000 11,121,500
8.25%, 2/10/00(6) 2,000,000 1,890,000
-------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
Capitalization Bonds, 8%, 4/15/14 35,536,209 25,041,922
Debs., 6%, 9/15/13 24,250,000 16,853,750
Nts., Banco Estado Minas Gerais, 7.875%, 2/10/99 9,320,000 8,877,300
-------------------------------------------------------------------------------------------------------------------------
Comtel Brasileira Ltd. Nts., 10.75%, 9/26/04(6) 500,000 511,875
-------------------------------------------------------------------------------------------------------------------------
Petroquimica do Nordeste Sr. Unsec. Unsub. Nts., 9.50%, 10/19/01 11,950,000 12,024,687
-------------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA:
Medium-Term Nts., 11.30%, 12/9/99(4)(5) 500,000 514,375
Medium-Term Nts., 11.30%, 12/9/99(4) 450,000 462,937
Bonds, 13%, 2/5/99 ITL 15,600,000,000 10,729,771
-------------
88,028,117
- ---------------------------------------------------------------------------------------------------------------------------------
BULGARIA--0.6%
Bulgaria (Republic of):
Disc. Bonds, Tranche A, 6.688%, 7/28/24(4) 16,520,000 8,394,225
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(11) 46,100,000 15,169,781
Front-Loaded Interest Reduction Bearer Bonds, Tranche B, 2.75%, 7/28/12(11) 8,000,000 2,642,500
Interest Arrears Bonds, 6.688%, 7/28/11(4) 31,650,000 14,559,000
-------------
40,765,506
</TABLE>
10 Oppenheimer Strategic Income Fund
<PAGE> 11
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CANADA--5.0%
Canada (Government of) Bonds:
11.75%, 2/1/03 CAD 29,520,000 $ 27,424,846
8.75%, 12/1/05 CAD 1,000,000 818,844
9.75%, 10/1/97 CAD 34,000,000 26,293,282
9.75%, 12/1/01 CAD 36,540,000 30,867,377
9.75%, 6/1/01 CAD 185,255,000 155,362,467
Series A-33, 11.50%, 9/1/00 CAD 21,915,000 19,161,610
Series A-76, 9%, 6/1/25 CAD 62,830,000 53,058,484
-------------
312,986,910
- ---------------------------------------------------------------------------------------------------------------------------------
COLOMBIA--0.1%
Financiera Energetica Nacional SA Eurobonds, 9.375%, 6/15/06(6) 3,650,000 3,667,109
- ---------------------------------------------------------------------------------------------------------------------------------
DENMARK--1.2%
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 247,150,000 46,184,501
8%, 3/15/06 DKK 167,180,000 30,572,668
-------------
76,757,169
- ---------------------------------------------------------------------------------------------------------------------------------
GERMANY--3.3%
Germany (Republic of) Bonds, Series 94, 6.25%, 1/4/24 DEM 348,250,000 210,329,287
- ---------------------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN--2.1%
United Kingdom Treasury:
Bonds, 10%, 9/8/03 GBP 31,690,000 56,511,254
Debs., 8.50%, 12/7/05 GBP 12,300,000 20,353,549
Nts., 12.50%, 11/21/05 GBP 10,000,000 19,957,765
Nts., 13%, 7/14/00 GBP 1,775,000 3,326,571
Nts., 7.75%, 9/8/06 GBP 150,000 235,243
Nts., 8%, 6/10/03 GBP 18,440,000 29,874,131
-------------
130,258,513
- ---------------------------------------------------------------------------------------------------------------------------------
INDONESIA--0.1%
PT Hutama Karya, Zero Coupon Medium-Term Nts.:
17.668%, 3/19/97(9) IDR 800,000,000 319,204
17.331%, 3/26/97(9) IDR 1,500,000,000 597,029
16.594%, 4/30/97(9) IDR 10,000,000,000 3,915,688
17.514%, 7/16/97(9) IDR 10,000,000,000 3,783,698
-------------
8,615,619
- ---------------------------------------------------------------------------------------------------------------------------------
IRELAND--0.3%
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 9,100,000 16,687,006
-------------------------------------------------------------------------------------------------------------------------
National Treasury Management Agency (Irish Government) Bonds:
8%, 10/18/00 IEP 75,000 127,381
8%, 8/18/06 IEP 50,000 85,721
-------------
16,900,108
- ---------------------------------------------------------------------------------------------------------------------------------
ITALY--0.7%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
10.50%, 7/15/00 ITL 42,480,000,000 30,296,006
9.50%, 5/1/01 ITL 17,000,000,000 11,832,593
-------------
42,128,599
</TABLE>
11 Oppenheimer Strategic Income Fund
<PAGE> 12
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JAPAN--0.6%
Japan (Government of) Bonds, Series 174, 4.60%, 9/20/04 JPY 3,536,000,000 $ 35,987,030
- ---------------------------------------------------------------------------------------------------------------------------------
MEXICO--1.4%
Banco Nacional de Comercio Exterior SNC:
Debs., 10.758%, 6/23/97(4) 280,000 289,625
International Finance BV Gtd. Nts., 8%, 8/5/03 23,000,000 20,585,000
International Finance BV Gtd. Registered Bonds, 11.25%, 5/30/06 9,700,000 10,172,875
Nts., 7.25%, 2/2/04 19,935,000 17,193,937
-------------------------------------------------------------------------------------------------------------------------
Mexican Williams Bonds, 6.631%, 11/15/08(4) 1,500,000 1,305,000
-------------------------------------------------------------------------------------------------------------------------
United Mexican States:
Bonds, 10.375%, 1/29/03 DEM 19,525,000 13,517,913
Bonds, 16.50%, 9/1/08 GBP 2,445,000 5,203,392
Nacional Financiera SNC Nts., 13.60%, 4/2/98 ESP 1,773,000,000 14,705,384
Petroleos Mexicanos Gtd. Unsec. Unsub. Nts., 7.875%, 3/2/99 CAD 5,600,000 4,103,027
-------------
87,076,153
- ---------------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND--1.5%
New Zealand Government Bonds, 10%, 7/15/97(12) NZD 111,745,000 78,864,219
-------------------------------------------------------------------------------------------------------------------------
Transpower Finance Ltd. Gtd. Unsec. Unsub. Bonds:
8%, 2/15/01(5) NZD 9,710,000 6,680,775
8%, 3/15/02 NZD 9,710,000 6,676,882
-------------
92,221,876
- ---------------------------------------------------------------------------------------------------------------------------------
PANAMA--0.2%
Panama (Republic of):
Debs., 6.629%, 5/10/02(4) 10,064,473 9,661,895
Interest Reduction Bonds, 3.50%, 7/17/14(11) 9,570,000 6,017,137
-------------
15,679,032
- ---------------------------------------------------------------------------------------------------------------------------------
POLAND--0.9%
Poland (Republic of) Treasury Bills, Zero Coupon:
20.375%, 1/2/97(9) PLZ 15,500,000 5,264,038
20.712%, 1/29/97(9) PLZ 9,960,000 3,339,047
21.464%, 10/16/96(9) PLZ 4,000,000 1,413,674
21.656%, 10/2/96(9) PLZ 12,800,000 4,550,071
21.089%, 10/23/96(9) PLZ 10,000,000 3,521,815
21.672%, 10/30/96(9) PLZ 7,500,000 2,631,750
21.076%, 11/13/96(9) PLZ 20,000,000 6,967,094
21.635%, 11/20/96(9) PLZ 4,350,000 1,509,923
20.393%, 11/27/96(9) PLZ 23,850,000 8,248,828
21.417%, 11/6/96(9) PLZ 4,200,000 1,468,472
21.394%, 12/11/96(9) PLZ 6,700,000 2,300,824
21.309%, 12/18/96(9) PLZ 25,220,000 8,629,739
20.107%, 2/12/97(9) PLZ 21,920,000 7,293,768
20.375%, 3/19/97(9) PLZ 8,680,000 2,839,250
-------------
59,978,293
</TABLE>
12 Oppenheimer Strategic Income Fund
<PAGE> 13
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RUSSIA--0.2%
Russia (Government of) Interest Nts., 6.547%, 12/29/49(3)(4) $ 17,390,000 $11,189,378
- ---------------------------------------------------------------------------------------------------------------------------------
SPAIN--1.8%
Spain (Kingdom of):
Bonds, Bonos y Obligacion del Estado, 10.15%, 1/31/06 ESP 5,900,000,000 52,592,954
Gtd. Bonds, Bonos y Obligacion del Estado, 10.30%, 6/15/02 ESP 3,449,800,000 30,251,737
Gtd. Bonds, Bonos y Obligacion del Estado, 12.25%, 3/25/00 ESP 3,148,200,000 27,996,800
-------------
110,841,491
- ---------------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL--1.2%
European Bank for Reconstruction & Development Sr. Unsec.
Medium-Term Nts., 10%, 12/20/96 CZK 326,600,000 12,040,594
-------------------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction & Development Bonds,
12.50%, 7/25/97 NZD 66,300,000 47,758,019
-------------------------------------------------------------------------------------------------------------------------
Nordic Investment Bank Unsec. Unsub. Bonds, 10.80%, 5/24/03 ITL 21,000,000,000 15,556,321
-------------
75,354,934
- ---------------------------------------------------------------------------------------------------------------------------------
SWEDEN--2.1%
Sweden (Kingdom of) Bonds:
Series 1030, 13%, 6/15/01 SEK 315,000,000 59,293,559
Series 1033, 10.25%, 5/5/03 SEK 81,600,000 14,309,874
Series 1034, 9%, 4/20/09 SEK 200,000,000 33,401,602
Series 1035, 6%, 2/9/05 SEK 182,800,000 25,228,424
-------------
132,233,459
- ---------------------------------------------------------------------------------------------------------------------------------
VENEZUELA--1.0%
Venezuela (Republic of):
Debs., Banco Venezuela TCI, Zero Coupon, 6.13%, 12/13/98(5)(9) 5,931,033 5,278,620
Disc. Bonds, Series DL, 6.625%, 12/18/07(4) 36,000,000 29,880,000
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(4) 11,950,000 10,075,344
New Money Bonds, Series A, 6.75%, 12/18/05(4) 8,000,000 6,670,000
New Money Bonds, Series B, 6.625%, 12/18/05(4) 12,000,000 10,005,000
New Money Bonds, Series P, 6.625%, 12/18/05(4) 3,250,000 2,705,625
-------------
64,614,589
-------------
Total Foreign Government Obligations (Cost $1,917,913,856) 1,987,514,560
-------------
=================================================================================================================================
LOAN PARTICIPATIONS--1.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) 1989--1990 Integrated Loan Facility Bonds:
6.875%, 10/26/03(4)(5) 17,909,160 16,565,974
6.563%, 7/1/01(4)(5) 18,647,855 17,715,462
-------------------------------------------------------------------------------------------------------------------------
Eskom Loan Participation Agreements:
6.875%, 9/15/99(4)(5) 5,147,370 4,986,515
7.125%, 4/15/98(4)(5) 1,383,908 1,366,610
-------------------------------------------------------------------------------------------------------------------------
GPA Investment BV, 6.40% Nts., 11/19/98 2,000,000 1,930,000
-------------------------------------------------------------------------------------------------------------------------
Hellenic Republic Bonds, 14.80%, 6/30/00(4) GRD 217,464,000 898,842
-------------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 6.50%, 10/16/00(4)(5) 1,537,616 1,483,800
Tranche B, 6.312%, 11/15/04(4)(5) 270,000 225,450
-------------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 6.437%, 1/1/09(4) 12,805,000 10,071,933
Tranche B, 6.437%, 1/1/04(4) 29,867,647 26,325,531
-------------------------------------------------------------------------------------------------------------------------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A:
6.563%, 9/20/97(4)(5) 66,720 59,256
6.563%, 3/20/99(4)(5) 826,965 735,999
-------------
Total Loan Participations (Cost $80,282,761) 82,365,372
</TABLE>
13 Oppenheimer Strategic Income Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
=================================================================================================================================
<S> <C> <C>
CORPORATE BONDS AND NOTES--27.9%
- ---------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY--3.0%
- ---------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.3%
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 $ 3,700,000 $ 3,903,500
-------------------------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% First Mtg. Nts., 6/1/03 3,500,000 3,823,022
-------------------------------------------------------------------------------------------------------------------------
Texas Petrochemicals Corp., 11.125% Sr. Sub. Nts., 7/1/06(6) 1,440,000 1,522,800
-------------------------------------------------------------------------------------------------------------------------
Viridian, Inc.:
10.50% Debs., 3/31/14 1,940,000 2,158,250
11% Debs., 3/31/04 CAD 10,000,000 8,271,531
9.75% Nts., 4/1/03 750,000 780,000
-------------
20,459,103
- ---------------------------------------------------------------------------------------------------------------------------------
METALS/MINING--0.7%
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03 11,826,000 12,979,035
-------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 9.875% Sr. Nts., 2/15/02 9,825,000 10,070,625
-------------------------------------------------------------------------------------------------------------------------
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06(6) 17,400,000 18,009,000
-------------------------------------------------------------------------------------------------------------------------
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05 2,250,000 2,581,875
-------------
43,640,535
- ---------------------------------------------------------------------------------------------------------------------------------
PAPER--1.8%
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts., 10/1/05 6,985,000 7,325,519
-------------------------------------------------------------------------------------------------------------------------
Asia Pulp & Paper International Finance Co., Zero Coupon
Asian Currency Nts.:
16.56%, 5/1/97(9) IDR 29,000,000,000 11,312,273
16.551%, 5/15/97(9) IDR 1,550,000,000 600,766
16.777%, 8/18/97(9) IDR 25,000,000,000 9,273,842
-------------------------------------------------------------------------------------------------------------------------
Domtar, Inc., 10.85% Debs., 8/5/17 CAD 1,700,000 1,398,785
-------------------------------------------------------------------------------------------------------------------------
Florida Coast Paper Co. LLC,
12.75% First Mtg. Nts., 6/1/03(6) 4,400,000 4,774,000
-------------------------------------------------------------------------------------------------------------------------
Gaylord Container Corp., 11.50% Sr. Nts., 5/15/01 2,350,000 2,505,687
-------------------------------------------------------------------------------------------------------------------------
Indah Kiat International Finance Co. BV:
11.875% Sr. Sec. Gtd. Nts., 6/15/02 900,000 969,750
12.50% Sr. Sec. Gtd. Nts., Series C, 6/15/06 5,400,000 5,859,000
-------------------------------------------------------------------------------------------------------------------------
PT Inti Indorayon Utama:
9.125% Sr. Nts., 10/15/00 4,025,000 3,964,625
Zero Coupon Promissory Nts., 20.107%, 2/12/97(9) IDR 30,300,000,000 12,287,364
-------------------------------------------------------------------------------------------------------------------------
QUNO Corp., 9.125% Sr. Nts., 5/15/05 1,000,000 1,010,000
-------------------------------------------------------------------------------------------------------------------------
Repap New Brunswick, Inc., 8.937% First Priority Sr. Sec. Nts., 7/15/00(4) 4,800,000 4,800,000
-------------------------------------------------------------------------------------------------------------------------
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts., 2/1/02 5,000,000 5,062,500
-------------------------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.25% Sr. Nts., 4/1/06 10,000,000 10,100,000
10.875% Sr. Sub. Nts., 4/1/08 12,585,000 12,459,150
-------------------------------------------------------------------------------------------------------------------------
Scotia Pacific Holding Co., 7.95% Timber Collateralized Nts., 7/20/15 2,444,581 2,414,983
-------------------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04 8,400,000 9,103,500
-------------------------------------------------------------------------------------------------------------------------
Stone Consolidated Corp., 10.25% Sr. Sec. Nts., 12/15/00 2,750,000 2,918,437
-------------------------------------------------------------------------------------------------------------------------
Stone Container Corp.:
10.75% First Mtg. Nts., 10/1/02 4,700,000 4,946,750
10.75% Sr. Sub. Nts., 6/15/97 900,000 920,250
-------------------------------------------------------------------------------------------------------------------------
Tembec Finance Corp., 9.875% Gtd. Sr. Nts., 9/30/05 1,800,000 1,746,000
-------------
115,753,181
</TABLE>
14 Oppenheimer Strategic Income Fund
<PAGE> 15
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STEEL--0.2%
Bar Technologies, Inc., 13.50% Gtd. Bonds, 4/1/01 $ 3,150,000 $ 3,181,500
-------------------------------------------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 10.75% Sr. Nts., 3/1/00 6,850,000 7,021,250
-------------------------------------------------------------------------------------------------------------------------
Sheffield Steel Corp., 12% First Mtg. Nts., 11/1/01 4,000,000 3,620,000
-------------
13,822,750
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED--4.7%
- ---------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--1.4%
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)(13)(14) 6,650,000 4,568,616
-------------------------------------------------------------------------------------------------------------------------
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 11.28%, 5/27/98(9) 13,150,000 11,243,250
-------------------------------------------------------------------------------------------------------------------------
E & S Holdings Corp., 10.375% Sr. Sub. Nts., 10/1/06(6) 4,950,000 5,061,375
-------------------------------------------------------------------------------------------------------------------------
Fletcher Challenge Industries Ltd., 10% Cv. Sub. Unsec. Nts., 4/30/05 NZD 9,800,000 7,040,544
-------------------------------------------------------------------------------------------------------------------------
Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 24,950,000 27,320,250
-------------------------------------------------------------------------------------------------------------------------
International Semi-Tech Microelectronics, Inc., 0%/11.50%
Sr. Sec. Disc. Nts., 8/15/03(14) 18,110,000 11,092,375
-------------------------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 10.125% Sr. Sub. Nts., 10/1/06(3) 2,000,000 2,042,500
-------------------------------------------------------------------------------------------------------------------------
Marvel Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts., Series B,
11.927%, 4/15/98(9) 5,000,000 3,962,500
-------------------------------------------------------------------------------------------------------------------------
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6) 7,500,000 8,493,750
-------------------------------------------------------------------------------------------------------------------------
Williams (J. B.) Holdings, Inc., 12% Sr. Nts., 3/1/04 5,700,000 5,728,500
-------------
86,553,660
- ---------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO--0.2%
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03 3,600,000 3,798,000
-------------------------------------------------------------------------------------------------------------------------
Doane Products Co., 10.625% Sr. Nts., 3/1/06 2,250,000 2,325,937
-------------------------------------------------------------------------------------------------------------------------
Dr. Pepper Bottling Holdings, Inc., 0%/11.625% Sr. Disc. Nts., 2/15/03(14) 6,430,000 5,674,475
-------------------------------------------------------------------------------------------------------------------------
Foodbrands America, Inc., 10.75% Sr. Sub. Nts., 5/15/06 2,000,000 2,060,000
-------------------------------------------------------------------------------------------------------------------------
Unilever CR spol. s.r.o., guaranteed by Unilever NV, Rotterdam,
The Netherlands, Zero Coupon Promissory Nts., 11.184%, 10/11/96(9) CZK 23,400,000 865,972
-------------
14,724,384
- ---------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE--0.7%
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 2,095,000 2,728,737
-------------------------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc.:
13% Sr. Sub. Nts., 7/15/02 3,497,000 3,899,155
13% Sr. Sub. Nts., 7/15/02 1,903,000 2,136,117
-------------------------------------------------------------------------------------------------------------------------
IHF Holdings, Inc., 0%/15% Sr. Sub. Disc. Nts., Series B, 11/15/04(14) 1,750,000 1,282,172
-------------------------------------------------------------------------------------------------------------------------
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04 8,000,000 8,760,000
-------------------------------------------------------------------------------------------------------------------------
Multicare Cos., Inc. (The), 12.50% Sr. Sub. Nts., 7/1/02 9,865,000 10,974,812
-------------------------------------------------------------------------------------------------------------------------
Quorum Health Group, Inc., 11.875% Sr. Sub. Nts., 12/15/02 3,750,000 4,153,125
-------------------------------------------------------------------------------------------------------------------------
Total Renal Care, Inc., 0%/12% Sr. Sub. Disc. Nts., 8/15/04(14) 10,302,000 10,907,242
-------------
44,841,360
</TABLE>
15 Oppenheimer Strategic Income Fund
<PAGE> 16
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HOTEL/GAMING--1.0%
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series A, 11/15/00(5) $ 5,775,000 $ 3,984,750
-------------------------------------------------------------------------------------------------------------------------
Aztar Corp., 13.75% Sr. Sub. Nts., 10/1/04 3,725,000 4,246,500
-------------------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc., Promissory Nts., 8/1/95(15) 33,500 --
-------------------------------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A, 11/15/00(5)(15) 2,100,000 1,470,000
-------------------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 9,700,000 9,615,125
-------------------------------------------------------------------------------------------------------------------------
HMC Acquisition Properties, Inc., 9% Sr. Nts., 12/15/07 5,900,000 5,634,500
-------------------------------------------------------------------------------------------------------------------------
Majestic Star Casino LLC (The), 12.75% Sr. Sec. Nts., 5/15/03(6) 5,100,000 5,610,000
-------------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts., 11/15/02 6,850,000 8,631,000
-------------------------------------------------------------------------------------------------------------------------
Players International, Inc., 10.875% Sr. Nts., 4/15/05 1,850,000 1,840,750
-------------------------------------------------------------------------------------------------------------------------
Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05 2,330,000 2,440,675
-------------------------------------------------------------------------------------------------------------------------
Santa Fe Hotel, Inc., 11% Gtd. First Mtg. Nts., 12/15/00 100,000 67,500
-------------------------------------------------------------------------------------------------------------------------
Showboat Marina Casino Partnership/Showboat Marina Finance Corp.,
13.50% First Mtg. Nts., 3/15/03 4,800,000 5,208,000
-------------------------------------------------------------------------------------------------------------------------
Stratosphere Corp., 14.25% Gtd. First Mtg. Nts., 5/15/02 2,400,000 1,872,000
-------------------------------------------------------------------------------------------------------------------------
Trump Atlantic City Associates/Trump Atlantic City Funding, Inc.,
11.25% First Mtg. Nts., 5/1/06 12,100,000 12,009,250
-------------
62,630,050
- ---------------------------------------------------------------------------------------------------------------------------------
LEISURE--0.1%
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02(5) 6,845,068 7,144,540
- ---------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS--0.5%
Apple South, Inc., 9.75% Sr. Nts., 6/1/06 3,500,000 3,465,000
-------------------------------------------------------------------------------------------------------------------------
Carrols Corp., 11.50% Sr. Nts., 8/15/03 3,570,000 3,739,575
-------------------------------------------------------------------------------------------------------------------------
Family Restaurants, Inc., 0%/10.875% Sr. Sub. Disc. Nts., 2/1/04(14) 4,000,000 1,220,000
-------------------------------------------------------------------------------------------------------------------------
Foodmaker, Inc.:
9.25% Sr. Nts., 3/1/99 6,465,000 6,481,162
9.75% Sr. Sub. Nts., 6/1/02 14,000,000 13,790,000
-------------
28,695,737
- ---------------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL--0.8%
Clark-Schwebel, Inc., 10.50% Sr. Nts., 4/15/06(6) 8,200,000 8,528,000
-------------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02 1,696,000 1,852,880
-------------------------------------------------------------------------------------------------------------------------
Polysindo International Finance Co. BV, 11.375% Bonds, 6/15/06 5,600,000 5,873,000
-------------------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.:
17.90%, 10/23/96(9) IDR 20,500,000,000 8,745,499
19.11%, 2/28/97(9) IDR 2,450,000,000 982,637
19.86%, 4/29/97(9) IDR 11,440,000,000 4,428,559
20.60%, 7/27/97(9) IDR 6,000,000,000 2,225,940
20.15%, 7/8/97(9) IDR 5,000,000,000 1,868,980
-------------------------------------------------------------------------------------------------------------------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 12,325,000 13,372,625
-------------
47,878,120
</TABLE>
16 Oppenheimer Strategic Income Fund
<PAGE> 17
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY--2.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy CORP.:
10.50% Sr. Nts., 6/1/02 $ 900,000 $ 957,375
9.125% Sr. Nts., 4/15/06 4,450,000 4,427,750
-------------------------------------------------------------------------------------------------------------------------
DeepTech International, Inc., 12% Sr. Sec. Nts., 12/15/00 1,000,000 1,015,000
-------------------------------------------------------------------------------------------------------------------------
Falcon Drilling Co., Inc., 8.875% Sr. Nts., Series B, 3/15/03 3,000,000 2,962,500
-------------------------------------------------------------------------------------------------------------------------
Global Marine, Inc., 12.75% Sr. Sec. Nts., 12/15/99 6,785,000 7,361,725
-------------------------------------------------------------------------------------------------------------------------
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 14,750,000 15,081,875
-------------------------------------------------------------------------------------------------------------------------
Mariner Energy, Inc., 10.50% Sr. Sub. Nts., 8/1/06(6) 6,525,000 6,753,375
-------------------------------------------------------------------------------------------------------------------------
Maxus Energy Corp.:
11.50% Debs., 11/15/15 3,500,000 3,657,500
8.50% Debs., 4/1/08 1,000,000 970,000
-------------------------------------------------------------------------------------------------------------------------
Mesa Operating Co.:
0%/11.625% Gtd. Sr. Sub. Disc. Nts., 7/1/06(14) 10,250,000 6,611,250
10.625% Gtd. Sr. Sub. Nts., 7/1/06 13,800,000 14,576,250
-------------------------------------------------------------------------------------------------------------------------
OPI International, Inc., 12.875% Sr. Gtd. Nts., 7/15/02 13,000,000 14,365,000
-------------------------------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05 2,452,000 2,712,525
9.375% Sub. Debs., 2/1/06 7,450,000 7,124,062
-------------------------------------------------------------------------------------------------------------------------
Plains Resources, Inc., 10.25% Sr. Sub. Nts., 3/15/06 800,000 838,000
-------------------------------------------------------------------------------------------------------------------------
Southwest Gas Corp., 9.75% Debs., Series F, 6/15/02 125,000 137,704
-------------------------------------------------------------------------------------------------------------------------
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02 20,900,000 22,258,500
-------------------------------------------------------------------------------------------------------------------------
Triton Energy Corp.:
0%/9.75% Sr. Sub. Disc. Nts., 12/15/00(14) 800,000 812,000
Zero Coupon Sr. Sub. Disc. Nts., 10.33%, 11/1/97(9) 11,350,000 10,527,125
-------------------------------------------------------------------------------------------------------------------------
United Meridian Corp., 10.375% Sr. Sub. Nts., 10/15/05 2,750,000 2,935,625
-------------------------------------------------------------------------------------------------------------------------
Vintage Petroleum, Inc., 9% Sr. Sub. Nts., 12/15/05 3,600,000 3,573,000
-------------
129,658,141
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--1.6%
- ---------------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS--0.6%
Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97 625,000 617,187
11% Sr. Unsec. Unsub. Bonds, 10/6/97 3,050,000 2,989,000
11% Unsec. Unsub. Nts., 11/24/97 647,000 634,060
9% Unsec. Unsub. Bonds, 10/29/98 3,240,000 3,013,200
-------------------------------------------------------------------------------------------------------------------------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 1,250,000 1,162,500
-------------------------------------------------------------------------------------------------------------------------
Banco Itamarati SA, 11.625% Sr. Unsec. Debs., 11/23/97 1,310,000 1,349,300
-------------------------------------------------------------------------------------------------------------------------
Banco Mexicano SA, 8% Sr. Unsec. Unsub. Exchangeable
Medium-Term Nts., 11/4/98 640,000 623,200
-------------------------------------------------------------------------------------------------------------------------
Banco Nacional de Mexico SA, 11% Sub. Exchangeable Capital Debs., 7/15/03 6,350,000 6,469,062
-------------------------------------------------------------------------------------------------------------------------
First Nationwide Escrow Corp., 10.625% Sr. Sub. Nts., 10/1/03(6) 11,650,000 12,188,813
-------------------------------------------------------------------------------------------------------------------------
First Nationwide Holdings, Inc., 12.50% Sr. Nts., 4/15/03 2,000,000 2,170,000
-------------------------------------------------------------------------------------------------------------------------
Ocwen Financial Corp., 11.875% Nts., 10/1/03 2,060,000 2,161,069
-------------------------------------------------------------------------------------------------------------------------
Siam Commercial Bank Public Ltd., Zero Coupon Debs.,
11.084%, 11/18/96(3)(9) THB 115,500,000 4,479,321
-------------
37,856,712
</TABLE>
17 Oppenheimer Strategic Income Fund
<PAGE> 18
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL--0.9%
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98 $ 12,980,000 $ 12,687,950
-------------------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I., 14% Sub. Nts., 6/10/02(5) 726,900 803,225
-------------------------------------------------------------------------------------------------------------------------
GPA Delaware, Inc.:
8.75% Gtd. Nts., 12/15/98 19,105,000 19,296,050
9.75%, 12/10/01 2,000,000 2,005,000
-------------------------------------------------------------------------------------------------------------------------
GPA Holland BV:
8.50% Medium-Term Nts., 2/10/97(5) 10,500,000 10,591,875
8.94% Medium-Term Nts., Series C, 2/16/99 2,000,000 2,030,000
-------------------------------------------------------------------------------------------------------------------------
GPA Netherlands BV, 8.50% Medium-Term Nts., 3/3/97(5) 6,500,000 6,556,875
-------------------------------------------------------------------------------------------------------------------------
Olympic Financial Ltd., 13% Sr. Nts., 5/1/00 2,850,000 3,238,313
-------------
57,209,288
- ---------------------------------------------------------------------------------------------------------------------------------
INSURANCE--0.1%
Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02 2,500,000 2,734,375
-------------------------------------------------------------------------------------------------------------------------
Terra Nova Insurance (UK) Holdings PLC, 10.75% Sr. Nts., 7/1/05 900,000 1,010,552
-------------
3,744,927
- ---------------------------------------------------------------------------------------------------------------------------------
HOUSING RELATED--1.0%
- ---------------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS--0.3%
Building Materials Corp., 0%/11.75% Sr. Deferred Coupon Nts.,
Series B, 7/1/04(14) 9,000,000 7,290,000
-------------------------------------------------------------------------------------------------------------------------
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03 12,375,000 12,251,250
-------------
19,541,250
- ---------------------------------------------------------------------------------------------------------------------------------
HOMEBUILDERS/
REAL ESTATE--0.7%
Blue Bell Funding, Inc., 11.85% Sec. Extendible Adjustable Rate Nts., 5/1/99 4,414,000 4,436,070
-------------------------------------------------------------------------------------------------------------------------
First Place Tower, Inc.:
9.22% First Mtg. Bonds, 12/15/05 CAD 1,547,050 1,229,316
Units (each unit consists of one $10 principal amount of
8.50% cv. sub. debs., 12/15/15 and 40 common shares)(13) CAD 930,410 1,212,283
-------------------------------------------------------------------------------------------------------------------------
Hovnanian K. Enterprises, Inc., 11.25% Sub. Gtd. Nts., 4/15/02 6,900,000 6,779,250
-------------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 17,075,000 18,184,875
-------------------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(5) 15,000,000 12,075,000
-------------
43,916,794
- ---------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING--1.0%
- ---------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/ELECTRONICS/
COMPUTERS--0.4%
Communications & Power Industries, Inc., 12% Sr. Sub. Nts., 8/1/05 10,750,000 11,744,375
-------------------------------------------------------------------------------------------------------------------------
Rohr, Inc., 11.625% Sr. Nts., 5/15/03 7,600,000 8,445,500
-------------------------------------------------------------------------------------------------------------------------
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01 1,000,000 1,055,000
-------------------------------------------------------------------------------------------------------------------------
Unisys Corp.:
15% Credit Sensitive Nts., 7/1/97(4) 5,250,000 5,565,000
8.875% Nts., 7/15/97 1,000,000 1,002,500
-------------
27,812,375
</TABLE>
18 Oppenheimer Strategic Income Fund
<PAGE> 19
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE--0.6%
Aftermarket Technology Corp., 12% Sr. Sub. Nts., Series B, 8/1/04 $ 4,370,000 $ 4,785,150
-------------------------------------------------------------------------------------------------------------------------
Chrysler Financial Corp., 13.25% Nts., 10/15/99 4,500,000 5,298,574
-------------------------------------------------------------------------------------------------------------------------
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 5,650,000 5,981,938
-------------------------------------------------------------------------------------------------------------------------
Foamex LP/Foamex Capital Corp.:
11.25% Sr. Nts., 10/1/02 2,500,000 2,650,000
9.50% Sr. Sec. Nts., 6/1/00 3,672,000 3,727,080
-------------------------------------------------------------------------------------------------------------------------
JPS Automotive Products Corp., 11.125% Sr. Nts., 6/15/01 2,500,000 2,587,500
-------------------------------------------------------------------------------------------------------------------------
Lear Corp., 9.50% Sub. Nts., 7/15/06 3,200,000 3,352,000
-------------------------------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 8,825,000 8,604,375
-------------
36,986,617
- ---------------------------------------------------------------------------------------------------------------------------------
MEDIA--4.5%
- ---------------------------------------------------------------------------------------------------------------------------------
BROADCASTING--1.0%
American Radio Systems Corp., 9% Sr. Sub. Nts., 2/1/06 3,600,000 3,487,500
-------------------------------------------------------------------------------------------------------------------------
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05 1,750,000 1,763,125
-------------------------------------------------------------------------------------------------------------------------
Chancellor Broadcasting Co., 12.50% Sr. Sub. Nts., 10/1/04 3,740,000 4,207,500
-------------------------------------------------------------------------------------------------------------------------
New City Communications, Inc., 11.375% Sr. Sub. Nts., 11/1/03 7,125,000 7,873,125
-------------------------------------------------------------------------------------------------------------------------
New World Communications Group Holding Corp.,
Zero Coupon Sr. Disc. Nts., Series B, 13.50%, 6/15/99(9) 1,250,000 1,000,000
-------------------------------------------------------------------------------------------------------------------------
Outlet Broadcasting, Inc., 10.875% Sr. Sub. Nts., 7/15/03 2,000,000 2,218,412
-------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.625% Sr. Sub. Nts., 10/1/02 18,850,000 19,981,000
-------------------------------------------------------------------------------------------------------------------------
SCI Television, Inc., 11% Sr. Nts., Series 1, 6/30/05 2,153,155 2,306,567
-------------------------------------------------------------------------------------------------------------------------
SFX Broadcasting, Inc., 10.75% Sr. Sub. Nts., 5/15/06 1,300,000 1,361,750
-------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 12/15/03 8,675,000 8,848,500
-------------------------------------------------------------------------------------------------------------------------
Univision Television Group, Inc., 11.75% Sr. Sub. Nts., 1/15/01 5,500,000 5,857,500
-------------------------------------------------------------------------------------------------------------------------
Young Broadcasting, Inc., 9% Sr. Sub. Nts., 1/15/06 4,300,000 4,063,500
-------------
62,968,479
- ---------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--2.2%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04(14) 13,706,495 10,314,137
-------------------------------------------------------------------------------------------------------------------------
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)(13)(14) 4,170,000 2,522,850
-------------------------------------------------------------------------------------------------------------------------
Bell Cablemedia PLC:
0%/11.875% Sr. Disc. Nts., 9/15/05(14) 7,150,000 4,897,750
0%/11.95% Sr. Disc. Nts., 7/15/04(14) 23,300,000 17,882,750
-------------------------------------------------------------------------------------------------------------------------
Cablevision Industries Corp.:
10.75% Sr. Nts., 1/30/02 1,000,000 1,070,000
9.25% Sr. Debs., Series B, 4/1/08 4,400,000 4,532,000
-------------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.:
10.50% Sr. Sub. Debs., 5/15/16 7,950,000 8,109,000
10.75% Sr. Sub. Debs., 4/1/04 6,325,000 6,554,281
9.875% Sr. Sub. Debs., 2/15/13 2,620,000 2,554,500
9.875% Sr. Sub. Nts., 5/15/06 1,215,000 1,221,075
-------------------------------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 11% Sr. Sub. Debs., 6/1/07 3,000,000 3,393,156
-------------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts., 6/1/04(14) 19,350,000 15,334,875
-------------------------------------------------------------------------------------------------------------------------
Fundy Cable Ltd./Ltee, 11% Sr. Sec. Second Priority Nts., 11/15/05 4,000,000 4,200,000
</TABLE>
19 Oppenheimer Strategic Income Fund
<PAGE> 20
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CABLE TELEVISION
(CONTINUED)
Helicon Group LP/Helicon Capital Corp., 9% Sr. Sec. Nts., Series B, 11/1/03(4) $ 11,825,000 $ 12,002,375
-------------------------------------------------------------------------------------------------------------------------
International CableTel, Inc.:
0%/10.875% Sr. Deferred Coupon Nts., 10/15/03(14) 900,000 686,250
0%/11.50% Sr. Deferred Coupon Nts., Series A, 2/1/06(14) 10,290,000 6,199,725
0%/12.75% Sr. Deferred Coupon Nts., 4/15/05(14) 8,950,000 6,063,625
-------------------------------------------------------------------------------------------------------------------------
Marcus Cable Operating Co. LP/Marcus Cable Capital Corp.,
0%/13.50% Sr. Sub. Gtd. Disc. Nts., Series II, 8/1/04(14) 1,900,000 1,486,750
-------------------------------------------------------------------------------------------------------------------------
People's Choice TV Corp., 0%/13.125% Sr. Disc. Nts., 6/1/04(14) 400,000 248,000
-------------------------------------------------------------------------------------------------------------------------
Rogers Cablesystems Ltd.:
10% Sr. Sec. Second Priority Debs., 12/1/07 10,100,000 10,150,500
11% Sr. Sub. Gtd. Debs., 12/1/15 2,000,000 2,060,000
-------------------------------------------------------------------------------------------------------------------------
TeleWest PLC, 0%/11% Sr. Disc. Debs., 10/1/07(14) 9,675,000 6,240,375
-------------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 3,600,000 3,999,164
-------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc.:
0%/14% Sr. Disc. Nts., 5/15/06(6)(14) 1,000,000 540,000
Zero Coupon Sr. Sec. Disc. Nts., Series B, 14%, 11/15/99(9) 350,000 245,000
Zero Coupon Sr. Sec. Disc. Nts., 14%, 11/15/99(9) 11,075,000 7,752,500
-------------
140,260,638
- ---------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEDIA--1.1%
Ackerley Communications, Inc., 10.75% Sr. Sec. Nts., Series A, 10/1/03 9,050,000 9,502,500
-------------------------------------------------------------------------------------------------------------------------
GSP I Corp., 10.15% First Mtg. Bonds, 6/24/10(5) 810,039 910,282
-------------------------------------------------------------------------------------------------------------------------
Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 2,650,000 2,524,125
-------------------------------------------------------------------------------------------------------------------------
Lamar Advertising Co., 11% Sr. Sec. Nts., 5/15/03 12,250,000 12,740,000
-------------------------------------------------------------------------------------------------------------------------
News America Holdings, Inc.:
10.125% Sr. Gtd. Debs., 10/15/12 3,300,000 3,721,452
12% Sr. Nts., 12/15/01 2,500,000 2,676,180
-------------------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp.:
0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(14) 24,500,000 22,295,000
9.75% Sr. Sec. Nts., 8/1/00 2,525,000 2,676,500
-------------------------------------------------------------------------------------------------------------------------
Time Warner Entertainment LP/Time Warner, Inc., 8.375% Sr. Debs., 3/15/23 9,254,000 9,206,942
-------------------------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.125% Debs., 1/15/13 2,000,000 2,121,628
-------------------------------------------------------------------------------------------------------------------------
Universal Outdoor Holdings, Inc., 11% Sr. Nts., 11/15/03 3,281,000 3,691,125
-------------
72,065,734
- ---------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT/FILM--0.2%
Imax Corp., 7% Sr. Nts., 3/1/01(11) 13,780,000 13,504,400
- ---------------------------------------------------------------------------------------------------------------------------------
PUBLISHING/PRINTING--0.0%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(14) 3,400,000 2,397,000
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER--1.1%
- ---------------------------------------------------------------------------------------------------------------------------------
CONGLOMERATES--0.5%
Acadia Partners LP, 13% Sr. Sub. Nts., 10/1/97(6) 25,000,000 25,625,000
-------------------------------------------------------------------------------------------------------------------------
MacAndrews & Forbes Holdings, Inc., 13% Sub. Debs., 3/1/99 5,215,000 5,241,075
-------------------------------------------------------------------------------------------------------------------------
Talley Industries, Inc., 0%/12.25% Sr. Disc. Debs., 10/15/05(14) 3,562,000 3,098,940
-------------
33,965,015
</TABLE>
20 Oppenheimer Strategic Income Fund
<PAGE> 21
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENVIRONMENTAL--0.1%
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 $ 3,350,000 $ 3,199,250
-------------------------------------------------------------------------------------------------------------------------
Mid-American Waste Systems, Inc., 12.25% Sr. Sub. Nts., 2/15/03(5)(15) 1,000,000 625,000
-------------
3,824,250
- ---------------------------------------------------------------------------------------------------------------------------------
SERVICES--0.5%
Borg-Warner Security Corp., 9.125% Sr. Sub. Nts., 5/1/03 10,660,000 10,326,875
-------------------------------------------------------------------------------------------------------------------------
CE Casecnan Water & Energy, Inc., 11.95% Sr. Nts., Series B, 11/15/10 1,800,000 1,953,000
-------------------------------------------------------------------------------------------------------------------------
Grupo Mexicano de Desarrollo SA, 8.25% Gtd. Nts., 2/17/01(6) 8,000,000 5,150,000
-------------------------------------------------------------------------------------------------------------------------
Protection One Alarm Monitoring, Inc.:
0%/13.625% Sr. Disc. Nts., 6/30/05(14) 4,650,000 4,161,750
6.75% Cv. Sr. Sub. Nts., 9/15/03 2,300,000 2,261,188
-------------------------------------------------------------------------------------------------------------------------
Sociedad Comercial del Plata SA, 11.50% Medium-Term Nts., 5/9/00(5) 9,300,000 9,439,500
-------------
33,292,313
- ---------------------------------------------------------------------------------------------------------------------------------
RETAIL--1.3%
- ---------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAILING--0.4%
Cole National Group, Inc., 11.25% Sr. Nts., 10/1/01 6,050,000 6,465,938
-------------------------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc., 12% Sr. Nts., 10/1/03 6,600,000 7,062,000
-------------------------------------------------------------------------------------------------------------------------
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 4,670,000 4,745,888
-------------------------------------------------------------------------------------------------------------------------
United Stationers Supply Co., 12.75% Sr. Sub. Nts., 5/1/05 5,000,000 5,450,000
-------------
23,723,826
- ---------------------------------------------------------------------------------------------------------------------------------
SUPERMARKETS--0.9%
Grand Union Co., 12% Sr. Nts., 9/1/04 24,448,000 24,784,160
-------------------------------------------------------------------------------------------------------------------------
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03(10) 3,051,268 3,066,524
-------------------------------------------------------------------------------------------------------------------------
Kroger Co., 8.50% Sr. Sec. Debs., 6/15/03 4,000,000 4,132,772
-------------------------------------------------------------------------------------------------------------------------
Penn Traffic Co.:
10.25% Sr. Nts., 2/15/02 1,500,000 1,327,500
11.50% Sr. Nts., 4/15/06 1,950,000 1,740,375
-------------------------------------------------------------------------------------------------------------------------
Purity Supreme, Inc., 11.75% Sr. Sec. Nts., Series B, 8/1/99 1,065,000 1,139,676
-------------------------------------------------------------------------------------------------------------------------
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04 4,010,000 4,100,225
10.45% Sr. Nts., 6/15/04 11,850,000 12,116,625
13.75% Sr. Sub. Nts., 6/15/05 1,500,000 1,590,000
-------------
53,997,857
- ---------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.8%
- ---------------------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION--0.3%
American International Group, Inc., 11.70% Unsec. Unsub. Bonds, 12/4/01 ITL 3,000,000,000 2,266,680
-------------------------------------------------------------------------------------------------------------------------
Atlas Air, Inc., 12.25% Pass-Through Certificates, 12/1/02 11,000,000 11,742,500
-------------------------------------------------------------------------------------------------------------------------
Northwest Airlines, Inc., 12.092% Sr. Gtd. Nts., 12/31/00 2,944,070 3,028,713
-------------
17,037,893
</TABLE>
21 Oppenheimer Strategic Income Fund
<PAGE> 22
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RAILROADS--0.3%
Transtar Holdings LP/Transtar Capital Corp.,
0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(14) $ 23,816,000 $ 18,010,850
- ---------------------------------------------------------------------------------------------------------------------------------
SHIPPING--0.2%
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts., 7/1/04 10,150,000 11,888,188
- ---------------------------------------------------------------------------------------------------------------------------------
UTILITIES--6.8%
- ---------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.8%
Beaver Valley II Funding Corp., 9% Second Lease Obligation Bonds, 6/1/17 956,000 879,520
-------------------------------------------------------------------------------------------------------------------------
C.A. La Electricidad de Caracas, 6.50% Exchange Eurobonds, 9/30/03(4) 3,273,205 2,745,401
-------------------------------------------------------------------------------------------------------------------------
CalEnergy Co., Inc.:
0%/10.25% Sr. Disc. Nts., 1/15/04(14) 18,990,000 19,417,275
9.50% Sr. Nts., 9/15/06(6) 2,925,000 2,972,531
-------------------------------------------------------------------------------------------------------------------------
Calpine Corp., 10.50% Sr. Nts., 5/15/06(6) 1,000,000 1,030,000
-------------------------------------------------------------------------------------------------------------------------
Centragas Natural Gas Transmission System, 10.65% Sr. Sec. Bonds, 12/1/10(6) 8,398,799 8,900,103
-------------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 9,500,000 9,832,500
-------------------------------------------------------------------------------------------------------------------------
First PV Funding Corp.:
10.15% Lease Obligation Bonds, Series 1986B, 1/15/16 20,350,000 21,520,125
10.30% Lease Obligation Bonds, Series 1986A, 1/15/14 16,700,000 17,660,250
-------------------------------------------------------------------------------------------------------------------------
New Zealand Electric Corp., 10% Debs., 10/15/01 NZD 19,420,000 14,423,319
-------------------------------------------------------------------------------------------------------------------------
Subic Power Corp.:
9.50% Sr. Sec. Nts., 12/28/08 6,853,448 6,862,015
9.50% Sr. Sec. Nts., 12/28/08(6) 5,517,241 5,524,138
-------------
111,767,177
- ---------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--5.0%
A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05 11,500,000 11,442,500
-------------------------------------------------------------------------------------------------------------------------
American Communications Services, Inc.:
0%/12.75% Sr. Disc. Nts., 4/1/06(14) 6,100,000 3,263,500
0%/13% Sr. Disc. Nts., 11/1/05(14) 7,050,000 4,053,750
-------------------------------------------------------------------------------------------------------------------------
Arch Communications Group, Inc., 0%/10.875% Sr. Disc. Nts., 3/15/08(14) 2,265,000 1,302,375
-------------------------------------------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04(14) 6,800,000 5,321,000
-------------------------------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(5)(14) 11,400,000 9,205,500
-------------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., 0%/13% Sr. Disc. Nts., 6/15/05(5)(14) 4,900,000 3,074,750
-------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc.,
Zero Coupon Sr. Disc. Nts., 12.133%, 8/15/00(9) 27,295,000 17,400,563
-------------------------------------------------------------------------------------------------------------------------
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03(14) 26,956,000 22,912,600
-------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(14) 7,250,000 4,495,000
-------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc.:
0%/15% Sr. Sec. Disc. Nts., 7/15/05(14) 18,400,000 12,006,000
12% Cv. Sr. Sub. Nts., 2/15/01 750,000 825,000
GST Telecommunications, Inc., 0%/13.875% Cv. Sr. Sub. Disc. Nts., 12/15/05(6)(14) 1,800,000 1,527,030
-------------------------------------------------------------------------------------------------------------------------
GST USA, Inc., 0%/13.875% Bonds, 12/15/05(14) 14,325,000 8,129,438
-------------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone LP/Horizon Finance Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 10/1/00(14) 28,039,000 27,092,684
</TABLE>
22 Oppenheimer Strategic Income Fund
<PAGE> 23
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS
(CONTINUED)
Hyperion Telecommunications, Inc., 0%/13% Sr. Disc. Nts., 4/15/03(6)(14) $ 5,500,000 $ 3,382,500
-------------------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp., 0%/14% Sr. Disc. Nts., 5/15/02(14) 13,050,000 4,502,250
-------------------------------------------------------------------------------------------------------------------------
IntelCom Group (USA), Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(14) 3,290,000 2,048,025
0%/13.50% Sr. Disc. Nts., 9/15/05(14) 18,525,000 12,481,219
-------------------------------------------------------------------------------------------------------------------------
MFS Communications Co., Inc.:
0%/8.875% Sr. Disc. Nts., 1/15/06(14) 3,815,000 2,684,806
0%/9.375% Sr. Disc. Nts., 1/15/04(14) 20,351,000 17,196,595
-------------------------------------------------------------------------------------------------------------------------
Occidente y Caribe Celular SA, Units (each unit consists of
$1,000 principal amount of 0%/14% sr. disc. nts., 3/15/04 and
one warrant to purchase 5.709 ordinary shares)(6)(13)(14) 5,400,000 2,835,000
-------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06(6) 12,975,000 13,591,313
-------------------------------------------------------------------------------------------------------------------------
ORBCOMM Global LP/ORBCOMM Global Capital Corp., 14% Sr. Nts., 8/15/04(6) 14,885,000 15,368,763
-------------------------------------------------------------------------------------------------------------------------
Petersburg Long Distance, Inc.:
9% Cv. Sub. Nts., 6/1/06(6) 1,500,000 1,785,000
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)(6)(13)(14) 13,200,000 10,824,000
-------------------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03(14) 9,350,000 7,620,250
0%/14% Sr. Sub. Disc. Nts., 11/15/01(14) 23,817,000 22,447,523
-------------------------------------------------------------------------------------------------------------------------
Real Time Data, Inc., Units (each unit consists of $1,000
principal amount of 0%/13.50% sub. disc. nts., 8/15/06 and one
warrant to purchase six ordinary shares)(5)(13)(14) 14,740,000 7,959,600
-------------------------------------------------------------------------------------------------------------------------
Sprint Spectrum LP/Sprint Spectrum Finance Corp., 11% Sr. Disc. Nts., 8/15/06 6,300,000 6,567,750
-------------------------------------------------------------------------------------------------------------------------
Telefonica de Argentina SA, 11.875% Unsec. Nts., 11/1/04 300,000 319,875
-------------------------------------------------------------------------------------------------------------------------
Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(14) 26,950,000 17,382,750
-------------------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II:
14% Sr. Nts., 11/1/04 11,100,000 12,626,250
9.50% Sr. Nts., 2/1/04 2,350,000 2,209,000
-------------------------------------------------------------------------------------------------------------------------
Western Wireless Corp., 10.50% Sr. Sub. Nts., 6/1/06 15,875,000 16,311,563
-------------
312,195,722
-------------
Total Corporate Bonds and Notes (Cost $1,698,268,461) 1,753,768,866
-------------
<CAPTION>
SHARES
=================================================================================================================================
<S> <C> <C>
COMMON STOCKS--0.8%
American Telecasting, Inc. (16) 25,000 275,000
-------------------------------------------------------------------------------------------------------------------------
Berg Electronics Corp.(5)(16) 38,740 1,002,882
-------------------------------------------------------------------------------------------------------------------------
Capstone Capital Corp. 297 6,237
-------------------------------------------------------------------------------------------------------------------------
Celcaribe SA(5)(16) 1,658,520 2,404,854
-------------------------------------------------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A(16) 23,350 636,288
-------------------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I. (5) 525 527,625
-------------------------------------------------------------------------------------------------------------------------
El Paso Electric Co. (16) 1,154,506 6,277,626
-------------------------------------------------------------------------------------------------------------------------
Equitable Bag, Inc.(5)(16) 68,985 172,462
-------------------------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc.(5)(16) 183,000 6,496,500
-------------------------------------------------------------------------------------------------------------------------
Grand Casinos, Inc. (16) 25,000 368,750
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
23 Oppenheimer Strategic Income Fund
<PAGE> 24
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS
(CONTINUED)
Grand Union Co. (16) 244,257 $ 1,557,138
-------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc. (16) 407,400 4,634,175
-------------------------------------------------------------------------------------------------------------------------
ICG Communications, Inc. (16) 50,000 1,050,000
-------------------------------------------------------------------------------------------------------------------------
Kash 'N Karry Food Stores, Inc. (16) 30,670 753,332
-------------------------------------------------------------------------------------------------------------------------
Ladish, Inc. (16) 806,000 1,410,500
-------------------------------------------------------------------------------------------------------------------------
New World Communications Group, Inc., Cl. B(16) 96,445 2,230,291
-------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp.(5)(16) 640,625 17,725,293
-------------------------------------------------------------------------------------------------------------------------
Thrifty PayLess Holdings, Inc., Cl. B(16) 11,400 212,325
-------------------------------------------------------------------------------------------------------------------------
Triangle Wire & Cable, Inc.(5)(16) 232,222 232,222
-------------------------------------------------------------------------------------------------------------------------
Walter Industries, Inc. (16) 174,583 2,247,756
-------------
Total Common Stocks (Cost $37,979,312) 50,221,256
=================================================================================================================================
PREFERRED STOCKS--1.5%
BankAmerica Corp., 8.375%, Series K 150,000 3,806,250
-------------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.:
11.125% Exchangeable Preferred Stock, Series M(10) 52,121 5,081,797
8.50% Cum. Cv., Series I 294,000 7,239,750
-------------------------------------------------------------------------------------------------------------------------
California Federal Bank, 10.625% Non-Cum., Series B 89,475 9,864,619
-------------------------------------------------------------------------------------------------------------------------
CRIIMI MAE, Inc., 10.875% Cum. Cv. Preferred Stock, Series B 297,000 7,907,625
-------------------------------------------------------------------------------------------------------------------------
Earthwatch, Inc., 12% Cv. Sr. Preferred Stock, Series C(5)(10) 600,000 6,240,000
-------------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 11.40% Series A Preferred Stock(10) 52,300 6,014,500
-------------------------------------------------------------------------------------------------------------------------
Fidelity Federal Bank, 12% Non-Cum. Exchangeable
Perpetual Preferred Stock, Series A 160,000 4,440,000
-------------------------------------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum. 111,500 12,627,375
-------------------------------------------------------------------------------------------------------------------------
Glendale Federal Bank, F.S.B., 8.75% Non-Cum. Cv., Series E 25,000 1,178,125
-------------------------------------------------------------------------------------------------------------------------
K-III Communications Corp.:
$11.625 Exchangeable, Series B(10) 66,963 6,713,065
Sr. Exchangeable, Series A 80,000 2,130,000
-------------------------------------------------------------------------------------------------------------------------
Kelley Oil & Gas Corp., $2.625 Cv. 82,000 2,029,500
-------------------------------------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B 238,000 4,760,000
-------------------------------------------------------------------------------------------------------------------------
TGX Corp., Series A(5)(16) 788,566 1,379,991
-------------------------------------------------------------------------------------------------------------------------
Time Warner, Inc., 10.25% Cum., Series K, Exchangeable Preferred Stock(5)(10) 5,085 5,364,675
-------------------------------------------------------------------------------------------------------------------------
Unisys Corp., $3.75 Cv., Series A 80,000 2,450,000
-------------------------------------------------------------------------------------------------------------------------
Walden Residential Properties, Inc., 9.16% Cv. Preferred Stock, Series B 280,000 7,280,000
-------------
Total Preferred Stocks (Cost $92,525,013) 96,507,272
=================================================================================================================================
OTHER SECURITIES--0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
MFS Communications Co., Inc., 8% Depositary Cv. Shares each Representing
1/100 Share of Dividend Enhanced Convertible Stock (Cost $8,164,132) 114,000 8,550,000
</TABLE>
24 Oppenheimer Strategic Income Fund
<PAGE> 25
<TABLE>
<CAPTION>
MARKET VALUE
UNITS SEE NOTE 1
=================================================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.2%
American Communications Services, Inc. Wts., Exp. 11/05(5) 5,225 $ 365,750
-------------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts.:
Exp. 6/99 119,070 535,815
Exp. 8/00(5) 8,000 184,000
-------------------------------------------------------------------------------------------------------------------------
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series AG-7A(5) 37,200 372
Litigation Trust(5) 118,975 1,190
-------------------------------------------------------------------------------------------------------------------------
Australis Media Ltd. Wts., Exp. 5/00 780 6
-------------------------------------------------------------------------------------------------------------------------
Becker Gaming, Inc. Wts., Exp. 11/00(5) 262,500 65,625
-------------------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc. Wts., Exp. 2/99(5) 74,086 2,222
-------------------------------------------------------------------------------------------------------------------------
Casino America, Inc. Wts., Exp. 11/96 9,789 --
-------------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc. Wts., Exp. 6/05(6) 39,200 617,400
-------------------------------------------------------------------------------------------------------------------------
Cellular Communications International, Inc. Wts., Exp. 8/03(5) 16,370 286,475
-------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(5) 7,250 36,250
-------------------------------------------------------------------------------------------------------------------------
Eye Care Centers of America, Inc. Wts., Exp. 10/03(5) 6,600 33,000
-------------------------------------------------------------------------------------------------------------------------
Foamex LP/JPS Automotive Corp. Wts., Exp. 7/99(5) 7,250 181,250
-------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc. Wts., Exp. 7/05(5) 690,000 2,415,000
-------------------------------------------------------------------------------------------------------------------------
Hyperion Telecommunications, Inc. Wts., Exp. 4/01(5) 5,500 55,000
-------------------------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc. Wts., Exp. 11/99(5) 5,400 273,240
-------------------------------------------------------------------------------------------------------------------------
IHF Holdings, Inc. Wts., Exp. 3/99(5) 1,750 288,750
-------------------------------------------------------------------------------------------------------------------------
In-Flight Phone Corp. Wts., Exp. 8/02(5) 13,050 --
-------------------------------------------------------------------------------------------------------------------------
IntelCom Group, Inc. Wts., Exp. 9/05(5) 46,860 738,045
-------------------------------------------------------------------------------------------------------------------------
Omnipoint Corp. Wts., Exp. 11/00(5) 102,500 2,836,047
-------------------------------------------------------------------------------------------------------------------------
People's Choice TV Corp. Wts., Exp. 6/00(5) 400 400
-------------------------------------------------------------------------------------------------------------------------
Protection One, Inc. Wts.:
Exp. 11/03(5) 182,000 1,456,000
Exp. 6/05 13,440 181,440
-------------------------------------------------------------------------------------------------------------------------
Stroh Brewery Co. Wts., Exp. 7/06 19,164 167,685
-------------------------------------------------------------------------------------------------------------------------
United International Securities Ltd. Wts., Exp. 11/99 20,345 406,900
-------------
Total Rights, Warrants and Certificates (Cost $3,411,878) 11,127,862
<CAPTION>
FACE
AMOUNT(1)
=================================================================================================================================
<S> <C> <C>
STRUCTURED INSTRUMENTS--5.6%
- ---------------------------------------------------------------------------------------------------------------------------------
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) $19,900,000 19,589,560
7.15% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97 9,800,000 9,723,560
</TABLE>
25 Oppenheimer Strategic Income Fund
<PAGE> 26
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STRUCTURED INSTRUMENTS
(CONTINUED)
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) $ 25,400,000 $ 25,079,960
16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO,
Zero Coupon, 4/9/97) 9,600,000 9,542,400
17% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 6,750,000 6,723,000
17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 4,600,000 4,581,600
-------------------------------------------------------------------------------------------------------------------------
CS First Boston Corp. Argentina Structured Product Asset Return
Trust Certificates, 9.40%, 9/1/97 [representing debt of Argentina
(Republic of) Bonos del Tesoro Bonds, Series II,
5.547%, 9/1/97 and an interest rate swap between Credit Suisse
Financial Products and the Trust](5) 3,142,856 3,081,238
-------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, New York Branch, Zero Coupon
Czech Koruna Nts., 10.911%, 11/1/96(9) CZK 55,192,119 2,024,701
-------------------------------------------------------------------------------------------------------------------------
Goldman, Sachs & Co. Argentina Local Market Securities Trust,
11.30%, 4/1/00 [representing debt of Argentina (Republic of)
Bonos del Tesoro Bonds, Series 10, 5.609%, 4/1/00 and an interest
rate swap between Goldman Sachs and the Trust](5) 15,456,521 15,804,294
-------------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.456%, 4/28/97(9) CZK 116,600,000 4,074,277
-------------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
11.50% Pass-Through Nts., 7/8/97 (Linked to the
European Bank of Reconstruction & Development
Czech Crown Denominated Nts., 11.50%, 7/8/97) CZK 416,250,000 15,699,069
Czech Koruna Linked Nts., 11.60%, 12/23/96 9,760,000 9,643,531
Zero Coupon Chilean Peso Linked Nts. with Chilean Sovereign Risk,
11.465%, 6/27/97(9) 15,000,000 13,669,500
Zero Coupon Chilean Peso Linked Nts., 10.865%, 12/11/96(9) 18,121,111 17,617,344
Zero Coupon Chilean Peso Linked Nts., 11.746%, 6/23/97(9) 4,625,000 4,199,963
Zero Coupon Chilean Peso Linked Nts., 11.608%, 6/24/97(9) 6,500,000 5,900,700
Zero Coupon Czech Crown Linked Nts., 11.777%, 6/26/97(9) 9,020,000 8,467,074
Zero Coupon Indian Rupee Linked Nts., 15.332%, 12/20/96(9) 2,070,000 1,997,757
-------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Units, 9.75%, 6/15/99 (representing debt of
Chemical Banking Corp., sub. capital nts., and equity of Citicorp,
7.75% preferred, series 22)(5) 10,000,000 11,319,000
-------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Group, Inc. Repackaged Argentina Domestic Securities Trust,
14.75%, 9/1/02 [representing debt of Argentina (Republic of)
Bonos de Consolidacion de Deudas Bonds, Series I, 5.461%, 9/1/02](5) 6,000,000 6,570,000
</TABLE>
26 Oppenheimer Strategic Income Fund
<PAGE> 27
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STRUCTURED INSTRUMENTS
(CONTINUED)
Salomon Brothers, Inc., Zero Coupon:
Brazilian Credit Linked nts.:
12.162%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(9) $ 5,800,000 $ 5,638,180
12.159%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(9) 7,200,000 6,999,120
12.408%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(9) 4,300,000 4,180,030
12.65%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(9) 5,900,000 5,735,390
12.416%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(9) 18,000,000 17,497,800
9.976%, 3/4/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 3/3/97)(9) 14,000,000 13,354,600
9.757%, 5/2/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 5/3/97)(9) 4,550,000 4,261,985
Chilean Peso Indexed Enhanced Access Nts.:
10.865%, 12/11/96(9) 7,170,000 6,985,014
11.20%, 12/11/96(9) 2,000,000 1,948,000
10.437%, 12/13/96(9) 1,000,000 969,800
10.483%, 12/18/96(9) 8,760,000 8,498,952
-------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., New York Branch, 6.60% CD Linked Nts.,
1/30/97 (indexed to the closing Nikkei 225 Index on 1/23/97) NZD 37,133,797 26,995,377
-------------------------------------------------------------------------------------------------------------------------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater of
Cetes Option Amount or USD LIBOR Option Amount, 11/27/96) 43,950,000 53,527,452
--------------
Total Structured Instruments (Cost $343,474,773) 351,900,228
</TABLE>
<TABLE>
<CAPTION>
DATE STRIKE CONTRACTS
=================================================================================================================================
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED--0.1%
Italy (Republic of) Treasury Bonds, Buoni
del Tesoro Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 102.30 ITL 29,104 145,523
-------------------------------------------------------------------------------------------------------------------------
Swiss Franc Put Opt. 10/96 1.22 CHF 120,147,540 3,206,858
--------------
Total Put Options Purchased (Cost $1,687,532) 3,352,381
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $6,651,214,705) 108.4% $6,818,019,003
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (8.4) (526,874,176)
------------- --------------
NET ASSETS 100.0% $6,291,144,827
============= ==============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
AUD -- Australian Dollar IDR -- Indonesian Rupiah
CAD -- Canadian Dollar IEP -- Irish Punt
CHF -- Swiss Franc ITL -- Italian Lira
CZK -- Czech Koruna JPY -- Japanese Yen
DEM -- German Deutsche Mark NZD -- New Zealand Dollar
DKK -- Danish Krone PLZ -- Polish Zloty
ESP -- Spanish Peseta SEK -- Swedish Krona
GBP -- British Pound Sterling THB -- Thai Baht
GRD -- Greek Drachma
27 Oppenheimer Strategic Income Fund
<PAGE> 28
STATEMENT OF INVESTMENTS (Continued)
- ---------------------------------------------------------------------------
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. 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 $185,362,543 or
2.95% of the Fund's net assets, at September 30, 1996.
7. Securities with an aggregate market value of $14,908,008 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See Note 6 of Notes to Financial
Statements.
8. A sufficient amount of securities has been designated to cover
outstanding written call and put options, as follows:
<TABLE>
<CAPTION>
CONTRACTS/FACE EXPIRATION EXERCISE PREMIUM MARKET VALUE
SUBJECT TO CALL/PUT DATE PRICE RECEIVED SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 31,164,000 10/96 1.258 AUD $ 207,760 $ 34,280
- -----------------------------------------------------------------------------------------------------------------------------
Call Option on Australian Dollar 33,497,325 10/96 1.258 AUD 223,316 43,547
- -----------------------------------------------------------------------------------------------------------------------------
Call Option on Banco Hipotecario Nacional
(Argentina) Medium-Term Nts., 10.625%, 8/7/06 15,000,000 8/00 $100.00 138,000 240,000
- -----------------------------------------------------------------------------------------------------------------------------
Call Option on New Zealand Dollar 23,833,915 10/96 1.435 NZD 115,594 140,620
- -----------------------------------------------------------------------------------------------------------------------------
Call Option on New Zealand Dollar 20,396,280 10/96 1.437 NZD 101,761 138,695
- -----------------------------------------------------------------------------------------------------------------------------
Call Option on Swiss Franc 127,460,870 10/96 1.15 CHF 277,865 12,746
- -----------------------------------------------------------------------------------------------------------------------------
Call Option on U.S. Treasury Nts., 6%, 2/15/26 97,820,000 10/96 $90.438 726,008 198,697
- -----------------------------------------------------------------------------------------------------------------------------
Put Option on Canadian Dollar 14,202,899 11/96 1.38 CAD 61,072 5,681
- -----------------------------------------------------------------------------------------------------------------------------
Put Option on Germany (Republic of) Bonds,
Series 118, 5.25%, 2/21/01 27,577,703 7/97 99.57 DEM 661,865 250,957
------------ ------------
$ 2,513,241 $ 1,065,223
============ ============
</TABLE>
9. For zero coupon bonds, the interest rate shown is the effective
yield on the date of purchase.
10. Interest or dividend is paid in kind.
11. Represents the current interest rate for an increasing rate
security.
12. A sufficient amount of securities has been designated to cover
outstanding forward foreign currency exchange contracts. See Note 5
of Notes to Financial Statements.
13. 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.
14. Denotes a step bond: a zero coupon bond that converts to a fixed
rate of interest at a designated future date.
15. Non-income producing--issuer is in default of interest payment.
16. Non-income producing security.
See accompanying Notes to Financial STATEMENTS.
28 Oppenheimer Strategic Income Fund
<PAGE> 29
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
=================================================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $6,651,214,705)--see accompanying statement $6,818,019,003
------------------------------------------------------------------------------------------------------------------------
Cash 499,989
------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts--Note 5 5,664,074
------------------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 275,579,465
Interest, dividends and principal paydowns 130,142,382
Shares of beneficial interest sold 20,264,074
Daily variation on futures contracts--Note 6 346,230
Closed forward foreign currency exchange contracts 92,103
------------------------------------------------------------------------------------------------------------------------
Other 46,948
--------------
Total assets 7,250,654,268
================================================================================================================================
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts--Note 5 595,408
------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $2,513,241)--
see accompanying statement--Note 7 1,065,223
------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $787,873,070 purchased on a when-issued basis)--Note 1 923,249,660
Shares of beneficial interest redeemed 14,633,593
Dividends 13,494,589
Distribution and service plan fees 3,765,026
Closed forward foreign currency exchange contracts 509,316
Transfer and shareholder servicing agent fees 246,598
Trustees' fees 5,514
Other 1,944,514
--------------
Total liabilities 959,509,441
================================================================================================================================
NET ASSETS $6,291,144,827
==============
================================================================================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $6,420,657,426
------------------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (6,688,731)
-------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (290,996,027)
-------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 168,172,159
--------------
Net assets $6,291,144,827
==============
================================================================================================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $3,526,249,337 and 728,891,642 shares of beneficial interest outstanding) $4.84
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $5.08
------------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $2,590,391,111 and 534,359,593 shares of beneficial interest outstanding) $4.85
------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $174,504,379 and 36,100,655 shares of beneficial interest outstanding) $4.83
</TABLE>
See accompanying Notes to Financial Statements.
29 Oppenheimer Strategic Income Fund
<PAGE> 30
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
================================================================================================================================
<S> <C>
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $1,177,851) $567,012,162
------------------------------------------------------------------------------------------------------------------------
Dividends 5,523,608
------------
Total income 572,535,770
================================================================================================================================
EXPENSES
Distribution and service plan fees--Note 4:
Class A 8,248,061
Class B 22,482,056
Class C 1,095,691
------------------------------------------------------------------------------------------------------------------------
Management fees--Note 4 30,343,674
------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 6,059,833
------------------------------------------------------------------------------------------------------------------------
Shareholder reports 2,260,357
------------------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 281
Class B 191,376
Class C 35,500
------------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 89,752
------------------------------------------------------------------------------------------------------------------------
Other 2,169,599
------------
Total expenses 72,976,180
================================================================================================================================
NET INVESTMENT INCOME 499,559,590
================================================================================================================================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised) 47,455,203
Closing of futures contracts (3,684,152)
Closing and expiration of options written 135,851
Foreign currency transactions (560,474)
------------
Net realized gain 43,346,428
------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 132,881,551
Translation of assets and liabilities denominated in foreign currencies 6,212,048
------------
Net change 139,093,599
------------
Net realized and unrealized gain 182,440,027
================================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $681,999,617
============
</TABLE>
See accompanying Notes to Financial Statements.
30 Oppenheimer Strategic Income Fund
<PAGE> 31
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1996 1995
=================================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 499,559,590 $ 448,882,414
-------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 43,346,428 (348,292,355)
-------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 139,093,599 296,653,910
-------------- --------------
Net increase in net assets resulting from operations 681,999,617 397,243,969
=================================================================================================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (288,582,659) (254,120,541)
Class B (175,634,637) (153,748,570)
Class C (8,327,086) (5,287,754)
-------------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A (11,371,215) (17,363,434)
Class B (8,353,085) (10,505,263)
Class C (562,714) (361,299)
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (9,994,119)
Class B -- (5,867,961)
Class C -- (14,565)
=================================================================================================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions--Note 2:
Class A 197,278,497 119,123,728
Class B 568,088,963 378,396,143
Class C 103,676,464 66,237,938
=================================================================================================================================
NET ASSETS
Total increase 1,058,212,145 503,738,272
-------------------------------------------------------------------------------------------------------------------------
Beginning of period 5,232,932,682 4,729,194,410
-------------- --------------
End of period (including overdistributed net investment income of
$6,688,731 and $6,400,367, respectively) $6,291,144,827 $5,232,932,682
============== ==============
See accompanying Notes to Financial Statements.
</TABLE>
31 Oppenheimer Strategic Income Fund
<PAGE> 32
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
==================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.68 $4.75 $5.21
- ----------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .44 .41 .45
Net realized and unrealized gain (loss) .15 (.03) (.35)
----- ----- -----
Total income from investment operations .59 .38 .10
- ----------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.41) (.41) (.43)
Distributions from net realized gain -- (.01) --
Distributions in excess of net realized gain -- -- (.12)
Tax return of capital (.02) (.03) (.01)
----- ----- -----
Total dividends and distributions to shareholders (.43) (.45) (.56)
- ----------------------------------------------------------------------------------
Net asset value, end of period $4.84 $4.68 $4.75
===== ===== =====
==================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 13.06% 8.62% 1.85%
==================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $3,526 $3,219 $3,143
- ----------------------------------------------------------------------------------
Average net assets (in millions) $3,340 $3,085 $3,082
- ----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.09% 9.63% 8.72%
Expenses 0.97% 0.99% 0.95%
- ----------------------------------------------------------------------------------
Portfolio turnover rate(5) 104.8% 141.5% 119.0%
</TABLE>
1. For the period from May 26, 1995 (inception of offering) to September 30,
1995.
2. For the period from November 30, 1992 (inception of offering) to September
30, 1993.
3. 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.
32 Oppenheimer Strategic Income Fund
<PAGE> 33
<TABLE>
<CAPTION>
CLASS B CLASS C
- ---------------- -------------------------------------- -----------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1993 1992 1996 1995 1994 1993(2) 1996 1995(1)
===================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$5.07 $5.01 $4.69 $4.76 $5.22 $4.89 $4.68 $4.68
- -----------------------------------------------------------------------------------
.48 .46 .40 .37 .42 .36 .38 .13
.17 .14 .15 (.03) (.36) .34 .16 .01
----- ----- ----- ----- ----- ----- ----- -----
.65 .60 .55 .34 .06 .70 .54 .14
- -----------------------------------------------------------------------------------
(.50) (.46) (.37) (.37) (.39) (.36) (.37) (.12)
(.01) (.08) -- (.01) -- (.01) -- (.01)
-- -- -- -- (.12) -- -- --
-- -- (.02) (.03) (.01) -- (.02) (.01)
----- ----- ----- ----- ----- ----- ----- -----
(.51) (.54) (.39) (.41) (.52) (.37) (.39) (.14)
- -----------------------------------------------------------------------------------
$5.21 $5.07 $4.85 $4.69 $4.76 $5.22 $4.83 $4.68
===== ===== ===== ===== ===== ===== ===== =====
===================================================================================
13.30% 12.56% 12.19% 7.79% 1.07% 13.58% 11.96% 3.09%
===================================================================================
$2,754 $1,736 $2,590 $1,947 $1,586 $695 $175 $67
- -----------------------------------------------------------------------------------
$2,107 $1,084 $2,250 $1,711 $1,236 $276 $110 $24
- -----------------------------------------------------------------------------------
9.78% 9.39% 8.30% 8.83% 7.90% 8.13%(4) 8.18% 8.28%(4)
1.09% 1.16% 1.72% 1.75% 1.71% 1.80%(4) 1.74% 2.02%(4)
- -----------------------------------------------------------------------------------
148.6% 208.2% 104.8% 141.5% 119.0% 148.6% 104.8% 141.5%
</TABLE>
4. Annualized.
5. 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 $6,365,987,904 and $5,950,010,495,
respectively. For the years ended September 30, 1995 and 1994, purchases and
sales of investment securities included mortgage "dollar-rolls."
See accompanying Notes to Financial Statements.
33 Oppenheimer Strategic Income Fund
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Strategic Income Fund (the Fund) is a separate series of
Oppenheimer Strategic Income Fund, a diversified, open-end management
investment company registered under the Investment Company Act of 1940,
as amended. The Fund's investment objective is to seek a high level of
current income by investing mainly in debt securities and by writing
covered call options on them. 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 $787,873,070.
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 $2,095,000, representing 0.03% of the Fund's
net assets, were in default.
-----------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of 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.
34 Oppenheimer Strategic Income Fund
<PAGE> 35
===============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
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
$266,400,000, which expires between 1998 and 2004.
-----------------------------------------------------------------------
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 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. Accordingly,
during the year ended September 30, 1996, amounts have been
reclassified to reflect a decrease in paid-in capital of $17,757,619, a
decrease in undistributed net investment income of $9,586,229, and a
decrease in accumulated net realized loss on investments of
$27,343,848. In addition, to properly reflect foreign currency gain in
the components of capital, $2,569,671 of foreign exchange gain
determined according to U.S. Federal income tax rules has been
reclassified from net realized gain to net investment income.
-----------------------------------------------------------------------
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 options written 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.
35 Oppenheimer Strategic Income Fund
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
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 YEAR ENDED SEPTEMBER 30, 1995(1)
-------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 161,911,012 $ 769,839,764 148,016,674 $ 683,433,740
Dividends and distributions reinvested 42,307,227 201,403,712 44,280,828 204,225,816
Issued in connection with the acquisition
of Quest for Value Global Income
Fund--Note 9 970,667 4,571,842 -- --
Redeemed (163,843,683) (778,536,821) (166,648,327) (768,535,828)
------------ ------------- ------------ --------------
Net increase 41,345,223 $ 197,278,497 25,649,175 $ 119,123,728
============ ============= ============ ==============
-----------------------------------------------------------------------------------------------------------------------
Class B:
Sold 164,417,334 $ 783,491,575 116,898,296 $ 540,870,128
Dividends and distributions reinvested 21,799,243 103,961,398 19,012,767 87,850,572
Issued in connection with the acquisition
of Quest for Value Global Income
Fund--Note 9 280,096 1,322,051 -- --
Redeemed (67,336,963) (320,686,061) (54,200,534) (250,324,557)
------------ ------------- ------------ --------------
Net increase 119,159,710 $ 568,088,963 81,710,529 $ 378,396,143
============ ============= ============ ==============
-----------------------------------------------------------------------------------------------------------------------
Class C:
Sold 25,473,363 $ 121,173,723 2,871,521 $ 13,389,069
Dividends and distributions reinvested 1,255,765 5,978,489 90,363 421,261
Issued in connection with the
acquisition of:
Oppenheimer Strategic Diversified
Income Fund--Note 9 -- -- 11,908,408 55,016,842
Quest for Value Global Income
Fund--Note 9 36,170 170,362 -- --
Redeemed (4,978,579) (23,646,110) (556,356) (2,589,234)
------------- ------------- ------------- --------------
Net increase 21,786,719 $ 103,676,464 14,313,936 $ 66,237,938
============= ============= ============= ==============
</TABLE>
1. For the year ended September 30, 1995 for Class A and Class B shares
and for the period from May 26, 1995 (inception of offering) to
September 30, 1995 for Class C shares.
===============================================================================
3. UNREALIZED GAINS
AND LOSSES ON
INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments and
options written of $168,252,316 was composed of gross appreciation of
$232,110,148, and gross depreciation of $63,857,832.
===============================================================================
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
0.75% of the first $200 million of the Fund's average annual net
assets, 0.72% of the next $200 million, 0.69% of the next $200 million,
0.66% of the next $200 million, 0.60% of the next $200 million, and
0.50% of 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
$17,340,997, of which $5,066,780 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 $29,339,240 and $1,164,853, of which $786,928 and
$34,767 respectively, was paid to an affiliated broker/dealer. During
the year ended September 30, 1996, OFDI received contingent deferred
sales charges of $5,337,650 and $81,871, 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.
36 Oppenheimer Strategic Income Fund
<PAGE> 37
===============================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
(CONTINUED)
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 $566,379
to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
The Fund has adopted a reimbursement type Distribution
and Service Plan for Class B shares to reimburse 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 reimburse 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 paid $134,901 to an affiliated broker/dealer as
reimbursement for Class B personal service and maintenance expenses and
retained $18,427,490 as reimbursement 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 $87,974,774 for Class
B.
The Fund has adopted a compensation type Distribution
and Service Plan for Class C shares to compensate 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 compensate 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 $17,782 to an affiliated broker/dealer as compensation
for Class C personal service and maintenance expenses and retained
$661,269 as compensation 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 $2,429,770 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.
37 Oppenheimer Strategic Income Fund
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (Continued)
===============================================================================
5. FORWARD CONTRACTS
(CONTINUED)
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
AMOUNT VALUATION AS OF UNREALIZED UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000S) SEPTEMBER 30, 1996 APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australian Dollar (AUD) 11/6/96 103,715 AUD $ 82,014,352 $ 783,692 $ --
Danish Krone (DKK) 10/2/96 838 DKK 143,083 -- 184
------------- ---------- --------
$ 82,157,435 783,692 184
============= ---------- --------
CONTRACTS TO SELL
- --------------------------------------------------------------------------------------------------------------------------------
Japanese Yen (JPY) 10/28/96--6/27/97 4,436,197 JPY $ 40,081,197 $ 989,347 $ --
New Zealand Dollar (NZD) 11/6/96 117,570 NZD 81,791,860 -- 560,737
Swedish Krona (SEK) 11/1/96 210,000 SEK 31,686,954 105,216 --
Swiss Franc (CHF) 10/21/96--6/26/97 115,301 CHF 92,324,449 3,785,819 34,487
------------- ---------- --------
$ 245,884,460 4,880,382 595,224
============= ---------- --------
Total Unrealized Appreciation and Depreciation $5,664,074 $595,408
========== ========
</TABLE>
===============================================================================
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 increases 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
expires.
Securities held in collateralized accounts to cover
initial margin requirements on open futures contracts are noted in the
Statement of Investments. The Statement of Assets and Liabilities
reflects a receivable or payable for the daily mark to market for
variation margin.
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.
At September 30, 1996, the Fund had outstanding futures contracts to
sell debt securities as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
DATE FUTURES CONTRACTS SEPTEMBER 30, 1996 DEPRECIATION
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Nts. 12/96 140 $ 14,783,125 $ 122,500
U.S. Treasury Nts. 12/96 1,287 138,070,969 2,252,125
U.S. Treasury Bonds 12/96 50 5,459,375 64,063
French Government Bonds 12/96 1,360 164,451,603 2,433,123
------------ -----------
$322,765,072 $ 4,871,811
============ ===========
</TABLE>
38 Oppenheimer Strategic Income Fund
<PAGE> 39
===============================================================================
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 option activity for the year ended September 30, 1996 was as
follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
---------------------------------------------------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF OPTIONS OF PREMIUMS OF OPTIONS OF PREMIUMS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1995 -- $ -- 49,000 $ 718,500
-----------------------------------------------------------------------------------------------------------------------
Options written 693,527,478 7,980,060 14,232,801 3,364,344
-----------------------------------------------------------------------------------------------------------------------
Options closed or expired (266,843,160) (4,933,159) (21,325) (2,954,907)
------------------------------------------------------------------------------------------------------------------------
Options exercised (190,219,108) (1,256,597) (30,000) (405,000)
------------ ----------- ---------- ------------
Options outstanding at September 30, 1996 236,465,210 $ 1,790,304 14,230,476 $ 722,937
============ =========== ========== ============
</TABLE>
39 Oppenheimer Strategic Income Fund
<PAGE> 40
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 $309,523,139, which represents 4.92% 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--12/9/93 $ 100.00 $ 69.00
-----------------------------------------------------------------------------------------------------------------------
Becker Gaming, Inc. Wts., Exp. 11/00 11/18/93--12/9/93 2.10 0.25
-----------------------------------------------------------------------------------------------------------------------
Capitol Queen & Casino, Inc., 12% First
Mtg. Nts., Series A, 11/15/00 11/18/93--12/17/93 95.98 70.00
-----------------------------------------------------------------------------------------------------------------------
ECM Fund, L.P.I.:
Common Stock 4/14/92 1,000.00 1,005.00
14% Sub. Nts., 6/10/02 4/14/92 100.00 110.50
-----------------------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc. Common Stock 1/18/96 21.25 35.50
-----------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., Units, 9.75%, 6/15/99 5/15/95 110.05 113.19
-----------------------------------------------------------------------------------------------------------------------
Transpower Finance Ltd. Gtd. Unsec. Unsub.
Bonds, 8%, 2/15/01 5/17/96 66.17 68.80
-----------------------------------------------------------------------------------------------------------------------
Triangle Wire & Cable, Inc. Common Stock 5/2/94 9.50 1.00
-----------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Debs., Banco
Venezuela TCI, Zero Coupon, 6.13%, 12/13/98 7/13/93--7/15/93 72.64 89.00
</TABLE>
===============================================================================
9. ACQUISITION OF OPPENHEIMER
STRATEGIC DIVERSIFIED
INCOME FUND AND
QUEST FOR VALUE
GLOBAL INCOME FUND
On August 18, 1995, the Fund acquired all of the net assets of
Oppenheimer Strategic Diversified Income Fund, pursuant to an Agreement
and Plan of Reorganization approved by the Oppenheimer Strategic
Diversified Income Fund shareholders on July 12, 1995. The Fund issued
11,908,408 shares of beneficial interest (Class C), valued at
$55,016,842 in exchange for the net assets, resulting in combined Class
C net assets of $63,020,965 on August 18, 1995. The net assets acquired
included net unrealized appreciation of $1,082,464. The exchange
qualifies as a tax-free reorganization for federal income tax purposes.
On November 24, 1995, the Fund acquired all of the net
assets of Quest for Value Global Income Fund, pursuant to an Agreement
and Plan of Reorganization approved by the Quest for Value Global
Income Fund shareholders on November 16, 1995. The Fund issued 970,667,
280,096 and 36,170 shares of beneficial interest for Class A, Class B
and Class C, respectively, valued at $4,571,842, $1,322,051 and
$170,362 in exchange for the net assets, resulting in combined Class A
net assets of $3,267,253,290, Class B net assets of $2,032,945,347 and
Class C net assets of $75,252,729 on November 24, 1995. The net assets
acquired included net unrealized appreciation of $338,553. The exchange
qualifies as a tax-free reorganization for federal income tax purposes.
40 Oppenheimer Strategic Income Fund
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
===============================================================================
The Board of Trustees and Shareholders of Oppenheimer Strategic Income
Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Strategic 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 Strategic 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
41 Oppenheimer Strategic Income Fund
<PAGE> 42
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 1.05% 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.
42 Oppenheimer Strategic Income Fund
<PAGE> 43
OPPENHEIMER STRATEGIC INCOME FUND
A Series of Oppenheimer Strategic Income Fund
===============================================================================
OFFICERS AND TRUSTEES
James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., 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
David P. Negri, Vice President
Arthur P. Steinmetz, 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 Strategic
Income Fund. This report must be preceded or accompanied by a
Prospectus of Oppenheimer Strategic 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.
43 Oppenheimer Strategic Income Fund
<PAGE> 44
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
RA0230.001.0996 November 30, 1996
[PHOTO]
Customer Service Representative
OppenheimerFunds Services
"How may I help you?"
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling
our toll-free Telephone Transactions number. And, by enrolling in AccountLink,
a convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
[OPPENHEIMERFUNDS LOGO]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
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