OPPENHEIMER STRATEGIC FUNDS TRUST, 497, 1997-01-16

OPPENHEIMER STRATEGIC FUNDS TRUST
497, 1997-01-16

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OPPENHEIMER STRATEGIC INCOME FUND
Supplement dated January 16, 1997 to the
Prospectus dated January 16, 1997

The Prospectus is changed as follows:

In addition to paying dealers the regular commission for (1)
sales of Class A shares stated in the sales charge table in "Buying
Class A Shares" on page 34, (2) sales of Class B shares described
in the fifth paragraph in "Distribution and Service Plans for Class
B and Class C Shares" on page 42, and (3) sales of Class C shares
described in the sixth paragraph in "Distribution and Service Plans
for Class B and Class C Shares" on page 42, the Distributor will
pay additional commission to each broker, dealer and financial
institution that has a sales agreement with the Distributor and
agrees to accept that additional commission (these are referred to
as "participating firms") for Class A, Class B and Class C shares
of the Fund sold in "qualifying transactions" (the "promotion").
The additional commission will be 1.00% of the offering price of
shares of the Fund sold by a registered representative or sales
representative of a participating firm during the promotion. If
the additional commission is paid on the sale of Class A shares of
$500,000 or more or the sale of Class A shares to a SEP IRA with
100 or more eligible participants and those shares are redeemed
within 13 months from the end of the month in which they were
purchased, the participating firm will be required to return the
additional commission.

"Qualifying transactions" are aggregate sales of $150,000 or
more of Class A, Class B and/or Class C shares of any one or more
of the Oppenheimer funds (except money market funds and municipal
bond funds) for rollovers or trustee-to-trustee transfers from
another retirement plan trustee, of IRA assets or other employee
benefit plan assets from an account or investment other than an
account or investment in the Oppenheimer funds to (1) IRAs,
rollover IRAs, SEP IRAs and SAR-SEP IRAs, using the
OppenheimerFunds, Inc. prototype IRA agreement, if the rollover
contribution is received during the period from January 1, 1997
through April 15, 1997 (the "promotion period"), or the acceptance
of a direct rollover or trustee-to-trustee transfer is acknowledged
by the trustee of the OppenheimerFunds prototype IRA during the
promotion period, and (2) IRAs, rollover IRAs, SEP IRAs and SAR-
SEP IRAs using the A.G. Edwards & Sons, Inc. prototype IRA
agreement, if the rollover contribution or trustee-to-trustee
payment is received during the promotion period. "Qualifying
transactions" do not include (1) purchases of Class A shares
intended but not yet made under a Letter of Intent, and (2)
purchases of Class A, Class B and/or Class C shares with the
redemption proceeds from an existing Oppenheimer funds account.

January 16, 1997 PS0230.013

<PAGE>

OPPENHEIMER
Strategic Income Fund
Prospectus dated January 16, 1997

Oppenheimer Strategic Income Fund is a mutual fund that seeks a
high level of current income by investing mainly in debt securities
and by writing covered call options on them. The Fund invests
principally in (1) debt securities of foreign governments and
companies, (2) U.S. Government securities, and (3) lower-rated,
high yield debt securities of U.S. companies, commonly known as
"junk bonds." The Fund may invest some or all of its assets in
any of these three market sectors at any time. When it invests in
more than one sector, the Fund may reduce some of the risks of
investing in only one market sector, which may help to reduce the
fluctuations in its net asset value per share.

The Fund may invest up to 100% of its assets in "junk bonds,"
or foreign debt securities rated below investment grade, which are
securities that are speculative and involve greater risks,
including risk of default, than higher rated securities. The Fund
is a diversified portfolio designed for investors willing to assume
additional risk in return for seeking high current income. You
should carefully review the risks associated with an investment in
the Fund. Please refer to "Investment Objective and Policies" for
more information about the types of securities in which the Fund
invests and please refer to "Investment Risks" for a discussion of
the risks of investing in the Fund.

This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and
keep it for future reference. You can find more detailed
information about the Fund in the January 16, 1997 Statement of
Additional Information. For a free copy, call OppenheimerFunds
Services, the Fund's Transfer Agent, at 1-800-525-7048, or write to
the Transfer Agent at the address on the back cover. The Statement
of Additional Information has been filed with the Securities and
Exchange Commission ("SEC") and is incorporated into this
Prospectus by reference (which means that it is legally part of
this Prospectus).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible
loss of the principal amount invested.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.<PAGE>
Contents

ABOUT THE FUND

Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
Investment Risks
Investment Techniques and Strategies
How the Fund is Managed
Performance of the Fund

ABOUT YOUR ACCOUNT

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

Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans

How to Sell Shares
By Mail
By Telephone
Checkwriting

How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Description of Ratings Categories
Appendix B: Special Sales Charge Arrangements
<PAGE>
ABOUT THE FUND

Expenses

The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other
services and those expenses are subtracted from the Fund's assets
to calculate the Fund's net asset value per share. All
shareholders therefore pay those expenses indirectly. Shareholders
pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you
understand your direct expenses of investing in the Fund and your
share of the Fund's business operating expenses that you will bear
indirectly. The numbers below are based on the Fund's expenses
during its last fiscal year ended September 30, 1996.

Shareholder Transaction Expenses are charges you pay when
you buy or sell shares of the Fund. Please refer to "About Your
Account," starting on page __ for an explanation of how and when
these charges apply.

Class A Class B Class C
Shares Shares Shares
- ---------------------------------------------------------------------
Maximum Sales Charge 4.75% None None
on Purchases (as a %
of offering price)
- ----------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the first 1.0% if
Charge(as a % of the lower of year, declining shares are
the original offering to 1% in the redeemed
price or redemption sixth year and within 12
proceeds) eliminated months of
thereafter(2) purchase(2)
- ----------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- ----------------------------------------------------------------------
Exchange Fee None None None
- ----------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)

(1)If you invest $1 million or more ($500,000 or more for purchases
by "Retirement Plans," as defined in "Class A Contingent Deferred
Sales Charge on page ___) in Class A shares, you may have to pay a
sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Buying Class A
Shares," below.
(2) See "How to Buy Shares - Buying Class B Shares" and "How to Buy
Shares - Buying Class C Shares" below, for more information on the
contingent deferred sales charges.
(3) There is a $10 transaction fee for redemptions paid by Federal
Funds wire, but not for redemptions paid by check or by ACH
transfer through AccountLink, or for which Checkwriting privileges
are used. See "How to Sell Shares", below.

Annual Fund Operating Expenses are paid out of the Fund's
assets and represent the Fund's expenses in operating its business.
For example, the Fund pays management fees to its investment
advisor, OppenheimerFunds, Inc. (referred to in this Prospectus as
the "Manager"). The rates of the Manager's fees are set forth in
"How the Fund is Managed" below. The Fund has other regular
expenses for services, such as transfer agent fees, custodial fees
paid to the bank that holds the Fund's portfolio securities, audit
fees and legal expenses. Those expenses are detailed in the Fund's
Financial Statements in the Statement of Additional Information.

Annual Fund Operating Expenses (as a Percentage of Average Net
Assets):
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------
Management Fees 0.53% 0.53% 0.53%
- -------------------------------------------------------
12b-1 Distribution
Plan Fees 0.25% 1.00% 1.00%
- -------------------------------------------------------
Other Expenses 0.19% 0.19% 0.21%
- -------------------------------------------------------
Total Fund
Operating Expenses 0.97% 1.72% 1.74%

The numbers in the chart above are based upon the Fund's
expenses in its last fiscal year ended September 30, 1996. These
amounts are shown as a percentage of the average net assets of each
class of the Fund's shares for that year. The "12b-1 Distribution
Plan Fees" for Class A Shares are Service Plan Fees (the maximum
fee is 0.25% of average annual net assets of that class), and for
Class B and Class C shares, are the 12b-1 Distribution and Service
Plan Fees (the maximum service fee is 0.25% of average annual net
assets of the class and the asset-based sales charge for Class B
and Class C shares is 0.75%). These Plans are described in greater
detail in "How to Buy Shares."

The actual expenses for each class of shares in future years
may be more or less than the numbers in the table, depending on a
number of factors, including the actual value of the Fund's assets
represented by each class of shares.

Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples
shown below. Assume that you make a $1,000 investment in each
class of shares of the Fund, and that the Fund's annual return is
5%, and that its operating expenses for each class are the ones
shown in the Annual Fund Operating Expenses table above. If you
were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of 1,
3, 5 and 10 years:

1 year 3 years 5 years 10 years*
- -----------------------------------------------------------
Class A Shares $57 $77 $ 99 $161
- -----------------------------------------------------------
Class B Shares $67 $84 $113 $165
- -----------------------------------------------------------
Class C Shares $28 $55 $ 94 $205

If you did not redeem your investment, it would incur the following
expenses:

1 year 3 years 5 years 10 years*
- -----------------------------------------------------------
Class A Shares $57 $77 $99 $161
- -----------------------------------------------------------
Class B Shares $17 $54 $93 $165
- -----------------------------------------------------------
Class C Shares $18 $55 $94 $205

* In the first example, expenses include the Class A initial sales
charge and the applicable Class B or Class C contingent deferred
sales charge. In the second example, Class A expenses include the
initial sales charge, but Class B and Class C expenses do not
include contingent deferred sales charges. The Class B expenses in
years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts your Class B shares into
Class A shares after 6 years. Because of the effect of the asset-
based sales charge and the contingent deferred sales charge imposed
on Class B and Class C shares, long-term holders of Class B and
Class C shares could pay the economic equivalent of more than the
maximum front-end sales charge allowed under applicable
regulations. For Class B shareholders, the automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur. Please refer to "How to Buy
Shares-Buying Class B Shares" for more information.

These examples show the effect of expenses on an investment,
but are not meant to state or predict actual or expected costs or
investment returns of the Fund, which may be more or less than
those shown.

A Brief Overview of the Fund

Some of the important facts about the Fund are summarized below,
with references to the section of this Prospectus where more
complete information can be found. You should carefully read the
entire Prospectus before making a decision about investing in the
Fund. Keep the Prospectus for reference after you invest,
particularly for information about your account, such as how to
sell or exchange shares.

What Is The Fund's Investment Objective? 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.

What Does the Fund Invest In? The Fund invests primarily in
debt securities of foreign governments and companies, U.S.
Government securities, and lower-rated high yield debt securities
of U.S. companies. The Fund may also write covered calls and use
derivative investments to enhance income, and may use hedging
instruments, including some derivative investments, to try to
manage investment risks. These investments are more fully
explained in "Investment Objective and Policies," starting on page
_____.

Who Manages the Fund? The Fund's investment advisor (the
"Manager") is OppenheimerFunds, Inc. The Manager (including a
subsidiary) advises investment company portfolios having over $62
billion in assets at December 31, 1996. The Manager is paid an
advisory fee by the Fund, based on its assets. The Fund has two
portfolio managers, David Negri and Arthur Steinmetz, who are
employed by the Manager and are primarily responsible for the
selection of the Fund's securities. The Board of Trustees, elected
by shareholders, oversees the investment advisor and the portfolio
managers. Please refer to "How the Fund is Managed," starting on
page __ for more information about the Manager and its fees.

How Risky is the Fund? All investments carry risks to some
degree. The Fund may invest all or any portion of its assets in
high yield, lower-rated, fixed-income securities. The primary
advantage of high yield securities is their relatively higher
potential investment return. However, such securities are
considered speculative and may be subject to greater market
fluctuations and risks of loss of income and principal and have
less liquidity than investments in higher-rated securities. Fixed-
income securities are also subject to interest rate risks and
credit risks which can negatively impact the value of the security
and the Fund's net asset value per share.

The Fund's investments in foreign securities, especially those
issued by underdeveloped countries, generally involve special
risks. The value of foreign securities may be affected by changes
in foreign currency rates, exchange control regulations,
expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement transactions, changes in governmental,
economic or monetary policy in the U.S. or abroad, or other
political or economic factors. In addition, the Fund's investments
in U.S. Government securities and bonds are subject to changes in
their value from a number of factors such as changes in general
bond and stock market movements, the change in value of particular
stocks or bonds because of an event affecting the issuer, or
changes in interest rates that can affect bond prices. These
changes affect the value of the Fund's investments and its price
per share.

In the Oppenheimer funds spectrum, the Fund is generally not
as risky as aggressive growth funds, but has more investment risk
than money market or investment grade bond funds. While the
Manager tries to reduce risks by diversifying investments, by
carefully researching securities before they are purchased for the
portfolio, and in some cases by using hedging techniques, there is
no guarantee of success in achieving the Fund's objectives and your
shares may be worth more or less than their original cost when you
redeem them. Please refer to "Investment Risks" starting on page
__ for a more complete discussion of the Fund's investment risks.

How Can I Buy Shares? You can buy shares through your
dealer or financial institution, or you can purchase shares
directly through the Distributor by completing an Application or by
using an Automatic Investment Plan under AccountLink. Please refer
to "How To Buy Shares" on page __ for more details.

Will I Pay a Sales Charge to Buy Shares? The Fund offers an
investor three classes of shares. All classes have the same
investment portfolio, but different expenses. Class A shares are
offered with a front-end sales charge, starting at 4.75%, and
reduced for larger purchases. Class B and Class C shares are
offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge if redeemed within 6 years or 12
months, respectively, of purchase. There is also an annual asset-
based sales charge on Class B and Class C shares. Please review
"How To Buy Shares" starting on page __ for more details, including
a discussion about factors you and your financial advisor should
consider in determining which class may be appropriate for you.

How Can I Sell My Shares? Shares can be redeemed by mail,
by telephone call to the Transfer Agent on any business day,
through your dealer, by writing a check against your Fund account
(available for Class A shares only) or by wire to a previously
designated bank account. Please refer to "How To Sell Shares" on
page __. The Fund also offers exchange privileges to other
Oppenheimer funds, described in "How to Exchange Shares" on page
__.

How Has the Fund Performed? The Fund measures its
performance by quoting its dividend yield, distribution return,
average annual total return and cumulative total return, which
measure historical performance. The Fund's yield and returns can
be compared to the yields and returns (over similar periods) of
other funds. Of course, other funds may have different objectives,
investments, and levels of risk. The Fund's performance can also
be compared to broad-based market indices, which we have done on
pages __ and __. Please remember that past performance does not
guarantee future results.

Financial Highlights

The table on the following pages presents selected financial
information about the Fund, including per share data and expense
ratios and other data based on the Fund's average net assets. This
information has been audited by Deloitte & Touche LLP, the Fund's
independent auditors, whose report on the Fund's financial
statements for the fiscal year ended September 30, 1996, is
included in the Statement of Additional Information.

<PAGE>

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

CLASS A

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

YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992 1991
1990(3)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
<S> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 4.68 $ 4.75 $ 5.21 $ 5.07 $ 5.01 $ 4.87
$ 5.00
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Income (loss) from investment operations:
Net investment income 0.44 .41 .45 .48 .46 .56
.59
Net realized and unrealized gain (loss) 0.15 (.03) (.35) .17 .14 .21
(.10)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Total income from investment operations 0.59 .38 .10 .65 .60 .77
.49
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Dividends and distributions to shareholders:
Dividends from net investment income (.41) (.41) (.43) (.50) (.46) (.57)
(.57)
Distributions from net realized gain -- (.01) -- (.01) (.08) (.06)
(.05)
Distributions in excess of net realized gain -- -- (.12) -- -- --
--
Tax return of capital (.02) (.03) (.01) -- -- --
--
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Total dividends and distributions
to shareholders (.43) (.45) (.56) (.51) (.54) (.63)
(.62)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Net asset value, end of period $ 4.84 $ 4.68 $ 4.75 $ 5.21 $ 5.07 $ 5.01
$ 4.87

======================================================================================

- ----------------------------------------------------------------------------------------------------------------
- ----------------
TOTAL RETURN, AT NET ASSET VALUE(4) 13.06% 8.62% 1.85% 13.30% 12.56% 16.97%
10.20%
- ----------------------------------------------------------------------------------------------------------------
- ----------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $3,526 $3,219 $3,143 $2,754 $1,736 $ 560
$ 177
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Average net assets (in millions) $3,340 $3,085 $3,082 $2,107 $1,084 $ 311
$ 93
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Ratios to average net assets:
Net investment income 9.09% 9.63% 8.72% 9.78% 9.39% 11.82%
12.79%(5)
Expenses 0.97% 0.99% 0.95% 1.09% 1.16%
1.27%(6) 1.36%(5)
- ----------------------------------------------------------------------------------------------------------------
- ----------------
Portfolio turnover rate(7) 104.8% 141.5% 119.0% 148.6% 208.2% 194.7%
424.6%

CLASS B CLASS C
--------------------------------------------
- -----------------------

YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER
30,
1996 1995 1994 1993(2) 1996
1995(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 4.69 $ 4.76 $ 5.22 $ 4.89 $ 4.68 $ 4.68
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 .37 .42 .36 .38
.13
Net realized and unrealized gain (loss) .15 (.03) (.36) .34 .16
.01
- --------------------------------------------------------------------------------------------------------------------
Total income from investment operations .55 .34 .06 .70 .54
.14
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.37) (.37) (.39) (.36) (.37)
(.12)
Distributions from net realized gain -- (.01) -- (.01) --
(.01)
Distributions in excess of net realized gain -- -- (.12) -- -- --
Tax return of capital (.02) (.03) (.01) -- (.02)
(.01)
- --------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.39) (.41) (.52) (.37) (.39)
(.14)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.85 $ 4.69 $ 4.76 $ 5.22 $ 4.83 $ 4.68
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 12.19% 7.79% 1.07% 13.58% 11.96%
3.09%
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $2,590 $1,947 $1,586 $ 695 $ 175 $
67
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $2,250 $1,711 $1,236 $ 276 $ 110 $
24
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 8.30% 8.83% 7.90% 8.13%(5) 8.18%
8.28%(5)
Expenses 1.72% 1.75% 1.71% 1.80%(5) 1.74%
2.02%(5)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 104.8% 141.5% 119.0% 148.6% 104.8%
141.5%
</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. For the period from October 16, 1989 (commencement of operations) to
September 30, 1990.

4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.

5. Annualized.

6. Includes $0.0002 and $0.0020 per share of federal excise tax expense for
1992 and 1991, respectively. The expense ratio, exclusive of federal excise tax
expense, was 1.16% and 1.23%, respectively.

7. 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."

<PAGE>

Investment Objective and Policies

Objective. The Fund seeks a high level of current income by
investing mainly in debt securities and by writing covered call
options on them. The Fund does not invest with the objective of
seeking capital appreciation.

Investment Policies and Strategies. The Fund seeks its investment
objective by investing principally in three market sectors: (1)
debt securities of foreign governments and companies, (2) U.S.
Government securities, and (3) lower-rated, high yield debt
securities of U.S. companies. Under normal market conditions the
Fund will invest in each of these three sectors, but from time to
time the Manager will adjust the amounts the Fund invests in each
sector.

By investing in all three sectors, the Fund seeks to reduce
the volatility of fluctuations in its net asset value per share,
because the overall securities price and interest rate movements in
each of the different sectors are not necessarily correlated with
each other. Changes in one sector may be offset by changes in
another sector that moves in a different direction. Therefore,
this strategy may help reduce some of the risks from negative
market movements and interest rate changes in any one sector.
However, the Fund may invest up to 100% of its assets in any one
sector if the Manager believes that in doing so the Fund can
achieve its objective without undue risk to the Fund's assets.

When investing the Fund's assets, the Manager considers many
factors, including general economic conditions in the U.S. and
abroad, prevailing interest rates, and the relative yields of U.S.
and foreign securities. While the Fund may seek to earn income by
writing covered call options, market price movements may make it
disadvantageous to do so. The Fund may also try to hedge against
losses by using hedging strategies described below. When market
conditions are unstable, the Fund may invest substantial amounts of
its assets in money market instruments for defensive purposes.
These strategies are described in greater detail below and also in
the Statement of Additional Information under the same headings.

The amount of income the Fund may earn to distribute to
shareholders will fluctuate, depending on the securities the Fund
owns and the sectors in which it invests. The Fund is not a
complete investment program and is designed for investors willing
to assume a higher degree of risk. There is no assurance that the
Fund will be able to achieve its investment objective. Because of
the high yield, lower-rated securities in which the Fund invests,
the Fund is considered a speculative investment, and the value of
your shares may decline in adverse market conditions.

Can the Fund's Investment Objective and Policies Change?
The Fund has an investment objective, which is described above, as
well as investment policies that it follows to try to achieve its
objective. Additionally, it uses certain investment techniques and
strategies in carrying out those investment policies. The Fund's
investment policies and techniques are not "fundamental" unless a
particular policy is identified in this Prospectus or in the
Statement of Additional Information as "fundamental." The Fund's
investment objective is a fundamental policy.

The Fund's Board of Trustees may change non-fundamental
policies, strategies and techniques without shareholder approval,
although significant changes will be described in amendments to
this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a "majority" of the Fund's
outstanding voting shares. The term "majority" is defined in the
Investment Company Act to be a particular percentage of outstanding
voting shares (and this term is explained in the Statement of
Additional Information).

How the Fund's Portfolio Securities Are Rated. As of
September 30, 1996, the Fund's portfolio included corporate bonds
in the following Standard & Poor's Corporation ("S&P") rating
categories or if unrated, determined by the Manager to be
comparable to the category indicated (the amounts shown are dollar-
weighted average values of the bonds in each category measured as
a percentage of the Fund's total assets):

AAA: 0.08%
A: .28%
BBB: 1.04%
BB: 4.94%
B: 15.39%
CCC: 2.98%
C: 0.14%
D: 0.01%

Appendix A to this Prospectus describes the rating categories.
The allocation of the Fund's assets in securities in the different
rating categories will vary over time. Additionally, as of
September 30, 1996, the Fund invested 35.6% of its assets in U.S.
Government securities (as defined in "U.S. Government Securities"
below). U.S. Government securities are not rated by any agency.

Debt Securities of Foreign Governments and Companies. The Fund may
invest in debt securities issued or guaranteed by foreign
companies, "supranational" entities such as the World Bank, and
foreign governments or their agencies. These foreign securities
may include debt obligations such as government bonds, debentures
issued by companies and notes. Some of these debt securities may
have variable interest rates or "floating" interest rates that
change in different market conditions. Those changes will affect
the income the Fund receives. The Fund can also invest in
preferred stocks and "zero coupon" securities, which have similar
features to the ones described below in "Debt Securities of U.S.
Companies." Preferred stocks and zero coupon securities are
described in more detail in the Statement of Additional
Information.

The Fund will not invest more than 25% of its total assets in
government securities of any one foreign country. Otherwise, the
Fund is not restricted in the amount of its assets it may invest in
foreign countries or in which countries, and the Fund has no
limitations on the maturity of a security or the capitalization of
the issuer of the foreign debt securities in which it invests,
although it is expected that most issuers will have total assets or
capitalization in excess of $100 million.

The Fund may buy or sell foreign currencies and foreign
currency forward contracts (agreements to exchange one currency for
another at a future date) to hedge currency risks and to facilitate
transactions in foreign investments. Although currency forward
contracts can be used to protect the Fund from adverse exchange
rate changes, there is a risk of loss if the Manager fails to
predict currency exchange movements correctly.

U.S. Government Securities. The Fund may invest in debt
securities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities ("U.S. Government securities").
Certain U.S. Government securities, including U.S. Treasury bills,
notes and bonds, and mortgage participation certificates guaranteed
by the Government National Mortgage Association ("Ginnie Mae") are
supported by the full faith and credit of the U.S. Government.
Ginnie Mae certificates are one type of mortgage-related U.S.
Government security the Fund invests in. Other mortgage-related
U.S. Government securities the Fund invests in that are issued or
guaranteed by federal agencies or government-sponsored entities are
not supported by the full faith and credit of the U.S. Government.
Those securities include obligations supported by the right of the
issuer to borrow from the U.S. Treasury, such as obligations of
Federal Home Loan Mortgage Corporation ("Freddie Mac") and
obligations supported only by the credit of the instrumentality,
such as Federal National Mortgage Association ("Fannie Mae"). Other
U.S. Government securities the Fund invests in may be zero coupon
Treasury securities and collateralized mortgage obligations
("CMOs").

Although U.S. Government securities involve little credit
risk, their values will fluctuate depending on prevailing interest
rates. Because the yields on U.S. Government securities are
generally lower than on corporate debt securities, when the Fund
holds U.S. Government securities it may attempt to increase the
income it can earn from them by writing covered call options
against them when market conditions are appropriate. Writing
covered calls is explained below, under "Put and Call Options."

Zero Coupon Treasury Securities. Zero coupon Treasury
securities generally are U.S. Treasury notes or bonds that have
been "stripped" of their interest coupons, U.S. Treasury bills
issued without interest coupons, or certificates representing an
interest in the stripped securities. A zero coupon Treasury
security pays no current interest and trades at a deep discount
from its face value and will be subject to greater market
fluctuations from changes in interest rates than interest-paying
securities. The Fund accrues interest on its holdings without
receiving the actual cash. As a result, the Fund may be forced to
sell portfolio securities to pay cash dividends or meet
redemptions. The Fund may invest up to 50% of its total assets in
zero coupon securities issued by either the U.S. Government or U.S.
companies.

Mortgage-Backed U.S. Government Securities and CMOs.
Certain mortgage-backed U.S. Government securities "pass-through"
to investors the interest and principal payments generated by a
pool of mortgages assembled for sale by government agencies. Pass-
through mortgage-backed securities entail the risk that principal
may be repaid at any time because of prepayments on the underlying
mortgages. That may result in greater price and yield volatility
than traditional fixed-income securities that have a fixed maturity
and interest rate.

The Fund may also invest in CMOs, which generally are
obligations fully collateralized by a portfolio of mortgages or
mortgage-related securities. Payment of the interest and principal
generated by the pool of mortgages is passed through to the holders
as the payments are received. CMOs are issued with a variety of
classes or series which have different maturities. Certain CMOs
may be more volatile and less liquid than other types of mortgage-
related securities, because of the possibility of the prepayment of
principal due to prepayments on the underlying mortgage loans.

The Fund may also enter into "forward roll" transactions with
banks or other buyers that provide for future delivery of the
mortgage-backed securities in which the Fund may invest. The Fund
would be required to iddentify liquid assets of any type, including
equity and debt securities of any grade to its custodian bank in an
amount equal to its purchase payment obligation under the roll.

Collateralized Mortgage Obligations. The Fund may invest in
collateralized mortgage obligations that are issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, or
that are collateralized by a portfolio of mortgages or mortgage-
related securities guaranteed by such an agency or instrumentality.
Payment of the interest and principal generated by the pool of
mortgages is passed through to the holders as the payments are
received by the issuer of the CMO.

CMOs may be issued in a variety of classes or series
("tranches") that have different maturities. The principal value
of certain CMO tranches may be more volatile than other types of
mortgage-related securities because of the possibility that the
principal value of the CMO may be prepaid earlier than the maturity
of the CMO as a result of prepayments of the underlying mortgage
loans by the borrowers.

The Fund may invest in "stripped" mortgage-backed securities,
CMOs or other securities issued by agencies or instrumentalities of
the U.S. Government. Stripped mortgage-backed securities usually
have two classes. The classes receive different proportions of the
interest and principal distributions on the pool of mortgage assets
that act as collateral for the security. In certain cases, one
class will receive all of the interest payments (and is known as an
"I/O"), while the other class will receive all of the principal
value on maturity (and is known as a "P/O").

The yield to maturity on the class that receives only interest
is extremely sensitive to the rate of payment of the principal on
the underlying mortgages. Principal prepayments increase that
sensitivity. Stripped securities that pay "interest-only" are
therefore subject to greater price volatility when interest rates
change. They have the additional risk that if the underlying
mortgages are prepaid, the Fund will lose the anticipated cash flow
from the interest on the prepaid mortgages. That risk is increased
when general interest rates fall, and in times of rapidly falling
interest rates, the Fund might receive back less than its
investment.

The value of "principal-only" securities generally increases
as interest rates decline and prepayment rates rise. The price of
these securities is typically more volatile than that of coupon-
bearing bonds of the same maturity.

Stripped securities are generally purchased and sold by
institutional investors through investment banking firms. At
present, established trading markets have not yet developed for
these securities. Therefore, some stripped securities may be
deemed "illiquid." The amount of illiquid stripped securities the
Fund can hold will be subject to the Fund's fundamental investment
policy limiting investments in illiquid securities to 5% of the
Fund's assets, described below.

The value of mortgage-backed securities may be affected by
changes in the market's perception of the creditworthiness of the
entity issuing or guaranteeing them or by changes in government
regulations and tax policies, as well as by interest rate risks,
described below. Because the yields on U.S. Government securities
are generally lower than on corporate debt securities, the Fund may
attempt to increase the income it can earn from U.S. Government
securities by writing covered call options against them, when
market conditions are appropriate. Writing covered call options is
explained below, under "Investment Techniques and Strategies."

Debt Securities of U.S. Companies. The Fund may invest in debt
securities, including bonds, debentures, notes, preferred stocks,
zero coupon securities, participation interests, asset-backed
securities and sinking fund and callable bonds. The Fund may
purchase these securities in public offerings or through private
placements. The Fund has no limitations on the maturity,
capitalization of the issuer or credit rating of the domestic debt
securities in which it invests, although it is expected that most
issuers will have total assets in excess of $100 million.

Zero Coupon Corporate Securities. Zero coupon corporate
securities are similar to U.S. Government zero coupon Treasury
securities but are issued by companies. They have an additional
risk that the issuing company may fail to pay interest or repay the
principal on the obligation.

Corporate Asset-Backed Securities. Asset-backed securities
are fractional interests in pools of consumer loans and other trade
receivables, similar to mortgage-backed securities. They are
issued by trusts and special purpose corporations. They are backed
by a pool of assets, such as credit card or auto loan receivables,
which are the obligations of a number of different parties. The
income from the underlying pool is passed through to holders, such
as the Fund. These securities are frequently supported by a credit
enhancement, such as a letter of credit, a guarantee or a
preference right. However, the extent of the credit enhancement
may be different for different securities and generally applies to
only a fraction of the security's value. These securities present
special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security
interest in the related collateral. Thus, the risks of corporate
asset-backed securities are ultimately dependent upon payment of
consumer loans by the individual borrowers.

Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan
and are acquired from banks or brokers that have made the loan or
are members of the lending syndicate. No more than 5% of the
Fund's net assets can be invested in participation interests of the
same borrower. The Manager has set certain creditworthiness
standards for issuers of loan participations, and monitors their
creditworthiness. The value of loan participation interests
depends primarily upon the creditworthiness of the borrower, and
its ability to pay interest and principal. Borrowers may have
difficulty making payments. If a borrower fails to make scheduled
interest or principal payments, the Fund could experience a decline
in the net asset value of its shares. Some borrowers may have
senior securities rated as low as "C" by Moody's or "D" by S&P, but
may be deemed acceptable credit risks. Participation interests are
subject to the Fund's limitations on investments in illiquid
securities. See "Illiquid and Restricted Securities".

Portfolio Turnover. The length of time the Fund has held a
security is not generally a consideration in investment decisions.
A change in the securities held by the Fund is known as "portfolio
turnover." As a result of the Fund's investment policies and
market factors, the Fund will trade its portfolio actively to try
to benefit from short-term yield differences among debt securities
and as a result the Fund's portfolio turnover may be higher than
other mutual funds. This strategy may involve greater transaction
costs from brokerage commissions and dealer mark-ups.
Additionally, high portfolio turnover may result in increased
short-term capital gains and affect the ability of the Fund to
qualify for tax deductions for payments made to shareholders as a
"regulated investment company" under the Internal Revenue Code. The
Fund qualified in its last fiscal year and intends to do so in the
coming year, although it reserves the right not to qualify.

Investment Risks

All investments carry risks to some degree, whether they are risks
that market prices of the investment will fluctuate (this is known
as "market risk") or that the underlying issuer will experience
financial difficulties and may default on its obligation under a
fixed-income investment to pay interest and repay principal (this
is referred to as "credit risk"). These general investment risks
and the special risks of certain types of investments that the Fund
may hold are described below. They affect the value of the Fund's
investments, its investment performance and the prices of its
shares. These risks collectively form the risk profile of the Fund.

Because of the types of securities the Fund invests in and the
investment techniques the Fund uses, the Fund is designed for
investors who are investing for the long term. It is not intended
for investors seeking assured income or preservation of capital.
While the Manager tries to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased, and in some case by using hedging techniques, changes in
overall market prices can occur at any time, and because the income
earned on securities is subject to change, there is no assurance
that the Fund will achieve its investment objective. When you
redeem your shares, they may be worth more or less than what you
paid for them.

Special Risks of Lower-Grade Securities. In seeking high
current income, the Fund may invest in higher yielding, lower grade
debt securities, commonly known as "junk bonds." There is no
restriction on the amount of the Fund's assets that could be
invested in these types of securities. Lower grade debt securities
are those rated below investment grade, which means they have a
rating lower than "Baa" by Moody s Investors Service,
Inc.("Moody's"), or lower than "BBB" by S&P or similar ratings by
other nationally recognized statistical rating organizations
("NRSROs"). The Fund may invest in securities rated as low as "C"
or "D" or which may be in default at the time the Fund buys them.
While securities rated "Baa" by Moody s or "BBB" by S&P are
investment grade and are not regarded as "junk bonds," those
securities may be subject to greater market fluctuations and risks
of loss of income and principal than higher-grade securities and
may be considered to have certain speculative characteristics.

The Manager does not rely solely on ratings of securities by
rating agencies when selecting investments for the Fund, but
evaluates other economic and business factors as well. The Fund
may invest in unrated securities that the Manager believes offer
yields and risks comparable to rated securities. High yield, lower
grade securities, whether rated or unrated, often have speculative
characteristics. Lower grade securities have special risks that
make them riskier investments than investment grade securities.
They may be subject to greater market fluctuations and risk of loss
of income and principal than lower yielding, investment grade
securities. There may be less of a market for them and therefore
they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be
insufficient to make the payments of interest due on the bonds.
The issuer's low creditworthiness may increase the potential for
its insolvency ("credit risk"). All corporate debt securities
(whether foreign or domestic) are subject to some degree of credit
risk. Additionally, during an economic downturn, high yield bonds
might decline in value more than lower yielding, investment grade
bonds. Also, an increase in interest rates could have a
significant negative impact on the value of high yield bonds.

These risks mean that the Fund may not achieve the expected
income from lower-grade securities, and that the Fund's net asset
value per share may be affected by declines in value of these
securities. The Fund is not obligated to dispose of securities
when issuers are in default or if the rating of the security is
reduced. These risks are discussed in more detail in the Statement
of Additional Information.

Interest Rate Risks. Debt securities are subject to changes
in value due to changes in prevailing interest rates. When
prevailing interest rates fall, the values of outstanding debt
securities generally rise. Conversely, when interest rates rise,
the values of outstanding debt securities generally decline. The
magnitude of these fluctuations will be greater when the average
maturity of the portfolio securities is longer. Changes in the
value of securities held by the Fund mean that the Fund's share
prices can go up or down when interest rates change because of the
effect of the change on the value of the Fund's portfolio of debt
securities.

Credit Risks. Debt securities are also subject to credit
risks. Credit risk relates to the ability of the issuer of a debt
security to make interest or principal payments on the security as
they become due. Generally, higher yielding, lower rated bonds
(which the Fund may hold in significant amounts) are subject to
greater credit risk than higher-rated bonds. Securities issued or
guaranteed by the U.S. Government are subject to little, if any,
credit risk because they are backed by the "full faith and credit
of the U.S. Government," which in general terms means that the U.S.
Treasury stands behind the obligation to pay interest and
principal. While the Manager may rely to some extent on credit
ratings by NRSROs, such as S&P's or Moody's, in evaluating the
credit risk of securities selected for the Fund's portfolio, it may
also use its own research and analysis. However, many factors
affect an issuer's ability to make timely payments, and there can
be no assurance that the credit risks of a particular security will
not change over time.

Risks of Foreign Securities. Investing in foreign
securities, especially those issued in underdeveloped countries,
generally involves special risks. For example, foreign issuers are
not subject to the same accounting and disclosure requirements that
U.S. companies are subject to. The value of foreign investments
may be affected by changes in foreign currency rates, exchange
control regulations, expropriation or nationalization of a
company's assets, foreign taxes, delays in settlement of
transactions, changes in governmental economic or monetary policy
in the U.S. or abroad, or other political and economic factors. If
the Fund distributes more income during a period than it earns
because of unfavorable currency exchange rates, those dividends may
later have to be considered a return of capital. Some of the
foreign debt securities the Fund may invest in, such as emerging
market debt, have speculative characteristics. More information
about the risks and potential rewards of foreign securities is
contained in the Statement of Additional Information.

Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and by companies
located in those countries may be subject to extended settlement
periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There
may be a lack of liquidity for emerging market securities; interest
rates and foreign currency exchange rates may be more volatile;
sovereign limitations on foreign investments may be more likely to
be imposed; there may be significant balance of payment deficits;
and their economies and markets may respond in a more volatile
manner to economic changes than those of developed countries.

Borrowing for Leverage. The Fund may borrow up to 50% of
the value of its net assets from banks to buy securities. The Fund
will borrow only if it can do so without putting up assets as
security for a loan. This is a speculative investment method known
as "leverage." This investing technique may subject the Fund to
greater risks and costs than funds that do not borrow. These risks
may include the possibility that the Fund's net asset value per
share will fluctuate more than the net asset value of funds that
don't borrow, since the Fund pays interest on borrowings and
interest expense affects the Fund's share price and yield.
Borrowing for leverage is subject to limits under the Investment
Company Act, described in more detail in "Borrowing for Leverage"
in the Statement of Additional Information. The Fund can borrow
only if it maintains a 300% ratio of net assets to borrowings at
all times in the manner set forth under the Investment Company Act.

Hedging Instruments Can Be Volatile Investments and May
Involve Special Risks. The use of hedging instruments requires
special skills and knowledge of investment techniques that are
different than what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or
judges market conditions incorrectly, hedging strategies may reduce
the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated
with its other investments or if it could not close out a position
because of an illiquid market for the future or option.

Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the
Fund is exercised on a security that has increased in value, the
Fund will be required to sell the security at the call price and
will not be able to realize any profit if the security has
increased in value above the call price. The use of forward
contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign
currency. To limit its exposure in foreign currency exchange
contracts, the Fund limits its exposure to the amount of its assets
denominated in the foreign currency. Interest rate swaps are
subject to credit risks (if the other party fails to meet its
obligations) and also to interest rate risks. The Fund could be
obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. These risks are
described in greater detail in the Statement of Additional
Information.

Derivatives May Entail Special Risks. The company issuing
the instrument may fail to pay the amount due on the maturity of
the instrument. Also, the underlying investment or security might
not perform the way the Manager expected it to perform. Markets,
underlying securities and indices may move in a direction not
anticipated by the Manager. Performance of derivative investments
may also be influenced by interest rate and stock market changes in
the U.S. and abroad. All of this can mean that the Fund will
realize less principal or income from the investment than expected.
Certain derivative investments held by the Fund may be illiquid.
Please refer to "Illiquid and Restricted Securities."

Investment Techniques and Strategies

The Fund may also use the investment techniques and strategies
described below. These techniques involve certain risks. The
Statement of Additional Information contains more information about
the practices, including limitations on their use that may help to
reduce some of the risks.

Temporary Defensive Investments. In times of unstable
economic or market conditions, the Manager may determine that it is
appropriate for the Fund to assume a temporary defensive position
by investing some of its assets (there is no limit on the amount)
in short-term money market instruments. These include U.S.
Government securities, bank obligations, commercial paper,
corporate obligations and other instruments approved by the Fund's
Board of Trustees.

Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security
and simultaneously sells it to the vendor for delivery at a future
date. There is no limit on the amount of the Fund's net assets
that may be subject to repurchase agreements of seven days or less.
Repurchase agreements must be fully collateralized. However, if the
vendor fails to pay the re-sale price on the delivery date, the
Fund may experience costs in disposing of the collateral and
losses if there is any delay in doing so.

Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active
trading market, making it difficult to value them or dispose of
them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of
1933. The Fund currently intends to invest no more than 10% of
its net assets in illiquid and restricted securities (the Board may
increase that limit to 15%). The Fund's percentage limitation on
these investments does not apply to certain restricted securities
that are eligible for resale to qualified institutional purchasers.
The Manager monitors holdings of illiquid securities on an ongoing
basis and at times the Fund may be required to sell some holdings
to maintain adequate liquidity.

Warrants and Rights. Warrants basically are options to
purchase stock at set prices that are valid for a limited period of
time. Rights are options to purchase securities, normally granted
to current holders by the issuer. The Fund may invest up to 5% of
its total assets in warrants or rights. That 5% does not apply to
warrants and rights the Fund acquired as part of units with other
securities or that were attached to other securities. No more than
2% of the Fund's assets may be invested in warrants that are not
listed on the New York or American Stock Exchanges. For further
details about these investments, please refer to "Warrants and
Rights" in the Statement of Additional Information.

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

Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures and broadly-based securities
indices, or enter into interest rate swap agreements. These are
all referred to as "hedging instruments." The Fund does not use
hedging instruments for speculative purposes, and has limits on the
use of them, described below. The hedging instruments the Fund may
use are described below and in greater detail in "Other Investment
Techniques and Strategies" in the Statement of Additional
Information.

The Fund may buy and sell options, futures and forward
contracts for a number of purposes. It may do so to try to manage
its exposure to the possibility that the prices of its portfolio
securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing
individual securities. It may do so to try to manage its exposure
to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the
Fund's portfolio against price fluctuations.

Other hedging strategies, such as buying futures and call
options, tend to increase the Fund's exposure to the securities
market. Forward contracts are used to try to manage foreign
currency risks on the Fund's foreign investments. Foreign currency
options are used to try to protect against declines in the dollar
value of foreign securities the Fund owns, or to protect against an
increase in the dollar cost of buying foreign securities. Writing
covered call options may also provide income to the Fund for
liquidity purposes or defensive reasons or to raise cash to
distribute to shareholders.

Futures. The Fund may buy and sell futures contracts that
relate to (1) broadly-based securities indices (these are referred
to as Stock Index Futures and Bond Index Futures), (2) interest
rates (these are referred to as Interest Rate Futures) and (3)
foreign currencies. All of these futures are described in "Hedging
With Options and Futures Contracts" in the Statement of Additional
Information. The Fund does not use futures and options on futures
for speculative purposes.

Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).

The Fund may purchase calls on (1) debt securities, (2)
Futures, (3) broadly-based securities indices and (4) foreign
currencies, (5) foreign currency or interest rate spreads, or to
terminate its obligation on a call the Fund previously wrote. The
Fund may write (that is, sell) covered call options on debt
securities to raise cash for income to distribute to shareholders
or for defensive reasons. When the Fund writes a call, it receives
cash (called a premium). The call gives the buyer the ability to
buy the investment on which the call was written from the Fund at
the call price during the period in which the call may be
exercised. If the value of the investment does not rise above the
call price, it is likely that the call will lapse without being
exercised, while the Fund keeps the cash premium (and the
investment).

The Fund may purchase put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set
price to a seller of a put on that investment. The Fund can
purchase those puts that relate to (1) debt securities, (2)
Interest Rate Futures, (3) broad-based securities indices, (4)
Stock or Bond Index Futures, (5) foreign currencies, or (6) foreign
currency or interest rate spreads. The Fund may purchase puts on
investments it does not own. Writing puts requires the segregation
of liquid assets to cover the put. The Fund will not write a put
if it will require more than 50% of the Fund's net assets to be
segregated to cover the put obligation.

The Fund may buy or sell foreign currency puts and calls if
they are traded on a securities or commodities exchange or on the
over-the-counter market, or are quoted by recognized dealers in
those options. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Fund
owns, or to protect against increases in the dollar cost of buying
foreign securities.

The Fund may buy and sell calls if certain conditions are met:
(1) the calls must be listed on a domestic or foreign securities or
commodities exchange or quoted on the Automated Quotation System of
the National Association of Securities Dealers, Inc. or traded in
the over-the-counter market; and (2) each written call must be
"covered" while it is outstanding; that means the Fund must own the
securities on which the call is written. There is no limit on the
amount of the Fund's total assets that may be subject to covered
calls. The Fund can also write calls on foreign currencies
(discussed below). The Fund may also write covered calls on
Futures Contracts it owns, but these calls must be covered by
securities or other liquid assets the Fund owns and segregates to
enable it to satisfy its obligations if the call is exercised. A
call or put option may not be purchased if the net value of all of
the Fund's put and call options would exceed 5% of the Fund's total
assets.

Forward Contracts. Forward contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency
for future delivery at a fixed price. The Fund uses them to "lock-
in" the U.S. dollar price of a security denominated in a foreign
currency that the Fund has bought or sold, or to protect against
losses from changes in the relative values of the U.S. dollar and
a foreign currency. The Fund may also use "cross hedging," where
the Fund hedges against changes in currencies other than the
currency in which a security it holds is denominated.

Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation
to pay interest on a security. For example, they may swap a right
to receive floating rate payments for fixed-rate payments. The
Fund enters into swaps only on securities it owns. The Fund may
not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets (such as cash
or U.S. Government securities) to cover any amounts it could owe
under swaps that exceed the amounts it is entitled to receive, and
it will adjust that amount daily, as needed.

Derivative Investments. In general, a "derivative
investment" is a specially designed investment. Its performance is
linked to the performance of another investment or security, such
as an option, future, index, currency or commodity. The Fund may
not purchase or sell physical commodities or commodity contracts;
however this does not prevent the Fund from buying or selling
options and futures contracts or from investing in securities or
other instruments backed by physical commodities. The Fund may
purchase and sell foreign currency in hedging transactions.

Derivative investments used by the Fund are used in some cases
for hedging purposes and in other cases for "non-hedging"
investment purposes to seek income or total return. In the
broadest sense, exchange-traded options and futures contracts
(discussed in "Hedging," above) may be considered "derivative
investment."

The Fund may invest in different types of derivatives,
generally known as "Structured Investments." "Index-linked" or
"commodity-linked" notes are debt securities of companies that call
for interest payments and/or payment on the maturity of the note in
different terms than the typical note where the borrower agrees to
make fixed interest payments and to pay a fixed sum on the maturity
of the note. Principal and/or interest payments on an index-linked
note depend on the performance of one or more market indices, such
as the S&P 500 Index or a weighted index of commodity futures, such
as crude oil, gasoline and natural gas. The Fund may invest in
"debt exchangeable for common stock" of an issuer or "equity-
linked" debt securities of an issuer. At maturity, the principal
amount of the debt security is exchanged for common stock of the
issuer or is payable in an amount based on the issuer s common
stock price at the time of maturity. In either case there is a
risk that the amount payable at maturity will be less than the
expected principal amount of the debt.

The Fund may also invest in currency-indexed securities.
Typically, these are short-term or intermediate-term debt
securities having a value at maturity, and/or an interest rate,
determined by reference to one or more foreign currencies. The
currency-indexed securities purchased by the Fund may make payments
based on a formula. The payment of principal or periodic interest
may be calculated as a multiple of the movement of one currency
against another currency, or against an index. These investments
may entail increased risk to recovery of the amount of the
principal anticipated and increased price volatility.

Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies. Under these
fundamental policies, the Fund cannot do any of the following:

As to 75% of its total assets, the Fund may not buy
securities issued or guaranteed by a single issuer if, as a result,
the Fund would have invested more than 5% of its assets in the
securities of that issuer or would own more than 10% of the voting
securities of that issuer (purchases of U.S. Government securities
are not restricted by this policy);
The Fund may not borrow money in excess of 50% of the value
of its total assets [as a non-fundamental policy, that limit is
applied to the Fund's net assets], and it may borrow only subject
to the restrictions described under "Borrowing for Leverage," in
the Statement of Additional Information;
The Fund may not invest more than 25% of its total assets in
any one industry (this limit does not apply to U.S. Government
securities but each foreign government is treated as an "industry,"
and utilities are divided according to the services they provide);
and
The Fund may not invest more than 5% of its total assets in
securities of issuers (including their predecessors) that have been
in operation less than three years.

Unless the prospectus states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund
makes an investment, and the Fund need not sell securities to meet
the percentage limits if the value of the investment increases in
proportion to the size of the Fund. Other investment restrictions
are listed in "Investment Restrictions" in the Statement of
Additional Information.

How the Fund is Managed

Organization and History. The Fund was organized in 1989 as a
Massachusetts business trust with one series, but in December 1993,
that business trust was reorganized to become a multi-series
business trust called Oppenheimer Strategic Funds Trust (the
"Trust"), and the Fund became a series of it. In January 1996,
the Trust was renamed Oppenheimer Strategic Income Fund. The Trust
is an open-end, diversified management investment company, with an
unlimited number of authorized shares of beneficial interest of one
series.

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

The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three
classes of shares, Class A, Class B and Class C. All classes
invest in the same investment portfolio. Each class has its own
dividends and distributions and pays certain expenses which may be
different for the different classes. Each class may have a
different net asset value. Each share has one vote at shareholder
meetings, with fractional shares voting proportionally. Only
shares of a particular class vote as a class on matters that affect
that class alone. Shares are freely transferrable.

The Manager and its Affiliates. The Fund is managed by the
Manager, OppenheimerFunds, Inc., which is responsible for selecting
the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established
by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Investment
Advisory Agreement sets forth the fees paid by the Fund to the
Manager and describes the expenses that the Fund is responsible to
pay to conduct its business.

The Manager has operated as an investment advisor since 1959.
The Manager (including a subsidiary) currently manages investment
companies, including other Oppenheimer funds, in excess of $62
billion as of December 31, 1996, held in more than 3 million
shareholder accounts. The Manager is owned by Oppenheimer
Acquisition Corp., a holding company that is owned in part by
senior officers of the Manager and controlled by Massachusetts
Mutual Life Insurance Company.

Portfolio Managers. The Portfolio Managers of the Fund are
Arthur P. Steinmetz and David P. Negri. They have been the
individuals principally responsible for the day-to-day management
of the Fund's portfolio since November 1989. Mr. Steinmetz, a
Senior Vice President of the Manager, and Mr. Negri, a Vice
President of the Manager, are Vice Presidents of the Trust. They
each serve as officers and portfolio managers of other Oppenheimer
funds.

Fees and Expenses. Under the Investment Advisory Agreement,
the Fund pays the Manager the following annual fees, which decline
on additional assets as the Fund grows: 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 average
annual net assets in excess of $1 billion. The Fund's management
fee for its last fiscal year was 0.53% of average annual net assets
for Class A, Class B shares and Class C shares, which may be higher
than the rate paid by some other mutual funds.

The Fund pays expenses related to its daily operations, such
as custodian fees, Trustees' fees, transfer agency fees, legal and
auditing costs. Those expenses are paid out of the Fund's assets
and are not paid directly by shareholders. However, those expenses
reduce the net asset value of shares, and therefore are indirectly
borne by shareholders through their investment. More information
about the Investment Advisory Agreement and the other expenses paid
by the Fund is contained in the Statement of Additional
Information.

There is also information about the Fund's brokerage policies
and portfolio transactions in "Brokerage Policies of the Fund" in
the Statement of Additional Information. Because the Fund
purchases most of its portfolio securities directly from the
sellers and not through brokers, it therefore incurs relatively
little expense for brokerage. From time to time it may use brokers
when buying portfolio securities. When deciding which brokers to
use in those cases, the Investment Advisory Agreement allows the
Manager to consider whether brokers have sold shares of the Fund or
any other funds for which the Manager also serves as investment
advisor.

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

The Transfer Agent. The Fund's transfer agent is
OppenheimerFunds Services, a division of the Manager, which acts as
the shareholder servicing agent for the Fund on an "at-cost" basis.
It also acts as the shareholder servicing agent for the other
Oppenheimer funds. Shareholders should direct inquiries about
their accounts to the Transfer Agent at the address and toll-free
numbers shown below in this Prospectus and on the back cover.

Performance of the Fund

Explanation of Performance Terminology. The Fund uses the terms
"total return," "average annual total return" and "yield" to
illustrate its performance. The performance of each class of
shares is shown separately, because the performance of each class
will usually be different, as a result of the different kinds of
expenses each class bears. This performance information may be
useful to help you see how well your investment has done and to
compare it to other funds or market indices, as we have done below.

It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to
be predictions of future returns or performance. This performance
data is described below, but more detailed information about how
total returns and yields are calculated is contained in the
Statement of Additional Information, which also contains
information about indices and other ways to measure and compare the
Fund's performance. The Fund's investment performance will vary
over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.

Total Returns. There are different types of "total returns"
used to measure the Fund's performance. Total return is the change
in value of a hypothetical investment in the Fund over a given
period, assuming that all dividends and capital gains distributions
are reinvested in additional shares. The cumulative total return
measures the change in value over the entire period (for example,
ten years). An average annual total return shows the average rate
of return for each year in a period that would produce the
cumulative total return over the entire period. However, average
annual total returns do not show the Fund's actual year-by-year
performance.

When total returns are quoted for Class A shares, normally the
current maximum initial sales charge has been deducted. When total
returns are shown for Class B or Class C shares, the contingent
deferred sales charge that applies to the period for which total
return is shown has been deducted. However, total returns may also
be quoted "at net asset value," without considering the effect of
the sales charge, and those returns would be less if sales charges
were deducted.

Yield. Each class of shares calculates its yield by
dividing the annualized net investment income per share on the
portfolio during a 30-day period by the maximum offering price on
the last day of the period. The yield of each class will differ
because of the different expenses of each class of shares. The
yield data represents a hypothetical investment return on the
portfolio, and does not measure an investment return based on
dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment
income during a stated period by the maximum offering price on the
last day of the period. Yields and dividend yields for Class A
shares reflect the deduction of the maximum initial sales charge,
but may also be shown based on the Fund's net asset value per
share. Yields for Class B and Class C shares do not reflect the
deduction of the contingent deferred sales charge.

Has the Fund Performed? Below is a discussion by the Manager of
the Fund's performance during its last fiscal year ended September
30, 1996, followed by a graphical comparison of the Fund's
performance to appropriate broad-based market indices.

Management's Discussion of Performance. During the Fund's
fiscal year ended September 30, 1996, the Fund's performance was
positively affected by its holdings of high yield debt securities
and debt securities of foreign governments and companies. As U.S.
interest rates declined, the Fund increased its investment in high
yield debt securities. In the foreign bond sector the Fund shifted
its focus to the emerging markets area which the Manager expected
to provide more income with reduced credit risk as many emerging
economies improved. Lastly, declining U.S. interest rates also
positively affected the Fund's holdings of U.S. Government
securities. The Fund's portfolio and its portfolio manager's
strategies are subject to change.

Comparing the Fund's Performance to the Market. The chart
below shows the performance of a hypothetical $10,000 investment in
Class A and Class B and Class C shares of the Fund from the
inception of each respective Class held through September 30, 1996,
with all dividends and capital gains distributions reinvested in
additional shares. The graph reflects the deduction of the 4.75%
maximum initial sales charge on Class A shares, the maximum 5%
contingent deferred sales charge for Class B shares (for one year)
and the 1% contingent deferred sales charge for Class C shares.

Because the Fund invests in a variety of debt securities in
domestic and foreign markets, the Fund's performance is compared to
the performance of The Lehman Brothers Aggregate Bond Index and The
Salomon Brothers World Government Bond Index. The Lehman Brothers
Aggregate Bond Index is a broad-based, unmanaged index of U.S.
corporate bond issues, U.S. Government securities and mortgage-
backed securities widely regarded as a measure of the performance
of the domestic debt securities market. The Salomon Brothers World
Government Bond Index is an unmanaged index of fixed-rate bonds
having a maturity of one year or more, widely regarded as a
benchmark of fixed-income performance on a world-wide basis. Index
performance reflects the reinvestment of income, but not capital
gains or transaction costs, and none of the data below shows the
effect of taxes. Also, the Fund's performance data reflects the
effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not
limited to the securities in any one index. Moreover, the index
data does not reflect any assessment of the risk of the investments
included in the index.

Oppenheimer Strategic Income Fund
Comparison of Change in Value
of $10,000 Hypothetical Investment to
Lehman Brothers Aggregate Bond Index and
Salomon Brothers World Government Bond Index

[Graph]

Past Performance is not predictive of future performance.
Oppenheimer Strategic Income Fund
Average Annual Total Returns at 9/30/96

1 Year 5 Years Life of Class*

Class A: 7.69% 8.82% 10.19%

1 Year Life of Class*
Class B: 7.19% 8.66%

1 Year Life of Class*
Class C 10.96% 11.25%

________________
*Class A shares were first publicly offered on 10/16/89.
Class B shares were first publicly offered on 11/30/92.
Class C shares were first publicly offered on 5/26/95.

ABOUT YOUR ACCOUNT

How to Buy Shares

Classes of Shares. The Fund offers investors three different
classes of shares. The different classes of shares represent
investments in the same portfolio of securities but may be subject
to different expenses and will likely have different share prices.

Class A Shares. If you buy Class A shares, you may pay an
initial sales charge on investments up to $1 million (up to
$500,000 for purchases by "Retirement Plans," as defined in "Class
A Contingent Deferred Sales Charge" on page __). If you purchase
Class A shares as part of an investment of at least $1 million
($500,000 for Retirement Plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if
you sell any of those shares within 18 months of buying them, you
may pay a contingent deferred sales charge. The amount of that
sales charge will vary depending on the amount you invested. Sales
charge rates are described in "Buying Class A Shares" below.

Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
six years of buying them, you will normally pay a contingent
deferred sales charge that varies depending on how long you own
your shares as described in "Buying Class B Shares" below.

Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within
12 months of buying them, you will normally pay a contingent
deferred sales charge of 1% as described in "Buying Class C Shares"
below.

Which Class of Shares Should You Choose? Once you decide that the
Fund is an appropriate investment for you, the decision as to which
class of shares is better suited to your needs depends on a number
of factors which you should discuss with your financial advisor.
The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment
will vary your investment results over time. The most important
factors to consider are how much you plan to invest and how long
you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider
another class of shares.

In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we
have made some assumptions using a hypothetical investment in the
Fund. We used the sales charge rates that apply to each class, and
considered the effect of the annual asset-based sales charge on
Class B and Class C expenses (which, like all expenses, will affect
your investment return). For the sake of comparison, we have
assumed that there is a 10% rate of appreciation in the investment
each year. Of course, the actual performance of your investment
cannot be predicted and will vary, based on the Fund's actual
investment returns and the operating expenses borne by each class
of shares, and which class of shares you invest in. The factors
discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations
are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will
purchase only one class of shares and not a combination of shares
of different classes.

How Long Do You Expect to Hold Your Investment? While
future financial needs cannot be predicted with certainty, knowing
how long you expect to hold your investment will assist you in
selecting the appropriate class of shares. Because of the effect
of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges
available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your
investment (which reduces the amount of your investment dollars
used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares
for which no initial sales charge is paid.

Investing for the Short Term. If you have a short-term
investment horizon (that is, you plan to hold your shares for not
more than six years), you should probably consider purchasing Class
A or Class C shares rather than Class B shares, because of the
effect of the Class B contingent deferred sales charge if you
redeem in less than 7 years, as well as the effect of the Class B
asset-based sales charge on the investment return for that class in
the short term. Class C shares might be the appropriate choice
(especially for investments of less than $100,000), because there
is no initial sales charge on Class C shares, and the contingent
deferred sales charge does not apply to amounts you sell after
holding them one year.

However, if you plan to invest more than $100,000 for the
shorter term, then the more you invest and the more your investment
horizon increases toward six years, Class C shares might not be as
advantageous as Class A shares. That is because the annual asset-
based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales
charge available for larger purchases of Class A shares. For
example, Class A shares might be more advantageous than Class C (as
well as Class B) shares for investments of more than $100,000
expected to be held for 5 or 6 years (or more). For investments
over $250,000 expected to be held 4 to 6 years (or more), Class A
shares may become more advantageous than Class C (and Class B)
shares. If investing $500,000 or more, Class A shares may be more
advantageous as your investment horizon approaches 3 years or more.

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

Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
an appropriate consideration, if you plan to invest less than
$100,000. If you plan to invest more than $100,000 over the long
term, Class A shares will likely be more advantageous than Class B
shares or C shares, as discussed above, because of the effect of
the expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A
shares under the Fund's Right of Accumulation. Of course, these
examples are based on approximations of the effect of current sales
charges and expenses on a hypothetical investment over time, using
the assumed annual performance return stated above, and therefore
you should analyze your options carefully.

Are There Differences in Account Features That Matter to
You? Because some account features (such as Checkwriting) may not
be available to Class B or Class C shareholders, or other features
(such as Automatic Withdrawal Plans) might not be advisable
(because of the effect of the contingent deferred sales charge) in
non-retirement accounts for Class B or Class C shareholders, you
should carefully review how you plan to use your investment account
before deciding which class of shares to buy. For example, share
certificates are not available for Class B or Class C shares and if
you are considering using you shares as collateral for a loan, that
may be a factor to consider. Also, Checkwriting privileges are not
available for Class B or Class C shares. Additionally, dividends
payable to Class B and Class C shareholders will be reduced by the
additional expenses borne by those classes that are not borne by
Class A, such as the Class B and Class C asset-based sales charges
described below and in the Statement of Additional Information.

How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different
compensation for selling one class of shares than for selling
another class. It is important that investors understand that the
purpose of the contingent deferred sales charge and asset-based
sales charge for Class B and Class C shares is the same as the
purpose of the front-end sales charge on sales of Class A shares:
that is, to compensate the Distributor for commissions it pays to
dealers and financial institutions for selling shares.

How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional
investments at any time with as little as $25. There are reduced
minimum investments under special investment plans:

With Asset Builder Plans, Automatic Exchange Plans,
403(b)(7) custodial plans and military allotment plans, you can
make initial and subsequent investments of as little as $25.
Subsequent purchases of at least $25 can be made by telephone
through AccountLink.

Under pension, profit-sharing and 401(k) plans and
Individual Retirement Accounts (IRAs), you can make an initial
investment of as little as $250 (if your IRA is established under
an Asset Builder Plan, the $25 minimum applies), and subsequent
investments may be as little as $25.

There is no minimum investment requirement if you are
buying shares by reinvesting dividends or distributions from the
Fund or other Oppenheimer funds (a list of them appears in the
Statement of Additional Information, or you can ask your dealer or
call the Transfer Agent), or by reinvesting distributions from unit
investment trusts that have made arrangements with the Distributor.

How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a
sales agreement with the Distributor, or directly through the
Distributor, or automatically from your bank account through an
Asset Builder Plan under the OppenheimerFunds AccountLink service.
The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders.
When you buy shares, be sure to specify Class A, Class B or Class
C shares. If you do not choose, your investment will be made in
Class A shares.

Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.

Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box
5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the
shares. However, we recommend that you discuss your investment
first with a financial advisor, to be sure it is appropriate for
you.

Buying Shares Through OppenheimerFunds AccountLink. You
can use AccountLink to link your Fund account with an account at a
U.S. bank or other financial institution that is an Automated
Clearing House (ACH) member. You can then transmit funds
electronically to purchase shares, to have the Transfer Agent send
redemption proceeds, and to transmit dividends and distributions to
your bank account.

Shares are purchased for your account on AccountLink on the
regular business day the Distributor is instructed by you to
initiate the ACH transfer to buy shares. You can provide those
instructions automatically, under an Asset Builder Plan, described
below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You should request AccountLink
privileges on the application or dealer settlement instructions
used to establish your account. Please refer to "AccountLink" below
for more details.

Asset Builder Plans. You may purchase shares of the Fund
(and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an
Asset Builder Plan with AccountLink. Details are on the Application
and in the Statement of Additional Information.

At What Prices Are Shares Sold? Shares are sold at the
public offering price based on the net asset value (and any initial
sales charge that applies) that is next determined after the
Distributor receives the purchase order in Denver, Colorado. In
most cases, to enable you to receive that day's offering price, the
Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all
references to time in this Prospectus mean "New York time"). The
net asset value of each class of shares is determined as of that
time on each day The New York Stock Exchange is open (which is a
"regular business day").

If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange, on a
regular business day and transmit it to the Distributor so that it
is received before the Distributor's close of business that day,
which is normally 5:00 P.M. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.

Special Sales Charge Arrangements for Certain Persons.
Appendix B to this Prospectus sets forth conditions for the waiver
of, or exemption from, sales charges or the special sales charge
rates that apply to purchases of shares of the Fund (including
purchases by exchange) by a person who was a shareholder of one of
the Former Quest for Value Funds (as defined in that Appendix).

Buying Class A Shares. Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales
charge. However, in some cases, described below, purchases are not
subject to an initial sales charge, and the offering price will be
the net asset value. In some cases, reduced sales charges may be
available, as described below. Out of the amount you invest, the
Fund receives the net asset value to invest for your account. The
sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor and
allocated to your dealer as commission. The current sales charge
rates and commissions paid to dealers and brokers are as follows:

Front-End Front-End
Sales Charge As Sales Charge As Commission as
a Percentage of a Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ---------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
- ---------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%
- ---------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
- ----------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- ---------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%

The Distributor reserves the right to reallow the entire commission
to dealers. If that occurs, the dealer may be considered an
"underwriter" under Federal securities laws.

Class A Contingent Deferred Sales Charge. There is no
initial sales charge on purchases of Class A shares of any one or
more of the Oppenheimer funds in the following cases:

Purchases by a retirement plan qualified under Section
401(a) if the retirement plan has total plan assets of $500,000 or
more.

Purchases aggregating $1 million or more.

Purchases by a retirement plan qualified under sections
401(a) or 401(k) of the Internal Revenue Code, by a non-qualified
deferred compensation plan (not including Section 457 plans),
Employee Benefit Plan, Group Retirement Plan (see "How to Buy
Shares - Retirement Plans" in the Statement of Additional
Information for further details), an employee's 403(b)(7) custodial
plan account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans
are collectively referred to as "Retirement Plans"); that: (1) buys
shares costing $500,000 or more or (2) has, at the time of
purchase, 100 or more eligible participants, or (3) certifies that
it projects to have annual plan purchases of $200,000 or more.

Purchases by an OppenheimerFunds Rollover IRA if the
purchases are made (1) through a broker, dealer, bank or registered
investment advisor that has made special arrangements with the
Distributor for these purchases, or (2) by a direct rollover of a
distribution from a qualified retirement plan if the administrator
of that plan has made special arrangements with the Distributor for
those purchases.

The Distributor pays dealers of record commissions on those
purchases in an amount equal to (i) 1.0% for non-Retirement Plan
accounts, and (ii) for Retirement Plan accounts, 1.0% of the first
$2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of
purchases over $5 million. That commission will be paid only on
those purchases that were not previously subject to a front-end
sales charge and dealer commission. No sales commission will be
paid to the dealer, broker or financial institution on sales of
Class A shares purchased with the redemption proceeds of shares of
a mutual fund offered as an investment option in a Retirement Plan
in which Oppenheimer funds are also offered as investment options
under a special arrangement with the Distributor if the purchase
occurs more than 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.

If you redeem any of those shares within 18 months of the end
of the calendar month of their purchase, a contingent deferred
sales charge (called the "Class A contingent deferred sales
charge") will be deducted from the redemption proceeds. That sales
charge may be equal to 1.0% of the lesser of (1) the aggregate net
asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gain distributions) or (2)
the original offering price (which is the original net asset value
of the redeemed shares). However, the Class A contingent deferred
sales charge will not exceed the aggregate commissions the
Distributor paid to your dealer on all Class A shares of all
Oppenheimer funds you purchased subject to the Class A contingent
deferred sales charge.

In determining whether a contingent deferred sales charge is
payable, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of
dividends and capital gains, and then will redeem other shares in
the order that you purchased them. The Class A contingent deferred
sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.

No Class A contingent deferred sales charge is charged on
exchanges of shares under the Fund's Exchange Privilege (described
below). However, if the shares acquired by exchange are redeemed
within 18 months of the end of the calendar month of the purchase
of the exchanged shares, the sales charge will apply.

Special Arrangements With Dealers. The Distributor may
advance up to 13 months' commissions to dealers that have
established special arrangements with the Distributor for Asset
Builder Plans for their clients.

Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one
or more of the following ways:

Right of Accumulation. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together Class A and Class B shares you
purchase for your individual accounts, or jointly, or for trust or
custodial accounts on behalf of your children who are minors. A
fiduciary can count all shares purchased for a trust, estate or
other fiduciary account (including one or more employee benefit
plans of the same employer) that has multiple accounts.

Additionally, you can add together current purchases of Class
A and Class B shares of the Fund and other Oppenheimer funds with
Class A shares of Oppenheimer funds to reduce the sales charge rate
that applies to current purchases of Class A shares. You can also
count Class A and Class B shares of Oppenheimer funds you
previously purchased subject to an initial or contingent deferred
sales charge to reduce the sales charge rate for current purchases
of Class A shares, provided that you still hold your investment in
one of the Oppenheimer funds. The value of those shares will be
based on the greater of the amount you paid for the shares or their
current value (at offering price). The Oppenheimer funds are
listed in "Reduced Sales Charges" in the Statement of Additional
Information, or a list can be obtained from the Distributor. The
reduced sales charge will apply only to current purchases and must
be requested when you buy your shares.

Letter of Intent. Under a Letter of Intent, if you purchase
Class A shares or Class A shares and Class B shares of the Fund and
other Oppenheimer funds during a 13-month period, you can reduce
the sales charge rate that applies to your purchase of Class A
shares. The total amount of your intended purchases of both Class
A and Class B shares will determine the reduced sales charge rate
for the Class A shares purchased during that period. This can
include purchases made up to 90 days before the date of the Letter.
More information is contained in the Application and in "Reduced
Sales Charges" in the Statement of Additional Information.

Waivers of Class A Sales Charges. The Class A sales charges
are not imposed in the circumstances described below. There is an
explanation of this policy in "Reduced Sales Charges" in the
Statement of Additional Information.

Waivers of Initial and Contingent Deferred Sales Charges for
Certain Purchasers. Class A shares purchased by the following
investors are not subject to any Class A sales charges:

the Manager or its affiliates;
present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced
Sales Charges" in the Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans
established by them for their employees;
registered management investment companies, or separate
accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
employees and registered representatives (and their spouses)
of dealers or brokers described above or financial institutions
that have entered into sales arrangements with such dealers or
brokers (and are identified to the Distributor) or with the
Distributor; the purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children);
dealers, brokers, banks or registered investment advisors
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients (those clients
may be charged a transaction fee by their dealer, broker or advisor
for the purchase or sale of Fund shares);
(1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients, (2)
Retirement Plans and deferred compensation plans and trusts used to
fund those Plans (including, for example, plans qualified or
created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker
or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; and (3)
clients of such investment advisors or financial planners who buy
shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master
account of their investment advisor or financial planner on the
books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each
of these investors may be charged a fee by the broker, agent or
financial intermediary for purchasing shares);
directors, trustees, officers or full-time employees of
OpCap Advisors or its affiliates, their relatives or any trust,
pension, profit sharing or other benefit plan which beneficially
owns shares for those persons;
accounts for which Oppenheimer Capital is the investment
advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which
is the beneficial owner of such accounts;
any unit investment trust that has entered into an
appropriate agreement with the Distributor;
a TRAC-2000 401(k) plan (sponsored by the former Quest for
Value Advisors) whose Class B or Class C shares of a Former Quest
for Value Fund were exchanged for Class A shares of that Fund due
to the termination of the Class B and Class C TRAC-2000 program on
November 24, 1995; or
qualified retirement plans that had agreed with the former
Quest for Value Advisors to purchase shares of any of the Former
Quest for Value Funds at net asset value, with such shares to be
held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, provided that such arrangements are consummated and
share purchases commence by December 31, 1996.

Waivers of Initial and Contingent Deferred Sales Charges in
Certain Transactions. Class A shares issued or purchased in the
following transactions are not subject to Class A sales charges:

shares issued in plans of reorganization, such as mergers,
asset acquisitions and exchange offers, to which the Fund is a
party;
shares purchased by the reinvestment of loan repayments by
a participant in a retirement plan for which the Manager or its
affiliates acts as sponsor;
shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts
for which reinvestment arrangements have been made with the
Distributor;
shares purchased and paid for with the proceeds of shares
redeemed in the past 12 months from a mutual fund (other than a
fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid
(this waiver also applies to shares purchased by exchange of shares
of Oppenheimer Money Market Fund, Inc. that were purchased and paid
for in this manner); this waiver must be requested when the
purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this
waiver; or
shares purchased with the proceeds of maturing principal of
units of any Qualified Unit Investment Liquid Trust Series.

Waivers of the Class A Contingent Deferred Sales Charge for
Certain Redemptions. The Class A contingent deferred sales charge
is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following
cases:

to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account
Rules and Policies," below);
if, at the time a purchase order is placed for Class A
shares that would otherwise be subject to the Class A contingent
deferred sales charge, the dealer agrees in writing to accept the
dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (and no further
commission will be payable if the shares are redeemed within 18
months of purchase);
for distributions from a TRAC-2000 401(k) plan sponsored by
the Distributor due to the termination of the TRAC-2000 program;
for distributions from Retirement Plans, deferred
compensation plans or other employee benefit plans for any of the
following purposes: (1) following the death or disability (as
defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must occur after the
participant's account was established); (2) to return excess
contributions; (3) to return contributions made due to a mistake of
fact; (4) hardship withdrawals, as defined in the plan; (5) under
a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code; (6) to meet the minimum distribution requirements of
the Internal Revenue Code; (7) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal
Revenue Code; (8) for retirement distributions or loans to
participants or beneficiaries; (9) separation from service; (10)
participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or its subsidiary)
offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a
special arrangement with the Distributor; or (11) plan termination
or "in-service distributions", if the redemption proceeds are
rolled over directly to an OppenheimerFunds IRA.

Service Plan for Class A Shares. The Fund has adopted a
Service Plan for Class A shares to reimburse the Distributor 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. The Distributor uses all of those fees to compensate
dealers, brokers, banks and other financial institutions quarterly
for providing personal service and maintenance of accounts of their
customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it
has not yet done) for its other expenditures under the Plan.

Services to be provided include, among others, answering
customer inquiries about the Fund, assisting in establishing and
maintaining shareholder accounts in the Fund, making the Fund's
investment plans available and providing other services at the
request of the Fund or the Distributor. Payments are made by the
Distributor quarterly at an annual rate not to exceed 0.25% of the
average annual net assets of Class A shares held in accounts of the
service providers or their customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details,
please refer to "Distribution and Service Plans" in the Statement
of Additional Information.

Buying Class B Shares. Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B
shares are redeemed within 6 years of their purchase, a contingent
deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or
the original offering price (which is the original net asset
value). The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net
asset value over the initial purchase price. The Class B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.

To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions and (2) shares held the longest during the 6-
year period. The contingent deferred sales charge is not imposed
in the circumstances described in "Waivers of the Class B and Class
C Sales Charges" below. Class B shares held for a period greater
than 6 years automatically convert to Class A shares.

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

Years Since Contingent Deferred Sales Charge
Beginning of Month In Which on Redemptions in that Year
Purchase Order was Accepted (As % of Amount Subject to Charge)

0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None

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

Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B
shareholders of the asset-based sales charge that applies to Class
B shares under the Class B Distribution Plan, described below. The
conversion is based on the relative net asset value of the two
classes, and no sales load or other charge is imposed. When Class
B shares convert, any other Class B shares that were acquired by
the reinvestment of dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature
is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A, Class B and Class C
Shares" in the Statement of Additional Information.

Distribution and Service Plan for Class B shares. The Fund
has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. This Plan is described below under "Buying
Class C Shares - Distribution and Service Plans for Class B and
Class C shares."

Waivers of Class B Sales Charges. The Class B contingent
deferred sales charge will not apply to shares purchases in certain
types of transactions, nor will it apply to shares redeemed in
certain circumstances, as described below under "Waivers of Class
B and Class C Sales Charges."

Buying Class C Shares. Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C
shares are redeemed within 12 months of their purchase, a
contingent deferred sales charge of 1.0% will be deducted from the
redemption proceeds. That sales charge will not apply to shares
purchased by the reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge will be based
on the lesser of the net asset value of the redeemed shares at the
time of redemption or the original offering price (which is the
original net asset value). The contingent deferred sales charge is
not imposed on the amount of your account value represented by the
increase in net asset value over the initial purchase price. The
Class C contingent deferred sales charge is paid to the Distributor
for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.

Distribution and Service Plans for Class B and Class C Shares.
The Fund has adopted Distribution and Service Plans for Class B and
Class C shares to compensate the Distributor for distributing Class
B and Class C shares and servicing accounts. Under the Plans, the
Fund pays the Distributor an annual "asset-based sales charge" of
0.75% per year on Class B shares that are outstanding for 6 years
or less and on Class C shares. The Distributor also receives a
service fee of 0.25% per year under each plan.

Under each Plan, both fees are computed on the average of the
net asset value of shares in the respective class, determined as of
the close of each regular business day during the period. The
asset-based sales charge and service fees increase Class B and
Class C expenses by up to 1.00% of the net assets per year of the
respective class.

The Distributor uses the service fees to compensate dealers
for providing personal services for accounts that hold Class B or
Class C shares. Those services are similar to those provided under
the Class A Service Plan, described above. The Distributor pays
the 0.25% service fees to dealers in advance for the first year
after Class B or Class C shares have been sold by the dealer and
retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service
fees to dealers on a quarterly basis.

The asset-based sales charge allows investors to buy Class B
or Class C shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The
Fund pays the asset-based sales charges to the Distributor for its
services rendered in distributing Class B and Class C shares.
Those payments are at a fixed rate that is not related to the
Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions,
service fees and other costs of distributing and selling Class B
and Class C shares.

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

The Distributor currently pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of
sale of Class C shares. Including the advance of the service fee,
the total amount paid by the Distributor to the dealer at the time
of sale of Class C shares is 1.00% of the purchase price. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been
outstanding for a year or more.

The Distributor's actual expenses in selling Class B and Class
C shares may be more than the payments it receives from contingent
deferred sales charges collected on redeemed shares and from the
Fund under the Distribution and Service Plans for Class B and Class
C shares. If the Fund terminates either Plan, the Board of Trustees
may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing shares before the Plan
was terminated.

At September 30, 1996, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses under the Class B
Plan of $87,974,774 (equal to 3.40% of the Fund's net assets
represented by Class B shares) which have been carried over into
the present plan year. At September 30, 1996, the end of the Class
C Plan year, the Distributor had incurred unreimbursed expenses
under the Class C Plan of $2,429,770 (equal to 1.39% of the Fund's
net assets represented by Class C shares) which have been carried
over into the present plan year.

Waivers of Class B and Class C Sales Charges. The Class B
and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions nor will it
apply to Class B and Class C shares redeemed in certain
circumstances as described below. The reasons for this policy are
in "Reduced Sales Charges" in the Statement of Additional
Information.

Waivers for Redemptions of shares in Certain Cases. The Class
B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases, if the Transfer Agent
is notified that these conditions apply at redemption:
distributions to participants or beneficiaries from
Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2,
as long as the payments are no more than 10% of the account value
annually (measured from the date the Transfer Agent receives the
request), or (b) following the death or disability (as defined in
the Internal Revenue Code) of the participant or beneficiary (the
death or disability must have occurred after the account was
established);
redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving
shareholder, including a trustee of a "grantor" trust or revocable
living trust for which the trustee is also the sole beneficiary
(the death or disability must have occurred after the account was
established, and for disability you must provide evidence of a
determination of disability by the Social Security Administration);
returns of excess contributions to Retirement Plans;
distributions from retirement plans to make "substantially
equal periodic payments" as permitted in Section 72(t) of the
Internal Revenue Code that do not exceed 10% of the account value
annually, measured from the date the Transfer Agent receives the
request;
shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
distributions from OppenheimerFunds prototype 401(k) plans
(1) for hardship withdrawals; (2) under a Qualified Domestic
Relations Order, as defined in the Internal Revenue Code; (3) to
meet minimum distribution requirements as defined in the Internal
Revenue Code; (4) to make "substantially equal periodic payments"
as described in Section 72(t) of the Internal Revenue Code; or (5)
for separation from service.

Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and
Class C shares sold or issued in the following cases:
shares sold to the Manager or its affiliates;
shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose; and
shares issued in plans of reorganization to which the Fund
is a party.

Special Investor Services

AccountLink. OppenheimerFunds AccountLink links your Fund account
to your account at your bank or other financial institution to
enable you to send money electronically between those accounts to
perform a number of types of account transactions. These include
purchases of shares by telephone (either through a service
representative or by PhoneLink, described below), automatic
investments under Asset Builder Plans, and sending dividends and
distributions or Automatic Withdrawal Plan payments directly to
your bank account. Please refer to the Application for details or
call the Transfer Agent for more information.

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

Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase
shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The
purchase payment will be debited from your bank account.

PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of
account transactions automatically using a touch-tone phone.
PhoneLink may be used on already-established Fund accounts after
you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number: 1-800-533-3310.

Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have
established AccountLink privileges to link your bank account with
the Fund, to pay for these purchases.

Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically
by phone from your Fund account to another Oppenheimer funds
account you have already established by calling the special
PhoneLink number. Please refer to "How to Exchange Shares," below,
for details.

Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will
send the proceeds directly to your AccountLink bank account.
Please refer to "How to Sell Shares," below, for details.

Automatic Withdrawal and Exchange Plans. The Fund has several
plans that enable you to sell shares automatically or exchange them
to another Oppenheimer funds account on a regular basis:

Automatic Withdrawal Plans. If your Fund account is worth
$5,000 or more, you can establish an Automatic Withdrawal Plan to
receive payments of at least $50 on a monthly, quarterly, semi-
annual or annual basis. The checks may be sent to you or sent
automatically to your bank account on AccountLink. You may even set
up certain types of withdrawals of up to $1,500 per month by
telephone. You should consult the Application and Statement of
Additional Information for more details.

Automatic Exchange Plans. You can authorize the Transfer
Agent to automatically exchange an amount you establish in advance
for shares of up to five other Oppenheimer funds on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange
Plan. The minimum purchase for each Oppenheimer funds account is
$25. These exchanges are subject to the terms of the Exchange
Privilege, described below.

Reinvestment Privilege. If you redeem some or all of your Class A
or B shares of the Fund, you have up to 6 months to reinvest all or
part of the redemption proceeds in Class A shares of the Fund or
other Oppenheimer funds without paying a sales charge. This
privilege applies to Class A shares that you purchased subject to
an initial sales charge and to Class A or Class B shares on which
you paid a contingent deferred sales charge when you redeemed them.
It does not apply to Class C shares. You must be sure to ask the
Distributor for this privilege when you send your payment. Please
consult the Statement of Additional Information for more details.

Retirement Plans. Fund shares are available as an investment for
your retirement plans. If you participate in a plan sponsored by
your employer, the plan trustee or administrator must make the
purchase of shares for your retirement plan account. The
Distributor offers a number of different retirement plans that can
be used by individuals and employers:

Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses

403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations

SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment,
including SAR/SEP-IRAs

Pension and Profit-Sharing Plans for self-employed persons
and other employers

401(k) prototype retirement plans for businesses

Please call the Distributor for the OppenheimerFunds plan
documents, which contain important information and applications.

How to Sell Shares

You can arrange to take money out of your account by selling
(redeeming) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated
after your order is received and accepted by the Transfer Agent.
The Fund offers you a number of ways to sell your shares: in
writing, by using the Fund's Checkwriting privilege or by
telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis, as described above. If you have
questions about any of these procedures, and especially if you are
redeeming shares in a special situation, such as due to the death
of the owner, or from a retirement plan, please call the Transfer
Agent first, at 1-800-525-7048, for assistance.

Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a withholding form with your request to avoid delay. If
your retirement plan account is held for you by your employer, you
must arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.

Certain Requests Require a Signature Guarantee. To protect
you and the Fund from fraud, certain redemption requests must be in
writing and must include a signature guarantee in the following
situations (there may be other situations also requiring a
signature guarantee):

You wish to redeem more than $50,000 worth of shares and
receive a check
A redemption check is not payable to all shareholders listed
on the account statement
A redemption check is not sent to the address of record on
your account statement
Shares are being transferred to a Fund account with a
different owner or name
Shares are redeemed by someone other than the owners (such
as an Executor)

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

Selling Shares by Mail. Write a "letter of instructions" that
includes:

Your name
The Fund's name
Your Fund account number (from your account statement)
The dollar amount or number of shares to be redeemed
Any special payment instructions
Any share certificates for the shares you are selling
The signatures of all registered owners exactly as the
account is registered, and
Any special requirements or documents requested by the
Transfer Agent to assure proper authorization of the person asking
to sell shares.

Use the following address for Send courier or Express Mail
requests by mail to: request to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270, 102 E. Girard Ave., Building D
Denver, Colorado 80217 Denver, Colorado 80231

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

To redeem shares through a service representative, call 1-
800-852-8457
To redeem shares automatically on PhoneLink, call 1-800-533-
3310

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

Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone in any 7-day period. The check must be
payable to all owners of record of the shares and must be sent to
the address on the account statement. This service is not
available within 30 days of changing the address on an account.

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

Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank account. The bank must be a member of the Federal
Reserve wire system. There is a $10 fee for each Federal Funds
wire. To place a wire redemption request, call the Transfer Agent
at 1-800-852-8457. The wire will normally be transmitted on the
next bank business day after the shares are redeemed. There is a
possibility that the wire may be delayed up to seven days to enable
the Fund to sell securities to pay the redemption proceeds. No
dividends are accrued or paid on the proceeds of shares that have
been redeemed and are awaiting transmittal by wire. To establish
wire redemption privileges on an account that is already
established, please contact the Transfer Agent for instructions.

Selling Shares Through Your Dealer. The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on
behalf of their customers. Brokers or dealers may charge for that
service. Please call your dealer for more information about this
procedure. Please refer to "Special Arrangements for Repurchase of
Shares from Dealers and Brokers" in the Statement of Additional
Information for more details.

Checkwriting. To be able to write checks against your Fund
account, you may request that privilege on your account Application
or you can contact the Transfer Agent for signature cards, which
must be signed (with a signature guarantee) by all owners of the
account and returned to the Transfer Agent so that checks can be
sent to you to use. Shareholders with joint accounts can elect in
writing to have checks paid over the signature of one owner. If
you previously signed a signature card to establish Checkwriting in
one of the other Oppenheimer funds, you may call 1-800-525-7048 to
request Checkwriting for an account in this Fund that has the same
registration as that other fund account.

Checks can be written to the order of whomever you wish, but
may not be cashed at the Fund's bank or custodian.
Checkwriting privileges are not available for accounts
holding Class B shares or Class C shares or Class A shares that are
subject to a contingent deferred sales charge.
Checks must be written for at least $100.
Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you
should not write a check close to the total account value.
You may not write a check that would require the Fund to
redeem shares that were purchased by check or Asset Builder Plan
payments within the prior 10 days.
Don't use your checks if you changed your Fund account
number.

How to Exchange Shares

Shares of the Fund may be exchanged for shares of certain
Oppenheimer funds at net asset value per share at the time of
exchange, without sales charge. To exchange shares, you must meet
several conditions:

Shares of the fund selected for exchange must be available
for sale in your state of residence
The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
You must meet the minimum purchase requirements for the fund
you purchase by exchange
Before exchanging into a fund, you should obtain and read
its prospectus

Shares of a particular class of the Fund may be exchanged only
for shares of the same class in the other Oppenheimer funds. For
example, you can exchange Class A shares of this Fund only for
Class A shares of another fund. At present, Oppenheimer Money
Market Fund, Inc. offers only one class of shares, which are
considered to be Class A shares for this purpose. In some cases,
sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.

Exchanges may be requested in writing or by telephone:

Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."

Telephone Exchange Requests. Telephone exchange requests may
be made either by calling a service representative at 1-800-852-
8457 or by using PhoneLink for automated exchanges, by calling 1-
800-533-3310. Telephone exchanges may be made only between accounts
that are registered with the same name(s) and address. Shares held
under certificates may not be exchanged by telephone.

You can find a list of Oppenheimer funds currently available
for exchanges in the Statement of Additional Information or obtain
one by calling a service representative at 1-800-525-7048. That
list can change from time to time.

There are certain exchange policies you should be aware of:

Shares are normally redeemed from one fund and purchased
from the other fund in the exchange transaction on the same regular
business day on which the Transfer Agent receives an exchange
request that is in proper form by the close of The New York Stock
Exchange that day, which is normally 4:00 P.M. but may be earlier
on some days. However, either fund may delay the purchase of
shares of the fund you are exchanging into up to seven days if it
determines it would be disadvantaged by a same-day transfer of the
proceeds to buy shares. For example, the receipt of multiple
exchange requests from a dealer in a "market-timing" strategy might
require the sale of portfolio securities at a time or price
disadvantageous to the Fund.

Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.

The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide
you notice whenever it is reasonably able to do so, it may impose
these changes at any time.

For tax purposes, exchanges of shares involve a redemption
of the shares of the Fund you own and a purchase of the shares of
the other fund, which may result in a capital gain or loss. For
more information about taxes affecting exchanges, please refer to
"How to Exchange Shares" in the Statement of Additional
Information.

If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares
eligible for exchange will be exchanged.

Shareholder Account Rules and Policies

Net Asset Value Per Share is determined for each class of
shares as of the close of The New York Stock Exchange, which is
normally 4:00 P.M., but may be earlier on some days, on each day
the exchange is open, by dividing the value of the Fund's net
assets attributable to a class by the number of shares of that
class that are outstanding. The Fund's Board of Trustees has
established procedures to value the Fund's securities to determine
net asset value. In general, securities values are based on market
value. There are special procedures for valuing illiquid and
restricted securities and obligations for which market values
cannot be readily obtained. These procedures are described more
completely in the Statement of Additional Information.

The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the
offering may be suspended by the Board of Trustees at any time the
Board believes it is in the Fund's best interest to do so.

Telephone Transaction Privileges for purchases, redemptions
or exchanges may be modified, suspended or terminated by the Fund
at any time. If an account has more than one owner, the Fund and
the Transfer Agent may rely on the instructions of any one owner.
Telephone privileges apply to each owner of the account and the
dealer representative of record for the account unless and until
the Transfer Agent receives cancellation instructions from an owner
of the account.

The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to
confirm that telephone instructions are genuine, by requiring
callers to provide tax identification numbers and other account
data or by using PINs, and by confirming such transactions in
writing. If the Transfer Agent does not use reasonable procedures
it may be liable for losses due to unauthorized transactions, but
otherwise neither the Transfer Agent nor the Fund will be liable
for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may
not be able to complete a telephone transaction and should consider
placing your order by mail.

Redemption or transfer requests will not be honored until
the Transfer Agent receives all required documents in proper form.
From time to time, the Transfer Agent in its discretion may waive
certain of the requirements for redemptions stated in this
Prospectus.

Dealers that can perform account transactions for their
clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their
clients' permission to perform those transactions and are
responsible to their clients who are shareholders of the Fund if
the dealer performs any transaction erroneously or improperly.

The redemption price for shares will vary from day to day
because the value of the securities in the Fund's portfolio
fluctuates, and the redemption price, which is the net asset value
per share, will normally be different for Class A, Class B and
Class C shares. Therefore, the redemption value of your shares may
be more or less than their original cost.

Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the
shareholder under the redemption procedures described above) within
7 days after the Transfer Agent receives redemption instructions in
proper form, except under unusual circumstances determined by the
Securities and Exchange Commission delaying or suspending such
payments. For accounts registered in the name of a broker-dealer,
payment will be forwarded within 3 business days. The Transfer
Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided
if you purchase shares by certified check or arrange with your bank
to provide telephone or written assurance to the Transfer Agent
that your purchase payment has cleared.

Involuntary redemptions of small accounts may be made by the
Fund if the account value has fallen below $200 for reasons other
than the fact that the market value of shares has dropped, and in
some cases involuntary redemptions may be made to repay the
Distributor for losses from the cancellation of share purchase
orders.

Under unusual circumstances, shares of the Fund may be
redeemed "in kind," which means that the redemption proceeds will
be paid with securities from the Fund's portfolio. Please refer to
"How to Sell Shares" in the Statement of Additional Information for
more details.

"Backup Withholding" of Federal income tax may be applied at
the rate of 31% from taxable dividends, distributions and
redemption proceeds (including exchanges) if you fail to furnish
the Fund a certified Social Security or Employer Identification
Number when you sign your application, or if you violate Internal
Revenue Service regulations on tax reporting of income.

The Fund does not charge a redemption fee, but if your
dealer or broker handles your redemption, they may charge a fee.
That fee can be avoided by redeeming your Fund shares directly
through the Transfer Agent. Under the circumstances described in
"How To Buy Shares," you may be subject to a contingent deferred
sales charge when redeeming certain Class A, Class B and Class C
shares.

To avoid sending duplicate copies of materials to
households, the Fund will mail only one copy of each annual and
semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call
the Transfer Agent at 1-800-525-7048 to ask that copies of those
materials be sent personally to that shareholder.

Transfer Agent and Shareholder Servicing Agent. The transfer
agent and shareholder servicing agent is OppenheimerFunds Services.
Unified Management Corporation (1-800-346-4601) is the shareholder
servicing agent for former shareholders of the AMA Family of Funds
and clients of AMA Investment Advisors, L.P. who owned shares of
the Former Quest For Value Fund when it merged into the Fund on
November 24, 1995.

Dividends, Capital Gains and Taxes

Dividends. The Fund declares dividends separately for Class A,
Class B and Class C shares from net investment income on each
regular business day and pays those dividends to shareholders
monthly. Normally, dividends are paid on the 25th day of each month
(or the prior regular business day if the 25th is not a regular
business day), but the Board of Trustees can change that date.
Distributions may be made monthly from any net short-term capital
gains the Fund realizes in selling securities. It is expected that
distributions paid with respect to Class A shares will generally be
higher than for Class B or Class C shares because expenses
allocable to Class B and Class C shares will generally be higher.

During the Fund's fiscal year ended September 30, 1996, the
Fund attempted to pay dividends on its Class A shares at a constant
level. That was done keeping in mind the amount of net investment
income and other distributable income available from the Fund's
portfolio investments. However, the amount of each dividend can
change from time to time (or there might not be a dividend at all
on either class) depending on market conditions, the Fund's
expenses, and the composition of the Fund's portfolio. Attempting
to pay dividends at a constant level required the Manager to
monitor the Fund's income stream from its investments and at times
to select higher yielding securities (appropriate to the Fund's
objectives and investment restrictions) to maintain income at the
required level. This practice did not affect the net asset values
of either class of shares. The Board of Trustees may change or end
the Fund's targeted dividend level for Class A shares at any time.
There is no targeted dividend level for Class B or Class C shares.

Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund
may make supplemental distributions of dividends and capital gains
following the end of its fiscal year. Long-term capital gains will
be separately identified in the tax information the Fund sends you
after the end of the year. Short-term capital gains are treated as
dividends for tax purposes. There can be no assurance that the
Fund will pay any capital gains distributions in a particular year.

Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are
reinvested. For other accounts, you have four options:

Reinvest All Distributions in the Fund. You can elect to
reinvest all dividends and long-term capital gains distributions in
additional shares of the Fund.

Reinvest Long-Term Capital Gains Only. You can elect to
reinvest long-term capital gains in the Fund while receiving
dividends by check or have them sent to your bank account on
AccountLink.

Receive All Distributions in Cash. You can elect to receive
a check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.

Reinvest Your Distributions in Another Oppenheimer Fund
Account. You can reinvest all distributions in another Oppenheimer
fund account you have established.

Taxes. If your account is not a tax-deferred retirement account,
you should be aware of the following tax implications of investing
in the Fund. Long-term capital gains are taxable as long-term
capital gains when distributed to shareholders. It does not matter
how long you have held your shares. Dividends paid from short-term
capital gains and net investment income are taxable as ordinary
income. Distributions are subject to federal income tax and may be
subject to state or local taxes. Your distributions are taxable
when paid, whether you reinvest them in additional shares or take
them in cash. Every year the Fund will send you and the IRS a
statement showing the amount of each taxable distribution you
received in the previous year.

"Buying a Dividend": If you buy shares on or just before
the ex-dividend date, or just before the Fund declares a capital
gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or
capital gain.

Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax.
Generally speaking, a capital gain or loss is the difference
between the price you paid for the shares and the price you
received when you sold them.

Returns of Capital: In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders. A non-taxable return of capital may reduce your tax
basis in your Fund shares.

This information is only a summary of certain federal tax
information about your investment. More information is contained
in the Statement of Additional Information, and in addition you
should consult with your tax advisor about the effect of an
investment in the Fund on your particular tax situation.

Appendix A

Description of Ratings-Categories of Rating Services

Description of Moody's Investors Service, Inc. Bond Ratings

Aaa: Bonds rated "Aaa" are judged to be the best quality and
to carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, the changes that can be expected are most
unlikely to impair the fundamentally strong position of such
issues.

Aa: Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are
generally known as "high-grade" bonds. They are rated lower than
the best bonds because margins of protection may not be as large as
with "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than those of "Aaa"
securities.

A: Bonds rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa: Bonds rated "Baa" are considered medium grade
obligations, that is, they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have
speculative characteristics as well.

Ba: Bonds rated "Ba" are judged to have speculative elements;
their future cannot be considered well-assured. Often the
protection of interest and principal payments may be very moderate
and not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.

B: Bonds rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.

Caa: Bonds rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.

Ca: Bonds rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other
marked shortcomings.

C: Bonds rated "C" can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

Description of Standard & Poor's Bond Ratings

AAA: "AAA" is the highest rating assigned to a debt obligation
and indicates an extremely strong capacity to pay principal and
interest.

AA: Bonds rated "AA" also qualify as high quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from "AAA"
issues only in small degree.

A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse
effects of change in circumstances and economic conditions.

BBB: Bonds rated "BBB" are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally
exhibit protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.

BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are
regarded, on balance, as predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree. While
such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.

C, D: Bonds on which no interest is being paid are rated "C."
Bonds rated "D" are in default and payment of interest and/or
repayment of principal is in arrears.

Appendix B

Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds

The initial and contingent deferred sales charge rates and
waivers for Class A, Class B and Class C shares of the Fund
described elsewhere in this Prospectus are modified as described
below for those shareholders of (i) Oppenheimer Quest Value Fund,
Inc., Oppenheimer Quest Growth and Income Value Fund, Oppenheimer
Quest Opportunity Value Fund, Oppenheimer Quest Small Cap Value
Fund and Oppenheimer Quest Global Value Fund, Inc. on November 24,
1995, when OppenheimerFunds, Inc. became the investment advisor to
those funds, and (ii) Quest for Value U.S. Government Income Fund,
Quest for Value Investment Quality Income Fund, Quest for Global
Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for
Value National Tax-Exempt Fund and Quest for Value California Tax-
Exempt Fund when those funds merged into various Oppenheimer funds
on November 24, 1995. The funds listed above are referred to in
this Prospectus as the "Former Quest for Value Funds." The waivers
of initial and contingent deferred sales charges described in this
Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds
or (ii) received by such shareholder pursuant to the merger of any
of the Former Quest for Value Funds into an Oppenheimer fund on
November 24, 1995.

Class A Sales Charges

Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders

Purchases by Groups, Associations and Certain Qualified
Retirement Plans. The following table sets forth the initial sales
charge rates for Class A shares purchased by a "Qualified
Retirement Plan" through a single broker, dealer or financial
institution, or by members of "Associations" formed for any purpose
other than the purchase of securities if that Qualified Retirement
Plan or that Association purchased shares of any of the Former
Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995. For this
purpose only, a "Qualified Retirement Plan" includes any 401(k)
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.

Front-End Front-End
Sales Sales Commission
Charge Charge as
Number of as a as a Percentage
Eligible Percentage Percentage of
Employees of Offering of Amount Offering
or Members Price Invested Price
- -------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- -------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%

For purchases by Qualified Retirement plans and Associations
having 50 or more eligible employees or members, there is no
initial sales charge on purchases of Class A shares, but those
shares are subject to the Class A contingent deferred sales charge
described on pages __ and __ of this Prospectus.

Purchases made under this arrangement qualify for the lower of
the sales charge rate in the table based on the number of eligible
employees in a Qualified Retirement Plan or members of an
Association or the sales charge rate that applies under the Rights
of Accumulation described above in the Prospectus. In addition,
purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they
qualified to purchase shares of any of the Former Quest For Value
Funds by virtue of projected contributions or investments of $1
million or more each year. Individuals who qualify under this
arrangement for reduced sales charge rates as members of
Associations, or as eligible employees in Qualified Retirement
Plans also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the
Fund's Distributor.

Special Class A Contingent Deferred Sales Charge Rates

Class A shares of the Fund purchased by exchange of shares of
other Oppenheimer funds that were acquired as a result of the
merger of Former Quest for Value Funds into those Oppenheimer
funds, and which shares were subject to a Class A contingent
deferred sales charge prior to November 24, 1995 will be subject to
a contingent deferred sales charge at the following rates: if they
are redeemed within 18 months of the end of the calendar month in
which they were purchased, at a rate equal to 1.0% if the
redemption occurs within 12 months of their initial purchase and at
a rate of 0.50 of 1.0% if the redemption occurs in the subsequent
six months. Class A shares of any of the Former Quest for Value
Funds purchased without an initial sales charge on or before
November 22, 1995 will continue to be subject to the applicable
contingent deferred sales charge in effect as of that date as set
forth in the then-current prospectus for such fund.

Waiver of Class A Sales Charges for Certain Shareholders

Class A shares of the Fund purchased by the following
investors are not subject to any Class A initial or contingent
deferred sales charges:

Shareholders of the Fund who were shareholders of the AMA
Family of Funds on February 28, 1991 and who acquired shares of any
of the Former Quest for Value Funds by merger of a portfolio of the
AMA Family of Funds.

Shareholders of the Fund who acquired shares of any Former
Quest for Value Fund by merger of any of the portfolios of the
Unified Funds.

Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions

The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares of the Fund purchased by the
following investors who were shareholders of any Former Quest for
Value Fund:

Investors who purchased Class A shares from a dealer that is
or was not permitted to receive a sales load or redemption fee
imposed on a shareholder with whom that dealer has a fiduciary
relationship under the Employee Retirement Income Security Act of
1974 and regulations adopted under that law.

Participants in Qualified Retirement Plans that purchased
shares of any of the Former Quest For Value Funds pursuant to a
special "strategic alliance" with the distributor of those funds.
The Fund's Distributor will pay a commission to the dealer for
purchases of Fund shares as described above in "Class A Contingent
Deferred Sales Charge."

Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers

Waivers for Redemptions of Shares Purchased Prior to March
6, 1995

Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995.

In the following cases, the contingent deferred sales charge
will be waived for redemptions of Class A, Class B or Class C
shares of the Fund acquired by merger of a Former Quest for Value
Fund into the Fund or by exchange from an Oppenheimer fund that was
a Former Quest For Value Fund or into which such fund merged, if
those shares were purchased on or after March 6, 1995, but prior to
November 24, 1995: (1) distributions to participants or
beneficiaries from Individual Retirement Accounts under
Section 408(a) of the Internal Revenue Code or retirement plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those
distributions are made either (a) to an individual participant as
a result of separation from service or (b) following the death or
disability (as defined in the Code) of the participant or
beneficiary; (2) returns of excess contributions to such retirement
plans; (3) redemptions other than from retirement plans following
the death or disability of the shareholder(s) (as evidenced by a
determination of total disability by the U.S. Social Security
Administration); (4) withdrawals under an automatic withdrawal plan
(but only for Class B or Class C shares) where the annual
withdrawals do not exceed 10% of the initial value of the account;
and (5) liquidation of a shareholder's account if the aggregate net
asset value of shares held in the account is less than the required
minimum account value. A shareholder's account will be credited
with the amount of any contingent deferred sales charge paid on the
redemption of any Class A, Class B or Class C shares of the Fund
described in this section if within 90 days after that redemption,
the proceeds are invested in the same Class of shares in this Fund
or another Oppenheimer fund.

Special Dealer Arrangements

Dealers who sold Class B shares of a Former Quest for Value
Fund to Quest for Value prototype 401(k) plans that were maintained
on the TRAC-2000 recordkeeping system and that were transferred to
an OppenheimerFunds prototype 401(k) plan shall be eligible for an
additional one-time payment by the Distributor of 1% of the value
of the plan assets transferred, but that payment may not exceed
$5,000 as to any one plan.

Dealers who sold Class C shares of a Former Quest for Value
Fund to Quest for Value prototype 401(k) plans that were maintained
on the TRAC-2000 recordkeeping system and (i) the shares held by
those plans were exchanged for Class A shares, or (ii) the plan
assets were transferred to an OppenheimerFunds prototype 401(k)
plan, shall be eligible for an additional one-time payment by the
Distributor of 1% of the value of the plan assets transferred, but
that payment may not exceed $5,000.

<PAGE>

APPENDIX TO PROSPECTUS OF
OPPENHEIMER STRATEGIC INCOME FUND

Graphic material included in Prospectus of Oppenheimer
Strategic Income Fund: "Comparison of Total Return of Oppenheimer
Strategic Income Fund with The Lehman Aggregate Bond Index and The
Salomon Brothers World Government Bond Index - Change in Value of
a $10,000 Hypothetical Investment". A linear graph will be
included in the Prospectus of Oppenheimer Strategic Income Fund
(the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund
during each of the Fund's fiscal years since the commencement of
the Fund's operations as to Class A shares (October 16, 1989) and
Class B shares (November 30, 1992) and Class C shares (May 26,
1995) comparing such values with the same investments over the same
time periods with The Lehman Aggregate Bond Index and The Salomon
World Government Bond Index. Set forth below are the relevant data
points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description
of The Lehman Brothers Aggregate Bond Index and The Salomon
Brothers World Government Bond Index, is set forth in the
Prospectus under "Fund Performance Information - Management's
Discussion of Performance."

Salomon
Brothers
Oppenheimer Lehman Bros. World
Fiscal Year Strategic Aggregate Government
(Period) Ended Income Fund A Bond Index Bond Index
- -------------- ------------- ------------ ----------
10/16/89(1) $ 9,525 $10,000 $10,000
09/30/90 $10,489 $10,498 $10,664
09/30/91 $12,258 $12,177 $12,268
09/30/92 $13,794 $13,705 $14,513
09/30/93 $15,667 $15,072 $15,839
09/30/94 $15,981 $14,586 $16,124
09/30/95 $17,349 $16,637 $18,733
09/30/96 $19,644 $17,452 $19,525

Salomon
Brothers
Oppenheimer Lehman Bros. World
Fiscal Year Strategic Aggregate Government
(Period) Ended Income Fund B Bond Index Bond Index
- -------------- ------------- ------------ ----------
11/30/92(2) $10,000 $10,000 $10,000
09/30/93 $11,489 $11,143 $11,400
09/30/94 $11,617 $10,784 $11,605
09/30/95 $12,522 $12,300 $13,483
09/30/96 $13,751 $12,903 $14,052

Salomon
Brothers
Oppenheimer Lehman Bros. World
Fiscal Year Strategic Aggregate Government
(Period) Ended Income Fund C Bond Index Bond Index
- -------------- ------------- ------------ ----------
05/26/95(3) $10,000 $10,000 $10,000
09/30/95 $10,309 $10,271 $ 9,953
09/30/96 $11,542 $10,774 $10,372

- -------------
(1) The Fund commenced operations on October 16, 1989.
(2) Class B shares of the Fund were first publicly offered on
November 30, 1992.
(3) Class C shares of the Fund were first publicly offered on May
26, 1995<PAGE>
Oppenheimer Strategic Income Fund
6803 South Tucson Way
Englewood, Colorado 80012
Telephone: 1-800-525-7048

Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203

Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048

Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015

Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202

Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202

No dealer, broker, salesperson or any other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus or the Statement of
Additional Information, and if given or made, such information and
representations must not be relied upon as having been authorized
by the Fund, OppenheimerFunds, Inc., OppenheimerFunds Distributor,
Inc., or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy
any of the securities offered hereby in any state to any person to
whom it is unlawful to make such offer in such state.

PR0230.001.0197* Printed on recycled paper

<PAGE>

Oppenheimer Strategic Income Fund

6803 South Tucson Way, Englewood, Colorado 80012
1-800-525-7048

Statement of Additional Information dated January 16, 1997

This Statement of Additional Information is not a Prospectus.
This document contains additional information about the Fund and
supplements information in the Prospectus dated January 16, 1997.
It should be read together with the Prospectus, which may be
obtained by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling
the Transfer Agent at the toll-free number shown above.

TABLE OF CONTENTS

Page
About the Fund
Investment Objective and Policies. . . . . . . . . . . . .
Investment Policies and Strategies. . . . . . . . . .
Other Investment Techniques and Strategies. . . . . .
Other Investment Restrictions . . . . . . . . . . . .
How the Fund is Managed . . . . . . . . . . . . . . . . .
Organization and History. . . . . . . . . . . . . . .
Trustees and Officers of the Fund . . . . . . . . . .
The Manager and Its Affiliates. . . . . . . . . . . .
Brokerage Policies of the Fund . . . . . . . . . . . . . .
Performance of the Fund. . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . .
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . .
How To Sell Shares . . . . . . . . . . . . . . . . . . . .
How To Exchange Shares . . . . . . . . . . . . . . . . . .
Dividends, Capital Gains and Taxes . . . . . . . . . . . .
Additional Information About the Fund. . . . . . . . . . .
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . .
Appendix: Corporate Industry Classifications . . . . . . . A-1<PAGE>
ABOUT THE FUND

Investment Objective and Policies

Investment Policies and Strategies. The investment objective and
policies of the Fund are discussed in the Prospectus. Set forth
below is supplemental information about those policies and the
types of securities in which the Fund invests, as well as
strategies the Fund may use to try to achieve its objective.
Capitalized terms used in this Statement of Additional Information
have the same meaning as those terms have in the Prospectus.

In selecting securities for the Fund's portfolio, the Fund's
investment manager, OppenheimerFunds, Inc. (the "Manager"),
evaluates the investment merits of debt securities primarily
through the exercise of its own investment analysis. This may
include, among other things, consideration of the financial
strength of an issuer, including its historic and current financial
condition, the trading activity in its securities, present and
anticipated cash flow, estimated current value of its assets in
relation to their historical cost, the issuer's experience and
managerial expertise, responsiveness to changes in interest rates
and business conditions, debt maturity schedules, current and
future borrowing requirements, and any change in the financial
condition of an issuer and the issuer's continuing ability to meet
its future obligations. The Manager also may consider anticipated
changes in business conditions, levels of interest rates of bonds
as contrasted with levels of cash dividends, industry and regional
prospects, the availability of new investment opportunities and the
general economic, legislative and monetary outlook for specific
industries, the nation and the world.

Investment Risks. With the exception of U.S. Government
Securities, the debt securities the Fund invests in will have one
or more types of investment risk: credit risk, interest rate risk
or foreign exchange rate risk. Credit risk relates to the ability
of the issuer to meet interest or principal payments or both as
they become due. Generally, higher yielding bonds are subject to
credit risk to a greater extent than higher quality bonds.
Interest rate risk refers to the fluctuations in value of debt
securities resulting solely from the inverse relationship between
price and yield of outstanding debt securities. An increase in
prevailing interest rates will generally reduce the market value of
debt securities, and a decline in interest rates will tend to
increase their value. In addition, debt securities with longer
maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Fluctuations in the market
value of debt securities subsequent to their acquisition will not
affect the interest payable on those securities, and thus the cash
income from such securities, but will be reflected in the
valuations of these securities used to compute the Fund's net asset
values. Foreign exchange rate risk refers to the change in value
of the currency in which a foreign security the Fund holds is
denominated against the U.S. dollar.

Special Risks - High Yield Securities. As stated in the
Prospectus, the corporate debt securities in which the Fund will
principally invest may be in the lower rating categories. The Fund
may invest in securities rated as low as "C" by Moody's or "D" by
Standard & Poor's. The Manager will not rely solely on the ratings
assigned by rating services and may invest, without limitation, in
unrated securities which offer, in the opinion of the Manager,
comparable yields and risks as those rated securities in which the
Fund may invest.

Risks of high yield securities may include: (i) limited
liquidity and secondary market support, (ii) substantial market
price volatility resulting from changes in prevailing interest
rates, (iii) subordination to the prior claims of banks and other
senior lenders, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest
rates that could cause the Fund to be able to reinvest premature
redemption proceeds only in lower yielding portfolio securities,
(v) the possibility that earnings of the issuer may be insufficient
to meet its debt service, and (vi) the issuer's low
creditworthiness and potential for insolvency during periods of
rising interest rates and economic downturn. As a result of the
limited liquidity of high yield securities, their prices have at
times experienced significant and rapid decline when a substantial
number of holders decided to sell. A decline is also likely in the
high yield bond market during an economic downturn. An economic
downturn or an increase in interest rates could severely disrupt
the market for high yield bonds and adversely affect the value of
outstanding bonds and the ability of the issuers to repay principal
and interest.

Portfolio Turnover. The Manager will monitor the Fund's
tax status under the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code") during periods in which the Fund's annual
turnover rate exceeds 100%. To the extent that increased portfolio
turnover results in sales of securities held less than three
months, the Fund's ability to qualify as "regulated investment
company" under the Internal Revenue Code may be affected (see
"Dividends and Distributions," below). No limitations are placed
on the weighted average maturity of the portfolio, which will
generally be of longer duration. Preferred stocks, other than
those of a finite maturity, will be assumed to have a 40 year
maturity for the purpose of calculating a weighted average
maturity. The Fund anticipates it will shift its investment focus
to securities of longer maturity as interest rates decline, and to
securities of shorter maturity as interest rates rise. Although
changes in the value of the Fund's portfolio securities subsequent
to their acquisition are reflected in the net asset value of the
Fund's shares, such changes will not affect the income received by
the Fund from such securities. The dividends paid by the Fund will
increase or decrease in relation to the income received by the Fund
from its investments, which will in any case be reduced by the
Fund's expenses before being distributed to the Fund's
shareholders.

Debt Securities of Foreign Governments and Companies. As
noted in the Prospectus, the Fund may invest in debt obligations
and other securities (which may be denominated in U.S. dollars or
non-U.S. currencies) issued or guaranteed by foreign corporations,
certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities, and in debt
obligations and other securities issued by U.S. corporations
denominated in non-U.S. currencies. All of these are considered to
be "foreign securities." The types of foreign debt obligations and
other securities in which the Fund may invest are the same types of
debt obligations identified under "Debt Securities of U.S.
Companies," below.

The percentage of the Fund's assets that will be allocated to
foreign securities will vary depending on the relative yields of
foreign and U.S. securities, the economies of foreign countries,
the condition of such countries' financial markets, the interest
rate climate of such countries and the relationship of such
countries' currency to the U.S. dollar. These factors are judged
on the basis of fundamental economic criteria (e.g., relative
inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and
political data.

Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic
issuers, by offering the opportunity to invest in foreign issuers
that appear to offer growth potential, or in foreign countries with
economic policies or business cycles different from those of the
U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign bond or other markets that do not move in a
manner parallel to U.S. markets. From time to time, U.S.
government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is
possible that such restrictions could be reimposed.

Securities of foreign issuers that are represented by American
depository receipts, or that are listed on a U.S. securities
exchange, or are traded in the U.S. over-the-counter market are not
considered "foreign securities" when the Fund moves its investment
focus among different sectors, because they are not subject to many
of the special considerations and risks (discussed below) that
apply to foreign securities traded and held abroad. If the Fund's
portfolio securities are held abroad, the sub-custodians or
depositories holding them must be approved by the Fund's Board of
Trustees to the extent that approval is required under applicable
SEC rules.

Risks of Foreign Securities. Investment in foreign
securities involves considerations and risks not associated with
investment in securities of U.S. issuers. For example, foreign
issuers are not required to use generally-accepted accounting
principles ("G.A.A.P."). If foreign securities are not registered
under the Securities Act of 1933, the issuer does not have to
comply with the disclosure requirements of the Securities Exchange
Act of 1934. In addition, it is generally more difficult to obtain
court judgments outside the United States. The values of foreign
securities will be affected by incomplete or inaccurate information
available as to foreign issuers, changes in currency rates or
exchange control regulations or currency blockage, application of
foreign tax laws, including withholding taxes, changes in
governmental administration or economic or monetary policy (in the
U.S. or abroad) or changed circumstances in dealings between
nations. Costs will be incurred in connection with conversions
between various currencies. Foreign brokerage commissions are
generally higher than commissions in the U.S., and foreign
securities markets may be less liquid, more volatile and less
subject to governmental regulation than in the U.S. Investments in
foreign countries could be affected by other factors not generally
thought to be present in the U.S., including expropriation or
nationalization, confiscatory taxation and potential difficulties
in enforcing contractual obligations, and could be subject to
extended settlement periods.

Because the Fund may purchase securities denominated in
foreign currencies, a change in the value of any such currency
against the U.S. dollar will result in a change in the U.S. dollar
value of the Fund's assets and its income available for
distribution. In addition, although a portion of the Fund's
investment income may be received or realized in foreign
currencies, the Fund will be required to compute and distribute its
income in U.S. dollars, and absorb the cost of currency
fluctuations. The Fund may engage in foreign currency exchange
transactions for hedging purposes to protect against changes in
future exchange rates. See "Hedging With Options and Futures
Contracts," below.

The values of foreign investments and the investment income
derived from them may also be affected unfavorably by changes in
currency exchange control regulations. Although the Fund will
invest primarily in securities denominated in foreign currencies
that at the time of investment do not have significant government-
imposed restrictions on conversion into U.S. dollars, there can be
no assurance against subsequent imposition of currency controls.
In addition, the values of foreign securities will fluctuate in
response to a variety of factors, including changes in U.S. and
foreign interest rates.

The Fund may invest in U.S. dollar-denominated foreign
securities referred to as "Brady Bonds." These are debt
obligations of foreign entities that may be fixed-rate par bonds or
floating-rate discount bonds and are generally collateralized in
full as to principal due at maturity by U.S. Treasury zero coupon
obligations that have the same maturity as the Brady Bonds.
However, the Fund may also invest in uncollateralized Brady Bonds.
Brady Bonds are generally viewed as having three or four valuation
components: (i) any collateralized repayment of principal at final
maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized amounts
constitute what is referred to as the "residual risk" of such
bonds). In the event of a default with respect to collateralized
Brady Bonds as a result of which the payment obligations of the
issuer are accelerated, the zero coupon U.S. Treasury securities
held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the
proceeds distributed. The collateral will be held by the
collateral agent to the scheduled maturity of the defaulted Brady
Bonds, which will continue to be outstanding, at which time the
face amount of the collateral will equal the principal payments
which would have then been due on the Brady Bonds in the normal
course. In addition, in light of the residual risk of Brady Bonds
and, among other factors, the history of defaults with respect to
commercial bank loans by public and private entities of countries
issuing Brady Bonds, investments in Brady Bonds are to be viewed as
speculative.

The obligations of foreign governmental entities may or may
not be supported by the full faith and credit of a foreign
government. Obligations of "supranational entities" include those
of international organizations designated or supported by
governmental entities to promote economic reconstruction or
development and of international banking institutions and related
government agencies. Examples include the International Bank for
Reconstruction and Development (the "World Bank"), the European
Coal and Steel Community, the Asian Development Bank and the Inter-
American Development Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make
additional capital contributions if the supranational entity is
unable to repay its borrowings. Each supranational entity's
lending activities are limited to a percentage of its total capital
(including "callable capital" contributed by members at the
entity's call), reserves and net income. There is no assurance
that foreign governments will be able or willing to honor their
commitments.

U.S. Government Securities. U.S. Government Securities are
debt obligations issued or guaranteed by the U.S. Government or one
of its agencies or instrumentalities. The U.S. Government
Securities the Fund can invest in are described in the Prospectus
and include U.S. Treasury securities such as "zero coupon" Treasury
securities, mortgage-backed securities and CMOs.

Zero Coupon Treasury Securities. The Fund may invest in
zero coupon Treasury securities, which are U.S. Treasury bills
issued without interest coupons, U.S. Treasury notes and bonds
which have been stripped of their unmatured interest coupons, and
receipts or certificates representing interests in such stripped
obligations and coupons. These securities usually trade at a deep
discount from their face or par value and will be subject to
greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities that
make current payments of interest. The interest rate is
effectively "locked in" and there is no risk of having to reinvest
periodic interest payments prior to maturity of the zero coupon
security in securities having lower rates.

Mortgage-Backed U.S. Government Securities and CMOs. These
securities represent participation interests in pools of
residential mortgage loans made by lenders such as banks and
savings and loan associations. The pools are assembled for sale to
investors (such as the Fund) by government agencies, which issue or
guarantee the securities relating to the pool. Such securities
differ from conventional debt securities which generally provide
for periodic payment of interest in fixed or determinable amounts
(usually semi-annually) with principal payments at maturity or
specified call dates. Some mortgage-backed U.S. Government
securities in which the Fund may invest may be backed by the full
faith and credit of the U.S. Treasury (e.g., direct pass-through
certificates of Government National Mortgage Association); some are
supported by the right of the issuer to borrow from the U.S.
Government (e.g., obligations of Federal Home Loan Mortgage
Corporation); and some are backed by only the credit of the issuer
itself (e.g., Federal National Mortgage Association). Those
guarantees do not extend to the value or yield of the mortgage-
backed securities themselves or to the net asset value of the
Fund's shares. Those government agencies may also issue derivative
mortgage backed securities such as collateralized mortgage
obligations ("CMOs"), discussed below.

The yield on mortgage-backed securities is based on the
average expected life of the underlying pool of mortgage loans.
The actual life of any particular pool will be shortened by any
unscheduled or early payments of principal and interest. Principal
prepayments generally result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages.
The occurrence of prepayments is affected by a wide range of
economic, demographic and social factors and, accordingly, it is
not possible to predict accurately the average life of a particular
pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of
newly-issued mortgages, the prepayment history of similar pools.
The actual prepayment experience of a pool of mortgage loans may
cause the yield realized by the Fund to differ from the yield
calculated on the basis of the expected average life of the pool.

Prepayments tend to increase during periods of falling
interest rates, while during periods of rising interest rates
prepayments will most likely decline. When prevailing interest
rates rise, the value of a pass-through security may decrease as do
the values of other debt securities, but, when prevailing interest
rates decline, the value of a pass-through security is not likely
to rise to the extent that the values of other debt securities
rise, because of the prepayment feature of pass-through securities.
The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at times when
available investments offer higher or lower rates than the original
investment, thus affecting the yield of the Fund. Monthly interest
payments received by the Fund have a compounding effect which may
increase the yield to the Fund more than debt obligations that pay
interest semi-annually. Because of those factors, mortgage-backed
securities may be less effective than Treasury bonds of similar
maturity at maintaining yields during periods of declining interest
rates. The Fund may purchase mortgage-backed securities at a
premium or at a discount. Accelerated prepayments adversely affect
yields for pass-through securities purchased at a premium (i.e., at
a price in excess of their principal amount) and may involve
additional risk of loss of principal because the premium may not
have been fully amortized at the time the obligation is repaid.
The opposite is true for pass-through securities purchased at a
discount.

Ginnie Mae Certificates. Certificates of Government
National Mortgage Association ("Ginnie Mae") are mortgage-backed
securities of Ginnie Mae that evidence an undivided interest in a
pool or pools of mortgages ("Ginnie Mae Certificates"). The Ginnie
Mae Certificates that the Fund may purchase are of the "modified
pass-through" type, which entitle the holder to receive timely
payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and Ginnie Mae, regardless
of whether the mortgagor actually makes the payments when due.

The National Housing Act authorizes Ginnie Mae to guarantee
the timely payment of principal and interest on securities backed
by a pool of mortgages insured by the Federal Housing
Administration ("FHA") or guaranteed by the Veterans Administration
("VA"). The Ginnie Mae guarantee is backed by the full faith and
credit of the U.S. Government. Ginnie Mae is also empowered to
borrow without limitation from the U.S. Treasury if necessary to
make any payments required under its guarantee.

The average life of a Ginnie Mae Certificate is likely to be
substantially shorter than the original maturity of the mortgages
underlying the securities. Prepayments of principal by mortgagors
and mortgage foreclosures will usually result in the return of the
greater part of principal investment long before the maturity of
the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the Ginnie Mae guarantee, except to
the extent that the Fund has purchased the certificates at a
premium in the secondary market.

FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages
insured by the FHA. FNMA issues guaranteed mortgage pass-through
certificates ("FNMA Certificates"). FNMA Certificates resemble
Ginnie Mae Certificates in that each FNMA Certificate represents a
pro rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of interest
and principal on FNMA Certificates. The FNMA guarantee is not
backed by the full faith and credit of the U.S. Government.

FHLMC Securities. The Federal Home Loan Mortgage
Corporation ("FHLMC") was created to promote development of a
nationwide secondary market for conventional residential mortgages.
FHLMC issues two types of mortgage pass-through securities ("FHLMC
Certificates"): mortgage participation certificates ("PCs") and
guaranteed mortgage certificates ("GMCs"). PCs resemble Ginnie Mae
Certificates in that each PC represents a pro rata share of all
interest and principal payments made and owed on the underlying
pool. FHMLC guarantees timely monthly payment of interest on PCs
and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.

Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs
are fully-collateralized bonds that are the general obligations of
the issuer thereof, either the U.S. Government, a U.S. Government
instrumentality, or a private issuer. Such bonds generally are
secured by an assignment to a trustee (under the indenture pursuant
to which the bonds are issued) of collateral consisting of a pool
of mortgages. Payments with respect to the underlying mortgages
generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed
through to the holders of the CMOs as such (i.e., the character of
payments of principal and interest is not passed through, and
therefore payments to holders of CMOs attributable to interest paid
and principal repaid on the underlying mortgages do not necessarily
constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest on
and repayment of principal of the CMOs. CMOs often are issued in
two or more classes with different characteristics such as varying
maturities and stated rates of interest. Because interest and
principal payments on the underlying mortgages are not passed
through to holders of CMOs, CMOs of varying maturities may be
secured by the same pool of mortgages, the payments on which are
used to pay interest on each class and to retire successive
maturities in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the
underlying mortgages are repaid. In the event of prepayment on
such mortgages, the class of CMO first to mature generally will be
paid down. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such
prepayment, there will be sufficient collateral to secure CMOs that
remain outstanding.

Stripped Mortgage-Backed Securities. These are derivative
multi-class mortgage back securities, that are usually structured
with two classes that receive different proportions of the interest
and principal distributions on a pool of Ginnie Mae, FNMA or FHLMC
certificates. Commonly, one class receives some of the interest
and most of the principal, while the other class will receive most
of the interest and the rest of the principal. In some cases, one
class will receive all of the interest ("interest-only" securities)
and the other will receive all of the principal. The yield on
interest-only securities is extremely sensitive to the rate of
principal payments (including prepayments) on the underlying pool,
and a rapid rate of principal prepayments may have a material
adverse effect on the yield of the interest-only class. If the
underlying pool experiences greater than anticipated principal
prepayments, the Fund may fail to fully recoup its initial
investment.

Mortgage-Backed Security Rolls. The Fund may enter into
"forward roll" transactions with respect to mortgage-backed
securities issued by Ginnie Mae, FNMA or FHLMC. In a forward roll
transaction, which is considered to be a borrowing by the Fund, the
Fund will sell a mortgage security to selected banks or other
entities and simultaneously agree to repurchase a similar security
(same type, coupon and maturity) from the institution at a
specified later date at an agreed upon price. The mortgage
securities that are repurchased will bear the same interest rate as
those sold, but generally will be collateralized by different pools
of mortgages with different prepayment histories than those sold.
Risks of mortgage-backed security rolls include: (i) the risk of
prepayment prior to maturity, (ii) the possibility that the Fund
may not be entitled to receive interest and principal payments on
the securities sold and that the proceeds of the sale may have to
be invested in money market instruments (typically repurchase
agreements) maturing not later than the expiration of the roll, and
(iii) the possibility that the market value of the securities sold
by the Fund may decline below the price at which the Fund is
obligated to purchase the securities. Upon entering into a
mortgage-backed security roll, the Fund will be required to
identify to its Custodian cash, U.S. Government Securities or other
high-grade debt securities in an amount equal to its obligation
under the roll.

Debt Securities of U.S. Companies. The Fund's investments
in fixed-income securities issued by domestic companies and other
issuers may include debt obligations (bonds, debentures, notes,
mortgage-backed and asset-backed securities and CMOs) together with
preferred stocks.

The risks attendant to investing in high-yielding, lower-rated
bonds are described above. If a sinking fund or callable bond held
by the Fund is selling at a premium (or discount) and the issuer
exercises the call or makes a mandatory sinking fund payment, the
Fund would realize a loss (or gain) in market value; the income
from the reinvestment of the proceeds would be determined by
current market conditions, and reinvestment of that income may
occur at times when rates are generally lower than those on the
called bond.

Preferred Stocks. Preferred stock, unlike common stock,
offers a stated dividend rate payable from the corporation's
earnings. Such preferred stock dividends may be cumulative or non-
cumulative, participating, or auction rate. If interest rates
rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline.
Preferred stock may have mandatory sinking fund provisions, as well
as call/redemption provisions prior to maturity, a negative feature
when interest rates decline. Dividends on some preferred stock may
be "cumulative," requiring all or a portion of prior unpaid
dividends to be paid. Preferred stock also generally has a
preference over common stock on the distribution of a corporation's
assets in the event of liquidation of the corporation, and may be
"participating," which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases. The rights of
preferred stocks on distribution of a corporation's assets in the
event of a liquidation are generally subordinate to the rights
associated with a corporation's debt securities.

Participation Interests. The Fund may invest in
participation interests, subject to the limitation, described in
"Illiquid and Restricted Securities" in the Prospectus, on
investments by the Fund in illiquid investments. Participation
interests represent an undivided interest in or assignment of a
loan made by the issuing financial institution. No more than 5% of
the Fund's net assets can be invested in participation interests of
the same issuing borrower. Participation interests are primarily
dependent upon the financial strength of the borrowing corporation,
which is obligated to make payments of principal and interest on
the loan, and there is a risk that such borrowers may have
difficulty making payments. Such borrowers may have senior
securities rated as low as "C" by Moody's or "D" by Standard &
Poor's. In the event the borrower fails to pay scheduled interest
or principal payments, the Fund could experience a reduction in its
income and might experience a decline in the net asset value of its
shares. In the event of a failure by the financial institution to
perform its obligation in connection with the participation
agreement, the Fund might incur certain costs and delays in
realizing payment or may suffer a loss of principal and/or
interest. The Manager has set certain creditworthiness standards
for issuers of loan participation and monitors their
creditworthiness. These same standards apply to participation
interests in loans to foreign companies.

Warrants and Rights. The Fund may, to the limited extent
described in the Prospectus, invest in warrants and rights.
Warrants basically are options to purchase equity securities at
specific prices valid for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying
securities. Rights are similar to warrants but normally have a
short duration and are distributed directly by the issuer to its
shareholders. Warrants and rights have no voting rights, receive
no dividends and have no rights with respect to the assets of the
issuer.

Asset-Backed Securities. These securities, issued by
trusts and special purpose entities, are backed by pools of assets,
primarily automobile and credit-card receivables and home equity
loans, which pass through the payments on the underlying
obligations to the security holders (less servicing fees paid to
the originator or fees for any credit enhancement). The value of
an asset-backed security is affected by changes in the market's
perception of the asset backing the security, the creditworthiness
of the servicing agent for the loan pool, the originator of the
loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has
been exhausted. Payments of principal and interest passed through
to holders of asset-backed securities are typically supported by
some form of credit enhancement, such as a letter of credit, surety
bond, limited guarantee by another entity or having a priority to
certain of the borrower's other securities. The degree of credit
enhancement varies, and generally applies to only a fraction of the
asset-backed security's par value until exhausted. If the credit
enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest
are not made with respect to the underlying loans, the Fund may
experience losses or delays in receiving payment. The risks of
investing in asset-backed securities are ultimately dependent upon
payment of consumer loans by the individual borrowers. As a
purchaser of an asset-backed security, the Fund would generally
have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject
to prepayments, which shorten the weighted average life of asset-
backed securities and may lower their return, in the same manner as
described above for prepayments of a pool of mortgage loans
underlying mortgage-backed securities. However, asset-backed
securities do not have the benefit of the same security interest in
the underlying collateral as do mortgage-backed securities.

Zero Coupon Corporate Securities. The Fund may invest in
zero coupon securities issued by corporations. Corporate zero
coupon securities are: (i) notes or debentures which do not pay
current interest and are issued at substantial discounts from par
value, or (ii) notes or debentures that pay no current interest
until a stated date one or more years into the future, after which
the issuer is obligated to pay interest until maturity, usually at
a higher rate than if interest were payable from the date of
issuance. Such corporate zero coupon securities, in addition to
the risks identified above under "U.S. Government Securities - Zero
Coupon Treasury Securities," are subject to the risk of the
issuer's failure to pay interest and repay principal in accordance
with the terms of the obligation.

Mortgage-Backed Securities. Mortgage-backed securities may
also be issued by private issuers such as commercial banks, savings
and loan associations, mortgage insurance companies and other
secondary market issuers that create pass-through pools of
conventional residential mortgage loans and on commercial mortgage
loans. They may be the originators of the underlying loans as well
as the guarantors of the mortgage-backed securities. There are no
direct or indirect government guarantees of payments on these
pools. However, timely payment of interest and principal of these
pools is generally supported by various forms of insurance or
guarantees. The insurance and guarantees are issued by government
entities, private insurers and the mortgage poolers. The insurance
available, the guarantees, and the creditworthiness of the issuers
will be evaluated by the Manager to determine whether a particular
mortgage-backed security of this type meets the Fund's investment
standards. There can be no assurance that the private insurers can
meet their obligations under the policies. Securities issued by
certain private poolers may not be readily marketable, and would be
treated as illiquid securities subject to the Fund's limitations on
investments in such securities.

Temporary Defensive Investments. In times of unstable or
uncertain economic or market conditions, when the Manager
determines it appropriate to do so, the Fund may assume a temporary
defensive position and invest an unlimited amount of its assets in
U.S. dollar-denominated debt obligations, issued by the U.S. or
foreign governments, domestic or foreign corporations or banks,
maturing in one year or less ("money market securities"). The Fund
will purchase money market securities to maintain liquidity deemed
necessary by the Manager for investment purposes, and to minimize
the impact of fluctuating interest rates on the net asset value of
the Fund. To the extent the Fund is so invested, it is not
invested to achieve its investment objective of seeking a high
level of current income.

Other Investment Techniques and Strategies

Repurchase Agreements. The Fund may acquire securities
that are subject to repurchase agreements, in order to generate
income while providing liquidity. In a repurchase transaction, the
Fund acquires a security from, and simultaneously resells it to, an
approved vendor (a U.S. commercial bank, U.S. branch of a foreign
bank or a broker-dealer which has been designated a primary dealer
in government securities, which must meet the credit requirements
set by the Fund's Board of Trustees from time to time), for
delivery on an agreed upon future date. The sale price exceeds the
purchase price by an amount that reflects an agreed-upon interest
rate effective for the period during which the repurchase agreement
is in effect. The majority of these transactions run from day to
day, and delivery pursuant to resale typically will occur within
one to five days of the purchase. Repurchase agreements are
considered "loans" under the Investment Company Act, collateralized
by the underlying security. The Fund's repurchase agreements will
require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase
price to collateralize the repayment obligation fully.
Additionally, the Manager will impose creditworthiness requirements
to confirm that the vendor is financially sound and will
continuously monitor the collateral's value. If the vendor of a
repurchase agreement fails to pay the agreed-upon resale price on
the delivery date, the Fund's risks in such event may include any
costs of disposing of the collateral, and any loss from any delay
in foreclosing on the collateral.

Illiquid and Restricted Securities. The Fund will not
purchase or otherwise acquire any security if, as a result, more
than 10% of its net assets (taken at current value) would be
invested in securities that are illiquid by virtue of the absence
of a readily available market or because of legal or contractual
restrictions on resale ("restricted securities"). As noted in the
Prospectus, the Board may increase that limit to 15%. This policy
applies to participation interests, bank time deposits, master
demand notes, repurchase transactions having a maturity beyond
seven days, over-the-counter options held by the Fund and that
portion of assets used to cover such options and certain derivative
instruments. This policy is not a fundamental policy and does not
limit purchases of restricted securities eligible for resale to
qualified institutional purchasers pursuant to Rule 144A under the
Securities Act of 1933 that are determined to be liquid by the
Board of Trustees or by the Manager under Board-approved
guidelines. Such guidelines take into account trading activity for
such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, the Fund's holdings of
those securities may be illiquid. There may be undesirable delays
in selling illiquid securities at prices representing their fair
value. The expenses of registration of restricted securities that
are subject to legal restrictions on resale (excluding securities
that may be resold by the Fund pursuant to Rule 144A, as explained
in the Prospectus) may be negotiated at the time such securities
are purchased by the Fund. When registration is required, a
considerable period may elapse between a decision to sell the
securities and the time the Fund would be permitted to sell them.
Thus, the Fund might not be able to obtain as favorable a price as
that prevailing at the time of the decision to sell. The Fund also
may acquire, through private placements, securities having
contractual resale restrictions, which might lower the amount
realizable upon the sale of such securities.

Loans of Portfolio Securities. The Fund may lend its
portfolio securities (other than in repurchase transactions) to
brokers, dealers and other financial institutions meeting certain
credit standards if the loan is collateralized in accordance with
applicable regulatory requirements, and if, after any loan, the
value of securities loaned does not exceed 25% of the value of the
Fund's total assets. Under applicable regulatory requirements
(which are subject to change), the loan collateral must, on each
business day, at least equal the market value of the loaned
securities and must consist of cash, bank letters of credit, U.S.
Government Securities, or other cash equivalents in which the Fund
is permitted to invest. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Fund if
the demand meets the terms of the letter. Such terms and the
issuing bank must be satisfactory to the Fund. In a portfolio
securities lending transaction, the Fund receives from the borrower
an amount equal to the interest paid or the dividends declared on
the loaned securities during the term of the loan as well as the
interest on the collateral securities, less any finders' or
administrative or other fees the Fund pays in connection with the
loan. The Fund may share the interest it receives on the
collateral securities with the borrower as long as it realizes at
least a minimum amount of interest required by the lending
guidelines established by its Board of Trustees. In connection
with securities lending, the Fund might experience risks of delay
in receiving additional collateral, or risks of delay in recovery
of the securities, or loss of rights in the collateral should the
borrower fail financially. The Fund will not lend its portfolio
securities to any officer, trustee, employee or affiliate of the
Fund or its Manager. The terms of the Fund's loans must meet
certain tests under the Internal Revenue Code and permit the Fund
to reacquire loaned securities on five business days' notice or in
time to vote on any important matter.

Borrowing for Leverage. From time to time, the Fund may
increase its ownership of securities by borrowing from banks on a
unsecured basis and investing the borrowed funds, subject to the
restrictions stated in the Prospectus. Any such borrowing will be
made only from banks, and pursuant to the current requirements of
the Investment Company Act, will be made only to the extent that
the value of the Fund's assets, less its liabilities other than
borrowings, is equal to at least 300% of all borrowings including
the proposed borrowing and amounts covering the Fund's obligations
under "forward roll" transactions. If the value of the Fund's
assets so computed should fail to meet the 300% asset coverage
requirement, the Fund is required within three days to reduce its
bank debt to the extent necessary to meet such requirement and may
have to sell a portion of its investments at a time when
independent investment judgment would not dictate such sale.
Borrowing for investment increases both investment opportunity and
risk. Since substantially all of the Fund's assets fluctuate in
value, but borrowing obligations are fixed, when the Fund has
outstanding borrowings, the net asset value per share of the Fund
correspondingly will tend to increase and decrease more when
portfolio assets fluctuate in value than otherwise would be the
case.

"When-Issued" and Delayed Delivery Transactions. The Fund
may purchase securities on a "when-issued" basis, and may purchase
or sell such securities on a "delayed delivery" basis. Although
the Fund will enter into such transactions for the purpose of
acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. "When-issued" or "delayed
delivery" refers to securities whose terms and indenture are
available and for which a market exists, but which are not
available for immediate delivery or are to be delivered at a later
date. When such transactions are negotiated, the price (which is
generally expressed in yield terms) is fixed at the time the
commitment is made, but delivery and payment for the securities
take place at a later date. Such securities may bear interest at
a lower rate than longer-term securities. The commitment to
purchase a security for which payment will be made on a future date
may be deemed a separate security and involve a risk of loss if the
value of the security declines prior to the settlement date.
During the period between commitment by the Fund and settlement
(usually within two months but generally not to exceed 120 days),
no payment is made for the securities purchased by the purchaser,
and no interest accrues to the purchaser from the transaction.
Such securities are subject to market fluctuation; the value at
delivery may be less than the purchase price. The Fund will
identify to its Custodian liquid securities or other high grade
debt obligations at least equal to the value of purchase
commitments until payment is made.

The Fund will engage in when-issued transactions in order to
secure what is considered to be an advantageous price and yield at
the time of entering into the obligation. When the Fund engages in
when-issued or delayed delivery transactions, it relies on the
buyer or seller, as the case may be, to consummate the transaction.
Failure of the buyer or seller to do so may result in the Fund
losing the opportunity to obtain a price and yield considered to be
advantageous. At the time the Fund makes a commitment to purchase
or sell a security on a when-issued or forward commitment basis, it
records the transaction and reflects the value of the security
purchased, or if a sale, the proceeds to be received, in
determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive
against a forward commitment, it may incur a gain or loss.

To the extent the Fund engages in when-issued and delayed
delivery transactions, it will do so for the purpose of acquiring
or selling securities consistent with its investment objective and
policies and not for the purposes of investment leverage. Although
the Fund may enter into such transactions with the intention of
actually receiving or delivering the securities, when-issued
securities and forward commitments may be sold prior to settlement
date. In addition, changes in interest rates before settlement in
a direction other than that expected by the Manager will affect the
value of such securities and may cause a loss to the Fund.

When-issued transactions and forward commitments allow the
Fund a technique to use against anticipated changes in interest
rates and prices. For instance, in periods of rising interest
rates and falling prices, the Fund might sell securities in its
portfolio on a forward commitment basis to attempt to limit its
exposure to anticipated falling prices. In periods of falling
interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-
issued or forward commitment basis, thereby obtaining the benefit
of currently higher cash yields.

Floating Rate/Variable Rate Obligations. Floating
Rate/Variable Rate Notes. Some of the notes the Fund may purchase
may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are
automatically adjusted according to a specified market rate for
such investments, such as the percentage of the prime rate of a
bank, or the 91-day U.S. Treasury Bill rate. Such obligations may
be secured by bank letters of credit or other credit support
arrangements.

Hedging with Options and Futures Contracts. As described
in the Prospectus, the Fund may employ one or more types of Hedging
Instruments for temporary defensive purposes. The Fund's strategy
of hedging with Futures and options on Futures will be incidental
to the Fund's activities in the underlying cash market. Puts may
also be written on debt securities to attempt to increase the
Fund's income. For hedging purposes, the Fund may use Interest
Rate Futures; Financial Futures (together with Interest Rate
Futures, "Futures"); Forward Contracts (defined below); and call
and put options on debt securities, Futures, bond indices and
foreign currencies (all of the foregoing are referred to as
"Hedging Instruments"). Hedging Instruments may be used to attempt
to: (i) protect against possible declines in the market value of
the Fund's portfolio resulting from downward trends in the debt
securities markets (generally due to a rise in interest rates),
(ii) protect unrealized gains in the value of the Fund's debt
securities which have appreciated, (iii) facilitate selling debt
securities for investment reasons, (iv) establish a position in the
debt securities markets as a temporary substitute for purchasing
particular debt securities, or (v) reduce the risk of adverse
currency fluctuations. A call or put may be purchased only if,
after such purchase, the net value of all call and put options
owned by the Fund would not exceed 5% of the Fund's total assets.
The Fund will not use Futures and options on Futures for
speculation. The Hedging Instruments the Fund may use are
described below.

When hedging to attempt to protect against declines in the
market value of the Fund's portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Futures, (ii) purchase puts on
such Futures or securities, (iii) write calls on securities held by
it or on Futures or (iv) purchase call options on interest rate,
currency or asset spreads. When hedging to attempt to protect
against the possibility that portfolio securities are not fully
included in a rise in value of the debt securities market, the Fund
may: (i) purchase Futures, or (ii) purchase calls on such Futures
or on securities. Covered calls and puts may also be written on
debt securities to attempt to increase the Fund's income. When
hedging to protect against declines in the dollar value of a
foreign currency-denominated security, the Fund may: (a) purchase
puts on that foreign currency and on foreign currency Futures, (b)
write calls on that currency or on such Futures, or (c) enter into
Forward Contracts at a lower rate than the spot ("cash") rate.

The Fund may also purchase calls and puts on spread options.
Spread options pay the difference between two interest rates, two
exchange rates or two referenced assets. Spread options are used
to hedge the decline in the value of an interest rate, currency or
asset compared to a referenced or base interest rate, currency or
asset. The risks associated with spread options are similar to
those for individual interest rate options, foreign exchange
options and debt or equity options.

The Fund's strategy of hedging with Futures and options on
Futures will be incidental to the Fund's activities in the
underlying cash market. Additional Information about the Hedging
Instruments the Fund may use is provided below. The Fund may employ
Hedging Instruments and strategies that are not presently
contemplated but which may be developed, to the extent such
investment methods are consistent with the Fund's investment
objective, legally permissible and adequately disclosed.

Writing Call Options. The Fund may write (that is, sell)
call options ("calls") on debt securities that are traded on U.S.
and foreign securities exchanges and over-the-counter markets, to
enhance income through the receipt of premiums from expired calls
and any net profits from closing purchase transactions. After any
such sale up to 100% of the Fund's total assets may be subject to
calls. All such calls written by the Fund must be "covered" while
the call is outstanding. Calls on Futures (discussed below) must
be covered by deliverable securities or by liquid assets segregated
to satisfy the Futures contract. When the Fund writes a call on a
security it receives a premium and agrees to sell the callable
investment to a purchaser of a corresponding call on the same
security during the call period at a fixed exercise price (which
may differ from the market price of the underlying security),
regardless of market price changes during the call period. The
Fund has retained the risk of loss should the price of the
underlying security decline during the call period, which may be
offset to some extent by the premium.

To terminate its obligation on a call it has written, the Fund
may purchase a corresponding call in a "closing purchase
transaction." A profit or loss will be realized, depending upon
whether the net of the amount of the option transaction costs and
the premium received on the call written was more or less than the
price of the call subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains
the underlying investment and the premium received. Any such
profits are considered short-term capital gains for Federal income
tax purposes, and when distributed by the Fund are taxable as
ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the
callable investments until the call lapsed or was exercised.

The Fund may also write calls on Futures without owning a
futures contract or a deliverable bond, provided that at the time
the call is written, the Fund covers the call by segregating in
escrow an equivalent dollar amount of liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed
assets drops below 100% of the current value of the Future. In no
circumstances would an exercise notice require the Fund to deliver
a futures contract; it would simply put the Fund in a short futures
position, which is permitted by the Fund's hedging policies.

Writing Put Options. The Fund may write put options on
debt securities or Futures but only if such puts are covered by
segregated liquid assets. The Fund will not write puts if, as a
result, more than 50% of the Fund's net assets would be required to
be segregated to cover such put obligations. In writing puts,
there is the risk that the Fund may be required to buy the
underlying security at a disadvantageous price. A put option on
securities gives the purchaser the right to sell, and the writer
the obligation to buy, the underlying investment at the exercise
price during the option period. Writing a put covered by
segregated liquid assets equal to the exercise price of the put has
the same economic effect to the Fund as writing a covered call.
The premium the Fund receives from writing a put option represents
a profit, as long as the price of the underlying investment remains
above the exercise price. However, the Fund has also assumed the
obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even
though the value of the investment may fall below the exercise
price. If the put lapses unexercised, the Fund (as the writer of
the put) realizes a gain in the amount of the premium. If the put
is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price, which will usually
exceed the market value of the investment at that time. In that
case, the Fund may incur a loss, equal to the sum of the current
market value of the underlying investment and the premium received
minus the sum of the exercise price and any transaction costs
incurred.

When writing put options on securities, to secure its
obligation to pay for the underlying security, the Fund will
deposit in escrow liquid assets with a value equal to or greater
than the exercise price of the put option. The Fund therefore
forgoes the opportunity of investing the segregated assets or
writing calls against those assets. As long as the obligation of
the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was
sold, requiring the Fund to take delivery of the underlying
security against payment of the exercise price. The Fund has no
control over when it may be required to purchase the underlying
security, since it may be assigned an exercise notice at any time
prior to the termination of its obligation as the writer of the
put. This obligation terminates upon expiration of the put, or
such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise
notice, it is thereafter not allowed to effect a closing purchase
transaction.

The Fund may effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent
an underlying security from being put. Furthermore, effecting such
a closing purchase transaction will permit the Fund to write
another put option to the extent that the exercise price thereof is
secured by the deposited assets, or to utilize the proceeds from
the sale of such assets for other investments by the Fund. The
Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the
premium received from writing the option. As above for writing
covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax
purposes, and when distributed by the Fund, are taxable as ordinary
income.

Purchasing Calls and Puts. The Fund may purchase calls on
debt securities, spreads, or on Futures that are traded on U.S. and
foreign securities exchanges and the U.S. over-the-counter markets,
in order to protect against the possibility that the Fund's
portfolio will not fully participate in an anticipated rise in
value of the long-term debt securities market. The value of debt
securities underlying calls purchased by the Fund will not exceed
the value of the portion of the Fund's portfolio invested in cash
or cash equivalents (i.e. securities with maturities of less than
one year). When the Fund purchases a call (other than in a closing
purchase transaction), it pays a premium and, except as to calls on
indices, spreads or Futures, has the right to buy the underlying
investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. When
the Fund purchases a call on an index, spread or Future, it pays a
premium, but settlement is in cash rather than by delivery of the
underlying investment to the Fund. In purchasing a call, the Fund
benefits only if the call is sold at a profit or if, during the
call period, the market price of the underlying investment is above
the sum of the call price plus the transaction costs and the
premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment.

The Fund may purchase put options ("puts") which relate to
debt securities (whether or not it holds such securities in its
portfolio), spreads or Futures. When the Fund purchases a put, it
pays a premium and, except as to puts on indices or spreads, has
the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at
a fixed exercise price. Buying a put on an investment the Fund
owns enables the Fund to protect itself during the put period
against a decline in the value of the underlying investment below
the exercise price by selling such underlying investment at the
exercise price to a seller of a corresponding put. If the market
price of the underlying investment is equal to or above the
exercise price and as a result the put is not exercised or resold,
the put will become worthless at its expiration date, and the Fund
will lose its premium payment and the right to sell the underlying
investment. The put may, however, be sold prior to expiration
(whether or not at a profit.)

Buying a put on an investment it does not own, either a put on
an index or a put on a Future not held by the Fund, permits the
Fund either to resell the put or buy the underlying investment and
sell it at the exercise price. The resale price of the put will
vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise
price and as a result the put is not exercised, the put will become
worthless on its expiration date. In the event of a decline in the
stock market, the Fund could exercise or sell the put at a profit
to attempt to offset some or all of its loss on its portfolio
securities. When the Fund purchases a put on an index, or on a
Future not held by it, the put protects the Fund to the extent that
the index moves in a similar pattern to the securities held. In
the case of a put on an index or Future, settlement is in cash
rather than by delivery by the Fund of the underlying investment.

Puts and calls on broadly-based indices or Futures are similar
to puts and calls on securities except that all settlements are in
cash and gain or loss depends on changes in the index in question
(and thus on price movements in the stock market generally) rather
than on price movements in individual securities or futures
contracts. When the Fund buys a call on an index or Future, it
pays a premium. During the call period, upon exercise of a call by
the Fund, a seller of a corresponding call on the same investment
will pay the Fund an amount of cash to settle the call if the
closing level of the index or Future upon which the call is based
is greater than the exercise price of the call. That cash payment
is equal to the difference between the closing price of the index
and the exercise price of the call times a specified multiple (the
"multiplier") which determines the total dollar value for each
point of difference. When the Fund buys a put on an index or
Future, it pays a premium and has the right during the put period
to require a seller of a corresponding put, upon the Fund's
exercise of its put, to deliver to the Fund an amount of cash to
settle the put if the closing level of the index or Future upon
which the put is based is less than the exercise price of the put.
That cash payment is determined by the multiplier, in the same
manner as described above as to calls.

An option position may be closed out only on a market which
provides secondary trading for options of the same series and there
is no assurance that a liquid secondary market will exist for any
particular option. The Fund's option activities may affect its
turnover rate and brokerage commissions. The exercise by the Fund
of puts on securities will cause the sale of related investments,
increasing portfolio turnover. Although such exercise is within
the Fund's control, holding a put might cause the Fund to sell the
related investments for reasons which would not exist in the
absence of the put. The Fund will pay a brokerage commission each
time it buys a put or call, sells a call, or buys or sells an
underlying investment in connection with the exercise of a put or
call. Such commissions may be higher than those which would apply
to direct purchases or sales of such underlying investments.
Premiums paid for options are small in relation to the market value
of the related investments, and consequently, put and call options
offer large amounts of leverage. The leverage offered by trading
in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investments.

Options on Foreign Currencies. The Fund intends to write
and purchase calls on foreign currencies. The Fund may purchase
and write puts and calls on foreign currencies that are traded on
a securities or commodities exchange or quoted by major recognized
dealers in such options, for the purpose of protecting against
declines in the dollar value of foreign securities and against
increases in the dollar cost of foreign securities to be acquired.
If a rise is anticipated in the dollar value of a foreign currency
in which securities to be acquired are denominated, the increased
cost of such securities may be partially offset by purchasing calls
or writing puts on that foreign currency. If a decline in the
dollar value of a foreign currency is anticipated, the decline in
value of portfolio securities denominated in that currency may be
partially offset by writing calls or purchasing puts on that
foreign currency. However, in the event of currency rate
fluctuations adverse to the Fund's position, it would lose the
premium it paid and transactions costs. A call written on a
foreign currency by the Fund is covered if the Fund owns the
underlying foreign currency covered by the call or has an absolute
and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration
held in a segregated account by its custodian) upon conversion or
exchange of other foreign currency held in its portfolio. A call
may be written by the Fund on a foreign currency to provide a hedge
against a decline due to an expected adverse change in the exchange
rate in the U.S. dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in a currency
other than that of underlying the option. This is a cross-hedging
strategy. In such circumstances, the Fund collateralizes the
option by maintaining in a segregated account with the Fund's
custodian, liquid assets in an amount not less than the value of
the underlying foreign currency in U.S. dollars marked-to-market
daily.

Futures. The Fund may buy and sell Futures. No price is
paid or received upon the purchase or sale of an Interest Rate
Future or a foreign currency exchange contract ("Forward
Contract"), discussed below. An Interest Rate Future obligates the
seller to deliver and the purchaser to take a specific type of debt
security at a specific future date for a fixed price. That
obligation may be satisfied by actual delivery of the debt security
or by entering into an offsetting contract. A securities index
assigns relative values to the securities included in that index
and is used as a basis for trading long-term Financial Futures
contracts. Financial Futures reflect the price movements of
securities included in the index. They differ from Interest Rate
Futures in that settlement is made in cash rather than by delivery
of the underlying investment.

Upon entering into a Futures transaction, the Fund will be
required to deposit an initial margin payment in cash or U.S.
Treasury bills with the futures commission merchant (the "futures
broker"). The initial margin will be deposited with the Fund's
Custodian in an account registered in the futures broker's name;
however the futures broker can gain access to that account only
under specified conditions. As the Future is marked to market to
reflect changes in its market value, subsequent margin payments,
called variation margin, will be made to or by the futures broker
on a daily basis. Prior to expiration of the Future, if the Fund
elects to close out its position by taking an opposite position, a
final determination of variation margin is made, additional cash is
required to be paid by or released to the Fund, and any loss or
gain is realized for tax purposes. Although Interest Rate Futures
by their terms call for settlement by delivery or acquisition of
debt securities, in most cases the obligation is fulfilled by
entering into an offsetting position. All futures transactions are
effected through a clearinghouse associated with the exchange on
which the contracts are traded.

Financial Futures are similar to Interest Rate Futures except
that settlement is made in cash, and net gain or loss on options on
Financial Futures depends on price movements of the securities
included in the index. The strategies which the Fund employs
regarding Financial Futures are similar to those described above
with regard to Interest Rate Futures.

Forward Contracts. The Fund may enter into foreign
currency exchange contracts ("Forward Contracts"), which obligate
the seller to deliver and the purchaser to take a specific amount
of foreign currency at a specific future date for a fixed price.
A Forward Contract involves bilateral obligations of one party to
purchase, and another party to sell, a specific currency at a
future date (which may be any fixed number of days from the date of
the contract agreed upon by the parties), at a price set at the
time the contract is entered into. These contracts are traded in
the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may
enter into a Forward Contract in order to "lock in" the U.S. dollar
price of a security denominated in a foreign currency which it has
purchased or sold but which has not yet settled, or to protect
against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and a foreign currency. There
is a risk that use of Forward Contracts may reduce the gain that
would otherwise result from a change in the relationship between
the U.S. dollar and a foreign currency.

The Fund may also enter into a forward contract to sell a
foreign currency denominated in a currency other than that in which
the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign
currency of the forward contract and the foreign currency of the
underlying investment than between the U.S. dollar and the foreign
currency of the underlying investment, or as a tactical allocation
to take advantage of differences in foreign interest rates. This
technique is referred to as "cross hedging." Cross hedges may be
established with the U.S. dollar as the base currency or with
another currency closely correlated with the U.S. dollar as the
base.

The success of cross hedging is dependent on many factors,
including the ability of the Manager to correctly identify and
monitor the correlation between foreign currencies and the U.S.
dollar and between foreign currencies and other base currencies
closely correlated with the U.S. dollar. To the extent that these
correlations are not identical, the Fund may experience losses or
gains on both the underlying security and the cross currency hedge.

The Fund may use Forward Contracts to protect against
uncertainty in the level of future exchange rates. The use of
Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities the Fund owns or intends to acquire, but
it does fix a rate of exchange in advance. In addition, although
Forward Contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies
increase.

There is no limitation as to the percentage of the Fund's
assets that may be committed to foreign currency exchange
contracts. The Fund will not enter into such forward contracts or
maintain a net exposure in such contracts to the extent that the
Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's assets denominated in that
currency, or enter into a "cross hedge," unless it is denominated
in a currency or currencies that the Manager believes will have
price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects
of Covered Calls and Hedging Instruments" below for a discussion of
the tax treatment of foreign currency exchange contracts.

The Fund may enter into Forward Contracts with respect to
specific transactions. For example, when the Fund enters into a
contract for the purchase or sale of a security denominated in a
foreign currency, or when the Fund anticipates receipt of dividend
payments in a foreign currency, the Fund may desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment by entering into a Forward Contract, for a fixed
amount of U.S. dollars per unit of foreign currency, for the
purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will
thereby be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the
security is purchased or sold, or on which the payment is declared,
and the date on which such payments are made or received.

The Fund may also use Forward Contracts to lock in the U.S.
dollar value of portfolio positions ("position hedge"). In a
position hedge, for example, when the Fund believes that foreign
currency may suffer a substantial decline against the U.S. dollar,
it may enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency,
or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a
fixed dollar amount. In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross hedge").

The Fund's Custodian will place liquid assets in a separate
account of the Fund with the Custodian having a value equal to the
aggregate amount of the Fund's commitments under forward contracts
entered into with respect to position hedges and cross hedges. If
the value of the assets placed in the separate account declines,
additional cash or securities will be placed in the account on a
daily basis so that the value of the account will equal the amount
of the Fund's obligations with respect to such contracts. As an
alternative to maintaining all or part of the separate account, the
Fund may purchase a call option permitting the Fund to purchase the
amount of foreign currency being hedged by a forward sale contract
at a price no higher than the forward contract price, or the Fund
may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price
as high or higher than the forward contract price. Unanticipated
changes in currency prices may result in poorer overall performance
for the Fund than if it had not entered into such contracts.

The precise matching of the Forward Contract amounts and the
value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
these securities between the date the Forward Contract is entered
into and the date it is sold. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (i.e.,
cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term
currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Forward Contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transactions costs.

At or before the maturity of a Forward Contract requiring the
Fund to sell a currency, the Fund may either sell a portfolio
security and use the sale proceeds to make delivery of the currency
or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to
which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly,
the Fund may close out a Forward Contract requiring it to purchase
a specified currency by entering into a second contract entitling
it to sell the same amount of the same currency on the maturity
date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting Forward Contract
under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates
of the first contract and offsetting contract.

The cost to the Fund of engaging in Forward Contracts varies
with factors such as the currencies involved, the length of the
contract period and the market conditions then prevailing. Because
Forward Contracts are usually entered into on a principal basis, no
fees or commissions are involved. Because such contracts are not
traded on an exchange, the Fund must evaluate the credit and
performance risk of each particular counterparty under a Forward
Contract.

Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign
currencies into U.S. dollars on a daily basis. The Fund may
convert foreign currency from time to time, and investors should be
aware of the costs of currency conversion. Foreign exchange
dealers do not charge a fee for conversion, but they do seek to
realize a profit based on the difference between the prices at
which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer.

Interest Rate Swap Transactions. Swap agreements entail
both interest rate risk and credit risk. There is a risk that,
based on movements of interest rates in the future, the payments
made by the Fund under a swap agreement will have been greater than
those received by it. Credit risk arises from the possibility that
the counterparty will default. If the counterparty to an interest
rate swap defaults, the Fund's loss will consist of the net amount
of contractual interest payments that the Fund has not yet
received. The Manager will monitor the creditworthiness of
counterparties to the Fund's interest rate swap transactions on an
ongoing basis. The Fund will enter into swap transactions with
appropriate counterparties pursuant to master netting agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under that master agreement shall be
regarded as parts of an integral agreement. If on any date amounts
are payable in the same currency in respect of one or more swap
transactions, the net amount payable on that date in that currency
shall be paid. In addition, the master netting agreement may
provide that if one party defaults generally or on one swap, the
counterparty may terminate the swaps with that party. Under such
agreements, if there is a default resulting in a loss to one party,
the measure of that party's damages is calculated by reference to
the average cost of a replacement swap with respect to each swap
(i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and
the result is the counterparty's gain or loss on termination. The
termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation".

Additional Information About Hedging Instruments and Their
Use. The Fund's Custodian, or a securities depository acting for
the Custodian, will act as the Fund's escrow agent, through the
facilities of the Options Clearing Corporation ("OCC"), as to the
investments on which the Fund has written options traded on
exchanges or as to other acceptable escrow securities, so that no
margin will be required for such transactions. OCC will release
the securities on the expiration of the option or upon the Fund's
entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option.

When the Fund writes an over-the-counter ("OTC") option, it
will enter into an arrangement with a primary U.S. Government
securities dealer, which would establish a formula price at which
the Fund would have the absolute right to repurchase that OTC
option. That formula price would generally be based on a multiple
of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying
security (that is, the extent to which the option is "in-the-
money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the
mark-to-market value of any OTC option held by it. The Securities
and Exchange Commission ("SEC") is evaluating whether OTC options
should be considered liquid securities, and the procedure described
above could be affected by the outcome of that evaluation.

Regulatory Aspects of Hedging Instruments. The Fund is
required to operate within certain guidelines and restrictions with
respect to its use of Futures and options on Futures established by
the Commodity Futures Trading Commission ("CFTC"). In particular,
the Fund is exempted from registration with the CFTC as a
"commodity pool operator" if the Fund complies with the
requirements of the Rule adopted by the CFTC. The Rule does not
limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its
aggregate initial Futures margin and related options premiums to no
more than 5% of the Fund's net assets for hedging strategies that
are not considered bona fide hedging strategies under the Rule.
Under the Rule the Fund also must use short futures and options on
futures solely for bona fide hedging purposes within the meaning
and intent of the applicable provisions of the Commodity Exchange
Act.

Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number
of options which may be written or held by a single investor or
group of investors acting in concert, regardless of whether the
options were written or purchased on the same or different
exchanges or are held in one or more accounts or through one or
more exchanges or brokers. Thus, the number of options which the
Fund may write or hold may be affected by options written or held
by other entities, including other investment companies having the
same or an affiliated investment advisor. Position limits also
apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose
certain other sanctions. Due to requirements under the Investment
Company Act, when the Fund purchases a Future, the Fund will
maintain, in a segregated account or accounts with its custodian
bank, cash or readily-marketable, short-term (maturing in one year
or less) debt instruments in an amount equal to the market value of
the securities underlying such Future, less the margin deposit
applicable to it.

Tax Aspects of Covered Calls and Hedging Instruments. The
Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code. One of the tests for such qualification
is that less than 30% of its gross income (irrespective of losses)
must be derived from gains realized on the sale of securities held
for less than three months. Due to this limitation, the Fund will
limit the extent to which it engages in the following activities,
but will not be precluded from them: (i) selling investments,
including Futures, held for less than three months, whether or not
they were purchased on the exercise of a call held by the Fund;
(ii) purchasing calls or puts which expire in less than three
months; (iii) effecting closing transactions with respect to calls
or puts purchased less than three months previously; (iv)
exercising puts or calls held by the Fund for less than three
months; and (v) writing calls on investments held for less than
three months.

Certain foreign currency exchange contracts ("Forward
Contracts") in which the Fund may invest are treated as "section
1256 contracts." Gains or losses relating to section 1256
contracts generally are characterized under the Internal Revenue
Code as 60% long-term and 40% short-term capital gains or losses.
However, foreign currency gains or losses arising from certain
section 1256 contracts (including Forward Contracts) generally are
treated as ordinary income or loss. In addition, section 1256
contracts held by the Fund at the end of each taxable year are
"marked-to market" with the result that unrealized gains or losses
are treated as though they were realized. These contracts also may
be marked-to-market for purposes of the excise tax applicable to
investment company distributions and for other purposes under rules
prescribed pursuant to the Internal Revenue Code. An election can
be made by the Fund to exempt these transactions from this mark-to-
market treatment.

Certain Forward Contracts entered into by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules
may affect the character and timing of gains (or losses) recognized
by the Fund on straddle positions. Generally, a loss sustained on
the disposition of a position making up a straddle is allowed only
to the extent such loss exceeds any unrecognized gain in the
offsetting positions making up the straddle. Disallowed loss is
generally allowed at the point where there is no unrecognized gain
in the offsetting positions making up the straddle, or the
offsetting position is disposed of.

Under the Internal Revenue Code, gains or losses attributable
to fluctuations in exchange rates that occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition of foreign currency forward
contracts, gains or losses attributable to fluctuations in the
value of a foreign currency between the date of acquisition of the
security or contract and the date of disposition also are treated
as ordinary gain or loss. Currency gains and losses are offset
against market gains and losses before determining a net "Section
988" gain or loss under the Internal Revenue Code, which may
increase or decrease the amount of the Fund's investment company
income available for distribution to its shareholders.

Possible Risk Factors in Hedging. In addition to the risks
with respect to options discussed in the Prospectus and above,
there is a risk in using short hedging by selling Futures to
attempt to protect against decline in value of the Fund's portfolio
securities (due to an increase in interest rates) that the prices
of such Futures will correlate imperfectly with the behavior of the
cash (i.e., market value) prices of the Fund's securities. The
ordinary spreads between prices in the cash and futures markets are
subject to distortions due to differences in the natures of those
markets. First, all participants in the futures markets are
subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close
out futures contracts through offsetting transactions which could
distort the normal relationship between the cash and futures
markets. Second, the liquidity of the futures markets depend on
participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to
make or take delivery, liquidity in the futures markets could be
reduced, thus producing distortion. Third, from the point of view
of speculators, the deposit requirements in the futures markets are
less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.

If the Fund uses Hedging Instruments to establish a position
in the debt securities markets as a temporary substitute for the
purchase of individual debt securities (long hedging) by buying
Futures and/or calls on such Futures or on debt securities, it is
possible that the market may decline; if the Fund then concludes
not to invest in such securities at that time because of concerns
as to possible further market decline or for other reasons, the
Fund will realize a loss on the Hedging Instruments that is not
offset by a reduction in the price of the debt securities
purchased.

Other Investment Restrictions

The Fund's most significant investment restrictions are set
forth in the Prospectus. There are additional investment
restrictions that the Fund must follow that are fundamental
policies of the Fund. Fundamental policies and the Fund's
investment objective cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the
vote of the holders of the lesser of (i) 67% or more of the shares
present or represented by proxy at a shareholders' meeting, if the
holders of more than 50% of the outstanding shares are present or
represented by a proxy, or (ii) more than 50% of the outstanding
shares.

Under these additional restrictions, the Fund cannot do any of
the following:

The Fund cannot buy or sell real estate, or commodities or
commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which invest in
real estate or interests therein, and the Fund may buy and sell
Hedging Instruments;

The Fund cannot buy securities on margin, except that the
Fund may make margin deposits in connection with any of the Hedging
Instruments which it may use;

The Fund cannot underwrite securities issued by other
persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be an
underwriter for purposes of the Securities Act of 1933;

The Fund cannot buy and retain securities of any issuer if
those officers, Trustees or Directors of the Fund or the Manager
who beneficially own more than 0.5% of the securities of such
issuer together own more than 5% of the securities of such issuer;

The Fund cannot invest in oil, gas, or other mineral
exploration or development programs;

The Fund cannot buy the securities of any company for the
purpose of exercising management control;

The Fund cannot make loans, except by purchasing debt
obligations in accordance with its investment objectives and
policies, or by entering into repurchase agreements, or as
described in "Loans of Portfolio Securities";

The Fund cannot buy securities of an issuer which, together
with any predecessor, has been in operation for less than three
years, if as a result, the aggregate of such investments would
exceed 5% of the value of the Fund's total assets; or

The Fund cannot make short sales of securities or maintain
a short position, unless at all times when a short position is open
it owns an equal amount of such securities or by virtue of
ownership of other securities has the right, without payment of any
further consideration, to obtain an equal amount of securities sold
short ("short sales against-the-box"); short sales against-the-box
may be made to defer realization of gain or loss for Federal income
tax purposes.

For purposes of the Fund's policy not to concentrate as
described in the Prospectus, the Fund has adopted the corporate
industry classifications set forth in Appendix A to this Statement
of Additional Information. This is not a fundamental policy.

How the Fund Is Managed

Organization and History. As a series of a Massachusetts business
trust, the Fund is not required to hold, and does not plan to hold,
regular annual meetings of shareholders. The Fund will hold
meetings when required to do so by the Investment Company Act or
other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders.
Shareholders have the right, upon the declaration in writing or
vote of two-thirds of the outstanding shares of the Fund, to remove
a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the
record holders of 10% of its outstanding shares. In addition, if
the Trustees receive a request from at least 10 shareholders (who
have been shareholders for at least six months) holding shares of
the Fund valued at $25,000 or more or holding at least 1% of the
Fund's outstanding shares, whichever is less, stating that they
wish to communicate with other shareholders to request a meeting to
remove a Trustee, the Trustees will then either make the Fund's
shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants' expense,
or the Trustees may take such other action as set forth under
Section 16(c) of the Investment Company Act.

The Fund's Declaration of Trust contains an express disclaimer
of shareholder or Trustee liability for the Fund's obligations, and
provides for indemnification and reimbursement of expenses out of
its property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Fund
shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a
shareholder of a business trust (such as the Fund) to be held
personally liable as a "partner" under certain circumstances, the
risk of a Fund shareholder incurring financial loss on account of
shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its
obligations described above. Any person doing business with the
Trust, and any shareholder of the Trust, agrees under the Trust's
Declaration of Trust to look solely to the assets of the Trust for
satisfaction of any claim or demand which may arise out of any
dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.

Trustees and Officers of the Fund. The Fund's Trustees and
officers and their principal occupations and business affiliations
and occupations during the past five years are listed below. All
of the Trustees are also trustees, directors or managing general
partners of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity
Income Fund, Oppenheimer High Yield Fund, Oppenheimer Cash
Reserves, Oppenheimer Municipal Fund, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc.,
Centennial America Fund, L.P., Oppenheimer Champion Income Fund,
Oppenheimer Main Street Funds, Inc., Oppenheimer Strategic Income
& Growth Fund, Oppenheimer International Bond Fund, Oppenheimer
Variable Account Funds, and Oppenheimer Integrity Funds; as well as
the following "Centennial Funds": Daily Cash Accumulation Fund,
Inc., Centennial Money Market Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial Tax Exempt Trust,
Centennial California Tax Exempt Trust and Panorama Series Fund,
Inc., (all of the foregoing funds are collectively referred to as
the "Denver-based Oppenheimer funds") except for Mr. Fossel and Ms.
Macaskill, who are Trustees, Directors or Managing General
Partners of all the Denver-based Oppenheimer funds except
Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund,
Panorama Series Fund, Inc. and Oppenheimer Variable Account Funds
and except for Mr. Fossel who is not a trustee of Centennial New
York Tax-Exempt Trust or a Managing General Partner of Centennial
America Fund, L.P. All of the Fund's officers except Messrs.
Steinmetz and Negri are officers of the Denver-based Oppenheimer
funds. Ms. Macaskill is President and Mr. Swain is Chairman of the
Denver-based Oppenheimer funds. As of December 30, 1996, the
Trustees and officers of the Fund as a group owned less than 1% of
each class of shares of the Fund. The foregoing statement does not
reflect ownership of shares held of record by an employee benefit
plan for employees of the Manager (for which plan three officers of
the Fund, Jon S. Fossel, Bridget A. Macaskill and Andrew J.
Donohue, are trustees), other than the shares beneficially owned
under that plan by officers of the Fund listed above.

Robert G. Avis, Trustee;* Age 65
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and
A.G. Edwards, Inc. (its parent holding company); Chairman of A.G.E.
Asset Management and A.G. Edwards Trust Company (its affiliated
investment advisor and trust company, respectively).

William A. Baker, Trustee; Age 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.

Charles Conrad, Jr., Trustee; Age 66
1501 Quail Street, Newport Beach, California 92660
Chairman and Chief Executive Officer of Universal Space Lines, Inc.
(a space services management company); formerly Vice President of
McDonnell Douglas Space Systems Co. and associated with the
National Aeronautics and Space Administration.

Sam Freedman, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds
Services, Chairman, Chief Executive Officer and a director of
Shareholder Services, Inc., Chairman, Chief Executive and Officer
and director of Shareholder Financial Services, Inc., Vice
President and director of Oppenheimer Acquisition Corporation and
a director of OppenheimerFunds, Inc.

Raymond J. Kalinowski, Trustee; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer
products training company); formerly Vice Chairman and a director
of A.G. Edwards, Inc., parent holding company of A.G. Edwards &
Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.

C. Howard Kast, Trustee; Age 75
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).

Robert M. Kirchner, Trustee; Age 75
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).

Ned M. Steel, Trustee; Age 81
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado; formerly Senior Vice President and
a Director of Van Gilder Insurance Corp. (insurance brokers).

________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
<PAGE>
James C. Swain, Chairman, Chief Executive Officer and Trustee;* Age
63
6803 South Tucson Way, Englewood, Colorado 80012
Vice Chairman of the Manager; formerly President and a Director of
Centennial Asset Management Corporation, an investment advisor
subsidiary of the Manager ("Centennial"); a director of the Manager
and Chairman of the Board of SSI.

Bridget A. Macaskill, President; Age 48
President, Chief Executive Officer and a Director of the Manager
and HarbourView Asset Management Corporation ("HarbourView") (a
subsidiary of the Manager); Chairman and a Director of SSI and
Shareholder Financial Services, Inc. ("SFSI"), President and a
Director of OAC and Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc.; formerly Executive Vice
President of the Manager.

Andrew J. Donohue, Vice President and Secretary; Age 46
Executive Vice President and General Counsel of OppenheimerFunds,
Inc. (the "Manager") and OppenheimerFunds Distributor, Inc. (the
"Distributor"); President and a director of Centennial; Executive
Vice President, General Counsel and a director of HarbourView, SSI,
SFSI, and Oppenheimer Partnership Holdings, Inc.; President and
director of Oppenheimer Real Asset Management, Inc.; General
Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an
officer of other Oppenheimer funds; formerly Senior Vice President
and Associate General Counsel of the Manager and the Distributor;
Partner in, Kraft & McManimon (a law firm); an officer of First
Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment advisor);
director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.

George C. Bowen, Vice President, Assistant Secretary and Treasurer;
Age 60
6803 South Tucson Way, Englewood, Colorado 80012
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and
SFSI; Treasurer of OAC; Vice President and Treasurer of Oppenheimer
Real Asset Management, Inc.; Chief Executive Officer, Treasurer and
a director of MultiSource Services, Inc.; an officer of other
Oppenheimer funds.

Arthur P. Steinmetz, Vice President and Portfolio Manager; Age 38
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other
Oppenheimer funds.

David P. Negri, Vice President and Portfolio Manager; Age 42
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer
funds.

________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.

Robert G. Zack, Assistant Secretary; Age 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.

Robert J. Bishop, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller of the Manager,
prior to which he was an Accountant for Yale & Seffinger, P.C., and
previously an Accountant and Commissions Supervisor for Stuart
James Company Inc., a broker-dealer.

Scott Farrar, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80012
Vice President of the Manager/Mutual Fund Accounting, an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Manager.

Remuneration of Trustees. The officers of the Trust and
certain Trustees of the Fund are affiliated with the Manager (Mr.
Swain, who is both an officer and a Trustee) receive no salary or
fee from the Fund. The remaining Trustees of the Fund received the
compensation shown below. Mr. Freedman became a Trustee June 27,
1996, and received no compensation from the Fund before that date.
The compensation from the Fund was paid during its fiscal year
ended September 30, 1996. Compensation from all of the Denver-
based Oppenheimer funds includes the Fund and compensation is
received as a Trustee, Director, Managing General Partner or member
of a committee of the Board of those funds during the calendar year
1996. Compensation is paid for services in the positions listed
beneath their names:

Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1

Robert G. Avis $10,766 $58,003
Trustee

William A. Baker $14,880 $79,715
Audit and Review
Committee Chairman
and Trustee

Charles Conrad, Jr. $13,062 $74,717
Audit and Review
Committee Member
and Trustee

Raymond J. Kalinowski $13,203 $74,173
Risk Management Oversight
Committee Member and Trustee

C. Howard Kast $13,203 $74,173
Risk Management Oversight
Committee Member and Trustee

Robert M. Kirchner $13,872 $74,717
Audit and Review
Committee Member
and Trustee

Ned M. Steel $10,766 $58,003
Trustee

Sam Freedman $ 5,063 $29,502
Trustee

______________________
1For the 1996 calendar year.

Major Shareholders. As of December 30, 1996, no person owned of
record or was known by the Fund to own beneficially 5% or more of
the Fund's outstanding Class A, Class B or Class C shares except:
Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive,
Jacksonville, Florida 32246-6484, which owned of record 4,695,289
Class C shares (approximately 10.04% of the Class C shares then
outstanding).

The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned
in part by certain of the Manager's directors and officers, some of
whom also serve as officers of the Fund, and one of whom (Mr.
Swain) serves as Trustee of the Fund.

The Manager and the Fund have a Code of Ethics. It is
designed to detect and prevent improper personal trading by certain
employees, including portfolio managers, that would compete with or
take advantage of the Fund's portfolio transactions. Compliance
with the Code of Ethics is carefully monitored and strictly
enforced by the Manager.

The Investment Advisory Agreement. A management fee is
payable monthly to the Manager under the terms of the investment
advisory agreement between the Manager and the Fund, and is
computed on the aggregate net assets of the Fund as of the close of
business each day. The investment advisory agreement requires the
Manager, at its expense, to provide the Fund with adequate office
space, facilities and equipment, and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective administration for the Fund, including the
compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.

Expenses not expressly assumed by the Manager under the
advisory agreement or by the Distributor are paid by the Fund. The
advisory agreement lists examples of expenses paid by the Fund, the
major categories of which relate to interest, taxes, brokerage
commissions, fees to unaffiliated trustees, legal, bookkeeping and
audit expenses, custodian and transfer agent expenses, share
issuance costs, certain printing and registration costs and non-
recurring expenses, including litigation. During the Fund's fiscal
years ended September 30, 1994, 1995 and 1996, the management fees
paid by the Fund to the Manager were $23,416,082, $25,850,869 and
$30,343,674, respectively.

The Investment Advisory Agreement contains no expense
limitation. However, because of state regulations limiting fund
expenses that previously applied, the Manager had voluntarily
undertaken that the Fund s total expenses in any fiscal year
(including the investment advisory fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) would
not exceed the most stringent state regulatory limitation
applicable to the Fund. Due to changes in federal securities laws,
such state regulations no longer apply and the Manager s
undertaking is therefore inapplicable and has been withdrawn.
During the Fund s last fiscal year, the Fund s expenses did not
exceed the most stringent state regulatory limit and the voluntary
undertaking was not invoked.

The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under
the advisory agreement, the Manager is not liable for any loss
sustained by reason of good faith errors or omissions in connection
with any matters to which the Agreement relates. The advisory
agreement permits the Manager to act as investment advisor for any
other person, firm or corporation and to use the name "Oppenheimer"
in connection with other investment companies for which it may act
as investment advisor or general distributor. If the Manager or
one of its affiliates shall no longer act as investment advisor to
the Fund, the right of the Fund to use the name "Oppenheimer" as
part of its name may be withdrawn.

The Distributor. Under its General Distributor's Agreement
with the Fund, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class
A, Class B and Class C shares, but is not obligated to sell a
specific number of shares. Expenses normally attributable to sales
(other than those paid under the Distribution and Service Plans),
including advertising and the cost of printing and mailing
prospectuses (other than those furnished to existing shareholders),
are borne by the Distributor. During the Fund's fiscal years ended
September 30, 1994, 1995 and 1996, the aggregate amount of sales
charges on sales of the Fund's Class A shares was $31,059,937,
$16,024,553 and $17,340,997, respectively, of which the Distributor
and an affiliated broker-dealer retained in the aggregate
$8,686,206, $4,566,642 and $5,066,780 in those respective years.
During the Fund's fiscal years ended September 30, 1994, 1995 and
1996, the contingent deferred sales charges collected on the Fund's
Class B shares totalled $2,731,436, $5,144,993 and $5,337,650,
respectively, all of which the Distributor retained. During the
Fund's fiscal period May 26, 1995 through September 30, 1995 and
the fiscal year ended September 30, 1996, the contingent deferred
sales charges collected on the Fund's Class C shares totalled
$5,409 and $81,871, all of which the Distributor retained. For
additional information about distribution of the Fund's shares and
the expenses connected with such activities, please refer to
"Distribution and Service Plans," below.

The Transfer Agent. OppenheimerFunds Services, as transfer
agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder
servicing and administrative functions.

Brokerage Policies of the Fund

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

Under the advisory agreement, the Manager is authorized to
select brokers which provide brokerage and/or research services for
the Fund and/or the other accounts over which the Manager or its
affiliates have investment discretion. The commissions paid to
such brokers may be higher than another qualified broker would have
charged, if a good faith determination is made by the Manager that
the commission is fair and reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may
also consider sales of the shares of the Fund and other investment
companies managed by the Manager or its affiliates as a factor in
the selection of brokers for the Fund's portfolio transactions.
Most purchases made by the Fund are principal transactions at net
prices, and the Fund incurs little or no brokerage costs.

Description of Brokerage Practices Followed by the Manager.
Subject to the provisions of the advisory agreement, the procedures
and rules described above, allocations of brokerage are made by
portfolio managers of the Manager under the supervision of the
Manager's executive officers. Transactions in securities other than
those for which an exchange is the primary market are generally
done with principals or market makers. Brokerage commissions are
paid primarily for effecting transactions in listed securities or
for certain fixed-income agency transactions in the secondary
market, and otherwise only if it appears likely that a better price
or execution can be obtained. When the Fund engages in an option
transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transactions in the
securities to which the option relates. Where possible, concurrent
orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates are combined.
The transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase
or sale orders actually placed for each account. Option
commissions may be relatively higher than those which would apply
to direct purchases and sales of portfolio securities.

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

The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Manager
and its affiliates, and investment research for the commissions of
these other accounts may be useful both to the Fund and one or more
of such other accounts. Such research, which may be supplied by a
third party at the instance of a broker, includes information and
analyses on particular companies and industries as well as market
or economic trends and portfolio strategy, receipt of market
quotations for portfolio evaluations, information systems, computer
hardware and similar products and services. If a research service
also assists the Manager in a non-research capacity (such as
bookkeeping or other administrative functions), then only the
percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid for in
commission dollars. The Board has also permitted the Manager to
use stated commissions on secondary fixed-income agency trades to
obtain research where the broker has represented to Manager that:
(i) the trade is not from or for the broker's own inventory, (ii)
the trade was executed by the broker of an agency basis at the
stated commission, and (iii) the trade is not a riskless principal
transaction.

The research services provided by brokers broaden the scope
and supplement the research activities of the Manager, by making
available additional views for consideration and comparisons, and
enabling the Manager to obtain market information for the valuation
of securities held in the Fund's portfolio or being considered for
purchase. The Board of Trustees, including the independent
Trustees of the Fund, annually reviews information furnished by the
Manager as to the commissions paid to brokers furnishing such
services in an effort to ascertain that the amount of such
commissions was reasonably related to the value or benefit of such
services.

During the Fund's fiscal years ended September 30, 1994, 1995
and 1996, total brokerage commissions paid by the Fund (not
including spreads or concessions on principal transactions on a net
trade basis) were $46,217, $1,029,940 and $594,459, respectively.
During the Fund's fiscal year ended September 30, 1996, $11,373 was
paid to brokers as commissions in return for research services; the
aggregate amount of those transactions was $2,604,265.

Performance of the Fund

Yield and Total Return Information. As described in the
Prospectus, from time to time the "standardized yield," "dividend
yield," "average annual total return", "cumulative total return,"
"average annual total return at net asset value," and "total return
at net asset value" of an investment in each class of Fund shares
may be advertised. An explanation of how yields and total returns
are calculated for each class and the components of those
calculations is set forth below.

The Fund's advertisement of its performance must, under
applicable SEC rules, include the average annual total returns for
each advertised class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most
recently ended calendar quarter. This enables an investor to
compare the Fund's performance to the performance of other funds
for the same periods. However, a number of factors should be
considered before using such information as a basis for comparison
with other investments. An investment in the Fund is not insured;
its yield and total return are not guaranteed and normally will
fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Yield and
total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on
its shares. The yield and total returns of the Class A, Class B
and Class C shares of the Fund are affected by portfolio quality,
portfolio maturity, the type of investments the Fund holds and
expenses allocated to the particular class.

Standardized Yields.

Yield. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is
calculated using the following formula set forth in rules adopted
by the Securities and Exchange Commission that apply to all funds
that quote yields:

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

The symbols above represent the following factors:

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

The standardized yield of a class of shares for a 30-day
period may differ from its yield for any other period. The SEC
formula assumes that the standardized yield for a 30-day period
occurs at a constant rate for a six-month period and is annualized
at the end of the six-month period. This standardized yield is not
based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net
investment income from the Fund's portfolio investments calculated
for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally,
because each class of shares is subject to different expenses, it
is likely that the standardized yields of the Fund's classes of
shares will differ. For the 30-day period ended September 30,
1996, the standardized yields for the Fund's Class A, Class B and
Class C shares were 7.60%, 7.21% and 7.20%, respectively.

Dividend Yield and Distribution Return. From time to time
the Fund may quote a "dividend yield" or a "distribution return"
for each class. Dividend yield is based on the Class A, Class B or
Class C share dividends derived from net investment income during
a stated period. Distribution return includes dividends derived
from net investment income and from realized capital gains declared
during a stated period. Under those calculations, the dividends
and/or distributions for that class declared during a stated period
of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that
class) on the last day of the period. When the result is
annualized for a period of less than one year, the "dividend yield"
is calculated as follows:

Dividend Yield of the Class =

Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)

divided by Number of days (accrual period) x 365

The maximum offering price for Class A shares includes the
maximum front-end sales charge. For Class B or Class C shares, the
maximum offering price is the net asset value per share, without
considering the effect of contingent deferred sales charges.

From time to time similar yield or distribution return
calculations may also be made using the Class A net asset value
(instead of its respective maximum offering price) at the end of
the period. The dividend yields on Class A shares for the 30-day
period ended September 30, 1996, were 7.85% and 8.23% when
calculated at maximum offering price and at net asset value,
respectively. The dividend yield on Class B shares for the 30-day
period ended September 30, 1996, was 7.48% when calculated at net
asset value. The dividend yield on Class C shares for the 30-day
period ended September 30, 1996, was 7.48% when calculated at net
asset value.

Total Return Information

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

1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )

Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical
investment of $1,000 over an entire period of years. Its
calculation uses some of the same factors as average annual total
return, but it does not average the rate of return on an annual
basis. For the Class C shares, the payment of the 1.0% contingent
deferred sales charge is applied to the investment result for the
one-year period (or less). Total return is determined as follows:

ERV - P
------- = Total Return
P

In calculating total returns for Class A shares, the current
maximum sales charge of 4.75% (as a percentage of the offering
price) is deducted from the initial investment ("P") (unless the
return is shown at net asset value, as discussed below). For Class
B shares, the payment of the applicable contingent deferred sales
charge (5.0% for the first year, 4.0% for the second year, 3.0% for
the third and fourth years, 2.0% in the fifth year, 1.0% in the
sixth year and none thereafter) is applied to the investment result
for the time period shown (unless the total return is shown at net
asset value, as described below). For Class C shares, the payment
of the 1.0% contingent deferred sales charge is applied to the
investment result for the one-year period (or less). Total
returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional
shares at net asset value per share, and that the investment is
redeemed at the end of the period. The "average annual total
returns" on an investment in Class A shares of the Fund for the one
and five year periods ended September 30, 1996 and for the period
from October 16, 1989 (commencement of operations) to September 30,
1996, were 7.69%, 8.82% and 10.19%, respectively. The cumulative
"total return" on Class A shares for the period from October 16,
1989 to September 30, 1996 was 96.45%. For the fiscal year ended
September 30, 1996 and the period from November 30, 1992 through
September 30, 1996, the average annual total return on an
investment in Class B shares of the Fund were 7.19% and 8.87%,
respectively. The cumulative total return on an investment in
Class B shares of the Fund for the period from November 30, 1992 to
September 30, 1996 was 37.51%. The average annual total return on
an investment in Class C shares of the Fund for the fiscal year
ended September 30, 1996, and for the period from May 26, 1995
through September 30, 1996 were 10.96% and 11.26%, respectively.
For the period from May 26, 1995 through September 30, 1996, the
cumulative total return on an investment in Class C shares of the
Fund was 15.42%.

Total Returns at Net Asset Value. From time to time the
Fund may also quote an "average annual total return at net asset
value" or a cumulative "total return at net asset value" for Class
A, Class B or Class C shares. Each is based on the difference in
net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares
(without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The cumulative "total returns at
net asset value" on the Fund's Class A shares for the fiscal year
ended September 30, 1996, and for the period from October 16, 1989
to September 30, 1996 were 13.06% and 106.25%, respectively. The
cumulative total return at net asset value on the Fund's Class B
shares for the fiscal year ended September 30, 1996 and for the
period from November 30, 1992 through September 30, 1996 was 12.19%
and 40.48%, respectively. The cumulative total returns at net
asset value on the Fund's Class C shares for the fiscal year ended
September 30, 1996 and for the period from May 26, 1995 through
September 30, 1996 were 11.96% and 15.42%.

Other Performance Comparisons. From time to time the Fund may
publish the ranking of the performance of its Class A, Class B or
Class C shares by Lipper Analytical Services, Inc. ("Lipper"), a
widely-recognized independent mutual fund monitoring service.
Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods
based on categories relating to investment objectives. The
performance of the Fund's classes is ranked against (i) all other
funds, excluding money market funds, and (ii) all other general
bond funds. The Lipper performance rankings are based on total
return that includes the reinvestment of capital gains
distributions and income dividends but does not take sales charges
or taxes into consideration. The Fund's performance may also be
compared to the performance of the Lipper General Bond Fund Index,
which is a net asset value weighted index of general bond funds
compiled by Lipper. It is calculated with adjustments for income
dividends and capital gains distributions as of the ex-dividend
date.

From time to time the Fund may publish the star ranking of the
performance of its Class A, Class B or Class C shares by
Morningstar Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in broad investment categories:
domestic stock funds, international stock funds, taxable bond funds
and municipal bond funds, based on risk-adjusted total investment
returns. Investment return measure a fund's or class's one,
three, five and ten-year average annual total returns (depending on
the inception of the fund or class) in excess of 90-day U.S.
Treasury bill returns after considering the fund's sales charges
and expenses. Risk measure a fund's class performance below 90-day
U.S. Treasury bill returns. Risk and investment return are
combined to produce star rankings reflecting performance relative
to the average fund in the fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next
22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The
current star rankings is the fund's or class's 3-year ranking or
its combined 3 and 5-year ranking (weighted 60%/40% respectively,
or its combined 3-,5-and 10-year ranking (weighted 40%, 30% and
30%, respectively) depending on the inception of the fund or class.
Rankings are subject to change monthly.

The Fund may also compare its performance to that of other
funds in its Morningstar Category. In addition to its star
rankings, Morningstar also categorizes and compares a fund's 3-year
performance on Morningstar's classification of the fund's
investments and investment style, rather than how a fund defines
its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable
bond) are each further subdivided into categories based on types of
investments and investment styles. Those comparison by Morningstar
are based on the same risk and return measurements as its star
rankings but do not consider the effect of sales charges.

The total return on an investment made in Class A, Class B and
Class C shares of the Fund may be compared with the performance for
the same period of one or more of the following indices: the
Consumer Price Index, the Salomon Brothers World Government Bond
Index, the Standard & Poor's 500 Index, the Salomon Brothers High
Grade Corporate Bond Index, the Shearson Lehman
Government/Corporate Bond Index, the Lehman Brothers Aggregate Bond
Index, and the J.P. Morgan Government Bond Index. Other indices
may be used from time to time. The Consumer Price Index is
generally considered to be a measure of inflation. The Salomon
Brothers World Government Bond Index generally represents the
performance of government debt securities of various markets
throughout the world, including the United States. The Salomon
Brothers High Grade Corporate Bond Index generally represents the
performance of high grade long-term corporate bonds, and the Lehman
Government/Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment
grade corporate debt securities. The Lehman Brothers Aggregate
Bond Index measures the performance of U.S. corporate bond issues,
U.S. government securities and mortgage-backed securities. The
J.P. Morgan Government Bond Index generally represents the
performance of government bonds issued by various countries
including the United States. The S&P 500 Index is a composite
index of 500 common stocks generally regarded as an index of U.S.
stock market performance. The foregoing bond indices are unmanaged
indices of securities that do not reflect reinvestment of capital
gains or take investment costs into consideration, as these items
are not applicable to indices. The performance of the Fund s Class
A, Class B or Class C shares may also be compared in publications
to (i) the performance of various market indices or to other
investments for which reliable performance data is available, and
(ii) to averages, performance rankings or other benchmarks prepared
by recognized mutual fund statistical services.

From time to time the Fund may also include in its
advertisements and sales literature performance information about
the Fund or rankings of the Fund's performance cited in newspapers
or periodicals, such as The New York Times, Money, The Wall Street
Journal, Fortune, or other publications. These articles may
include quotations of performance from other sources, such as
Lipper or Morningstar.

When comparing yield, total return and investment risk of an
investment in Class A, Class B or Class C shares of the Fund with
other investments, investors should understand that certain other
investments have different risk characteristics than an investment
in shares of the Fund. For example, certificates of deposit may
have fixed rates of return and may be insured as to principal and
interest by the FDIC, while the Fund's returns will fluctuate and
its share values and returns are not guaranteed. Money market
accounts offered by banks also may be insured by the FDIC and may
offer stability of principal. U.S. Treasury securities are
guaranteed as to principal and interest by the full faith and
credit of the U.S. government. Money market mutual funds may seek
to offer a fixed price per share.

Distribution and Service Plans

The Fund has adopted a Service Plan for Class A Shares and
Distribution and Service Plans for Class B and Class C shares of
the Fund under Rule 12b-1 of the Investment Company Act, pursuant
to which the Fund makes payments to the Distributor in connection
with the distribution and/or servicing of the shares of that class,
as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority
of the Independent Trustees, cast in person at a meeting called for
the purpose of voting on that Plan, and (ii) the holders of a
"majority" (as defined in the Investment Company Act) of the shares
of each class. For the Distribution and Service Plans for the Class
B and Class C shares, the votes were cast by the Manager as the
then-sole initial holder of such shares.

In addition, the Manager and the Distributor may, under the
Plans, from time to time from their own resources (which, as to the
Manager, may include profits derived from the advisory fee it
receives from the Fund) make payments to Recipients for
distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase
or decrease the amount of distribution assistance payments they
make to Recipients from their own assets.

Unless terminated as described below, each Plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of
Trustees and its Independent Trustees by a vote cast in person at
a meeting called for the purpose of voting on such continuance.
Any Plan may be terminated at any time by the vote of a majority of
the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the
outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund
is required by a Securities and Exchange Commission rule to obtain
the approval of Class B as well as Class A shareholders for a
proposed amendment to the Class A Plan that would materially
increase payments under the plan. Such approval must be by a
"majority" of the Class A and Class B shares (as defined in the
Investment Company Act), voting separately by class. All material
amendments must be approved by the Independent Trustees.

While the plans are in effect, the Treasurer of the Fund must
provide separate written reports to the Fund's Board of Trustees at
least quarterly describing the amount of payments made pursuant to
each Plan and the purposes for which the payments were made. The
Class B report also must include the Distributor's distribution
costs for the quarter, and such costs for previous quarters that
have been carried forward. The Class A and Class B reports also
must include the identity of each Recipient that received any
payment. These reports are subject to the review and approval of
the Independent Trustees.

Under the Plans, no payment will be made to any broker, dealer
or other financial institution under the Plan (each is referred to
as a "Recipient") in any quarter if the aggregate net asset value
of all Fund shares held by the Recipient for itself and its
customers did not exceed a minimum amount, if any, that may be
determined from time to time by a majority of the Fund's
Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate allowed under the Plans and set no minimum
amount.

For the fiscal year ended September 30, 1996, payments under
the Class A Plan totalled $8,248,061, all of which was paid by the
Distributor to Recipients, including $566,379 paid to an affiliate
of the Distributor. Unreimbursed expenses incurred with respect to
Class A shares for any fiscal quarter by the Distributor may not be
recovered under the Class A Plan in subsequent fiscal quarters.
Payments received by the Distributor under the Class A Plan will
not be used to pay any interest expense, carrying charges, or other
financial costs, or allocation of overhead by the Distributor.

The Class B Plan and Class C Plan allow the service fee
payments to be paid by the Distributor to Recipients in advance for
the first year such shares are outstanding, and thereafter on a
quarterly basis, as described in the Prospectus. The advance
payment is based on the net asset value of shares sold. An
exchange of shares does not entitle the Recipient to an advance
payment of the service fee. In the event shares are redeemed
during the first year such shares are outstanding, the Recipient
will be obligated to repay a pro rata portion of the advance of the
service fee payment to the Distributor.

Although the Class B Plan and the Class C Plan permit the
Distributor to retain both the asset-based sales charges and the
service fee, or to pay Recipients the service fee on a quarterly
basis, without payment in advance, the Distributor presently
intends to pay the service fee to Recipients in the manner
described above. A minimum holding period may be established from
time to time under the Class B Plan and the Class C Plan by the
Board. Initially, the Board has set no minimum holding period.
All payments under the Class B Plan and the Class C Plan are
subject to the limitations imposed by the Conduct Rules of the
National Association of Securities Dealers, Inc. on payments of
asset based sales charges and service fees. The Distributor
anticipates that it will take a number of years for it to recoup
(from the Fund's payments to the Distributor under the Class B Plan
and from the contingent deferred sales charges collected on
redeemed Class B shares) the sales commissions paid to authorized
brokers or dealers. For the fiscal year ended September 30, 1996,
payments under the Class B Plan totaled $22,482,056, including
$134,901 paid to an affiliate of the Distributor and $18,427,490
retained by the Distributor. For the fiscal year ended September
30, 1996, payments under Class C Plan totaled $1,095,691, including
$17,782 paid to an affiliate of the Distributor and $661,269
retained by the Distributor.

Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of
a front-end sales load and at the same time permit the Distributor
to compensate brokers and dealers in connection with the sale of
Class B and Class C shares of the Fund. The Distributor's actual
distribution expenses for any given year may exceed the aggregate
of payments received pursuant to the Class B or Class C Plan and
from contingent deferred sales charges. Under the Class B Plan,
such expenses will be carried forward and paid in future years.
The Fund will be charged only for interest expenses, carrying
charges or other financial costs that are directly related to the
carry-forward of actual distribution expenses for such shares. For
example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered
in the form of contingent deferred sales charges paid by investors
and $1,600,000 was reimbursed in the form of payments made by the
Fund to the Distributor under the Class B Plan, the balance of
$400,000 (plus interest) would be subject to recovery in future
fiscal years from such sources.

The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in
subsequent fiscal periods, as described above and in the
Prospectus. The asset-based sales charge paid to the Distributor
by the Fund under the Class B Plan is intended to allow the
Distributor to recoup the cost of sales commissions paid to
authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be
used to pay for the following expenses in connection with the
distribution of Class B shares: (i) financing the advance of the
service fee payment to Recipients under the Class B Plan, (ii)
compensation and expenses of personnel employed by the Distributor
to support distribution of Class B shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those
furnished to current shareholders) and state "blue sky"
registration fees.

The Class C Plan provides for the Distributor to be
compensated at a flat rate, whether the Distributor's distribution
expenses are more or less than the amounts paid by the Fund. Such
payments are made in recognition that the Distributor (i) pays
sales commissions to authorized brokers and dealers at the time of
sale, as described in the Prospectus, (ii) may finance such
commissions and/or the advance of the service fee payment to
Recipients under that Plan, (iii) employs personnel to support
distribution of shares, and (iv) may bear the costs of sales
literature, advertising and prospectuses (other than those
furnished to current shareholders) and state "blue sky"
registration fees.

ABOUT YOUR ACCOUNT

How To Buy Shares

Alternative Sales Arrangements - Class A, Class B and Class C
Shares. The availability of three classes of shares permits the
individual investor to choose the method of purchasing shares that
is more beneficial to the investor depending on the amount of the
purchase, the length of time the investor expects to hold shares
and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-
based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class
A shares. Any salesperson or other person entitled to receive
compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other.
The Distributor will not accept any order of $500,000 or more of
Class B shares or $1 million or more of Class C shares on behalf of
a single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that
investor to purchase Class A shares of the Fund instead.

The three classes of shares each represent an interest in the
same portfolio investments of the Fund. However, each class has
different shareholder privileges and features. The net income
attributable to Class B and Class C shares and the dividends
payable on Class B and Class C shares will be reduced by
incremental expenses borne solely by that class, including the
asset-based sales charge to which Class B and Class C shares are
subject.

The conversion of Class B shares to Class A shares after six
years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel
or tax advisor, to the effect that the conversion of Class B shares
does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in
which event no further conversions of Class B shares would occur
while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event
for the holder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer
than six years.

The methodology for calculating the net asset value, dividends
and distributions of the Fund's Class A, Class B and Class C shares
recognizes two types of expenses. General expenses that do not
pertain specifically to any class are allocated pro rata to the
shares of each class, based on the percentage of the net assets of
such class to the Fund's total assets, and then equally to each
outstanding share within a given class. Such general expenses
include (i) management fees, (ii) legal, bookkeeping and audit
fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other
materials for current shareholders, (iv) fees to Independent
Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and
brokerage commissions, and (ix) non-recurring expenses, such as
litigation costs. Other expenses that are directly attributable to
a class are allocated equally to each outstanding share within that
class. Such expenses include (a) Distribution Plan fees, (b)
incremental transfer and shareholder servicing agent fees and
expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific
class rather than to the Fund as a whole.

Retirement Plans. In describing certain types of employee
benefit plans that may purchase Class A shares without being
subject to the Class A contingent deferred sales charge, the term
"employee benefit plan" means any plan or arrangement, whether or
not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which
Class A shares are purchased by a fiduciary or other person for the
account of participants who are employees of a single employer or
of affiliated employers, if the Fund account is registered in the
name of the fiduciary or other person for the benefit of
participants in the plan.

The term "group retirement plan" means any qualified or non-
qualified retirement plan (including 457 plans, SEPs, SARSEPs,
403(b) plans, and SIMPLE plans) for employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association or other organized group of persons (the members of
which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group
participating in the plan purchase Class A shares of the Fund
through a single investment dealer, broker or other financial
institution designated by the group.

Determination of Net Asset Values Per Share. The net asset values
per share of Class A, Class B and Class C shares of the Fund are
determined as of the close of business of The New York Stock
Exchange (the "Exchange") on each day that the Exchange is open by
dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class outstanding. The Exchange
normally closes at 4:00 P.M., New York time, but may close earlier
on some days (for example, in case of weather emergencies or on
days falling before a holiday). The Exchange most recent annual
holiday schedule (which is subject to change) states that it will
close New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
It may also close on other days. Trading may occur in debt
securities and in foreign securities at times when the Exchange is
closed, including weekends and holidays or after the close of the
Exchange on a regular business day. Because the net asset values
of the Fund will not be calculated at such times, if securities
held in the Fund's portfolio are traded at such times, the net
asset values per share of Class A, Class B and Class C shares of
the Fund may be significantly affected at times when shareholders
do not have the ability to purchase or redeem shares.

The Fund's Board of Trustees has established procedures for
the valuation of the Fund's securities as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for
which last sale information is regularly reported are valued at the
last reported sale price on their primary exchange or NASDAQ that
day (or, in the absence of sales that day, at values based on the
last sale prices of the preceding trading day, or closing "bid"
price that day); (ii) securities traded on a foreign securities
exchange are valued generally at the last sales price available to
the pricing service approved by the Fund s Board of Trustees or to
the Manager as reported by the principal exchange on which the
security is traded at its last trading session on or immediately
preceding the valuation date, or at the mean between "bid" and
"asked" prices obtained from active market makers in the security
on the basis of reasonable inquiry; (iii) long-term debt securities
having a remaining maturity in excess of 60 days are valued based
on the mean between the "bid" and "asked" prices determined by a
portfolio pricing service approved by the Fund s Board of Trustees
or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) debt instruments
having a maturity of more than 397 days when issued, and non-money
market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are
valued at the mean between the "bid" and "asked" prices determined
by a pricing service approved by the Fund s Board of Trustees or
obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (v) money market-type
debt securities that had a maturity of less than 397 days when
issued that have a remaining maturity of 60 days or less are valued
at cost, adjusted for amortization of premiums and accretion of
discounts; and (vi) securities (including restricted securities)
not having readily-available market quotations are valued at fair
value determined under the Board s procedures. If the Manager is
unable to locate two market makers willing to give quotes (see
(ii), (iii) and (iv) above), the security may be priced at the mean
between the "bid" and "ask" prices provided by a single active
market maker (which in certain cases may be the "bid" price if no
"ask" price is available).

In the case of U.S. Government securities, foreign fixed
income, corporate bonds and mortgage-backed securities, where last
sale information is not generally available, such pricing
procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity and
other special factors involved. The Manager may use pricing
services approved by the Board of Trustees to price U.S. Government
securities for which last sale information is not generally
available. The Manager will monitor the accuracy of such pricing
services, which may include comparing prices used for portfolio
evaluation to actual sales prices of selected securities.

Trading in securities on European and Asian exchanges and
over-the-counter markets is normally completed before the close of
the Exchange. Events affecting the values of foreign securities
traded in securities markets that occur between the time their
prices are determined and the close of the Exchange will not be
reflected in the Fund's calculation of its net asset value unless
the Board of Trustees, or the Manager under procedures established
by the Board, determines that the particular event would materially
affect the Fund's net asset value, in which case an adjustment
would be made. Foreign currency, including forward contracts,
will be valued at the closing price in the London foreign exchange
market that day as provided by a reliable bank, dealer or pricing
service. The value of securities denominated in foreign currency
will be converted to U.S. dollars at the closing price in the
London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service.

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

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

AccountLink. When shares are purchased through AccountLink, each
purchase must be at least $25.00. Shares will be purchased on the
regular business day the Distributor is instructed to initiate the
Automated Clearing House transfer to buy the shares. Dividends
will begin to accrue on shares purchased by the proceeds of ACH
transfers on the business day the Fund receives Federal Funds for
the purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00 P.M.,
but may close earlier on certain days. If Federal Funds are
received after the close of the Exchange, the shares will be
purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received
by the Fund 3 days after the transfers are initiated. The
Distributor and the Fund are not responsible for any delays in
purchasing shares resulting from delays in ACH transmissions.

Reduced Sales Charges. As discussed in the Prospectus, a reduced
sales charge rate may be obtained for Class A shares under Right of
Accumulation and Letters of Intent because of the economies of
sales efforts and reduction in expenses realized by the
Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in the
Prospectus because the Distributor, dealer or broker incurs little
or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents,
aunts, uncles, nieces, nephews, parents-in-law, brothers and
sisters, sons- and daughters-in-law, a sibling's spouse and a
spouse's siblings.

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

Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California
Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer Enterprise Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Bond Fund For Growth
Rochester Fund Municipals*
Limited-Term New York Municipal Fund*

and the following "Money Market Funds":

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

_________________
* Shares of the Fund are not presently exchangeable for shares of
these funds.

There is an initial sales charge on the purchase of Class A
shares of each of the Oppenheimer funds except Money Market Funds
(under certain circumstances described herein, redemption proceeds
of Money Market Fund shares may be subject to a CDSC).

Letters of Intent. A Letter of Intent (referred to as a
"Letter") is an investor s statement in writing to the Distributor
of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month
period (the "Letter of Intent period"), which may, at the
investor s request, include purchases made up to 90 days prior to
the date of the Letter. The Letter states the investor s intention
to make the aggregate amount of purchases of shares which, when
added to the investor s holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made
by reinvestment of dividends or distributions of capital gains and
purchases made at net asset value without sales charge do not count
toward satisfying the amount of the Letter. A Letter enables an
investor to count the Class A and Class B shares purchased under
the Letter to obtain the reduced sales charge rate on purchases of
Class A shares of the Fund (and other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of
Class A shares. Each purchase under the Letter will be made at the
public offering price (including the sales charge) applicable to a
single lump-sum purchase of shares in the intended purchase amount,
as described in the Prospectus.

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

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

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

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

Terms of Escrow That Apply to Letters of Intent.

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

2. If the intended purchase amount specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.

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

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

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

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

Asset Builder Plans. To establish an Asset Builder Plan from a
bank account, a check (minimum $25) for the initial purchase must
accompany the application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption
restrictions for recent purchases described in "Shareholder Account
Rules and Policies," in the Prospectus. Asset Builder Plans also
enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four
other Oppenheimer funds.

There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply
to shares purchased by Asset Builder payments. An application
should be obtained from the Transfer Agent, completed and returned,
and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating Asset Builder
payments. The amount of the Asset Builder investment may be
changed or the automatic investments may be terminated at any time
by writing to the Transfer Agent. A reasonable period
(approximately 15 days) is required after the Transfer Agent's
receipt of such instructions to implement them. The Fund reserves
the right to amend, suspend, or discontinue offering such plans at
any time without prior notice.

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

How to Sell Shares

Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and
conditions for redemptions set forth in the Prospectus.

Checkwriting. When a check is presented to the Bank for
clearance, the Bank will ask the Fund to redeem a sufficient number
of full and fractional shares in the shareholder's account to cover
the amount of the check. This enables the shareholder to continue
receiving dividends on those shares until the check is presented to
the Fund. Checks may not be presented for payment at the offices
of the Bank or the Fund's Custodian. This limitation does not
affect the use of checks for the payment of bills or to obtain cash
at other banks. The Fund reserves the right to amend, suspend or
discontinue offering Checkwriting privileges at any time without
prior notice.

Selling Shares by Wire. The wire of redemptions proceeds
may be delayed if the Fund's custodian bank is not open for
business on a day when the Fund would normally authorize the wire
to be made, which is usually the Fund's next regular business day
following the redemption. In those circumstances, the wire will
not be transmitted until the next bank business day on which the
Fund is open for business. No dividends will be paid on the
proceeds of redeemed shares awaiting transfer by wire.

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

Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash.
However, the Board of Trustees of the Fund may determine that it
would be detrimental to the best interests of the remaining
shareholders of the Fund to make payment of a redemption order
wholly or partly in cash. In that case the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind"
of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1
under the Investment Company Act, pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day
period for any one shareholder. If shares are redeemed in kind,
the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. The method of valuing securities
used to make redemptions in kind will be the same as the method the
Fund uses to value its portfolio securities described above under
the "Determination of Net Asset Values Per Share" and that
valuation will be made as of the time the redemption price is
determined.

Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of
(i) Class A shares that you purchased subject to an initial or
contingent deferred sales charge or (ii) Class B shares on which
you paid a contingent deferred sales charge when you redeemed them.
The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which
shares of the Fund are exchangeable as described below, at the net
asset value next computed after the Transfer Agent receives the
reinvestment order. This reinvestment privilege does not apply to
Class C shares. The shareholder must ask the Distributor for such
privilege at the time of reinvestment. Any capital gain that was
realized when the shares were redeemed is taxable, and reinvestment
will not alter any capital gains tax payable on that gain. If
there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount
of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid
are reinvested in shares of the Fund or another of the Oppenheimer
funds within 90 days of payment of the sales charge, the
shareholder's basis in the shares of the Fund that were redeemed
may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the
redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.

Transfer of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of
transfer to the name of another person or entity (whether the
transfer occurs by absolute assignment, gift or bequest, not
involving, directly or indirectly, a public sale). The transferred
shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the
transferring shareholder. If less than all shares held in an
account are transferred, and some but not all shares in the account
would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and
Class C contingent deferred sales charge will be followed in
determining the order in which shares are transferred.

Distributions From Retirement Plans. Requests for distributions
from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans, or pension or profit-sharing plans should be
addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the
Transfer Agent at its address listed in "How To Sell Shares" in the
Prospectus or on the back cover of this Statement of Additional
Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if
the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed persons
maintaining a plan account in their own name) in OppenheimerFunds-
sponsored prototype pension or profit-sharing or 401(k) plans may
not directly redeem or exchange shares held for their accounts
under those plans. The employer or plan administrator must sign
the request. Distributions from pension and profit sharing plans
are subject to special requirements under the Internal Revenue Code
and certain documents (available from the Transfer Agent) must be
completed before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the
Internal Revenue Code, and IRS Form W-4P (available from the
Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that
tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the
Distributor, the Trustee and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the
conditions of applicable tax laws and will not be responsible for
any tax penalties assessed in connection with a distribution.

Special Arrangements for Repurchase of Shares from Dealers and
Brokers. The Distributor is the Fund's agent to repurchase its
shares from authorized dealers or brokers on behalf of their
customers. The shareholder should contact the broker or dealer to
arrange their type of redemption. The repurchase price per share
will be the net asset value next computed after the Distributor
receives the order placed by such dealer or broker, except that if
the Distributor receives a repurchase order from a dealer or broker
after the close of The New York Stock Exchange on a regular
business day, it will be processed at that day's net asset value if
the order was received by the dealer or broker from its customers
prior to the time the Exchange closes (normally, that is 4:00 P.M.,
but may be earlier on some days) and the order was transmitted to
and received by the Distributor prior to its close of business that
day (normally 5:00 P.M.). Ordinarily, for accounts redeemed by a
broker-dealer under this procedure, payment will be made within
three business days after the shares have been redeemed upon the
Distributor s receipt of the required redemption documents in
proper form, with the signature(s) of the registered owners
guaranteed on the redemption document as described in the
Prospectus.

Automatic Withdrawal and Exchange Plans. Investors owning shares
of the Fund valued at $5,000 or more can authorize the Transfer
Agent to redeem shares (minimum $50) automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic
Withdrawal Plan. Shares will be redeemed three business days prior
to the date requested by the shareholder for receipt of the
payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable
to all shareholders of record and sent to the address of record for
the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on
this basis. Payments are normally made by check, but shareholders
having AccountLink privileges (see "How To Buy Shares") may arrange
to have Automatic Withdrawal Plan payments transferred to the bank
account designated on the OppenheimerFunds New Account Application
or signature-guaranteed instructions. The Fund cannot guarantee
receipt of the payment on the date requested and reserves the right
to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on
Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an
Automatic Withdrawal Plan. Class B and Class C shareholders should
not establish withdrawal plans, because of the imposition of the
contingent deferred sales charge on such withdrawals (except where
the Class B or the Class C contingent deferred sales charge is
waived as described in the Prospectus in "Waivers of Class B and
Class C Sales Charge").

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

Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of
shares of the Fund for shares (of the same class) of other
Oppenheimer funds automatically on a monthly, quarterly, semi-
annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is
$25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.

Automatic Withdrawal Plans. Fund shares will be redeemed
as necessary to meet withdrawal payments. Shares acquired without
a sales charge will be redeemed first and thereafter shares
acquired with reinvested dividends and capital gains distributions
will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments.
Depending upon the amount withdrawn, the investor's principal may
be depleted. Payments made under such plans should not be
considered as a yield or income on your investment. It may not be
desirable to purchases additional Class A shares while making
automatic withdrawals because of the sales charges that apply to
purchases when made. Accordingly, a shareholder normally may not
maintain an Automatic Withdrawal Plan while simultaneously making
regular purchases of Class A shares.

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

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

Redemptions of shares needed to make withdrawal payments will
be made at the net asset value per share determined on the
redemption date. Checks or ACH transfer payments of the proceeds
of Plan withdrawals will normally be transmitted three business
days prior to the date selected for receipt of the payment (receipt
of payment on the date selected cannot be guaranteed), according to
the choice specified in writing by the Planholder.

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

The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at
any time by the Transfer Agent upon receiving directions to that
effect from the Fund. The Transfer Agent will also terminate a
Plan upon receipt of evidence satisfactory to it of the death or
legal incapacity of the Planholder. Upon termination of a Plan by
the Transfer Agent or the Fund, shares that have not been redeemed
from the account will be held in uncertificated form in the name of
the Planholder, and the account will continue as a dividend-
reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.

To use Class A shares held under the Plan as collateral for a
debt, the Planholder may request issuance of a portion of the Class
A shares in certificated form. Share certificates are not issued
for Class B or Class C shares. Upon written request from the
Planholder, the Transfer Agent will determine the number of shares
for which a certificate may be issued without causing the
withdrawal checks to stop because of exhaustion of uncertificated
shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will
terminate.

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

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be
exchanged only for shares of the same class of other Oppenheimer
funds. Shares of the Oppenheimer funds that have a single class
without a class designation are deemed "Class A" shares for this
purpose. All Oppenheimer funds offer Class A, B and C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market
Trust, Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax
Exempt Trust, Centennial America Fund, L.P., and Daily Cash
Accumulation Fund, Inc., which only offer Class A shares and
Oppenheimer Main Street California Municipal Fund which only offers
Class A and Class B shares, (Class B and Class C shares of
Oppenheimer Cash Reserves are generally available only by exchange
from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds sponsored 401(k) plans). A current list showing
which funds offer which class can be obtained by calling the
Distributor at 1-800-525-7048.

Class A shares of Oppenheimer funds may be exchanged at net
asset value for shares of any Money Market Fund; shares of any
Money Market Fund purchased without a sales charge may be exchanged
for shares of Oppenheimer funds offered with a sales charge upon
payment of the sales charge (or, if applicable, may be used to
purchase shares of Oppenheimer funds subject to a CDSC); and shares
of this Fund acquired by reinvestment of dividends or distributions
from any other of the Oppenheimer funds (except Oppenheimer Cash
Reserves) or from any unit investment trust for which reinvestment
arrangements have been made with the Distributor may be exchanged
at net asset value for shares of any of the Oppenheimer funds.
However, shares of Oppenheimer Money Market Fund, Inc. purchased
with the redemption procedures of shares of other mutual funds
(other than funds managed by the Manager or its subsidiaries)
redeemed within the 12 months prior to that purchase may
subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales
charge, whichever is applicable. To qualify for that privilege,
the investor or the investor s dealer must notify the Distributor
of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and, if
requested, must supply proof of entitlement to this privilege. The
Class B contingent deferred sales charge is imposed on Class B
shares redeemed within six years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.

The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of more
than one account. The Fund may accept requests for exchanges of up
to 50 accounts per day from representatives of authorized dealers
that qualify for this privilege. In connection with any exchange
request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include
shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without
restriction will be exchanged.

When Class B or Class C shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the
Prospectus for the imposition of the Class B and Class C contingent
deferred sales charge will be followed in determining the order in
which the shares are exchanged. Shareholders should take into
account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the
subsequent redemption of remaining shares. Shareholders owning
shares of more than one class must specify whether they intend to
exchange Class A, Class B or Class C shares.

When exchanging shares by telephone, the shareholder must
either have an existing account in, or acknowledge receipt of a
prospectus of, the fund to which the exchange is to be made. For
full or partial exchanges of an account made by telephone, any
special account features such as Asset Builder Plans, Automatic
Withdrawal Plans and retirement plan contributions will be switched
to the new account unless the Transfer Agent is instructed
otherwise. If all telephone lines are busy (which might occur, for
example, during periods of substantial market fluctuations),
shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. Dividends will be payable on shares
held of record at the time of the previous determination of net
asset value, or as otherwise described in "How to Buy Shares."
Daily dividends on newly purchased shares will not be declared or
paid until such time as Federal Funds (funds credited to a member
bank's account at the Federal Reserve Bank) are available from the
purchase payment for such shares. Normally, purchase checks
received from investors are converted to Federal Funds on the next
business day. Dividends will be declared on shares repurchased by
a dealer or broker for three business days following the trade date
(i.e., to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will
be paid together with the redemption proceeds.

Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by
the Postal Service as undeliverable will be invested in shares of
Oppenheimer Money Market Fund, Inc., as promptly as possible after
the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds.

Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains
distributions is explained in the Prospectus under the caption
"Dividends, Capital Gains and Taxes." Special provisions of the
Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends
paid by the Fund which may qualify for the deduction is limited to
the aggregate amount of qualifying dividends (generally dividends
from domestic corporations) which the Fund derives from its
portfolio investments held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on shares held by that shareholder for 45 days or
less. To the extent the Fund's dividends are derived from its
gross income from option premiums, interest income or short-term
capital gains from the sale of securities, or dividends from
foreign corporations, its dividends will not qualify for the
deduction. It is expected that for the most part the Fund's
dividends will not qualify, because of the nature of the
investments held by the Fund in its portfolio.

The amount of a class's distributions may vary from time to
time depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the Fund or borne separately by a
class, as described in "Alternative Sales Arrangements -- Class A,
Class B and Class C Shares," above. Dividends are calculated in the
same manner, at the same time and on the same day for shares of
each class. However, dividends on Class B and Class C shares are
expected to be lower as a result of the asset-based sales charge on
Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net
asset value between the classes.

If prior distributions must be re-characterized at the end of
the fiscal year as a result of the effect of the Fund's investment
policies, shareholders may have a non-taxable return of capital,
which will be identified in notices to shareholders. There is no
fixed dividend rate (although the Fund may have a targeted dividend
rate for Class A shares which can be changed at ant time) and there
can be no assurance as to the payment of any dividends or the
realization of any capital gains.

If the Fund qualifies as a "regulated investment company"
under the Internal Revenue Code, it will not be liable for Federal
income taxes on amounts paid by it as dividends and distributions.
The Fund qualified as a regulated investment company in its last
fiscal year and intends to qualify in future years, but reserves
the right not to qualify. The Internal Revenue Code contains a
number of complex tests to determine whether the Fund will qualify,
and the Fund might not meet those tests in a particular year. For
example, if the Fund derives 30% or more of its gross income from
the sale of securities held less than three months, it may fail to
qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be
treated for tax purposes as an ordinary corporation and will
receive no tax deduction for payments of dividends and
distributions made to shareholders.

Under the Internal Revenue Code, by December 31 each year the
Fund must distribute 98% of its taxable investment income earned
from January 1 through December 31 of that year and 98% of its
capital gains realized in the period from November 1 of the prior
year through October 31 of the current year, or else the Fund must
pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements,
the Board of Trustees and the Manager might determine in a
particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the
required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.

The Internal Revenue Code requires that a holder (such as the
Fund) of a zero coupon security accrue as income each year a
portion of the discount at which the security was purchased even
though the Fund receives no interest payment in cash on the
security during the year. As an investment company, the Fund must
pay out substantially all of its net investment income each year or
be subject to excise taxes, as described above. Accordingly, when
the Fund holds zero coupon securities, it may be required to pay
out as an income distribution each year an amount which is greater
than the total amount of cash interest the Fund actually received
during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales.
In the event the Fund realizes net capital gains from such
transactions, its shareholders may receive a larger capital gain
distribution than they would have had in the absence of such
transactions.

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

Additional Information About The Fund

The Custodian. The Bank of New York is the custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on
the portfolio securities and handling the delivery of such
securities to and from the Fund. The Manager has represented to
the Fund that the banking relationships between the Manager and the
Custodian have been and will continue to be unrelated to and
unaffected by the relationship between the Fund and the Custodian.
It will be the practice of the Fund to deal with the Custodian in
a manner uninfluenced by any banking relationship the Custodian may
have with the Manager and its affiliates. The Fund's cash balances
with the Custodian in excess of $100,000 are not protected by
Federal deposit insurance. Such uninsured balances may at times be
substantial.

Independent Auditors. The independent auditors of the Fund audit
the Fund's financial statements and perform other related audit
services. They also act as auditors for the Manager and certain
other funds advised by the Manager and its affiliates.

<PAGE>
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

<PAGE>

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

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

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)

- ----------------------------------------------------------------------------------------------------------------
- ---------
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)

- ----------------------------------------------------------------------------------------------------------------
- ---------
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)

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

- ----------------------------------------------------------------------------------------------------------------
- ---------
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)

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

- ----------------------------------------------------------------------------------------------------------------
- ---------
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:

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.

<PAGE>

Appendix

Corporate Industry Classifications

Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking

<PAGE>

Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203

Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048

Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015

Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street, Suite 3600
Denver, Colorado 80202-3942

Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202