--------------------
As filed with the Securities and Exchange Commission on
December 28, 2006
--------------------
--------------------
--------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. __ / /
POST-EFFECTIVE AMENDMENT NO. __ / /
OPPENHEIMER STRATEGIC INCOME FUND
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of Principal Executive Offices)
303-768-3200
(Registrant's Area Code and Telephone Number)
Robert G. Zack, Esq.
Executive Vice President & General Counsel
OppenheimerFunds, Inc.
Two World Financial Center
225 Liberty Street
New York, New York 10148
(212) 323-0250
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
Title of Securities Being Registered: Class A shares of Oppenheimer Strategic
Income Fund.
It is proposed that this filing will become effective on January 29, 2007
pursuant to Rule 488.
No filing fee is due because of reliance on Section 24(f) of the Investment
Company Act of 1940, as amended.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Part A
Combined Prospectus and Proxy Statement of Oppenheimer Strategic Income Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
Atlas Strategic Income Fund
794 Davis Street
San Leandro, California 94577
1.800.933.ATLAS
In Brief
You are asked to approve a proposal to merge your Atlas Strategic Income Fund
into the Oppenheimer Strategic Income Fund.
Approving this proposal should be to your benefit, and the Board of Trustees
recommends that you vote FOR the proposal.
January __, 2007
Dear Shareholder,
At a meeting on November 14, 2006, the Trustees of the Atlas Funds approved a
proposal to merge your Atlas Strategic Income Fund with the Oppenheimer
Strategic Income Fund in May 2007. If approved by shareholders, this is how
the merger will work:
o You will receive new Class A shares in the Oppenheimer Strategic Income
Fund in an amount equal to the value of your Atlas Strategic Income
Fund shares. Although the number of shares you hold may change, the
total value of your investment will not change as a result of the
merger.
o It is expected that the merger will be a non-taxable event for you for
federal income tax purposes.
The resulting merger is expected to provide several potential benefits to
shareholders:
o Broader product selection: as a shareholder of the OppenheimerFunds'
family of funds, you will have the ability to exchange into more
than 90 Oppenheimer Funds.
o Lower Fund expenses: The expenses are lower for the Oppenheimer
Strategic Income Fund than for your existing Atlas Strategic Income
Fund.
o No load purchases: Although sales charges typically apply to the
purchase of Oppenheimer Fund shares, following the completion of the
merger, you will have the ability to purchase or exchange Class A
shares at net asset value (with no sales charges) in all Oppenheimer
Funds for as long as you maintain your current account registration.
o Continuity in Portfolio Management Style: OppenheimerFunds, Inc. is
the current sub-adviser for the Atlas Strategic Income Fund and also
is the investment adviser for Oppenheimer Strategic Income Fund.
Both Funds also have the same portfolio manager.
Please consult the attached Prospectus/Proxy Statement for detailed
information about the proposed Fund merger.
How should shareholders respond?
The Board of Trustees of Atlas Funds has approved the Fund merger and
recommends that you vote FOR the proposal in the enclosed proxy. Your prompt
response will ensure that your vote is counted immediately and that the
expense of additional proxy solicitations can be avoided.
Questions?
If you have any questions about the proposals, please call 1-800-499-8519 and
a knowledgeable representative will be glad to help you. You can also contact
your Atlas Investment Representative in your local World branch.
We appreciate your support.
Sincerely,
_______________
Marion O. Sandler
Chairman of the Board
Atlas Funds
ATLAS STRATEGIC INCOME FUND
794 Davis Street
San Leandro, California 94577
[Phone Number]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 27, 2007
A Special Meeting (the "Meeting") of Shareholders of the Atlas
Strategic Income Fund, a series of the Atlas Funds, will be held at the
offices of Atlas Advisers, 794 Davis Street, San Leandro, California 94577 on
February 27, 2007, at 1:00 p.m., Eastern Time, and any adjournment(s) or
postponement(s) thereof, for the following purposes, each of which is more
fully described in the accompanying Prospectus/Proxy Statement dated January
___, 2007:
1. To consider and act upon the proposed merger of the Atlas Strategic
Income Fund ("Atlas Fund") into the Oppenheimer Strategic Income Fund
("Oppenheimer Fund") pursuant to the Agreement and Plan of
Reorganization dated as of December __, 2006.
2. To transact any other business which may properly come before the
Meeting or any adjournment(s) or postponement(s) thereof.
On behalf of Atlas Fund, the Board of Trustees of the Atlas Funds has
fixed the close of business on December 29, 2006 as the record date for the
determination of shareholders of the Atlas Strategic Income Fund entitled to
notice of, and to vote at, the Meeting or any adjournment(s) thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN WITHOUT DELAY
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE, OR
VOTE USING ONE OF THE OTHER METHODS DESCRIBED AT THE END OF THE
PROSPECTUS/PROXY STATEMENT SO THAT YOUR SHARES MAY BE REPRESENTED AT THE
MEETING. YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY CARD WILL HELP TO AVOID
THE EXPENSE OF FURTHER SOLICITATION.
By order of the Board of Trustees of
Atlas Funds,
Lezlie Iannone
Secretary
January ___, 2007
PROSPECTUS/PROXY STATEMENT
January ___, 2007
- --------------------------------------------------------------------------------
Acquisition of the Net Assets of By and in exchange for Class A
Shares of
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund, a series of Oppenheimer Strategic Income Fund
Atlas Funds
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Funds OppenheimerFunds, Inc.
794 Davis Street 6803 S. Tucson Way
San Leandro, California 94577 Centennial, Colorado 80112-3924
1.800.933.ATLAS 1-800-225-5677
- --------------------------------------------------------------------------------
This Prospectus/Proxy Statement contains or incorporates by reference
the information you should know before voting on the proposed merger
("Merger") of Atlas Strategic Income Fund ("Atlas Fund") into Oppenheimer
Strategic Income Fund ("Oppenheimer Fund") (Atlas Fund and Oppenheimer Fund
are each a "Fund" and collectively, the "Funds"). If approved, the Merger
will result in your receipt of Class A shares of Oppenheimer Fund in exchange
for your Atlas Fund shares.
MORE INFORMATION ABOUT THE FUNDS IS AVAILABLE
Please read this Prospectus/Proxy Statement carefully and retain it for
future reference.
The following documents contain additional information concerning each
Fund involved in the Merger. All of these documents have been filed with the
Securities and Exchange Commission ("SEC"). Atlas Fund is a series of a
registered open-end management investment company. A copy of the prospectus
for Oppenheimer Fund into which Atlas Fund will be merged will be mailed to
you along with this Prospectus/Proxy Statement.
- ---------------------------------------------------------------------------------------------
Date of Date of Statement Date of Annual Date of
Prospectus (as of Additional Report Semi-Annual
Fund supplemented Information (as Report (if
from time to supplemented from applicable)
time) time to time) (Unaudited)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Oppenheimer Strategic January __, January __, 2007 September 30, N/A
Income Fund 2007 2006
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Atlas Strategic April 30, 2006 April 30, 2006 December 31, June 30, 2006
Income Fund 2005
- ---------------------------------------------------------------------------------------------
Also available is the statement of additional information relating to
this Prospectus/Proxy Statement and the proposed Merger, dated January ___,
2007 (the "Merger SAI").
Information relating to each Fund is contained in its prospectus,
statement of additional information, annual report and semiannual report for
Atlas Fund, as well as the Merger SAI, and each of these documents is hereby
incorporated by reference into this Prospectus/Proxy Statement. Each of these
documents has also been filed with the SEC. Information that has been
incorporated by reference into this Prospectus/Proxy Statement is legally
considered to be part of this Prospectus/Proxy Statement.
The Funds make all of the documents listed above available to you free of
charge if you:
o Call 800.225.5677 for Oppenheimer Fund or 800.933.2852 for Atlas Fund, or
o Write the Funds at either address above.
Shareholders may also obtain many of these documents by accessing the Internet
site for the Funds at
o www.oppenheimerfunds.com or www.atlasfunds.com.
Shareholders can obtain any of these documents from the SEC in the following
ways:
o View online and download text-only versions of the Funds' documents from
the EDGAR database on the SEC's Internet site at www.sec.gov.
o Review and copy information about the Funds by visiting the Public
Reference Room, U.S. Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-0102.
o Obtain copies, upon payment of a duplicating fee, by sending an e-mail
request to publicinfo@sec.gov or by writing the Public Reference Room at
the address above. Information on the operation of the Public Reference
Room may be obtained by calling 1-202-551-8090.
The Funds' SEC file numbers are:
o Atlas Funds (Atlas Strategic Income Fund), 033-20318 and 811-05485
o Oppenheimer Strategic Income Fund, 33-28598 and 811-05724
To ask questions about this Prospectus/Proxy Statement:
o Call 1-800-499-8519, or
o Write to the Funds at either address above.
The SEC has not determined that the information in this
Prospectus/Proxy Statement is accurate or complete, nor has it approved or
disapproved these securities. Anyone who tells you otherwise is committing a
crime.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS
OF A BANK, AND ARE NOT INSURED, ENDORSED OR GUARANTEED BY THE FDIC OR ANY
GOVERNMENT AGENCY AND INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF
YOUR ORIGINAL INVESTMENT.
TABLE OF CONTENTS
SUMMARY OF THE MERGER..................................................................
What are the key features of the Merger?......................................................
After the Merger, what class of shares of Oppenheimer Fund will I
own?................
Does the Board of Trustees recommend that I vote in favor of
approving the
Plan?.....................................................3
How do the Funds' investment objectives, principal investment
strategies, risks, sales charges, expenses and performance
compare?...........................................
Will I be able to buy, sell and exchange shares the same way?
............................
Purchase and Redemption Procedures......................................................
Minimum Balance Fee
Short-Term Trading Policy...................................................................
Exchange Privileges...........................................................................
Distribution and Tax Policies...........................................................
Who will be the Investment Advisor and Portfolio Manager of my
Fund after the
Merger? What will the respective advisory fees be after the
Merger?................
Are there any legal proceedings pending against Oppenheimer Fund
and/or OFI?......
What will be the primary federal tax consequences of the Merger?
........................
MERGER INFORMATION.....................................................................
Reasons for the Merger...........................................................................
Agreement and Plans of Reorganization.....................................................
Federal Income Tax Consequences............................................................
Pro Forma Capitalization
Distribution of Shares............................................................................
Calculating the Share Price......................................................................
INFORMATION ON SHAREHOLDERS' RIGHTS.......................................
Form of Organization.............................................................................
Shareholder Liability.............................................................................
Shareholder Meetings and Voting Rights......................................................
VOTING INFORMATION CONCERNING THE MEETING............................
Shareholder Information.........................................................................
FINANCIAL STATEMENTS AND EXPERTS..............................................
OTHER BUSINESS..............................................................................
ADDITIONAL INFORMATION..............................................................
INSTRUCTIONS FOR EXECUTING PROXY CARDS...................................
OTHER WAYS TO VOTE YOUR PROXY..................................................
EXHIBIT A--Form of Agreement and Plan of Reorganization................................. A-1
EXHIBIT B--Pro Forma Capitalization........................................................... B-1
SUMMARY OF THE MERGER
This section summarizes the primary features and consequences of the
Merger. This summary is qualified in its entirety by reference to the
additional information contained elsewhere in or incorporated by reference in
this Prospectus/Proxy Statement, the Merger SAI, and the Agreement and Plan
of Reorganization.
[OBJECT OMITTED]What are the key features of the Merger?
The Merger has its own Agreement and Plan of Reorganization (the
"Plan") which sets forth the key features of the Merger. For a complete
description of the Merger, see the form of the Plan, attached as Exhibit A to
this Prospectus/Proxy Statement. The Plan generally provides for the
following:
o the transfer of substantially all of the assets of Atlas Fund to
Oppenheimer Fund in exchange for Class A shares of Oppenheimer Fund;
o the assumption by Oppenheimer Fund of the identified liabilities of
Atlas Fund;
o the liquidation of Atlas Fund by distributing Class A shares of
Oppenheimer Fund to Atlas Fund's shareholders and cancellation of all
shares of Atlas Fund;
o the expected treatment of the receipt of Oppenheimer Fund shares by
Atlas Fund's shareholders in the Merger as a non-taxable transaction for
shareholders for federal income tax purposes;
o the assumption of the costs of the Merger by Atlas Advisers.
As a shareholder of Atlas Fund, please be advised that the Merger of
Atlas Fund into Oppenheimer Fund may proceed only after the proposed Merger
receives the requisite approval from shareholders of Atlas Fund.
The Merger is scheduled to take place on or about May 11, 2007.
[OBJECT OMITTED]After the Merger, what class of shares of Oppenheimer Fund
will I own?
You will receive Class A shares of Oppenheimer Fund in the Merger. The
new shares you receive will have the same total value as your Atlas Fund
shares as of the close of business on the day immediately prior to the
Merger. The shares of Oppenheimer Fund that you receive in the merger will
be issued at net asset value ("NAV") without any sales charge. Additionally,
all subsequent purchases by former shareholders of Atlas Fund of Class A
shares of Oppenheimer Fund or of Class A shares of any other Oppenheimer fund
that is available for exchange to shareholders of Oppenheimer Fund will be
made at NAV without the imposition of any front-end sales charge.
[OBJECT OMITTED] Does the Board of Trustees recommend that I vote in
favor of approving the Merger?
Yes. The Board of Trustees of Atlas Fund, including a majority of the
Trustees who are not "interested persons" (the "Independent Trustees"), as
that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), has concluded that the Merger would be in the best interest of
Atlas Fund and its shareholders, and that existing Atlas Fund shareholders'
interests will not be diluted as a result of the Merger. Accordingly, the
Trustees have submitted the Plan for approval by Atlas Fund's shareholders.
The Trustees of Oppenheimer Fund have also approved the Plan and concluded
that the Merger would be in the best interest of Oppenheimer Fund and its
shareholders and existing Oppenheimer Fund shareholders' interests would not
be diluted as a result of the Merger.
[OBJECT OMITTED]How do the Funds' investment objectives, principal investment
strategies, risks, sales charges, expenses and performance compare?
The following sections highlight the comparison between Atlas Fund and
Oppenheimer Fund with respect to their investment objectives, principal
investment strategies, risks, sales charges, expenses and performance, as set
forth in each Fund's prospectus and statement of additional information. The
information below is only a summary; for more detailed information, please
see each Fund's prospectus and statement of additional information.
Each Fund's investment objective is fundamental and may not be
changed without the approval of a majority of the respective Fund's
shareholders. Oppenheimer Fund has adopted certain fundamental investment
policies which may not be changed without the vote of a majority of
Oppenheimer Fund's outstanding shareholders.
The following table highlights the comparison between Atlas Fund and
Oppenheimer Fund with respect to their investment objectives and principal
investment strategies as set forth in each Fund's prospectus and statement of
additional information:
Comparison of Investment and Principal Investment Strategies
- -------------------------------------------------------------------------------------
Atlas Strategic Income Fund Oppenheimer Strategic Income Fund
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
INVESTMENT Seeks high current income Seeks high current income by investing
GOALS consistent with capital mainly in debt securities
preservation
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
PRINCIPAL The Fund: The Fund:
INVESTMENT o Looks for income o Invests primarily in debt
STRATEGIES opportunities among three securities in three market sectors:
broad sectors of the bond debt securities of foreign
market: U.S. Government governments and companies, U.S.
securities; Foreign fixed government securities, and
income debt; High-yield, lower-rated high-yield securities of
high-risk, lower-rated U.S. and foreign companies("junk
debt of U.S. companies bonds"). Those debt securities
("junk bonds"). typically include:
o Seeks to manage risk oforeign government and U.S.
by investing in all three government bonds and notes,
sectors and by varying the ocollateralized mortgage
amount in each in order to obligations (CMOs),
take advantage of changing oother mortgage-related
market conditions. Assets securities and asset-backed
within each sector are securities,
also broadly diversified. oparticipation interests in
loans,
o Fund managers select o"structured" notes,
bonds that offer olower-grade, high-yield domestic
attractive yields relative and foreign corporate debt
to expected credit and obligations, and
interest rate risks. o"zero-coupon" or "stripped"
securities.
o May purchase issues of o Can invest up to 100% of its
any maturity, based on the assets in any one sector.
outlook for interest rates.
o Can invest in issuers in any
o May invest in market capitalization range and can
Mortgage-Backed securities. buy securities having short-,
medium, or long-term maturities.
o May invest in
derivative investments, o Can invest in US Government
such as credit default securities: U.S. Treasury
swaps contracts, and other Obligations, Obligations of U.S.
types of derivatives for Government Agencies or
hedging purposes Instrumentalities, Mortgage-Related
U.S. Government securities
o Does not invest in
companies that manufacture o Can invest in Private-Issuer
tobacco products Mortgage-Backed securities
o Can invest in Asset-Backed
securities
o Can invest through "Fund of
Funds"
o Can invest in debt securities of
issuers in developed markets and
emerging markets
o Can buy investment-grade
securities, although it normally
invests a substantial part of its
assets in debt securities below
investment-grade, and can do so
without limit.
o May invest derivative
investments for hedging purposes or
to seek its investment objective.
o Does not concentrate 25% or more
of its total assets in investments
in the securities of any one foreign
government or in securities of
companies in any one industry.
o Does not have a policy
prohibiting investing in companies
that manufacture tobacco products.
- -------------------------------------------------------------------------------------
Comparison of Principal Investment Risks
An investment in either Fund is subject to certain risks. The principal risk
factors for each Fund are similar due to the similarity of the Funds'
investment objectives and principle investment strategies. There is no
assurance that investment performance of either Fund will be positive or that
either Fund will meet its investment objectives. The following tables and
discussions highlight the principal risks associated with an investment in
each Fund.
- ----------------------------------------------------------------------------------
Atlas Strategic Income Fund Oppenheimer Strategic Income Fund
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Each Fund is subject to Credit Risk.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk is the
risk that the issuer of a debt security might not make interest and principal
payments on the security as they become due. If the issuer fails to pay
interest, a Fund's income might be reduced, and if the issuer fails to repay
principal, the value of that security and of the Fund's shares might fall. A
downgrade in an issuer's credit rating or other adverse news about an issuer can
reduce the market value of that issuer's securities. While each Fund's
investments in U.S. government securities are subject to little credit risk,
each Fund's other investments in debt securities, particularly high-yield,
lower-grade debt securities, are subject to risks of default.
Special Risks of Lower-Grade Securities. Because each Fund can invest without
limit in securities below investment grade to seek high income, each
Fund's credit risks are greater than those of funds that buy only
investment-grade bonds. Lower-grade debt securities may be subject to
greater market fluctuations and greater risks of loss of income and
principal than investment-grade debt securities (particularly during
general economic downturns). Securities that are (or that have fallen)
below investment grade are exposed to a greater risk that the issuers of
those securities might not meet their debt obligations. The market for
these securities may be less liquid, making it difficult for each Fund to
value or sell them at an acceptable price. These risks can reduce each
Fund's share prices and the income it earns.
- ----------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund Oppenheimer Strategic Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each Fund is subject to Foreign Investment Risk.
RISKS OF FOREIGN INVESTING. Each Fund can invest without limit in foreign
government and corporate debt securities in both developed and emerging
markets. Each Fund will normally invest significant amounts of its assets in
foreign securities. While foreign securities may offer special investment
opportunities, they also have special risks that can reduce each Fund's share
prices and income.
The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency. Currency rate changes can also affect the distributions
each Fund makes from the income it receives from foreign securities if foreign
currency values change against the U.S. dollar. Foreign investing can result
in higher transaction and operating costs for each Fund. Foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to.
The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic
or monetary policy in the U.S. or abroad, or other political and economic
factors.
Special Risks of Emerging Markets. Each Fund can buy securities in emerging
and developing markets. They present risks not found in more mature
markets. Those securities may be more difficult to value and sell at an
acceptable price and their prices may be more volatile than securities
of issuers in more developed markets. Settlements of trades may be
subject to greater delays so that a Fund might not receive the sale
proceeds of a security on a timely basis.
Emerging markets might have less developed trading markets and exchanges
than developed markets, and less developed legal and accounting systems.
Investments may be subject to greater risks of government restrictions on
withdrawing the sales proceeds of securities from the country. Economies of
developing countries may be more dependent on relatively few industries that
may be highly vulnerable to local and global changes. Governments may be more
unstable and present greater risks of nationalization or restrictions on
foreign ownership of securities of local companies. These investments may be
substantially more volatile than debt securities of issuers in the U.S. and
other developed countries and may be very speculative.
Additionally, if either Fund invests a significant amount of its assets in
foreign securities, it might expose the Fund to "time-zone arbitrage" attempts
by investors seeking to take advantage of the differences in value of foreign
securities that might result from events that occur after the close of the
foreign securities market on which a foreign security is traded and before the
close of the New York Stock Exchange (the "NYSE") that day, when the Fund's
net asset value is calculated. If such time-zone arbitrage were successful, it
might dilute the interests of other shareholders. However, each Fund's use of
"fair value pricing" to adjust the closing market prices of foreign securities
under certain circumstances, to reflect what the Manager and each Fund's Board
believe to be their fair value, may help deter those activities.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund Oppenheimer Strategic Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each Fund is subject to Interest Rate Risk.
INTEREST RATE RISKS. The values of debt securities, including U.S. government
securities, are subject to change when prevailing interest rates change. When
interest rates fall, the values of already-issued debt securities generally
rise. When interest rates rise, the values of already-issued debt securities
generally fall, and they may sell at a discount from their face amount. The
magnitude of these fluctuations will often be greater for debt securities
having longer maturities than for shorter-term debt securities. Each Fund's
share prices can go up or down when interest rates change because of the
effect of the changes on the value of the Fund's investments in debt
securities. Also, if interest rates fall, each Fund's investments in new
securities at lower yields will reduce the Fund's income.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund Oppenheimer Strategic Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each Fund is subject to Prepayment Risk.
PREPAYMENT RISK. Prepayment risk is the risk that the issuer of a security can
prepay the principal prior to the security's expected maturity. The prices and
yields of mortgage-related securities are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when general interest rates rise. Securities subject
to prepayment risk, including the mortgage-related securities that the Fund
buys, have greater potential for losses when interest rates rise than other
types of debt securities.
The impact of prepayments on the price of a security may be difficult to
predict and may increase the volatility of the price. Interest-only and
principal-only "stripped" securities can be particularly volatile when
interest rates change. If each Fund buys mortgage-related securities at a
premium, accelerated prepayments on those securities could cause each Fund to
lose a portion of its principal investment represented by the premium the Fund
paid.
If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. If interest rates rise rapidly, prepayments may occur at slower
rates than expected, which could have the effect of lengthening the expected
maturity of a short- or medium-term security. That could cause its value to
fluctuate more widely in response to changes in interest rates. In turn, this
could cause the value of each Fund's shares to fall more.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund Oppenheimer Strategic Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each Fund is subject to Derivative Investment Risk.
RISKS OF DERIVATIVE INVESTMENTS. In general terms, a derivative investment is
an investment contract whose value depends on (or is derived from) the value
of an underlying asset, interest rate or index. Options, futures, structured
notes and mortgage-related securities are some of the derivatives each Fund
typically uses.
If the issuer of the derivative does not pay the amount due, either Fund
can lose money on the investment. Also, the underlying security or investment
on which the derivative is based, and the derivative itself, might not perform
the way the Manager expected it to perform. If that happens, each Fund's share
prices could fall, and the Fund could get less income than expected, or its
hedge might be unsuccessful. Some derivatives may be illiquid, making it
difficult to value or sell them at an acceptable price. Using derivatives can
increase the volatility of each Fund's share prices.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund Oppenheimer Strategic Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each Fund is subject to Sector Allocation Risk.
SECTOR ALLOCATION RISKS. In allocating each Fund's investments among the three
principal sectors in which the Fund invests to seek to take advantage of the
lack of correlation of the performance of these sectors, the Manager's
expectations about the relative performance of those sectors may be
inaccurate, and each Fund's returns might be less than other funds using
similar strategies.
- --------------------------------------------------------------------------------
Other Risks
In the short term, the values of debt securities can fluctuate
substantially because of interest rate changes. Prices of foreign debt
securities, particularly in emerging markets, and of high-yield securities
can be volatile, and the prices of the Funds' shares and its income can go up
and down substantially because of events affecting foreign markets or issuers
or events affecting the high-yield market. The Funds are generally more
aggressive and have more risks than funds that focus on U. S. government
securities and investment-grade bonds, but sector diversification strategy
may help make the Funds less volatile than funds that focus solely on
investments in high-yield bonds or a single foreign sector, such as emerging
markets.
Each Fund generally does not take portfolio turnover into account when
making investment decisions; as a result each Fund can experience a high rate
of portfolio turnover (greater than 100%) in any given fiscal year. When
this happens, a Fund can incur greater brokerage and other transaction costs
which are borne by the Fund and its shareholders. This can also result in a
Fund realizing greater net short-term capital gains, distributions from which
may be taxable to shareholders as ordinary income. The following are the
portfolio turnover rates for each Fund, as of the past two fiscal year end
periods:
- --------------------------------------------------------------------------
Fiscal Year ended Fiscal Year ended
December 31, 2005 December 31, 2004
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Atlas Fund 88.58% 97.55%
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Fiscal Year ended Fiscal Year ended
September 30, 2006 September 30, 2005
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Oppenheimer Fund 96% 103%
- --------------------------------------------------------------------------
Each Fund has other investment strategies, policies, practices and
restrictions which, together with their related risks, are also set forth in
each Fund's prospectus and statement of additional information.
Comparison of Sales Charges and Expenses
The sales charges and expenses for the Class A shares of Oppenheimer
Fund and shares of Atlas Fund are different. For a complete description of
the sales charges and expenses for each Fund, see the table below under the
caption "Shareholder Fees" and the section "Merger Information - Distribution
of Shares."
The following table allows you to compare the sales charges of the
Funds. The column titled "Oppenheimer Strategic Income Fund Pro Forma" also
shows you what the sales charge will be, assuming the Merger takes place. You
will not pay any front-end sales charge on shares you
receive in connection with the Merger.
In addition, all subsequent purchases by former shareholders of Atlas Fund
of Class A shares of Oppenheimer Fund or of Class A shares of any other
Oppenheimer Fund that is available for exchange to shareholder of Oppenheimer
Fund will be made at net asset value without the imposition of any front-end
sales charge ("NAV Privilege). Former Atlas Fund shareholders will retain the
NAV Privilege so long as the account remains under the same registration that
exists at the time of the Merger. If an Atlas Fund shareholder transfers his or
her account to a financial intermediary, so long as the registration remains the
same, the NAV Privilege will remain in effect.
Shareholder Fees (fees paid directly from your investment)
- ----------------------------------------------------------------------
Shareholder Atlas Oppenheimer Oppenheimer
Transaction Strategic Strategic Strategic Income
Expenses Income Fund Income Fund Fund Pro Forma
(Class A) (Class A)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Maximum sales None 4.75 4.75*
charge imposed on
purchases (as a %
of offering price)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Maximum None None* None*
contingent
deferred sales
charge (as a % of
either the
redemption amount
or initial
investment,
whichever is
lower)
- ----------------------------------------------------------------------
*Investments of $1 million or more are not subject to a front-end sales
charge, but a contingent deferred sales charge may apply to redemptions of
investments of $1 million or more ($500,000 for certain retirement plan
accounts) of Class A shares. All subsequent purchases of Class A shares by
former shareholders of Atlas Fund will be made at net asset value without the
imposition of any front-end sales charge.
The following tables allow you to compare the expenses of the Funds.
The amounts for Atlas Fund set forth in the following table and in the
examples are based on actual expenses for the fiscal year ended December 31,
2005. The amounts for the Class A shares of Oppenheimer Fund set forth in
the following table and in the examples are based on the actual expenses for
the fiscal year ended September 30, 2006. The table titled "Combined Pro
Forma Expenses" shows you what the expenses are estimated to have been for
the twelve-month period ended September 30, 2006, assuming the Merger had
taken place. Expenses may vary in future years.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
- ---------------------------------------------------------------------------------
Fee and Expense Comparison Combined
(Class A shares) Atlas Fund(1) Oppenheimer Pro Forma
Fund(2) Expenses(3)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Management Fee 0.72% 0.53% 0.53%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Distribution and/or Service 0.25% 0.25% 0.25%
(12b-1) Fees
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Other Expenses 0.26% 0.15%(4) 0.15%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Total Annual Operating Expenses 1.23% 0.93% 0.93%
- ---------------------------------------------------------------------------------
1. based on expenses for fiscal year ended December 31, 2005
2. based on expenses for fiscal year ended September 30, 2006
3. based on what the estimated combined expenses of Oppenheimer Strategic
Income would have been for the 12 months ended September 30, 2006
assuming the Merger had occurred.
4. "Other Expenses" include transfer agent fees, custodial fees and
accounting and legal expenses that Oppenheimer Fund pays. The "Other
Expenses" in the table are based on, among other things, the fees
Oppenheimer Fund would have paid if the transfer agent had not waived a
portion of its fee under a voluntary undertaking to the Fund to limit
these "Other Fees" to 0.35% of average daily net assets per fiscal
year. That undertaking may be amended or withdrawn at any time. After
the waiver, the actual "Other Expenses" and "Total Annual Operating
Expenses" as percentages of average daily net assets were 0.16% and
0.92% for Class A shares.
Examples of Fund Expenses
Examples of Fund Expenses. The tables below show examples of the total
fees and expenses you would pay on a $10,000 investment over one-, three-,
five- and ten-year periods. The examples are intended to help you compare
the cost of investing in Atlas Fund versus Oppenheimer Fund, both before and
after the Merger, and are for illustration purposes only. The examples
assume a 5% average annual return, reinvestment of all dividends and
distributions, that the applicable Fund's operating expenses are the same as
described in the applicable table above. For Oppenheimer Fund, the table
shows the total fees and expenses with, and without, the imposition of its
Class A sales charge. Both examples are shown because you will not pay any
front-end sales charge in connection with the shares
you receive in the merger. Your actual costs may be higher or lower.
Examples of Fund Expenses
- -------------------------------------------------------------------------
Atlas Strategic Oppenheimer Strategic
Income Fund Income Fund (Class A)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Expenses With
Class A Sales Charge
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
After 1 year $125 $566
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
After 3 years $390 $759
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
After 5 years $676 $967
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
After 10 years $1,489 $1,569
- -------------------------------------------------------------------------
---------------------------------------------
Oppenheimer Strategic Income Fund (Class A)
Pro Forma
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Expenses With Expenses Without
Class A Sales Class A Sales
Charge Charge*
---------------------------------------------
---------------------------------------------
After 1 $566 $95
year
---------------------------------------------
---------------------------------------------
After 3 $759 $298
years
---------------------------------------------
---------------------------------------------
After 5 $967 $517
years
---------------------------------------------
---------------------------------------------
After 10 $1,569 $1,148
years
---------------------------------------------
*All subsequent purchases of Class A shares by former shareholders of Atlas
Strategic Income Fund will be made at net asset value without the imposition
of any front-end sales charge.
Comparison of Performance
The following tables show how each Fund has performed in the past. Past
performance (both before and after taxes) is not an indication of future
results.
Year-by-Year Total Return (%)
The tables below show the percentage gain or loss for shares of Atlas
Fund and the Class A shares of Oppenheimer Fund for the last ten complete
calendar years. The tables should give you a general idea of the risks of
investing in each Fund by showing how each Fund's return has varied from
year-to-year. The tables include the effect of Fund expenses and the
reinvestment of all dividends and distributions and show both with, and
without, Oppenheimer Fund's sales charges. As shown below, when these charges
are included, the returns for Oppenheimer Fund are lower.
----------------------------------------------------------------------------
Atlas Strategic Income Fund
----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
`96 `97 `98 `99 `00 `01 `02 `03 `04 '05
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
N/A 9.6% 4.0% 1.9% 2.1% 4.5% 6.3% 16.1% 8.7% 2.3%
- -------------------------------------------------------------------------------
Best Quarter: 4th Quarter 2004 5.62%
Worst Quarter: 2nd Quarter 2004 -2.00%
Year-to-date as of 9/30/06 is 2.89%.
----------------------------------------------------------------------------
Oppenheimer Strategic Income Fund (Without Sales Charge)
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
`96 `97 `98 `99 `00 `01 `02 `03 `04 '05
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
12.59% 8.36% 1.67% 4.04% 2.21% 3.52% 6.85% 19.60% 9.62% 4.16%
- ----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oppenheimer Strategic Income Fund (With Sales Charge)
----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
`96 `97 `98 `99 `00 `01 `02 `03 `04 '05
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
7.23% 3.22% -3.16% -0.90% -2.65% -1.40% 1.77% 13.92% 4.41% -0.79%
- ----------------------------------------------------------------------------
Best Quarter: 2nd Quarter 2003 6.55%
Worst Quarter: 3rd Quarter 1998 -3.41%
Year-to-date as of 9/30/06 is -1.31% with sales charge and 3.61%
without sales charge.
The following tables list each Fund's average annual total return over
the past one-, five- and ten- years (for each Fund) (through 12/31/2005),
including any applicable sales charges. These tables are intended to
provide you with some indication of the risks of investing in each Fund by
comparing each Fund's performance with that of an index. At the bottom of the
table, you can compare the performance of each Fund with that of the
Citigroup World Government Bond Index and Lehman Brothers Aggregate Bond
Index, both a broad-based market index. The Citigroup World Government Bond
Index is an unmanaged index of U.S. corporate and government bonds. Lehman
Brothers Aggregate Bond Index is an unmanaged index of debt securities of
major foreign government bond markets. The indices performance includes
reinvestment of income but does not reflect transaction costs, fees, expenses
or taxes. The Funds' investments vary from those in the indices. Each
Fund's past investment performance, both before and after taxes, is not
necessarily an indication of how the Fund will perform in the future.
Average Annual Total Returns (for the periods ended 12/31/2005)
- -------------------------------------------------------------
Atlas Strategic Income Fund
- -------------------------------------------------------------
- -------------------------------------------------------------
1 Year 5 Years Since
Inception
(5/20/96)
- -------------------------------------------------------------
- -------------------------------------------------------------
Return Before Taxes 2.34% 7.49% 6.62%
- -------------------------------------------------------------
- -------------------------------------------------------------
Return After Taxes on 0.14% 4.95% 3.78%
Distributions*
- -------------------------------------------------------------
- -------------------------------------------------------------
Return After Taxes on 1.51% 4.84% 3.85%
Distributions and Sale of
Fund Shares*
- -------------------------------------------------------------
- -------------------------------------------------------------
Lehman Brothers Aggregate 2.43% 5.87% 6.70%
Bond Index
- -------------------------------------------------------------
- -------------------------------------------------------------
Citigroup World -6.88% 6.92% 5.44%
Government Bond Index
- -------------------------------------------------------------
- -------------------------------------------------------------
Oppenheimer Strategic Income Fund- Class A Shares (With
Sales Charge)
- -------------------------------------------------------------
- -------------------------------------------------------------
1 Year 5 Years 10 Years
- -------------------------------------------------------------
- -------------------------------------------------------------
Return Before Taxes -0.79% 7.54% 6.61%
- -------------------------------------------------------------
- -------------------------------------------------------------
Return After Taxes on -3.29% 4.90% 3.48%
Distributions*
- -------------------------------------------------------------
- -------------------------------------------------------------
Return After Taxes on 4.82% 3.63%
Distributions and Sale of -0.52%
Fund Shares*
- -------------------------------------------------------------
- -------------------------------------------------------------
Lehman Brothers Aggregate 2.43% 5.87% 6.16%
Bond Index
- -------------------------------------------------------------
- -------------------------------------------------------------
Citigroup World -6.88% 6.92% 5.44%
Government Bond Index
- -------------------------------------------------------------
Oppenheimer Fund's average annual total returns include the current
maximum initial sales charge of 4.75% for Class A shares. As previously
stated, all subsequent purchases by former shareholders of Atlas Fund of
Class A shares of Oppenheimer Fund or of any other Oppenheimer fund that is
available for exchange will be made at NAV Privilege. Former Atlas Fund
shareholders will retain the NAV Privilege so long as the account remains
under the same registration that exists at the time of the Merger. If an
Atlas Fund shareholder transfers his or her account to a financial
intermediary, so long as the registration remains the same, the NAV Privilege
will remain in effect.
The after-tax returns shown are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
state and local taxes. In certain cases, the figure representing "Return
After Taxes on Distributions and Sale of Fund Shares" may be higher than the
other return figures for the same period. A higher after-tax return results
when a capital loss occurs upon redemption and translates into an assumed tax
deduction that benefits the shareholder. After-tax returns on distributions
and the sale of Fund shares assumes a complete sale of Fund shares at the end
of the measurement period, resulting in capital gains taxes or tax benefits
when capital losses occur. Actual after-tax returns will depend on your
individual tax situation and may differ from those shown. The after-tax
returns shown are not relevant to you if you hold your Fund shares through
tax-deferred arrangements, such as 401(k) plans or IRAs.
For a detailed discussion of the manner of calculating total return,
please see each Fund's statement of additional information. Generally, the
calculations of total return assume the reinvestment of all dividends and
capital gain distributions on the reinvestment date.
Will I be able to buy, sell and exchange shares the same way?
There are differences in the procedures for buying, selling and
exchanging shares of each Fund with respect to minimum purchases and exchange
privileges. For more information, see the sections titled "Merger
Information - Purchase and Redemption Procedures" and "Merger Information -
Exchange Privileges."
Who will be the Investment Advisor and Portfolio Manager of
my Fund after the Merger? What will the respective advisory fees be after the
Merger?
Investment Advisor
The overall management of Oppenheimer Fund is the responsibility of,
and is supervised by, the Board of Trustees of Oppenheimer Fund. The overall
management of Atlas Fund is the responsibility of, and is supervised by, the
Board of Trustees of Atlas Funds.
Oppenheimer Fund is managed by OppenheimerFunds, Inc. ("OFI"). Atlas
Fund is managed by Atlas Advisers, Inc. and subadvised by OFI. As
sub-adviser to Atlas Fund, OFI provides discretionary portfolio management
to Atlas Fund. Following are some key facts about OFI:
--------------------------------------------------------------------------
o Has been an investment advisor since 1960.
o Manages over $220 billion in assets for the Oppenheimer funds as
of September 30, 2006, including other Oppenheimer funds with more
than 6 million shareholder accounts.
o Is located at Two World Financial Center, 225 Liberty Street, 11th
Floor, New York, NY 10281-1008.
--------------------------------------------------------------------------
Portfolio Management
Oppenheimer Fund's portfolio is managed by Arthur P. Steinmetz. Mr.
Steinmetz has been principally responsible for the day-to-day management of
the Fund's portfolio since October 1989 and sole portfolio manager since May
2003. Mr. Steinmetz has been a Senior Vice President of the OFI since March
1993. Mr. Steinmetz also is the current portfolio manager for Atlas Fund
(since May 1996).
Advisory Fees
For its management and supervision of the daily business affairs of
Oppenheimer Fund, OFI is entitled to receive an annual fee based on
Oppenheimer Fund's net assets (computed as of the close of each business day)
as follows:
0.75% of the first $200 million;
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;
0.50% of the next $4.0 billion; and
0.48% of the average annual net assets in excess of $5 billion.
Oppenheimer Fund's management fee for its last fiscal year ended September
30, 2006 was 0.53% of average annual net assets for each class of shares.
Under Atlas Fund's investment advisory agreement, Atlas Fund pays Atlas
Advisers an advisory fee at an annual rate that declines on additional net
assets as Atlas Fund grows:
- --------------------------------------------------------------------------------
Atlas Fund Advisory Fee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Assets
Net Assets Over $100 Net Assets
Up to $100 Million and Over $500
Million Up to $500 Million
Million
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund 0.75% 0.70% 0.65%
- --------------------------------------------------------------------------------
For the most recently completed fiscal year ended on December 31, 2005,
Atlas Fund paid 0.72% of average annual net assets to Atlas Advisers.
Under Atlas Adviser's sub-advisory agreement with OFI for Atlas Fund,
Atlas Advisers pays OFI an advisory fee at an annual rate that declines on
additional net assets as Atlas Fund grows:
- -------------------------------------------------------------
Atlas Fund Sub-Advisory Fee
- -------------------------------------------------------------
- -------------------------------------------------------------
Net Assets Up to Net Assets Over
$100 Million $100 Million
- -------------------------------------------------------------
- -------------------------------------------------------------
Atlas Strategic 0.30% 0.25%
Income Fund
- -------------------------------------------------------------
Are there any legal proceedings pending against Oppenheimer
Fund and/or OFI?
A consolidated amended complaint was filed as a putative class action against
OFI and OppenheimerFunds Services ("Transfer Agent") (and other defendants)
in the U.S. District Court for the Southern District of New York on January
10, 2005 and was amended on March 4, 2005. The complaint alleged, among other
things, that OFI charged excessive fees for distribution and other costs, and
that by permitting and/or participating in those actions, the
Directors/Trustees and the Officers of the funds breached their fiduciary
duties to fund shareholders under the Investment Company Act of 1940 and at
common law. The plaintiffs sought unspecified damages, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of
the eight counts in the complaint, including the claims against certain of
the Oppenheimer funds (including Oppenheimer Strategic Income Fund), as
nominal defendants, and against certain present and former Directors,
Trustees and officers of the funds, and the Distributor, as defendants, were
dismissed with prejudice by court order dated March 10, 2006, and the
remaining count against OFI and the Transfer Agent was dismissed with
prejudice by court order dated April 5, 2006. The plaintiffs filed an appeal
of those dismissals on May 11, 2006.
OFI believes that it is premature to render any opinion as to the
likelihood of an outcome unfavorable to it, the funds, the Directors/Trustees
or the Officers on the appeal of the decisions of the district court, and
that no estimate can yet be made with any degree of certainty as to the
amount or range of any potential loss. However, OFI believes that the
allegations contained in the complaint are without merit and that there are
substantial grounds to sustain the district court's rulings.
What will be the primary federal tax consequences of the
Merger?
The Merger is intended to qualify as a tax-free reorganization. Prior
to or at the time of the Merger, Atlas Fund and Oppenheimer Fund will have
received opinions from KPMG, LLP ("KPMG"), that the Merger between Atlas Fund
and Oppenheimer Fund has been structured so that no gain or loss will be
realized by Atlas Fund or its shareholders for federal income tax purposes,
as a result of receiving Oppenheimer Fund shares in connection with the
Merger. The holding period and aggregate tax basis of shares of Oppenheimer
Fund that are received by the Atlas Fund shareholder will be the same as the
holding period and aggregate tax basis of shares of Atlas Fund previously
held by such shareholder, provided that shares of Atlas Fund are held as
capital assets. In addition, the holding period and tax basis of the assets
of Atlas Fund in the hands of Oppenheimer Fund as a result of the Merger will
be the same as the tax basis and holding period of such assets were in the
hands of Atlas Fund immediately prior to the Merger. No gain or loss will be
recognized by Oppenheimer Fund upon the receipt of the assets of Atlas Fund
in exchange for shares of the relevant Oppenheimer Fund and the assumption by
Oppenheimer Fund of Atlas Fund's identified liabilities.
The opinion will be based on certain factual certifications made by
officers of Atlas Fund and Oppenheimer Fund and will also be based on
customary assumptions. It is possible that the IRS could disagree with
KPMG's opinion.
Because the Merger will end the tax year of Atlas Fund, the Fund may
accelerate distributions from Atlas Fund to shareholders. Specifically, Atlas
Fund will recognize any net investment company taxable income and any net
capital gains, including those realized on disposition of portfolio
securities in connection with the Merger (after reduction by any available
capital loss carryforwards) or net capital losses in the short tax year
ending on the date of the Merger, and will declare and pay a distribution of
such income and any such net capital gains remaining after reduction by any
available capital loss carryforwards to their shareholders on or before that
date.
In addition, a portion of the portfolio assets of Atlas Fund may be
sold in connection with the Merger. The actual tax impact of such sales will
depend on the difference between the price at which such portfolio assets are
sold and Atlas Fund's basis in such assets. Any capital gains recognized in
these sales on a net basis will be distributed to Atlas Fund shareholders as
capital-gain dividends (to the extent of net realized long-term capital gains
distributed) and/or ordinary dividends (to the extent of net realized
short-term capital gains distributed) during or with respect to the year of
sale, and such distributions will be taxable to shareholders.
MERGER INFORMATION
Reasons for the Merger
On October 1, 2006, and after approval by shareholders of both
companies, Golden West Financial Corporation, the sole shareholder of Atlas
Advisers, Inc., merged into a wholly-owned subsidiary of Wachovia
Corporation. Prior to that merger, subsidiaries of Wachovia Corporation and
Golden West Financial Corporation had managed the Evergreen family of funds
and the Atlas family of funds, respectively. Since October 1, 2006,
management of this newly-combined financial services company has evaluated
funds within the Atlas and Evergreen mutual fund families for opportunities
to combine funds in a manner that serves the interests of shareholders of
both groups. The objective of the analysis was to ensure that a consolidated
Atlas and Evergreen fund family offered a streamlined, more complete,
competitive set of mutual funds, while serving the interests of the
shareholders.
In accordance with this objective, management of the newly-combined
financial services company proposed to the Trustees of Atlas Fund that Atlas
Fund merge into Oppenheimer Fund. OppenheimerFunds, Inc., as investment
sub-adviser to Atlas Fund and investment manager to Oppenheimer Fund, employs
similar investment portfolio strategies for both Funds, including the use of
foreign and domestic high yield securities and certain structured notes.
Accordingly, it was determined that the interests of Atlas Fund's
shareholders would be best served by merging into Oppenheimer Fund.
At a special meeting held on November 14, 2006, all of the Trustees of
Atlas Funds, including the Independent Trustees, considered and approved the
Merger. With respect to the Merger, the Atlas Trustees determined that the
Merger was in the best interests of Atlas Fund and its shareholders and that
the interests of existing shareholders of Atlas Fund would not be diluted as
a result of the transactions contemplated by the Merger. In addition, with
respect to the Merger, the Trustees of Oppenheimer Fund considered and
approved the Merger at a meeting held on December __, 2006. With respect to
the Merger, the Trustees determined that the Merger was in the best interests
of Oppenheimer Fund and its shareholders, and that the interests of existing
shareholders of Oppenheimer Fund would not be diluted as a result of the
transactions contemplated by the Merger. As discussed in more details in the
following paragraphs, before approving the Plan, the Trustees of Atlas Fund
reviewed various factors about the Funds and the proposed Merger. The
Trustees considered the relative size of the Funds as well as the similarity
of the Funds' investment objectives and strategies. The Trustees evaluated
the potential economies of scale associated with larger mutual funds and
concluded that operational efficiencies may be achieved by combining Atlas
Fund with Oppenheimer Fund. As of September 30, 2006, the total assets of
Atlas Fund were approximately $318.1 million and the total assets of
Oppenheimer Fund were approximately $6.9 billion.
By merging into Oppenheimer Fund, shareholders of Atlas Fund will have
the benefit of a larger fund with similar investment objective and policies,
and greater investment flexibility.
The Trustees of the Atlas Funds also considered the past performance
history and the relative expenses for Atlas Fund in comparison with its
respective Oppenheimer Fund. They noted that the performance for each of the
past year-to-date, one-, three- and five-year periods ended September 30,
2006 had been higher for Oppenheimer Fund (without sales charges) than for
Atlas Fund.
The Trustees of Atlas Fund also considered the relative expenses of
Atlas Fund as compared to those of Oppenheimer Fund. They noted that the
expense ratio of Oppenheimer Fund is currently, and is expected to remain
after the Merger, lower than that of Atlas Fund. In addition, the Board of
Atlas Funds considered among other things:
o the terms and conditions of the Merger;
o the fact that the Merger would not result in the dilution of
shareholders' interests;
o the compatibility of and differences between the Funds' investment
goals, policies, risks and principal investment strategies;
o the fact that Atlas Advisers and not shareholders will bear the
expenses incurred by Atlas Fund and Oppenheimer Fund in connection with
the Merger;
o the fact that Oppenheimer Fund will assume all of the identified
liabilities of Atlas Fund;
o the Funds' relative asset sizes;
o the relative differences in the Funds' sales charges and the fact that
following the Merger, former Atlas Fund shareholders will have an
exemption from front-end sales charges of
OppenheimerFunds family of funds;
o the fact that the Merger is expected to be tax-free for federal income
tax purposes;
o the fact that no gain or loss is expected to be recognized by
shareholders for federal income tax purposes as a result of the Merger;
o respective tax positions of each Fund as described below;
o alternatives available to shareholders of Atlas Fund, including the
ability to redeem their shares;
o the investment experience, expertise and resources of OppenheimerFunds
and the experience of the investment professionals at OppenheimerFunds
managing the assets of Atlas Fund as sub-advisor;
o the information described under "Summary of the Merger" in this
Prospectus/Proxy Statement; and
o the service features and distribution resources available to
shareholders of the Fund and the anticipated increased array of
investment alternatives available to shareholders of the
OppenheimerFunds' family of funds.
In connection with their consideration of the Merger, the Trustees of
Atlas Fund met with counsel to Atlas Fund regarding the legal issues
involved.
Accordingly, for the reasons noted above, together with other factors
and information considered relevant, and recognizing that there can be no
assurance that any economies of scale or other benefits will be realized, the
Trustees of Atlas Fund concluded that each of the proposed Merger would be in
the best interests of Atlas Fund and its shareholders.
In addition, the Trustees of Oppenheimer Fund approved the Merger on
behalf of Oppenheimer Fund and its shareholders. The Trustees of Oppenheimer
Fund considered among other things the minimal impact on Oppenheimer Fund and
fund expenses, the potential for economies of scale, the terms and conditions
of the Merger, the compatibility of the Funds' investment objectives and
principal investment strategies, and the fact that Oppenheimer Fund will not
bear any expenses incurred by Oppenheimer Fund in connection with the Merger.
Agreement and Plan of Reorganization
The following summary is qualified in its entirety by reference to the
Plan (a form of which is attached as Exhibit A to this Prospectus/Proxy
Statement).
If the shareholders of Atlas Fund approve the Reorganization Agreement,
the Reorganization will take place after various conditions are satisfied by
Atlas Fund and Oppenheimer Fund, including delivery of certain documents. The
Closing Date is presently scheduled for on or about May 11, 2007 and the
"Valuation Date" (which is the business day preceding the Closing Date of the
Reorganization) is presently scheduled for on or about May 10, 2007.
If the shareholders of Atlas Fund vote to approve the Reorganization
Agreement, you will receive Class A shares of Oppenheimer Fund equal in value
to the value as of the Valuation Date of your shares of Atlas Fund. Atlas
Fund will then be liquidated and its outstanding shares will be cancelled.
The stock transfer books of Atlas Fund will be permanently closed at the
close of business on the Valuation Date.
Shareholders of Atlas Fund who vote their shares in favor of the
Reorganization will be electing in effect to redeem their shares of Atlas
Fund at net asset value on the Valuation Date, after Atlas Fund subtracts a
cash reserve ("Cash Reserve"), if any, and reinvest the proceeds in Class A
shares of Oppenheimer Fund at net asset value. The Cash Reserve is an amount
retained by Atlas Fund for the payment of any unknown liabilities that may
mature following the Reorganization. Oppenheimer Fund is not assuming any
liabilities of Atlas Fund except stated liabilities on the Closing Date
specified on a financial statement. Atlas Fund may recognize capital gains or
losses on any sales of portfolio securities made prior to the Reorganization.
The sales of certain portfolio securities contemplated in the Reorganization
are anticipated to be in the ordinary course of business of Atlas Fund's
activities and are required as a condition to the Reorganization. Following
the Reorganization and final payment of the Cash Reserve, if any, Atlas Fund
shall take all necessary steps to complete its liquidation and effect a
complete dissolution of the Fund.
Under the Reorganization Agreement, either Atlas Fund or Oppenheimer
Fund may abandon and terminate the Reorganization Agreement for any reason
and there shall be no liability for damages or other recourse available to
the other Fund, provided, however, that in the event that one of the Funds
terminates the Reorganization Agreement without reasonable cause, it shall,
upon demand, reimburse the other Fund for all expenses, including reasonable
out-of-pocket expenses and fees incurred in connection with the
Reorganization Agreement.
To the extent permitted by law, the Funds may agree to amend the
Reorganization Agreement without shareholder approval. They may also agree to
terminate and abandon the Reorganization at any time before or, to the extent
permitted by law, after the approval of shareholders of Atlas Fund.
Whether or not the Merger is consummated, Atlas Advisers will pay the
expenses incurred by Atlas Fund and Oppenheimer Fund in connection with the
Merger (including the cost of a proxy-soliciting agent) other than
out-of-pocket expenses of each Fund. No portion of the expenses will be borne
directly or indirectly by Atlas Fund, Oppenheimer Fund or their respective
shareholders.
If Atlas Fund shareholders do not approve the Merger, the Trustees of
Atlas Fund will consider other possible courses of action in the best
interests of Atlas Fund and its shareholders.
Federal Income Tax Consequences
The Merger is intended to qualify for federal income tax purposes as a
tax-free reorganization under section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"). As a condition to the closing of the Merger,
Atlas Fund and Oppenheimer Fund will receive an opinion from KPMG to the
effect that, on the basis of the existing provisions of the Code, U.S.
Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for federal income tax purposes:
(1) The transfer of substantially all of the assets of Atlas Fund
solely in exchange for shares of Oppenheimer Fund and the
assumption by Oppenheimer Fund of the identified liabilities of
Atlas Fund followed by the distribution of Oppenheimer Fund's
shares to the shareholders of Atlas Fund in liquidation of Atlas
Fund will constitute a "reorganization" within the meaning of
section 368(a) of the Code, and Oppenheimer Fund and Atlas Fund
should each be a "party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) No gain or loss will be recognized by Oppenheimer Fund upon the
receipt of the assets of Atlas Fund solely in exchange for the
shares of Oppenheimer Fund and the assumption by Oppenheimer Fund
of the identified liabilities of Atlas Fund;
(3) No gain or loss will be recognized by Atlas Fund on the transfer
of its assets to Oppenheimer Fund in exchange for Oppenheimer
Fund's shares and the assumption by Oppenheimer Fund of the
identified liabilities of Atlas Fund or upon the distribution of
Oppenheimer Fund's shares to Atlas Fund's shareholders in exchange
for their shares of Atlas Fund;
(4) No gain or loss will be recognized by Atlas Fund's shareholders
upon the exchange of their shares of Atlas Fund for shares of
Oppenheimer Fund in liquidation of Atlas Fund;
(5) The aggregate tax basis of the shares of Oppenheimer Fund received
by each shareholder of Atlas Fund pursuant to the Merger will be
the same as the aggregate tax basis of the shares of Atlas Fund
held by such shareholder immediately prior to the Merger, and the
holding period of the shares of Oppenheimer Fund received by each
shareholder of Atlas Fund should include the period during which
the shares of Atlas Fund exchanged therefore were held by such
shareholder (provided that the shares of Atlas Fund were held as a
capital asset on the date of the Merger); and
(6) The tax basis of the assets of Atlas Fund acquired by Oppenheimer Fund
will be the same as the tax basis of such assets to Atlas Fund
immediately prior to the Merger, and the holding period of such
assets in the hands of Oppenheimer Fund shall include the period
during which such assets were held by Atlas Fund.
The opinion will be based on certain factual certifications made by
officers of Atlas Fund and Oppenheimer Fund and will also be based on
customary assumptions. It is possible that the IRS could disagree with
KPMG's opinion.
Opinions of counsel are not binding upon the Internal Revenue Service
or the courts. If the Merger is consummated but does not qualify as a
tax-free reorganization under the Code, a shareholder of Atlas Fund would
recognize a taxable gain or loss equal to the difference between his or her
tax basis in his or her Atlas Fund shares and the fair market value of
Oppenheimer Fund shares he or she received. Shareholders of Atlas Fund
should consult their tax advisors regarding the effect, if any, of the
proposed applicable Merger in light of their individual circumstances. Since
the foregoing discussion relates only to the federal income tax consequences
of the Merger, shareholders of Atlas Fund should also consult their tax
advisors as to the state and local tax consequences, if any, of the Merger.
A portion of the portfolio assets of Atlas Fund may be sold in
connection with the Merger. The actual tax impact of such sales will depend
on the difference between the price at which such portfolio assets are sold
and Atlas Fund's basis in such assets. Any net capital gains recognized in
these sales will be distributed to Atlas Fund shareholders as capital gain
dividends (to the extent of net realized long-term capital gains) and/or
ordinary dividends (to the extent of net realized short-term capital gains)
during or with respect to year of sale, and such distributions will be
taxable to shareholders.
Prior to the closing of the Merger, Atlas Fund will declare a
distribution to shareholders, which together with all previous distributions,
will have the effect of distributing to shareholders all of its investment
company taxable income (computed without regard to the deduction for
dividends paid) and net capital gains, including those realized on
disposition of portfolio securities in connection with the Merger (after
reduction by any available capital loss carryforwards), if any, through the
closing of the Merger. Such distributions will be taxable to shareholders.
As noted above, Atlas Fund had unutilized capital loss carryovers as of the
end of its fiscal year end. The final amount of unutilized capital loss
carryovers for Atlas Fund is subject to change and will not be determined
until the time of the Reorganization.
Fund (Fiscal Year End) Unutilized Capital Loss
Carryovers
- --------------------------------------------------------
Atlas Strategic Income $ 2,404,000
Fund
(December 31, 2005)
Oppenheimer Fund also had unutilized capital loss carryovers as of the end of
its fiscal year end.
Unutilized Capital Loss
Fund (Fiscal Year End) Carryovers
- ------------------------------------------------------------
Oppenheimer Strategic Income $ 963,979,042.
Fund
(September 30, 2006)
Pro-forma Capitalization
Information concerning the pro forma capitalization of each Fund is
contained in Exhibit B to this Prospectus/Proxy Statement.
Distribution of Shares
OppenheimerFunds Distributor, Inc., ("OFDI"), a subsidiary of OFI, acts
as underwriter of the shares of Oppenheimer Fund. Atlas Securities, Inc.
("Atlas Securities"), a subsidiary of Wachovia Corporation., acts as
underwriter of shares of Atlas Fund. The underwriters distribute each Fund's
shares directly or through broker-dealers, banks (including Wachovia Bank,
N.A.), or other financial intermediaries. Oppenheimer Fund involved in the
proposed Merger offers the following classes of shares: Class A, Class B,
Class C, Class N and Class Y. Only Class A shares are involved in the
Merger. Atlas Fund offers one class of shares, and that class is involved in
the Merger. Each class of Oppenheimer Fund shares has a separate
distribution arrangement and bears its own distribution expenses (See
"Distribution-Related and Shareholder Servicing-Related Expenses" below).
The following is a summary description of charges and fees for the
Class A shares of Oppenheimer Fund that will be received by Atlas Fund
shareholders in the Merger. More detailed descriptions of the distribution
arrangements applicable to the Class A shares of Oppenheimer Fund and shares
of Atlas Fund are contained in each Fund's prospectus and statement of
additional information.
Sales Charges and Other Related Fees. Class A shares of Oppenheimer
Fund may pay a front-end initial sales charge of up to 4.75% of the offering
price and, as indicated below, are subject to distribution-related fees. For
a description of the front-end sales charge applicable to the purchase of
Class A shares see "How Can You Buy Class A Shares?" in the prospectus of
Oppenheimer Fund. No front-end sales charge will be imposed on Class A
shares of Oppenheimer Fund received by Atlas Fund shareholders as a result of
the Merger. Oppenheimer Fund does not charge a redemption fee. In addition,
all subsequent purchases by former shareholders of Atlas Fund of Class A
shares of Oppenheimer Fund or of Class A shares of any other Oppenheimer Fund
that is available for exchange to shareholders of Oppenheimer Fund will be
made at NAV Privilege.
Atlas Fund does not impose a sales charge for purchases of its shares.
Atlas Fund does not charge a redemption fee. See "Summary of the Merger" in
this document and "Risk/Return Summary and Fund Expenses" in Atlas Fund's
prospectus for more information.
Distribution-Related and Shareholder Servicing-Related Expenses.
Oppenheimer Fund has adopted a Service Plan for Class A shares. It reimburses
OFDI for a portion of its costs incurred for services provided to accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate
of up to 0.25% of the average annual net assets of Class A shares of
Oppenheimer Fund. OFDI currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions periodically for providing
personal service and maintenance of accounts of their customers that hold
Class A shares.
Atlas Fund has adopted a Rule 12b-1 plan under which Atlas Fund may pay
for distribution-related expenses and shareholder servicing fees at an annual
rate which may not exceed 0.25% of Atlas Fund's average daily net assets.
For more information about distribution-related and shareholder
servicing-related fees of Atlas Fund, see "Fund Management -- The Distributor
and the distribution plan" in Atlas Fund's prospectus and "Investment
Advisory and Other Services -- 12b-1 Distribution Plan" in its statement of
additional information, and "Distribution and Service (12b-1) Plans" in
Oppenheimer Fund's prospectus, and "Distribution and Service Plans" in its
statement of additional information.
Calculating the Share Price
Oppenheimer Fund calculates the net asset value of each class of shares
as of the close of the NYSE on each day the NYSE is open for trading
(referred to as a "regular business day"). The NYSE normally closes at 4:00
p.m., Eastern time, but may close earlier on some days.
The net asset value per share for a class of shares on a "regular
business day" is determined by dividing the value of Oppenheimer Fund's net
assets attributable to that class by the number of shares of that class
outstanding on that day. To determine net asset values, Oppenheimer Fund
assets are valued primarily on the basis of current market quotations. If
market quotations are not readily available or do not accurately reflect fair
value for a security (in OFI's judgment) or if a security's value has been
materially affected by events occurring after the close of the exchange or
market on which the security is principally traded, that security may be
valued by another method that Oppenheimer Fund's Board of Trustees
("Oppenheimer Fund's Board") believes accurately reflects the fair value.
Because some foreign securities trade in markets and on exchanges that
operate on weekends and U.S. holidays, the values of some of Oppenheimer
Fund's foreign investments may change on days when investors cannot buy or
redeem Fund shares.
Oppenheimer Fund's Board has adopted valuation procedures for
Oppenheimer Fund and has delegated the day-to-day responsibility for fair
value determinations to OFI's Valuation Committee. Fair value determinations
by OFI are subject to review, approval and ratification by Oppenheimer Fund's
Board at its next scheduled meeting after the fair valuations are
determined. In determining whether current market prices are readily
available and reliable, OFI monitors the information it receives in the
ordinary course of its investment management responsibilities for significant
events that it believes in good faith will affect the market prices of the
securities of issuers held by Oppenheimer Fund. Those may include events
affecting specific issuers (for example, a halt in trading of the securities
of an issuer on an exchange during the trading day) or events affecting
securities markets (for example, a foreign securities market closes early
because of a natural disaster). Oppenheimer Fund uses fair value pricing
procedures to reflect what OFI and Oppenheimer Fund's Board believes to be
more accurate values for Oppenheimer Fund's portfolio securities, although it
may not always be able to accurately determine such values. In addition, the
discussion of "time zone arbitrage" describes effects that Oppenheimer Fund's
fair value pricing policy is intended to counteract.
If, after the close of the principal market on which a security held by
Oppenheimer Fund is traded and before the time as of which Oppenheimer Fund's
net asset values are calculated that day, a significant event occurs that OFI
learns of and believes in the exercise of its judgment will cause a material
change in the value of that security from the closing price of the security
on the principal market on which it is traded, OFI will use its best judgment
to determine a fair value for that security.
OFI believes that foreign securities values may be affected by
volatility that occurs in U.S. markets on a trading day after the close of
foreign securities markets. OFI's fair valuation procedures therefore
include a procedure whereby foreign securities prices may be "fair valued" to
take those factors into account.
Purchase and Redemption Procedures
Investments in the Funds are not insured. The minimum initial purchase
requirement for Class A shares of Oppenheimer Fund is $1,000. There is a $50
minimum for subsequent purchases of shares of Oppenheimer Fund. If the
Merger is approved, Atlas Fund shareholders will not be subject to this
minimum initial investment requirement. The minimum initial purchase
requirement for Atlas Fund is $2,500, with a $250 minimum for subsequent
purchases. Both Funds reserve the right to reject any purchase order. All
funds invested in each Fund are invested in full and fractional shares. For
more information on the pricing and purchasing of shares of each Fund, see
"How to Buy Shares," "What is the Minimum Amount You Must Invest?" and "At
What Price Are Shares Sold?" in Oppenheimer Fund's prospectus, and "Doing
Business with Atlas" and "Buying Shares" in Atlas Fund's prospectus.
Each Fund provides for telephone, mail, checkwriting or wire redemption
of shares at net asset value as next determined after receipt of a redemption
request on each day the NYSE is open for trading. Each Fund reserves the
right to redeem in-kind, under certain circumstances, by paying the redeeming
shareholder the proceeds of a redemption in securities rather than in cash.
Each Fund may involuntarily redeem shareholders' accounts that have less than
the minimum initial investment of invested funds. For more information on
redeeming shares of each Fund, see "How to Sell Shares" and "Shareholder
Account Rules and Policies" in Oppenheimer Fund's prospectus, and "Selling
Shares" and "Other Account Information" in Atlas Fund's prospectus.
Minimum Balance Fee
As stated in Oppenheimer Fund's Prospectus, a $12 annual "Minimum
Balance Fee" is assessed on each Fund account with a share balance valued
under $500. The Minimum Balance Fee is automatically deducted from each such
Fund account in September. For additional information on Fund Account Fees,
please refer to Oppenheimer Fund's statement of additional information.
Oppenheimer Fund reserves the authority to modify Fund Account Fees in its
discretion.
Atlas Fund does not assess a small account fee on its accounts.
Short-Term Trading Policy
Oppenheimer Fund exchange privilege affords investors the ability to
switch their investments among Oppenheimer funds if their investment needs
change. However, there are limits on that privilege. Frequent purchases,
redemptions and exchanges of fund shares may interfere with OFI's ability to
manage the fund's investments efficiently, increase the fund's transaction
and administrative costs and/or affect the fund's performance, depending on
various factors, such as the size of the fund, the nature of its investments,
the amount of fund assets the portfolio manager maintains in cash or cash
equivalents, the aggregate dollar amount and the number and frequency of
trades. If large dollar amounts are involved in exchange and/or redemption
transactions, the Fund might be required to sell portfolio securities at
unfavorable times to meet redemption or exchange requests, and the Fund's
brokerage or administrative expenses might be increased.
Therefore, OFI and Oppenheimer Fund's Board of Trustees have adopted the
following policies and procedures to detect and prevent frequent and/or
excessive exchanges, and/or purchase and redemption activity, while balancing
the needs of investors who seek liquidity from their investment and the
ability to exchange shares as investment needs change. There is no guarantee
that the policies and procedures described below will be sufficient to
identify and deter excessive short-term trading.
o Timing of Exchanges. Exchanged shares are normally redeemed from one
fund and the proceeds are reinvested in the fund selected for exchange
on the same regular business day on which the Transfer Agent or its
agent (such as a financial intermediary holding the investor's shares
in an "omnibus" or "street name" account) receives an exchange request
that conforms to these policies. The request must be received by the
close of the NYSE that day, which is normally 4:00 p.m. Eastern time,
but may be earlier on some days, in order to receive that day's net
asset value on the exchanged shares. Exchange requests received after
the close of the NYSE will receive the next net asset value calculated
after the request is received. However, the Transfer Agent may delay
transmitting the proceeds from an exchange for up to five business days
if it determines, in its discretion, that an earlier transmittal of the
redemption proceeds to the receiving fund would be detrimental to
either the fund from which the exchange is being made or the fund into
which the exchange is being made. The proceeds will be invested in the
fund into which the exchange is being made at the next net asset value
calculated after the proceeds are received. In the event that such a
delay in the reinvestment of proceeds occurs, the Transfer Agent will
notify you or your financial representative.
o Limits on Disruptive Activity. The Transfer Agent may, in its
discretion, limit or terminate trading activity by any person, group or
account that it believes would be disruptive, even if the activity has
not exceeded the policy outlined in this Prospectus. The Transfer Agent
may review and consider the history of frequent trading activity in all
accounts in the Oppenheimer funds known to be under common ownership or
control as part of the Transfer Agent's procedures to detect and deter
excessive trading activity.
o Exchanges of Client Accounts by Financial Advisers. Oppenheimer Fund
and the Transfer Agent permit dealers and financial intermediaries
to submit exchange requests on behalf of their customers (unless the
customer has revoked that authority). OFDI and/or the Transfer Agent
have agreements with a number of financial intermediaries that
permit them to submit exchange orders in bulk on behalf of their
clients. Those intermediaries are required to follow the exchange
policies stated in this Prospectus and to comply with additional,
more stringent restrictions. Those additional restrictions include
limitations on the funds available for exchanges, the requirement to
give advance notice of exchanges to the Transfer Agent, and limits
on the amount of client assets that may be invested in a particular
fund. A fund or the Transfer Agent may limit or refuse bulk exchange
requests submitted by such financial intermediaries if, in the
Transfer Agent's judgment, exercised in its discretion, the
exchanges would be disruptive to any of the funds involved in the
transaction.
o Redemptions of Shares. These exchange policy limits do not apply to
redemptions of shares. Shareholders are permitted to redeem their
shares on any regular business day, subject to the terms of Oppenheimer
Fund's prospectus. Further details are provided under "How to Sell
Shares" in Oppenheimer Fund's prospectus.
o Right to Refuse Exchange and Purchase Orders. OFDI and/or the Transfer
Agent may refuse any purchase or exchange order in their discretion
and are not obligated to provide notice before rejecting an order.
Oppenheimer Fund may amend, suspend or terminate the exchange
privilege at any time. You will receive 60 days' notice of any
material change in the exchange privilege unless applicable law
allows otherwise.
o Right to Terminate or Suspend Account Privileges. The Transfer Agent
may send a written warning to direct shareholders that the Transfer
Agent believes may be engaging in excessive purchases, redemptions
and/or exchange activity and reserves the right to suspend or
terminate the ability to purchase shares and/or exchange privileges
for any account that the Transfer Agent determines, in carrying out
these policies and in the exercise of its discretion, has engaged in
disruptive or excessive trading activity, with or without such
warning.
o Omnibus Accounts. If you hold your shares of Oppenheimer Fund through
a financial intermediary such as a broker-dealer, a bank, an
insurance company separate account, an investment adviser, an
administrator or trustee of a retirement plan or 529 plan, that
holds your shares in an account under its name (these are sometimes
referred to as "omnibus" or "street name" accounts), that financial
intermediary may impose its own restrictions or limitations to
discourage short-term or excessive trading. You should consult your
financial intermediary to find out what trading restrictions,
including limitations on exchanges, they may apply.
While Oppenheimer Fund, OFDI, OFI and the Transfer Agent encourage
financial intermediaries to apply Oppenheimer Fund's policies to their
customers who invest indirectly in Oppenheimer Fund, the Transfer Agent may
not be able to detect excessive short term trading activity facilitated by,
or in accounts maintained in, the "omnibus" or "street name" accounts of a
financial intermediary. Therefore the Transfer Agent might not be able to
apply this policy to accounts such as (a) accounts held in omnibus form in
the name of a broker-dealer or other financial institution, or (b) omnibus
accounts held in the name of a retirement plan or 529 plan trustee or
administrator, or (c) accounts held in the name of an insurance company for
its separate account(s), or (d) other accounts having multiple underlying
owners but registered in a manner such that the underlying beneficial owners
are not identified to the Transfer Agent.
However, the Transfer Agent will attempt to monitor overall purchase
and redemption activity in those accounts to seek to identify patterns that
may suggest excessive trading by the underlying owners. If evidence of
possible excessive trading activity is observed by the Transfer Agent, the
financial intermediary that is the registered owner will be asked to review
account activity, and to confirm to the Transfer Agent and the fund that
appropriate action has been taken to curtail any excessive trading activity.
However, the Transfer Agent's ability to monitor and deter excessive
short-term trading in omnibus or street name accounts ultimately depends on
the capability and cooperation of the financial intermediaries controlling
those accounts.
Additional Policies and Procedures. Oppenheimer Fund's Board has adopted the
following additional policies and procedures to detect and prevent frequent
and/or excessive exchanges and purchase and redemption activity:
o 30-Day Limit. A direct shareholder may exchange some or all of the
shares of Oppenheimer Fund held in his or her account to another
eligible Oppenheimer fund once in a 30 calendar-day period. When shares
are exchanged into a fund account, that account will be "blocked" from
further exchanges into another fund for a period of 30 calendar days
from the date of the exchange. The block will apply to the full account
balance and not just to the amount exchanged into the account. For
example, if a shareholder exchanged $1,000 from one fund into another
fund in which the shareholder already owned shares worth $10,000, then,
following the exchange, the full account balance ($11,000 in this
example) would be blocked from further exchanges into another fund for
a period of 30 calendar days. A "direct shareholder" is one whose
account is registered on Oppenheimer Fund's books showing the name,
address and tax ID number of the beneficial owner.
o Exchanges Into Money Market Funds. A direct shareholder will be
permitted to exchange shares of a stock or bond fund for shares of a
money market fund at any time, even if the shareholder has exchanged
shares into the stock or bond fund during the prior 30 days. However,
all of the shares held in that money market fund would then be blocked
from further exchanges into another fund for 30 calendar days.
o Dividend Reinvestments/B Share Conversions. Reinvestment of dividends
or distributions from one fund to purchase shares of another fund and
the conversion of Class B shares into Class A shares will not be
considered exchanges for purposes of imposing the 30-day limit.
o Asset Allocation. Third-party asset allocation and rebalancing
programs will be subject to the 30-day limit described above. Asset
allocation firms that want to exchange shares held in accounts on
behalf of their customers must identify themselves to the Transfer
Agent and execute an acknowledgement and agreement to abide by these
policies with respect to their customers' accounts. "On-demand"
exchanges outside the parameters of portfolio rebalancing programs will
be subject to the 30-day limit. However, investment programs by other
Oppenheimer "funds-of-funds" that entail rebalancing of investments in
underlying Oppenheimer funds will not be subject to these limits.
o Automatic Exchange Plans. Accounts that receive exchange proceeds
through automatic or systematic exchange plans that are established
through the Transfer Agent will not be subject to the 30-day block as a
result of those automatic or systematic exchanges (but may be blocked
from exchanges, under the 30-day limit, if they receive proceeds from
other exchanges).
The Atlas Funds have also adopted policies and procedures reasonably
designed to monitor fund trading activity and discourage disruptive trading
and, in cases where disruptive trading activity is detected, to take action
to stop such activity. These policies may be modified at any time without
shareholder notice but not with the intent to allow market timing. When
Atlas Fund's management believes frequent trading activity by any person,
group or account would have a disruptive effect on a fund's ability to manage
its investments, Atlas Fund will reject uniformly purchase orders and/or
exchanges into Atlas Fund. The history of exchange activity in all accounts
under common ownership or control with Atlas Fund complex may be considered
with respect to the review of excessive exchange activity. Atlas Fund's
management considers certain factors, such as transaction size, type of
transaction, frequency of transaction and trade history, when determining
whether to reject a purchase order or terminate or restrict exchange
privileges.
Exchange Privileges
Shareholders of Oppenheimer Fund may exchange their shares for shares
of the same class of another Oppenheimer fund that offers the exchange
privilege. For example, you can exchange Class A shares of Oppenheimer Fund
only for Class A shares of another fund. To exchange shares, Oppenheimer Fund
shareholders must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectus of the selected fund must offer the exchange privilege.
o When a shareholder establishes an account, he or she must hold the
shares he or she buys for at least seven days before you can exchange
them. After your account is open for seven days, you can exchange
shares on any regular business day, subject to the limitations
described below.
o The shareholder must meet the minimum purchase requirements for the
selected fund.
o Generally, exchanges may be made only between identically registered
accounts, unless all account owners send written exchange instructions
with a signature guarantee.
o Before exchanging into a fund, shareholders must obtain its prospectus
and should read it carefully.
For tax purposes, an exchange of shares of Oppenheimer Fund is
considered a sale of those shares and a purchase of the shares of the fund
into which you are exchanging. An exchange may result in a capital gain or
loss. Shareholders should consult with their tax advisors
Shareholders can find a list of the Oppenheimer funds that are
currently available for exchanges in the Statement of Additional Information
or they can obtain a list by calling a service representative at
1.800.225.5677. The funds available for exchange can change from time to
time.
A contingent deferred sales charge (CDSC) is not charged when you
exchange shares of Oppenheimer Fund for shares of another Oppenheimer fund.
However, if shareholders exchange their shares during the applicable CDSC
holding period, the holding period will carry over to the fund shares that
they acquire. Similarly, if shareholders acquire shares of Oppenheimer Fund
in exchange for shares of another Oppenheimer fund that are subject to a CDSC
holding period, that holding period will carry over to the acquired shares of
Oppenheimer Fund. In either of these situations, a CDSC may be imposed if the
acquired shares are redeemed before the end of the CDSC holding period that
applied to the exchanged shares.
There are a number of other special conditions and limitations that
apply to certain types of exchanges. These conditions and circumstances are
described in detail in the "How to Exchange Shares" section of Oppenheimer
Fund's Statement of Additional Information.
Holders of shares of Atlas Fund may exchange their shares for shares of
the same class of any other fund within its fund family. Exchanges between
Atlas Fund accounts will be accepted only if the registrations are identical
(same name, address and taxpayer identification number). Atlas Fund does not
impose a sales charge on exchanges. An exchange within the Atlas fund family
represents an initial investment in another fund and must meet any minimum
investment requirements imposed by such fund. Atlas Fund has no express limit
on the number of exchanges. However, Atlas Fund may modify or terminate the
exchange privilege at any time. Atlas Fund's management or adviser may
determine from the amount, frequency and pattern of exchanges that a
shareholder is engaged in excessive trading that is detrimental to Atlas Fund
and its shareholders. If this occurs, Atlas Fund may terminate the
availability of exchanges to that shareholder and may bar that shareholder
from purchasing other Atlas Funds. An exchange is treated as a redemption and
a subsequent purchase, and is a taxable transaction. Atlas Fund reserves the
right to reject any purchase or exchange and to terminate an investor's
investment or exchange privileges if Atlas Fund determines that the trading
activity by the investor may be materially detrimental to the interests of
long-term shareholders.
For more information on each Fund's current exchange procedures, and
the requirements and limitations attendant thereto, see "How to Exchange
Shares" in Oppenheimer Fund's prospectus and "Other Account Information --
Exchanges" and "Other Account Information -- Frequent Trading of Fund Shares"
in Atlas Fund's prospectus.
Distribution and Tax Policies
Each Fund distributes its net realized gains at least annually to
shareholders of record on the dividend record date and intends to declare
dividends from its investment company taxable net income on each regular
business day and to pay those dividends monthly.
Dividends and distributions are reinvested in additional shares of the
same class of the respective Fund, or paid in cash, as a shareholder has
elected. For further information concerning each Fund's dividends,
distributions and tax treatment, see "Other Account Information -- Taxes" and
"Other Account Information --Dividends and distributions" in Atlas Fund's
prospectus and "Taxation of the Funds" in Atlas Fund's statement of
additional information and "Dividends, Capital Gains and Taxes" in
Oppenheimer Fund's prospectus. For information on the tax consequences to
Atlas Fund shareholders of the Merger, see the section titled "Merger
Information - Federal Income Tax Consequences" herein.
After the Merger, shareholders of Atlas Fund who have elected to have
their dividends and/or distributions reinvested will have dividends and/or
distributions received from Oppenheimer Fund reinvested in Class A shares of
the Oppenheimer Fund. Shareholders of Atlas Fund who have elected to receive
dividends and/or distributions in cash will receive dividends and/or
distributions from Oppenheimer Fund in cash after the Merger, although they
may, after the Merger, elect to have such dividends and/or distributions
reinvested in additional shares of the Oppenheimer Fund.
Each Fund is qualified and intends to continue to qualify to be treated
as regulated investment companies under the Code. To remain qualified as a
regulated investment company, a Fund must distribute at least 90% of its
taxable and tax-exempt income. While so qualified, so long as the Fund
distributes substantially all of its net investment company taxable and
tax-exempt income and any net realized gains to shareholders, it is expected
that the Fund will not be required to pay any federal income taxes on the
amounts so distributed. A 4% nondeductible excise tax will be imposed on
amounts not distributed if a Fund does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
INFORMATION ON SHAREHOLDERS' RIGHTS
Form of Organization
Oppenheimer Fund is an open-end, diversified management investment
company registered with the SEC under the 1940 Act, which continuously offers
shares to the public. Oppenheimer Fund is organized as a Massachusetts
business trust and is governed by its Amended and Restated Declaration of
Trust (referred to herein as "Declaration of Trust"), Amended By-Laws, a
Board of Trustees and by applicable Massachusetts and federal law. Atlas
Fund is a series of Atlas Funds, an open-end management investment company
registered with the SEC under the 1940 Act, which continuously offers shares
to the public. Atlas Funds is organized as a Delaware statutory trust and is
governed by its Amended Declaration of Trust (referred to herein as the
"Trust Agreement"), Restated By-Laws, a Board of Trustees and by applicable
Delaware and federal law.
Shareholder Liability
Atlas Fund
Under Delaware law, shareholders of a Delaware statutory trust are
entitled to the same limitation of personal liability extended to
stockholders of Delaware corporations. Other than in a limited number of
states, no such similar statutory or other authority limiting statutory trust
shareholder liability exists. As a result, to the extent that each Trust or
one of its shareholders is subject to the jurisdiction of a court that does
not apply Delaware law, shareholders of each Trust may be subject to
liability. To guard against this risk, the Trust Agreement of the Atlas Funds
(a) provides that any written obligation of the Trust may contain a statement
that such obligation may only be enforced against the assets of the Trust or
the particular series in question and the obligation is not binding upon the
shareholders of the Trust; however, the omission of such a disclaimer will
not operate to create personal liability for any shareholder; and (b)
provides for indemnification out of Trust property of any shareholder held
personally liable for the obligations of the Trust. Accordingly, the risk of
a shareholder of the Trust incurring financial loss beyond that shareholder's
investment because of shareholder liability is limited to circumstances in
which: (i) the court refuses to apply Delaware law; (ii) no contractual
limitation of liability was in effect; and (iii) the relevant Trust itself is
unable to meet its obligations. In light of Delaware law, the nature of each
Trust's business, and the nature of its assets, the risk of personal
liability to a shareholder of each Trust is remote.
Oppenheimer Fund
Oppenheimer Fund's Declaration of Trust contains an express disclaimer
of shareholder liability for Oppenheimer Fund's obligations. It also provides
for indemnification and reimbursement of expenses out of the Fund's property
for any shareholder held personally liable for its obligations. The
Declaration of Trust also states that upon request, Oppenheimer Fund shall
assume the defense of any claim made against a shareholder for any act or
obligation of Oppenheimer Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as
Oppenheimer Fund) to be held personally liable as a "partner" under certain
circumstances. However, the risk that Oppenheimer Fund shareholder will incur
financial loss from being held liable as a "partner" of Oppenheimer Fund is
limited to the relatively remote circumstances in which Oppenheimer Fund
would be unable to meet its obligations.
Oppenheimer Fund's contractual arrangements state that any person doing
business with Oppenheimer Fund (and each shareholder of Oppenheimer Fund)
agrees under its Declaration of Trust to look solely to the assets of
Oppenheimer Fund for satisfaction of any claim or demand that may arise out
of any dealings with Oppenheimer Fund and that the Trustees shall have no
personal liability to any such person, to the extent permitted by law.
Shareholder Meetings and Voting Rights
Atlas Fund
The Atlas Funds, on behalf of Atlas Fund, are not required to hold
annual meetings of shareholders. Atlas Fund does not currently intend to
hold regular shareholder meetings. In addition, with respect to the Atlas
Funds, a meeting of shareholders must be called when requested by the
holders of at least 10% of the outstanding shares of the Atlas Funds (or
series or class thereof as applicable) for such purpose as is stated in the
shareholder meeting request. Atlas Fund is also required to call a meeting
of shareholders for the purpose of electing Trustees if, at any time, less
than a majority of the Trustees then holding office were elected by
shareholders. Cumulative voting is not permitted. Except when a larger
quorum is required by the applicable governing documents or other law, with
respect to Atlas Fund, one-third of the outstanding shares entitled to vote
constitutes a quorum for consideration of a matter. For Atlas Fund, when a
quorum is present, a majority of the shares cast and entitled to vote is
sufficient to act on a matter (other than the election of Trustees of Atlas
Fund, which requires a plurality, or unless otherwise specifically required
by the applicable governing documents or other law, including the 1940 Act).
Oppenheimer Fund
As a Massachusetts business trust, Oppenheimer Fund is not required to
hold, and does not plan to hold, regular annual meetings of shareholders,
but may hold shareholder meetings from time to time on important matters or
when required to do so by the Investment Company Act or other applicable
law. Shareholders have the right, upon a vote or declaration in writing of
two-thirds of the outstanding shares of the Fund, to remove a Trustee or to
take other action described in the Fund's Declaration of Trust.
Oppenheimer Fund's Trustees will call a meeting of shareholders to vote
on the removal of a Trustee upon the written request of the record holders of
10% of its outstanding shares. If Oppenheimer Fund's Trustees receive a
request from at least 10 shareholders stating that they wish to communicate
with other shareholders to request a meeting to remove a Trustee, Oppenheimer
Fund's Trustees will then either make Oppenheimer Fund's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense. The shareholders making the request
must have been shareholders for at least six months and must hold shares of
Oppenheimer Fund valued at $25,000 or more or constituting at least 1% of
Oppenheimer Fund's outstanding shares. The Trustees may also take other
action as permitted by the Investment Company Act.
Under the Declaration of Trust of Oppenheimer Fund, each share of
Oppenheimer Fund will be entitled to one vote for each dollar or fraction of
a dollar of net asset value applicable to such share. Under the Trust
Agreement of the Atlas Funds, as to any matter on which the shareholder is
entitled to vote, each whole share of Atlas Fund is entitled to one vote and
each fractional share is entitled to a proportionate fractional vote.
The foregoing is only a summary of certain characteristics of the
operations of the Declaration of Trust of Oppenheimer Fund and the Trust
Agreement of the Atlas Funds, their respective By-Laws and applicable
Massachusetts law and applicable Delaware law and is not a complete
description of those documents or law. Shareholders should refer to the
provisions of such Declaration of Trust, Trust Agreement, By-Laws, applicable
Massachusetts law and applicable Delaware law directly for more complete
information.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is being sent to shareholders of Atlas
Fund in connection with a solicitation of proxies by the Trustees of Atlas
Fund, to be used at the Special Meeting of Shareholders (the "Meeting") to be
held at 1:00 p.m., Eastern time, on February 27, 2007, at the offices of
Evergreen Investment Management Company, LLC, 200 Berkeley Street, Boston,
MASS 02116, and at any adjournment(s) or postponement(s) thereof. This
Prospectus/Proxy Statement, along with the Notice of the Meeting and a proxy
card, are first being mailed to shareholders of Atlas Fund on or about
__________, 2007. Only shareholders of record as of the close of business on
December 29, 2006 (the "Record Date") will be entitled to receive notice of,
and to vote at, the Meeting or any adjournment(s) thereof. The costs incurred
in connection with the solicitation of proxies and the costs of holding the
Meeting will be borne by Atlas Advisers.
If the enclosed form of proxy is properly executed and returned in time
to be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Signed but unmarked proxies on which no instructions are given will be voted
FOR the proposed Merger and FOR any other matter deemed appropriate. Proxies
that reflect abstentions and "broker non-votes" (i.e., shares held by brokers
or nominees as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will
be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Assuming a quorum is present,
abstentions and broker non-votes will have the effect of being counted as
votes against the Merger. A proxy may be revoked at any time on or before
the Meeting by (i) sending a signed, written letter of revocation to the
Secretary of Atlas Fund at the address set forth on the cover of this
Prospectus/Proxy Statement which is received by Atlas Fund prior to the
Meeting; (ii) properly executing and delivering a subsequent proxy, which is
received by Atlas Fund prior to the Meeting; or (iii) by attending the
Meeting, requesting a return of any previously delivered proxy and voting in
person. Unless revoked, all valid proxies will be voted in accordance with
the specifications thereon or, in the absence of such specifications, FOR
approval of the Merger contemplated thereby.
The holders of a majority of the shares of Atlas Fund outstanding as of
Record Date present in person or represented by proxy, will constitute a
quorum for the transaction of business at the Meeting although a larger
number may be required to approve the proposals. Assuming a quorum is
present at the Meeting, approval of the Merger will require the affirmative
vote of a majority of Atlas Fund's outstanding voting securities. A majority
of the outstanding voting securities is defined in the 1940 Act as the lesser
of (a) 67% of the shares of Atlas Fund that are present or represented at the
Meeting if more than 50% of the shares outstanding on the Record Date are
present in person or by proxy at the Meeting; or (b) more than 50% of the
shares of Atlas Fund outstanding on the Record Date.
In voting for the Merger, each share of Atlas Fund will be entitled to
one vote. Fractional shares are entitled to proportionate shares of one
vote.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, through the Internet or personal
telephone solicitations conducted by officers or other representatives of
Atlas Fund (who will not be paid for their soliciting activities). In
addition, Altman Group, Inc., Atlas Fund's proxy solicitor, may make proxy
solicitations. Altman Group has been engaged to assist the solicitation of
proxies at an estimated cost of [$_____], which is being paid by Atlas
Advisers. If you wish to participate in the Meeting, you may submit the proxy
card included with this Prospectus/Proxy Statement by mail or by Internet,
vote by telephone or attend the Meeting in person (See the back of this
Prospectus/Proxy Statement for voting instructions.). As discussed above, any
proxy given by you is revocable.
If Atlas Fund's shareholders do not vote to approve the Merger, the
Trustees of Atlas Fund will consider other possible courses of action in the
best interests of shareholders. In the event that a quorum is not present at
the Meeting or, even if a quorum is present, in the event sufficient votes to
approve a proposal are not received before the Meeting, the persons named as
proxies may propose one or more adjournments or postponements of the Meeting
to permit further solicitation of proxies for a reasonable time after the
date set for the original Meeting. In addition, if, in the judgment of the
persons named as proxies, it is advisable to defer action on the proposal,
the persons named as proxies may propose one or more adjournments or
postponements of the Meeting with respect to the proposal for a reasonable
time after the date set for the original Meeting.
An Atlas Fund shareholder who objects to a proposed Merger will not be
entitled under either Delaware law or the Trust Agreement of Atlas Fund to
demand payment for, or an appraisal of, his, her or its shares. However,
shareholders should be aware that the Merger as proposed is not expected to
result in recognition of gain or loss to shareholders for federal income tax
purposes and if the Merger is approved, shareholders will be free to redeem
the shares of Oppenheimer Fund that they receive in the transaction at their
then-current net asset value. Shareholders of Atlas Fund may wish to consult
their tax advisors as to any differing consequences of redeeming their Atlas
Fund shares prior to the Merger or exchanging such shares in the Merger for
Oppenheimer Fund shares.
Atlas Fund does not hold annual shareholder meetings. If the Merger is
not approved, shareholders wishing to submit proposals to be considered for
inclusion in a proxy statement for a subsequent shareholder meeting should
send their written proposals to the Secretary of Atlas Fund at the address
set forth on the cover of this Prospectus/Proxy Statement so that they will
be received by Atlas Fund in a reasonable period of time prior to the time
before Atlas Fund solicits proxies for that meeting.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise Atlas Fund whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies
of this Prospectus/Proxy Statement needed to supply copies to the beneficial
owners of the respective shares. Atlas Advisers will reimburse bankers,
broker-dealers and others for their reasonable expenses in forwarding
solicitation materials to the beneficial owners of shares of Atlas Fund.
Shareholder Information
As of the Record Date, the following amount of shares of beneficial
interest of Atlas Fund was outstanding:
- --------------------------------------------------------------------------------
Atlas Fund Shares Outstanding
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund
- --------------------------------------------------------------------------------
As of the Record Date, the officers and Trustees of Atlas Funds
beneficially owned as a group less than 1% of the outstanding shares of Atlas
Fund. To Atlas Fund's knowledge, the following persons owned beneficially or
of record more than 5% of the outstanding shares of Atlas Fund as of the
Record Date:
For Atlas Fund:
- ---------------------------------------------------------------------------------
Name and Address No. of Percentage of Percentage of Shares
Shares Shares After Merger
Before Merger
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
As of the Record Date, the officers and Trustees of Oppenheimer Fund
beneficially owned as a group less than 1% of each class of the outstanding
shares of Oppenheimer Fund. To the knowledge of Oppenheimer Fund, the
following persons owned beneficially or of record more than 5% of the
outstanding Class A shares of Oppenheimer Fund as listed below, as of the
Record Date:
For Oppenheimer Fund:
- ---------------------------------------------------------------------------------
Name and Address No. of Shares Percentage of Percentage of
Shares of Class Shares of Class
Before Merger After Merger
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
THE TRUSTEES OF ATLAS FUND RECOMMEND APPROVAL OF THE MERGER. ANY EXECUTED
BUT UNMARKED PROXY CARDS WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED
IN FAVOR OF APPROVAL OF THE MERGER.
FINANCIAL STATEMENTS AND EXPERTS
The statement of additional information relating to this
prospectus/proxy statement includes the following: (i) the audited financial
statements of Atlas Fund and Oppenheimer Fund as listed below, including the
financial highlights for the periods indicated therein and the reports of
Deloitte & Touche LLP, Oppenheimer Fund's independent registered public
accounting firm and Atlas Fund's independent registered public accounting
firm thereon, and (ii) the financial statements of Atlas Fund and Oppenheimer
Fund as listed below, including the unaudited financial statements and
financial highlights for the periods indicated therein.
- --------------------------------------------------------------------------------
Date of Annual Date of Semi-Annual
Report Report
Fund (if applicable)
(Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Oppenheimer Strategic Income September 30, 2006 N/A
Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Atlas Strategic Income Fund December 31, 2005 June 30, 2006
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
Atlas Fund and Oppenheimer Fund are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and the 1940
Act, and in accordance therewith file reports and other information including
proxy material and charter documents with the SEC. These items can be
inspected and copies obtained at the Public Reference Room maintained by the
SEC at 100 F. 450 Fifth Street, N.E., Washington, D.C. 20549, and at the
SEC's Regional Offices located at 233 Broadway, New York, New York 10279, and
175 W. Jackson Blvd., Suite 900, Chicago, Illinois 60604, at prescribed rates.
OTHER BUSINESS
The Trustees of Atlas Funds do not intend to present any other business
at the Meeting other than as set forth in the Notice of the Meeting. If,
however, any other matters are properly brought before the Meeting or any
adjournment(s) or postponement(s) thereof, the persons named in properly
executed proxies will vote thereon in accordance with their judgment.
January __, 2007
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and may help to avoid the time and expense involved in validating your
vote if you fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the Registration on the
proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
Registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp. John Doe
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith John B. Smith, Jr., Executor
After completing your proxy card, return it in the enclosed postage paid
envelope.
OTHER WAYS TO VOTE YOUR PROXY
VOTE BY TELEPHONE:
1. Read the Prospectus/Proxy Statement and have your proxy card at hand.
2. Call the toll-free number indicated on your proxy card.
3. Enter the control number found on your proxy card.
4. Follow the simple recorded instructions.
VOTE BY INTERNET:
1. Read the Prospectus/Proxy Statement and have your proxy card at hand.
2. Go to the website indicated on your proxy card and follow the voting
instructions.
The above methods of voting are generally available 24 hours a day. Do
not mail the proxy card if you are voting by telephone or Internet. If you
have any questions about the proxy card, please call Altman Group, our proxy
solicitor, at 1-800-499-8519 (toll free).
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
December 29, 2006 by and among Atlas Funds, a Delaware statutory trust (the
"Trust") having its principal place of business at 749 Davis Street, San
Leandro, California 94577, on behalf of its series, Atlas Strategic Income
Fund ("Atlas Fund"), and Oppenheimer Strategic Income Fund ("Oppenheimer
Fund"), a Massachusetts business trust having its principal place of business
at 6803 South Tucson Way, Centennial, CO 80112, and, as to Section 9 only,
Atlas Advisers, Inc., a California corporation ("Atlas Advisers").
WHEREAS, Atlas Fund is a separate investment series of and the
Oppenheimer Fund is an open-end investment company of the management type;
WHEREAS, the Agreement is intended to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), of Atlas Fund through the acquisition by Oppenheimer
Fund of substantially all of the assets of Atlas Fund in exchange for the
voting shares of beneficial interest ("shares") of Class A of Oppenheimer
Fund and the assumption by Oppenheimer Fund of certain liabilities of Atlas
Fund, which Class A shares of Oppenheimer Fund are to be distributed by Atlas
Fund pro rata to its shareholders in complete liquidation of Atlas Fund and
complete cancellation of its shares (the "Reorganization");
WHEREAS, the Board of Trustees of Oppenheimer Fund has determined that
the Reorganization is in the best interests of Oppenheimer Fund and its
shareholders and that the interests of the existing shareholders of
Oppenheimer Fund will not be diluted as a result of the transactions
contemplated herein;
WHEREAS, the Trustees of the Trust have determined that the
Reorganization is in the best interests of the Atlas Fund and its
shareholders, and that the interests of the Atlas Fund's existing
shareholders will not be diluted as a result of the transactions contemplated
herein;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement and Plan of
Reorganization pursuant to Section 368(a)(1) of the Code as follows: The
reorganization will be comprised of the acquisition by Oppenheimer Fund of
substantially all of the assets of Atlas Fund in exchange for Class A shares
of Oppenheimer Fund and the assumption by Oppenheimer Fund of certain
liabilities of Atlas Fund, followed by the distribution of such Class A
shares of Oppenheimer Fund to the shareholders of Atlas Fund in exchange for
their shares of Atlas Fund, all upon and subject to the terms of the
Agreement hereinafter set forth.
The share transfer books of Atlas Fund will be permanently closed at
the close of business on the Valuation Date (as hereinafter defined) and only
redemption requests received in proper form on or prior to the close of
business on the Valuation Date shall be fulfilled by Atlas Fund; redemption
requests received by Atlas Fund after that date shall be treated as requests
for the redemption of the shares of Oppenheimer Fund to be distributed to the
shareholder in question as provided in Section 5 hereof.
2. Subject to requisite approvals and the other terms and conditions set
forth herein and on the basis of the representations and warranties contained
herein, on the Closing Date (as hereinafter defined), the Trust on behalf of
the Atlas Fund, agrees to sell, assign, convey, transfer and deliver all of
the assets of Atlas Fund, as set forth in paragraph 2.1, on that date,
excluding a cash reserve (the "Cash Reserve") to be retained by Atlas Fund
sufficient in its discretion for the payment of the expenses of Atlas Fund's
dissolution and its liabilities, but not in excess of the amount contemplated
by Section 10E (the "Assets"), delivered in the manner as provided (to the
extent applicable) in Section 8, to Oppenheimer Fund, and Oppenheimer Fund
agrees in exchange therefor and against delivery thereof, to (a) issue and
deliver to Atlas Fund on the Closing Date that number of full and fractional
Class A shares of Oppenheimer Fund, determined by dividing: (i) the aggregate
value of the Assets, net of liabilities of the Atlas Fund assumed by
Oppenheimer Fund in Section (b) hereof, computed in the manner and as of the
time and date set forth in paragraph 3, by (ii) the net asset value of one
Oppenheimer Fund share computed in the manner and as of the time and date set
forth in paragraph 3; and (b) assume certain liabilities of Atlas Fund, as
set forth in paragraph 2.2 ("Stated Liabilities").
2.1. Assets. The Assets of Atlas Fund to be acquired by Oppenheimer
Fund shall consist of all property owned by Atlas Fund, including, without
limitation, all cash, securities, commodities, interests in futures and other
financial instruments, claims (whether absolute or contingent, known or
unknown), receivables (including dividends, interest, principal,
subscriptions and other receivables), goodwill and other intangible property,
all books and records belonging to Atlas Fund, any deferred or prepaid
expenses shown as an asset on the books of Atlas Fund on the Valuation Date,
and all interests, rights, privileges and powers, other than the Cash Reserve
as provided for in Section 2 hereof and other than the Atlas Fund's rights
under this Agreement. Notwithstanding the prior sentence, the Assets shall
consist of only those assets as set forth in Atlas Fund's statement of assets
and liabilities as of the Closing Date as delivered by Atlas Fund to
Oppenheimer Fund pursuant to Section 10.J.
If requested by Oppenheimer Fund, Atlas Fund will, within 30 days prior
to the Closing Date, furnish Oppenheimer Fund with a list of Atlas Fund's
portfolio securities and other investments, and Oppenheimer Fund will, within
15 days prior to the Closing Date, furnish Atlas Fund with a list of the
securities and other instruments, if any, on Atlas Fund's list referred to
above that do not conform to Oppenheimer Fund's investment objectives,
policies and restrictions. If requested by Oppenheimer Fund, Atlas Fund will
dispose of securities and other instruments on Atlas Fund's list before the
Closing Date. If and after Atlas Fund furnishes Oppenheimer Fund with the
list described above, Atlas Fund will not, without the prior approval of
Oppenheimer Fund, acquire any additional securities other than securities
which Oppenheimer Fund is permitted to purchase, pursuant to its investment
objective and policies or otherwise (taking into consideration its own
portfolio composition as of such date). Notwithstanding the foregoing,
nothing herein will require Atlas Fund to dispose of any portfolio securities
or other investments, if, in the reasonable judgment of Atlas Advisers, such
disposition would adversely affect the tax-free nature of the Reorganization
for federal income tax purposes or would otherwise not be in the best
interests of Atlas Fund.
2.2. [TO BE INSERTED]
3. The net asset value of Class A shares of Oppenheimer Fund and the value
of the Assets and the amount of Stated Liabilities of Atlas Fund to be
transferred or assumed shall in each case be determined as of the close of
regular trading on The New York Stock Exchange on the Valuation Date. The
computation of the net asset value of the Class A shares of Oppenheimer Fund
and the Assets and Stated Liabilities of Atlas Fund shall be done in the
manner used by Oppenheimer Fund and Atlas Fund, respectively, in the
computation of such net asset value per share as set forth in their
respective prospectuses or such other valuation procedures as shall be
mutually agreed upon by Atlas Fund and Oppenheimer Fund. The methods used by
Oppenheimer Fund in such computation shall be applied to the valuation of the
Assets and Stated Liabilities of Atlas Fund to be transferred to Oppenheimer
Fund.
Except to the extent prohibited by Rule 19b-1 under the Investment
Company Act of 1940, as amended (the "Act"), Atlas Fund shall declare and
pay, immediately prior to the Valuation Date, a dividend or dividends which,
together with all previous such dividends, shall have the effect of
distributing to Atlas Fund's shareholders all of Atlas Fund's investment
company taxable income for taxable years ending on or prior to the Closing
Date (computed without regard to any dividends paid) and all of its net
capital gain, if any, realized in taxable years ending on or prior to the
Closing Date (after reduction for any capital loss carry-forward).
4. The closing (the "Closing") shall be held at the offices of
OppenheimerFunds, Inc., 6803 S. Tucson Way, Centennial, CO 80112, and shall
occur on or about May 11, 2007, or on such date, time or at such other place
as the Trust and Oppenheimer Fund may designate or as provided below (the
"Closing Date"). The business day immediately preceding the Closing Date is
herein referred to as the "Valuation Date."
In the event that on the Valuation Date either Atlas Fund or
Oppenheimer Fund has, pursuant to the Investment Company Act of 1940, as
amended (the "Act"), or any rule, regulation or order thereunder, suspended
the redemption of its shares or postponed payment therefor, the Closing Date
shall be postponed until the first business day after the date when both
Atlas Fund and Oppenheimer Fund have ceased such suspension or postponement;
provided, however, that if such suspension shall continue for a period of 60
days beyond the Valuation Date, then the other party not effecting a
suspension or postponement shall be permitted to terminate the Agreement
without liability to any party for such termination.
5. Immediately following the actions contemplated by Section 2 on the
Closing Date, the Trust on behalf of Atlas Fund shall distribute on a pro
rata basis to the shareholders of record of Atlas Fund as of the Valuation
Date the Class A shares of Oppenheimer Fund received by Atlas Fund on the
Closing Date pursuant to Section 2(a) hereof in complete liquidation of Atlas
Fund. To accomplish such distribution by the Trust on behalf of Atlas Fund
of Class A shares of Oppenheimer Fund to Atlas Fund's shareholders,
Oppenheimer Fund will promptly cause its transfer agent to: (a) transfer an
appropriate number of Class A shares of Oppenheimer Fund then credited to the
account of Atlas Fund on the books of Oppenheimer Fund to open accounts on
the share records of Oppenheimer Fund in the names of Atlas Fund shareholders
to each shareholder of Atlas Fund in accordance with a list (the "Shareholder
List") of Atlas Fund shareholders that Atlas Fund will cause its transfer
agent to deliver to Oppenheimer Fund's transfer agent (which list will
contain the information specified in the immediately following paragraph);
and (b) credit an appropriate number of Class A shares of Oppenheimer Fund to
each shareholder of Atlas Fund, it being agreed that the aggregate net asset
value of Class A Oppenheimer Fund shares to be so credited to such Atlas Fund
shareholders shall be equal to the aggregate net asset value of the Atlas
Fund shares of owned by Atlas Fund shareholders on the Closing Date. All
issued and outstanding Atlas Fund shares will be redeemed or canceled, as the
case may be, on the books of Atlas Fund.
The Shareholder List shall indicate, as of the close of business on the
Valuation Date, the name and address of each shareholder of Atlas Fund,
indicating the number and percentage ownership of outstanding shares of Atlas
Fund owned by each such shareholder immediately prior to the Closing . Atlas
Fund agrees to supply the Shareholder List to Oppenheimer Fund not later than
the Closing Date. The transfer agent for Oppenheimer Fund shall deliver at
the Closing a certificate as to the opening on Oppenheimer Fund's share
transfer books of accounts in the names of the Atlas Shareholders.
Oppenheimer Fund shall issue and deliver or cause its transfer agent to issue
and deliver to the Secretary of the Trust a confirmation evidencing the
Oppenheimer Fund shares to be credited on the Closing Date or provide
evidence satisfactory to Atlas Fund that such Oppenheimer Fund shares have
been credited to Atlas Fund's shareholders' account on the books of
Oppenheimer Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, share certificates, if any, receipts and
other documents as such other party or its counsel may reasonably request.
Shareholders of Atlas Fund holding certificates representing their shares
shall not be required to surrender their certificates to anyone in connection
with the reorganization. After the Closing Date, however, it will be
necessary for such shareholders to surrender their certificates in order to
redeem, transfer or pledge the shares of Oppenheimer Fund which they received.
6. Within one year after the Closing Date, Atlas Fund shall (a) either pay
or make provision for payment of all of its liabilities and taxes, and (b)
either (i) transfer any remaining amount of the Cash Reserve to Oppenheimer
Fund, if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined below) or (ii)
ratably distribute such remaining amount to the persons who are shareholders
of Atlas Fund on the Valuation Date. Such remaining amount shall be deemed
to be material if the amount to be distributed, after deduction of the
estimated expenses of the distribution, equals or exceeds one cent per share
of Atlas Fund outstanding on the Valuation Date. The Atlas Fund will
promptly thereafter be terminated and dissolved promptly following all
distributions in accordance with the laws of the State of Delaware and the
federal securities laws.
7. Prior to the Closing Date, Atlas Fund shall analyze its portfolio
and will have sold such of its assets, if any, as Oppenheimer Fund shall have
advised Atlas Fund in writing are necessary to assure that, after giving
effect to the acquisition of the Assets of Atlas Fund pursuant to the
Agreement, the requisite percentage of Atlas Fund's portfolio would meet
Oppenheimer Fund's investment policies and restrictions so that, after the
Closing, Oppenheimer Fund will be in compliance in all material respects with
all of its investment policies and restrictions. At the Closing, Atlas Fund
shall deliver to Oppenheimer Fund a list of Atlas Fund's portfolio securities
and assets in accordance with Section 10.J. of this Agreement.
8. Portfolio securities represented by a certificate or other written
instrument shall be endorsed and delivered, or transferred by appropriate
transfer or assignment documents, by Atlas Fund on the Closing Date to
Oppenheimer Fund, or at its direction, to its custodian bank, in proper form
for transfer in such condition as to constitute good delivery thereof in
accordance with the custom of brokers and shall be accompanied by all
necessary state transfer stamps, if any. The Atlas Fund's securities and
instruments deposited with a securities depository (as defined in Rule 17f-4
under the 1940 Act) or other permitted counterparties or a futures commission
merchant (as defined in Rule 17f-6 under the Act) shall be delivered as of
the Closing Date by book entry in accordance with the customary practices of
such depositories and futures commission merchants and Atlas Fund's
custodian. The cash delivered shall be transferred by bank wire or intra-bank
transfer payable to the order of Oppenheimer Fund for the account of
Oppenheimer Fund. Class A shares of Oppenheimer Fund representing the number
of Class A shares of Oppenheimer Fund being delivered against the assets of
Atlas Fund, registered in the name of Atlas Fund, shall be transferred to
Atlas Fund on the Closing Date. Such shares shall thereupon be assigned by
Atlas Fund to its shareholders so that the shares of Oppenheimer Fund may be
distributed as provided in Section 5.
If, at the Closing Date, Atlas Fund is unable to make delivery under
this Section 8 to Oppenheimer Fund of any of its portfolio securities or cash
for the reason that any of such securities purchased by Atlas Fund, or the
cash proceeds of a sale of portfolio securities, prior to the Closing Date
have not yet been delivered to it or Atlas Fund's custodian, then the
delivery requirements of this Section 8 with respect to said undelivered
securities or cash will be waived and Atlas Fund will deliver to Oppenheimer
Fund by or on the Closing Date with respect to said undelivered securities or
cash executed copies of an agreement or agreements of assignment in a form
reasonably satisfactory to Oppenheimer Fund, together with such other
documents, including a due bill or due bills and brokers' confirmation slips
as may reasonably be required by Oppenheimer Fund.
9. The cost of printing and distributing the proxies and proxy
statements will be borne by Atlas Advisers, including the cost of printing
and distributing any documents such as existing prospectuses or annual
reports that are included in that mailing. Any cost of proxy solicitation,
including the engagement of a proxy solicitation firm shall be borne by Atlas
Advisers. To the extent third parties are reimbursed for forwarding
soliciting materials to beneficial owners of the shares of record on behalf
of Atlas Fund and obtaining authorization for the execution of proxies, those
third parties will be reimbursed by Atlas Advisers. Atlas Advisers shall
bear the cost of each fund's respective tax opinion and the costs of Deloitte
& Touche LLP's engagement to review (including any consents to be provided by
Deloitte & Touche LLP) the Registration Statement on Form N-14 ("Form N-14")
to be filed by Oppenheimer Fund under the Securities Act of 1933, as amended
(the "1933 Act"). Any other out-of-pocket expenses of Oppenheimer Fund and
Atlas Fund associated with this reorganization, including, but not limited
to, legal, accounting and transfer agent expenses, will be borne by Atlas
Advisers and Oppenheimer Fund, respectively, in the amounts so incurred by
each.
10. The obligations of Oppenheimer Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of Atlas Fund shall have authorized the
execution of the Agreement, and the shareholders holding a requisite number
of shares of Atlas Fund shall have approved the Agreement and the
transactions contemplated hereby, and Atlas Fund shall have furnished to
Oppenheimer Fund copies of resolutions to that effect certified by the
Secretary or the Assistant Secretary of Atlas Fund; such shareholder approval
shall have been by the affirmative vote required by Delaware Law, the Act and
Atlas Fund's charter documents at a meeting for which proxies have been
solicited by the Proxy Statement and Prospectus (as hereinafter defined).
B. Oppenheimer Fund shall have received an opinion dated as of the
Closing Date from legal counsel to Atlas Fund, to the effect that (i) Atlas
Fund is a statutory trust duly organized, validly existing and in good
standing under the laws of the State of Delaware with the statutory trust
power to carry on its business as described in Atlas Fund's then-current
Prospectus as then being conducted and to execute and deliver, and perform
its obligations under, the Agreement; and (ii) that all action on the part of
the Atlas Fund necessary to authorize the transactions contemplated by the
Agreement have been taken by Atlas Fund. Delaware counsel may be relied upon
for this opinion.
C. The representations and warranties of Atlas Fund contained herein shall
be true and correct in all material respects at and as of the Closing Date,
and the Trust, on behalf of Atlas Fund, shall have performed all of the
covenants and complied with all of the provisions required by the Agreement
to be performed or complied with by the Trust, on behalf of Atlas Fund, on or
before the Closing Date, and Oppenheimer Fund shall have been furnished with
a certificate of the President, or a Vice President, or the Secretary or the
Assistant Secretary or the Treasurer or the Assistant Treasurer of Atlas
Fund, dated as of the Closing Date, to that effect.
D. On the Closing Date, Atlas Fund shall have furnished to Oppenheimer
Fund a certificate of the Treasurer or Assistant Treasurer of Atlas Fund as
to the amount of the capital loss carry-over and net unrealized appreciation
or depreciation, if any, with respect to Atlas Fund as of the Closing Date.
E. The Cash Reserve shall not exceed 10% of the value of the net
assets, or 30% in value of the gross assets, of Atlas Fund at the close of
business on the Valuation Date.
F. The Form N-14 filed by Oppenheimer Fund, containing a preliminary form
of the Proxy Statement and Prospectus, shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued.
G. On the Closing Date, Oppenheimer Fund shall have received a
letter from an authorized officer of Atlas Fund acceptable to Oppenheimer
Fund, stating that nothing has come to his or her attention which in his or
her judgment would indicate that as of the Closing Date, other than as
previously disclosed to Oppenheimer Fund, there were any material, actual or
contingent liabilities of Atlas Fund arising out of litigation brought
against Atlas Fund or claims pending or to the best of his or her knowledge
claims or litigation threatened in writing and not reflected in or apparent
from the most recent audited financial statements and footnotes thereto of
Atlas Fund delivered to Oppenheimer Fund. Such letter may also include such
additional statements relating to the scope of the review conducted by such
person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
H. Oppenheimer Fund shall have received a separate opinion, dated as
of the Closing Date, of KPMG LLP, to the same effect as the opinion
contemplated by Section 11.E. of the Agreement.
I. The Trust, on behalf of Atlas Fund, shall have executed and
delivered to Oppenheimer Fund all such assignments and other instruments of
transfer as Oppenheimer Fund may reasonably deem necessary or desirable in
order to vest in and confirm (a) the Atlas Fund's title to and possession of
the Class A Oppenheimer Fund shares to be delivered hereunder and (b)
Oppenheimer Fund's title to and possession of all the Assets and to otherwise
carry out the intent and purpose of the Agreement.
J. [TO BE INSERTED]
K. On the Closing Date, no court or governmental agency of competent
jurisdiction shall have issued any order that remains in effect and that
restrains or enjoins the Trust, with respect to Atlas Fund, or Oppenheimer
Fund from completing the transactions contemplated by the Agreement. All
consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities deemed necessary by
Oppenheimer Fund or the Trust to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
Atlas Fund or Oppenheimer Fund, provided that either party hereto may for
itself waive any of such conditions. The Securities and Exchange Commission
(the "Commission") shall not have issued an unfavorable report under Section
25(b) of the Act, or instituted any proceeding seeking to enjoin the
consummation of the transactions contemplated by the Agreement under Section
25(c) of the Act.
L. On the Closing Date, Atlas Fund shall deliver to the custodian of
Oppenheimer Fund an authorization and direction of instructions to transfer
to the custodial account of Oppenheimer Fund all Assets as set forth in
section 10.J. of this Agreement. Oppenheimer Fund shall then cause its
custodian to deliver to Atlas Fund a receipt executed by an authorized
officer of Oppenheimer Fund's custodian acknowledging receipt of such Assets
on behalf of Oppenheimer Fund.
11. The obligations of Atlas Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of Oppenheimer Fund shall have authorized
the execution of the Agreement, and the transactions contemplated thereby,
and Oppenheimer Fund shall have furnished to Atlas Fund copies of resolutions
to that effect certified by the Secretary or the Assistant Secretary of
Oppenheimer Fund.
B. Atlas Fund's shareholders holding a requisite number of shares
shall have approved the Agreement and the transactions contemplated hereby,
by an affirmative vote required by Delaware Law, the Act and Atlas Fund's
charter documents and Atlas Fund shall have furnished Oppenheimer Fund copies
of resolutions to that effect certified by the Secretary or an Assistant
Secretary of Atlas Fund.
C. Atlas Fund shall have received an opinion dated as of the Closing
Date from counsel to Oppenheimer Fund, to the effect that (i) Oppenheimer
Fund is a business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts with full powers
to carry on its business as then being conducted and to execute and deliver,
and perform its obligations under, the Agreement; (ii) all actions on the
part of Oppenheimer Fund necessary to authorize the transactions contemplated
by the Agreement have been taken by Oppenheimer Fund, and (iii) the shares of
Oppenheimer Fund to be issued hereunder are duly authorized and when issued
will be validly issued, fully-paid and non-assessable, except as set forth
under "Shareholder and Trustee Liability" in Oppenheimer Fund's Statement of
Additional Information. Massachusetts counsel may be relied upon for this
opinion.
D. The representations and warranties of Oppenheimer Fund contained
herein shall be true and correct in all material respects at and as of the
Closing Date, and Oppenheimer Fund shall have performed all of the covenants
and complied with all of the provisions required by the Agreement to be
performed or complied with by Oppenheimer Fund on or before the Closing Date,
and Atlas Fund shall have been furnished with a certificate of the President,
a Vice President or the Secretary or the Assistant Secretary or the Treasurer
or the Assistant Treasurer of the Trust to that effect dated as of the
Closing Date.
E. Atlas Fund shall have received an opinion of KPMG LLP to the
effect that the federal tax consequences of the transaction, if carried out
in the manner outlined in the Agreement and in accordance with (i) Atlas
Fund's representation that there is no plan or intention by any Atlas Fund
shareholder who owns 5% or more of Atlas Fund's outstanding shares, and, to
Atlas Fund's best knowledge, there is no plan or intention on the part of the
remaining Atlas Fund shareholders, to redeem, sell, exchange or otherwise
dispose of a number of Oppenheimer Fund shares received in the transaction
that would reduce Atlas Fund shareholders' ownership of Oppenheimer Fund
shares to a number of shares having a value, as of the Closing Date, of less
than 50% of the value of all of the formerly outstanding Atlas Fund shares as
of the same date, and (ii) the representation by each of Atlas Fund and
Oppenheimer Fund that, as of the Closing Date, Atlas Fund and Oppenheimer
Fund should qualify as regulated investment companies or should meet the
diversification test of Section 368(a)(2)(F)(ii) of the Code, will be as
follows:
a. The transactions contemplated by the Agreement will qualify as a
tax-free "reorganization" within the meaning of Section 368(a)(1) of the
Code, and under the regulations promulgated thereunder.
b. Atlas Fund and Oppenheimer Fund will each qualify as a "party to a
reorganization" within the meaning of Section 368(b)(2) of the Code.
c. No gain or loss will be recognized by the shareholders of Atlas Fund
upon the distribution of Class A shares of beneficial interest in Oppenheimer
Fund to the shareholders of Atlas Fund pursuant to Section 354 of the Code.
d. Under Section 361(a) of the Code no gain or loss will be recognized by
Atlas Fund by reason of the transfer of substantially all its assets in
exchange for Class A shares of Oppenheimer Fund.
e. Under Section 1032 of the Code no gain or loss will be recognized by
Oppenheimer Fund by reason of the transfer of substantially all of Atlas
Fund's assets in exchange for Class A shares of Oppenheimer Fund and
Oppenheimer Fund's assumption of certain liabilities of Atlas Fund.
f. The shareholders of Atlas Fund will have the same tax basis and holding
period for the Class A shares of beneficial interest in Oppenheimer Fund that
they receive as they had for Atlas Fund shares that they previously held,
pursuant to Section 358(a) and 1223(1), respectively, of the Code.
g. The securities transferred by Atlas Fund to Oppenheimer Fund will have
the same tax basis and holding period in the hands of Oppenheimer Fund as
they had for Atlas Fund, pursuant to Section 362(b) and 1223(1),
respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value of the net
assets, or 30% in value of the gross assets, of Atlas Fund at the close of
business on the Valuation Date.
G. The Form N-14 filed by Oppenheimer Fund, containing a preliminary
form of the Proxy Statement and Prospectus, shall have become effective under
the 1933 Act and no stop orders suspending the effectiveness thereof shall
have been issued.
H. On the Closing Date, Atlas Fund shall have received a letter from an
authorized officer of Oppenheimer Fund acceptable to Atlas Fund, stating
that nothing has come to his or her attention which in his or her judgment
would indicate that as of the Closing Date, other than as previously
disclosed to Atlas Fund, there were any material, actual or contingent
liabilities of Oppenheimer Fund arising out of litigation brought against
Oppenheimer Fund or claims pending or, to the best of his or her knowledge,
claims or litigation threatened in writing and not reflected in or apparent
by the most recent audited financial statements and footnotes thereto of
Oppenheimer Fund delivered to Atlas Fund. Such letter may also include such
additional statements relating to the scope of the review conducted by such
person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
I. Oppenheimer Fund shall have executed and delivered an assumption
of the Stated Liabilities and all such other agreements and instruments as
the Trust on behalf of Atlas Fund may reasonably deem necessary or desirable
in order to vest in and confirm (a) Atlas Fund's title to and possession of
the Class A Oppenheimer Fund shares to be delivered hereunder and (b)
Oppenheimer Fund's assumption of all of the Stated Liabilities and to
otherwise to carry out the intent and purpose of the Agreement.
J. On the Closing Date, no court or governmental agency of competent
jurisdiction shall have issued any order that remains in effect and that
restrains or enjoins the Trust, with respect to Atlas Fund, or Oppenheimer
Fund from completing the transactions contemplated by the Agreement. All
consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities deemed necessary by
Oppenheimer Fund or the Trust to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
Atlas Fund or Oppenheimer Fund, provided that either party hereto may for
itself waive any of such conditions. The Commission shall not have issued an
unfavorable report under Section 25(b) of the Act, or instituted any
proceeding seeking to enjoin the consummation of the transactions
contemplated by the Agreement under Section 25(c) of the Act.
12. Atlas Fund hereby represents and warrants to Oppenheimer Fund
that:
A. The audited financial statements of Atlas Fund as of December 31, 2005
and unaudited financial statements as of June 30, 2006 heretofore furnished
to Oppenheimer Fund, present fairly in all material respects the financial
position, results of operations, and changes in net assets of Atlas Fund as
of that date, in conformity with generally accepted accounting principles
applied on a basis consistent with the preceding year; and that from June 30,
2006 through the date hereof there have not been, and through the Closing
Date there will not be, any material adverse change in the business or
financial condition of Atlas Fund, it being agreed that a decrease in the
size of Atlas Fund due to a diminution in the value of its portfolio and/or
redemption of its shares shall not be considered a material adverse change;
B. No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Atlas Fund to
transfer all of the assets of Atlas Fund to be conveyed hereunder free and
clear of all liens, encumbrances and security interests, except such as may
be required under the 1933 Act, the Securities Exchange Act of 1934 ("1934
Act"), the Act and state securities laws and approval of the transactions
contemplated hereby by the requisite vote of Atlas Fund's shareholders;
C. The Prospectus, as amended and supplemented, contained in Atlas Fund's
Registration Statement under the 1933 Act, as amended (the "Registration
Statement"), is true, correct and complete in all material respects, conforms
to the requirements of the 1933 Act in all material respects and does not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading. The Registration Statement, as amended, was, as of
the date of the filing of the last Post-Effective Amendment thereto, true,
correct and complete in all material respects, conformed to the requirements
of the 1933 Act in all material respects and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
D. There is no material contingent liability of Atlas Fund and no material
claim and no material legal, administrative or other proceedings pending or,
to the knowledge of Atlas Fund, threatened in writing against Atlas Fund, not
reflected in such Prospectus;
E. Except for the Agreement, there are no material contracts outstanding
to which Atlas Fund is a party other than those filed as exhibits to the
Trust's Registration Statement;
F. The Trust is a statutory trust duly organized, validly existing and in
good standing under the laws of the State of Delaware and Atlas Fund is duly
established as a series of the Trust; and has all necessary and material
Federal and state authorizations to own all of its assets and to carry on its
business as now being conducted; and the Trust is a registered open-end
management investment company, and its registration with the Commission as an
investment company under the 1940 Act, and the registration of Atlas Fund
shares under the 1933 Act, has not been rescinded or revoked and is in full
force and effect;
G. All federal and other tax returns and reports of Atlas Fund required by
law to be filed have been filed (or will be filed in the case of any final
tax returns) , and all federal and other taxes shown due on said returns and
reports have been paid or provision shall have been made for the payment
thereof (including any outstanding taxes shown due after the Closing) and to
the best of the knowledge of Atlas Fund no such return is currently under
audit and no assessment has been asserted with respect to such returns;
H. For each taxable year of its operations, Atlas Fund has elected to be
treated as a "regulated investment company", has met the requirements of
Subchapter M of the Code for qualification and treatment as a "regulated
investment company" and Atlas Fund intends to meet such requirements with
respect to its current taxable year; and
L. Atlas Fund is not engaged currently, and the execution, delivery
and performance of the Agreement by Atlas Fund will not result, in a material
violation of Delaware law.
13. Oppenheimer Fund hereby represents and warrants to Atlas Fund that:
A. The audited financial statements of Oppenheimer Fund as of September
30, 2006 heretofore furnished to Atlas Fund, present fairly the financial
position, results of operations, and changes in net assets of Oppenheimer
Fund, as of that date, in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding year; and that
from September 30 , 2006 through the date hereof there have not been, and
through the Closing Date there will not be, any material adverse changes in
the business or financial condition of Oppenheimer Fund, it being understood
that a decrease in the size of Oppenheimer Fund due to a diminution in the
value of its portfolio and/or redemption of its shares shall not be
considered a material or adverse change;
B. The Prospectus, as amended and supplemented, contained in Oppenheimer
Fund's Registration Statement under the 1933 Act ("Oppenheimer Fund
Registration Statement), is true, correct and complete in all material
respects, conforms to the requirements of the 1933 Act in all material
respects and does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Registration Statement, as
amended, was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete in all material respects, conformed to
the requirements of the 1933 Act in all material respects and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;
C. There is no material contingent liability of Oppenheimer Fund and no
material claim and no material legal, administrative or other proceedings
pending or, to the knowledge of Oppenheimer Fund, threatened in writing
against Oppenheimer Fund, not reflected in such Prospectus;
D. Except for the Agreement, there are no material contracts outstanding
to which Oppenheimer Fund is a party other than those filed as exhibits to
the Oppenheimer Fund Registration Statement;
E. Oppenheimer Fund is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts; Oppenheimer Fund has all necessary and material federal and
state authorizations to own all its properties and assets and to carry on its
business as now being conducted; all of the Class A shares of Oppenheimer
Fund to be issued and delivered to Atlas Fund, for the account of Atlas Fund
shareholders, pursuant to Section 2 of the Agreement will on the Closing Date
have been duly authorized and, when so issued and delivered, will be duly and
validly and legally issued Class A shares of Oppenheimer Fund and will be
fully paid and non-assessable except as set forth under "Shareholder and
Trustee Liability" in Oppenheimer Fund's Statement of Additional Information.
Massachusetts counsel may be relied upon for this opinion; will conform to
the description thereof contained in Oppenheimer Fund's Registration
Statement and will have been offered and sold in compliance with applicable
registration requirements of all applicable federal and state securities
laws; and Oppenheimer Fund is a registered open-end management investment
company, and its registration with the Commission as an investment company
under the 1940 Act has not been revoked or rescinded and is in full force and
effect;
F. All federal and other tax returns and reports of Oppenheimer Fund
required by law to be filed have been filed, and all federal and other taxes
shown due on said returns and reports have been paid or provision shall have
been made for the payment thereof and to the best of the knowledge of
Oppenheimer Fund, no such return is currently under audit and no assessment
has been asserted with respect to such returns and to the extent such tax
returns with respect to the taxable year of Oppenheimer Fund ended September
30, 2006 have not been filed, such returns will be filed when required and
the amount of tax shown as due thereon shall be paid when due;
G. For each taxable year of its operations, Oppenheimer Fund has
elected to be treated as a regulated investment company and, , Oppenheimer
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company and Oppenheimer Fund intends
to meet such requirements with respect to its current taxable year;
H. Oppenheimer Fund has no plan or intention (i) to dispose of any
of the assets transferred by Atlas Fund, other than in the ordinary course of
business, or (ii) to redeem or reacquire any of the Class A shares
contemplated to be issued by it hereunder other than pursuant to valid
requests of shareholders;
I. After consummation of the transactions contemplated by the
Agreement, Oppenheimer Fund intends to operate its business in a
substantially unchanged manner;
J. No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Oppenheimer Fund
of the transactions contemplated herein, except such as may be required under
the 1933 Act, the 1934 Act, the 1940 Act and state securities laws, and
Oppenheimer Fund has all necessary federal, state and local authorization and
the power under its Declaration of Trust, as amended and/or supplemented, to
carry on its business as now being conducted and to fulfill the terms of the
Agreement;
L. Oppenheimer Fund is not engaged currently, and the execution,
delivery and performance of the Agreement by Oppenheimer Fund will not
result, in a material violation of Massachusetts law;
M. The execution, delivery and performance of the Agreement, and the
transactions contemplated herein, have been duly authorized by all necessary
action on the part of the Oppenheimer Fund Board of Trustees; and
N. The Proxy Statement and Prospectus (as defined below) as of its
effective date and at all times subsequent thereto up to and including the
Closing Date, conforms and will conform, as it relates to Oppenheimer Fund,
in all material respects to the requirements of the federal and state
securities laws and the rules and regulations thereunder.
14. Each party hereby represents to the other that no broker or
finder has been employed by it with respect to the Agreement or the
transactions contemplated hereby. Each party also represents and warrants to
the other that the information concerning it included in the Proxy Statement
and Prospectus and made in reliance upon and in conformity with written
information furnished by it will not as of its date contain any untrue
statement of a material fact or omit to state a fact necessary to make the
statements concerning it therein in light of the circumstances under which
they were made not misleading and that the financial statements concerning it
will present the information shown fairly in all material respects in
accordance with generally accepted accounting principles applied on a basis
consistent with the preceding year. Each party also represents and warrants
to the other that the Agreement is valid, binding and enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles, and that the
execution, delivery and performance of the Agreement will not result in any
violation of, or be in conflict with, any provision of any charter, by-laws,
contract, agreement, judgment, decree or order to which it is subject or to
which it is a party. Oppenheimer Fund hereby represents to and covenants
with Atlas Fund that, if the transactions contemplated hereby are
consummated, Oppenheimer Fund will treat each shareholder of Atlas Fund who
received any of Oppenheimer Fund's shares as a result of the reorganization
as having made the minimum initial purchase of shares of Oppenheimer Fund
received by such shareholder for the purpose of making additional investments
in shares of Oppenheimer Fund, regardless of the value of the shares of
Oppenheimer Fund received.
15. Oppenheimer Fund agrees that it will prepare and file a
Registration Statement on Form N-14 under the 1933 Act which shall contain a
preliminary form of proxy statement and prospectus contemplated by Rule 145
under the 1933 Act. The final form of such proxy statement and prospectus is
referred to in the Agreement as the "Proxy Statement and Prospectus."
Oppenheimer Fund agrees that it will use its best efforts to have such
Registration Statement declared effective and Oppenheimer Fund and the Trust
on behalf of Atlas funds each agree to supply such information concerning
itself for inclusion in the Proxy Statement and Prospectus as may be
necessary or desirable in this connection.
Any reporting responsibility of the Trust pertaining to the Atlas Fund,
including but not limited to, the responsibility for filing regulatory
reports, tax returns, or other documents with the Securities and Exchange
Commission, any state securities commission, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall
remain the responsibility of the Trust on behalf of Atlas Fund.
16. Atlas Fund and Oppenheimer Fund, respectively, hereby agree that
each Fund will operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include the declaration and payment of customary dividends and
distributions, and any other distribution that may be advisable.
17. Atlas Fund shall assist Oppenheimer Fund in obtaining such information
as Oppenheimer Fund or its officers or agents reasonably request concerning
the beneficial ownership of Atlas Fund Shares and upon reasonable notice and
request, shall make available to Oppenheimer Fund's officers and agents all
books and records of Atlas Fund.
18. Oppenheimer Fund and Atlas Fund agree as follows:
A. Indemnification by Oppenheimer Fund. Oppenheimer Fund, out of
its assets and property (including any amounts paid to Oppenheimer Fund
pursuant to any applicable liability insurance policies or indemnification
agreements) agrees to indemnify and hold harmless the Trust and the members
of its Board of Trustees and its officers from and against any and all
losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which the Trust and those board members and officers may
become subject, insofar as such loss, claim, damage, liability or expense (or
actions with respect thereto) arises out of or is based on (a) any material
breach by Oppenheimer Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement or (b) any act, error,
omission, neglect, materially misleading statement, material breach of duty
or other act wrongfully done or attempted to be committed by Oppenheimer Fund
or the members of its Board of Trustees or its officers prior to the Closing
Date that causes material harm to Atlas Fund, provided that such
indemnification by Oppenheimer Fund is not (i) in violation of any applicable
law or (ii) otherwise prohibited as a result of any applicable order or
decree issued by any governing regulatory authority or court of competent
jurisdiction.
B. Indemnification by Atlas Fund. Until the date of the transfer or
distribution of the Cash Reserve pursuant to Section 6 hereof, Atlas Fund,
out of its assets and property (including any amounts paid to Atlas Fund
pursuant to any applicable liability insurance policies or indemnification
agreements) agrees to indemnify and hold harmless Oppenheimer Fund and the
members of its Board of Trustees and its officers from and against any and
all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which Oppenheimer Fund and those board members and officers
may become subject, insofar as such loss, claim, damage, liability or expense
(or actions with respect thereto) arises out of or is based on (a) any
material breach by Atlas Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement or (b) any act, error,
omission, neglect, materially misleading statement, material breach of duty
or other act wrongfully done or attempted to be committed by Atlas Fund or
the members of its Board of Trustees or its officers prior to the Closing
Date that causes material harm to Oppenheimer Fund, provided that such
indemnification by Atlas Fund is not (i) in violation of any applicable law
or (ii) otherwise prohibited as a result of any applicable order or decree
issued by any governing regulatory authority or court of competent
jurisdiction.
C. Any claim or request for indemnification pursuant to this section
18 shall be limited to an amount not to exceed the monetary value of the net
assets to be transferred from Atlas Fund to Oppenheimer Fund at the Closing
Date. Further, notice of any such claim or request for indemnification must
be made in writing to the other party within one year from the Closing Date.
19. The obligations of the parties shall be subject to the right of
either party to abandon and terminate the Agreement for any reason upon prior
written notice thereof and there shall be no liability for damages or other
recourse available to a party not so terminating the Agreement, provided,
however, that in the event that a party shall terminate the Agreement without
reasonable cause, the party so terminating shall, upon demand, reimburse the
party not so terminating for all expenses, including reasonable out-of-pocket
expenses and fees incurred in connection with the Agreement.
20. The Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all taken together shall constitute
one Agreement. The rights and obligations of each party pursuant to the
Agreement shall not be assignable without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed
to confer upon or give any person, firm or corporation, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of the Agreement. All prior or contemporaneous
agreements and representations are merged into the Agreement, which
constitutes the entire contract between the parties hereto. No amendment or
modification hereof shall be of any force and effect unless in writing and
signed by the parties and no party shall be deemed to have waived any
provision herein for its benefit unless it executes a written acknowledgment
of such waiver.
21. Oppenheimer Fund understands and agrees that the obligations of
the Trust on behalf of the Atlas Fund under the Agreement shall not be
binding upon any trustee, shareholder, nominees, officers, agents or
employees of the Trust on behalf of Atlas Fund personally, but bind only the
Trust on behalf Atlas Fund and Atlas Fund's property, as provided in the
declaration of trust of the Trust. Moreover, no series of the Trust other
than Atlas Fund shall be responsible for the obligations of the Trust
hereunder, and all persons shall look only to the assets of the Atlas Fund to
satisfy the obligations of the Atlas Fund hereunder. Oppenheimer Fund
represents that it has notice of the provisions of the Declaration of Trust
of Atlas Fund disclaiming shareholder and trustee liability for acts or
obligations of Atlas Fund.
22. Atlas Fund understands and agrees that the obligations of
Oppenheimer Fund under the Agreement shall not be binding upon any trustee,
shareholder, nominees, officers, agents or employees of Oppenheimer Fund
personally, but bind only Oppenheimer Fund and Oppenheimer Fund's property.
Moreover, all persons shall look only to the assets of Oppenheimer Fund to
satisfy the obligations of the Oppenheimer Fund hereunder. Atlas Fund
represents that it has notice of the provisions of the Declaration of Trust
of Oppenheimer Fund disclaiming shareholder and trustee liability for acts or
obligations of Oppenheimer Fund.
23. The Agreement shall be governed by and construed and interpreted in
accordance with the internal laws of the State of Delaware.
24. Any notice, report, statement or demand required or permitted by
any provisions of the Agreement shall be in writing and shall be given by
facsimile, electronic delivery (i.e., e-mail provided electronic receipt is
requested), personal service or prepaid or certified mail addressed to
applicable party, at its address set forth in the preamble to the Agreement,
in the case of Atlas Fund to the attention of its president and in the case
of Oppenheimer Fund to the attention of its general counsel.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to be
executed and attested by its officers thereunto duly authorized on the date
first set forth above.
ATLAS FUNDS, ON BEHALF OF ITS SERIES ATLAS
STRATEGIC INCOME FUND
By: ___________________________
[Name and Title]
OPPENHEIMER STRATEGIC INCOME FUND
By: /s/ Robert G. Zack
___________________________
Robert G. Zack
Vice President and Secretary
ATLAS ADVISERS, INC.
Solely for the purposes of Section 9 of the
Agreement,
By: ____________________________
[Name and Title]
Schedule 2.2.
In re G-I Holdings, Inc., et al. A complaint filed in the U.S. Bankruptcy
Court for the District of Delaware in July 2004 against Building Materials
Corporation of America noteholders claiming that creation of notes by G-I
Holdings' predecessor constituted a fraudulent transfer. Atlas Fund and
Strategic Income Fund held this security during the relevant time period. To
date, neither Fund has been named as a party to this matter. As the case
progresses, however, it is likely that both funds will be named as defendants
to this matter.
EXHIBIT B
PRO-FORMA CAPITALIZATION
The following table sets forth the capitalization of Atlas Fund and
Oppenheimer Fund as of September 30, 2006, and the capitalization of
Oppenheimer Fund on a pro forma basis as of that date, giving effect to the
proposed acquisition of assets at net asset value and assuming the Merger had
been consummated on that date.
The table below should not be relied upon to reflect the number of shares to
be received in the Merger; the actual number of shares to be received will
depend upon the net asset value and number of shares outstanding of each Fund
at the time of the Merger.
1. Capitalization of Atlas Strategic Income Fund, Oppenheimer Strategic
Income Fund and Oppenheimer Strategic Income Fund (Pro Forma) as of September
30, 2006*
- ---------------------------------------------------------------------------------
Atlas Oppenheimer Adjustments Combined
Strategic Strategic Oppenheimer
Income Fund Income Fund Strategic
Income Fund
(Pro Forma)*
=======================
Net Assets
Class A N/A $5,077,400,158 $318,135,595 $5,395,535,753
Class B N/A $718,742,377 N/A 718,742,377
Class C N/A $857,843,200 N/A 857,843,200
Class N N/A $108,323,749 N/A 108,323,749
Class Y N/A $179,308,424 N/A 179,308,424
Atlas Fund shares $318,135,595 N/A (318,135,595) 0
Total Net Assets $318,135,595 $6,941,617,908 $0 $7,259,753,503
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Net Asset Value Per
Share
Class A N/A $4.18 N/A $4.18
Class B N/A $4.20 N/A $4.20
Class C N/A $4.18 N/A $4.18
Class N N/A $4.19 N/A $4.19
Class Y N/A $4.17 N/A $4.17
Atlas Fund shares $4.46 N/A N/A N/A
- ---------------------------------------------------------------------------------
Shares Outstanding
Class A N/A 1,213,643,842 77,154,185 1,290,798,027
Class B N/A 171,227,025 N/A 171,227,025
Class C N/A 205,466,631 N/A 205,466,631
Class N N/A 25,876,803 N/A 25,876,803
Class Y N/A 42,979,530 N/A 42,979,530
Atlas Fund Shares 71,326,278 N/A N/A N/A
Total Shares 71,326,278 1,659,193,831 N/A 1,736,348,016
Outstanding
- ---------------------------------------------------------------------------------
* The pro forma data reflects the issuance of 77,154,185 Class A shares
of Oppenheimer Strategic Income Fund in a tax-free exchange for the net
assets of Atlas Strategic Income Fund
STATEMENT OF ADDITIONAL INFORMATION
TO PROSPECTUS AND PROXY STATEMENT
Dated January __, 2007
Reorganization of
ATLAS STRATEGIC INCOME FUND
into
OPPENHEIMER STRATEGIC INCOME FUND
This Statement of Additional Information (the "SAI") to the Prospectus
and Proxy Statement dated January __, 2007 relates specifically to the
proposed merger of Atlas Strategic Income Fund ("Atlas Fund") into
Oppenheimer Strategic Income Fund ("Oppenheimer Fund") pursuant to the
Agreement and Plan of Reorganization dated as of December __, 2006 (the
"Reorganization").
This SAI consists of this Cover Page and the following documents which
are incorporated into this SAI by reference: (i) the Statement of Additional
Information of Atlas Strategic Income Fund dated April 30, 2006, which
includes audited financial statements of Atlas Strategic Income Fund for the
12-month period ended December 31, 2005; and (ii) and the Statement of
Additional Information of Strategic Income Fund dated January__, 2007, which
includes audited financial statements of Strategic Income Fund for the
12-month period ended September 30, 2006.
This SAI is not a Prospectus; you should read this SAI in conjunction
with the Prospectus and Proxy Statement dated January __, 2007, relating to
the Reorganization. You can request a copy of the Prospectus and Proxy
Statement by calling Atlas Fund at __________________ or by writing Atlas
Fund at 794 Davis Street, San Leandro, CA 94577. The date of this SAI is
January _, 2007.
PRO FORMA FINANCIAL STATEMENTS
Pro forma financial statements demonstrating the effect of the
Reorganization on Oppenheimer Fund are not necessary because the net asset
value of Atlas Fund does not exceed ten percent of the net asset value of
Strategic Income Fund as of December 15, 2006.
Oppenheimer
Strategic Income Fund
Prospectus dated January 27, 2006
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
Oppenheimer Strategic Income Fund is a mutual fund. It seeks high current
income by investing mainly in debt securities in three market sectors: debt
securities of foreign governments and companies, U.S. government securities,
and lower-rated high-yield securities of U.S. and foreign companies.
This Prospectus contains important information about the Fund's
objective, its investment policies, strategies and risks. It also contains
important information about how to buy and sell shares of the Fund and other
account features. Please read this Prospectus carefully before you invest and
keep it for future reference about your account.
(logo) OppenheimerFunds
The Right Way to Invest
46
Contents
About the Fund
- ------------------------------------------------------------------------------
The Fund's Investment Objective and Principal Investment
Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
About Your Account
- ------------------------------------------------------------------------------
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares
Class Y Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Website
Retirement Plans
How to Sell Shares
Checkwriting
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
A B O U T T H E F U N D
The Fund's Investment Objective and Principal Investment
Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks high current income
by investing mainly in debt securities.
WHAT DOES THE FUND MAINLY INVEST IN? The Fund invests mainly in debt
securities of issuers in three market sectors: foreign governments and
companies, U.S. government securities and lower-rated high-yield securities
of U.S. and foreign companies (commonly called "junk bonds"). Those debt
securities typically include:
o foreign government and U.S. government bonds and notes,
o collateralized mortgage obligations (CMOs),
o other mortgage-related securities and asset-backed securities,
o participation interests in loans,
o "structured" notes,
o lower-grade, high-yield domestic and foreign corporate debt
obligations, and
o "zero-coupon" or "stripped" securities.
Under normal market conditions, the Fund invests in each of those three
market sectors. However, the Fund is not required to invest in all three
sectors at all times, and the amount of its assets in each of the three
sectors will vary over time. The Fund can invest up to 100% of its assets in
any one sector at any time, if the Fund's investment Manager,
OppenheimerFunds, Inc., believes that the Fund can achieve its objective
without undue risk. The Fund can invest in issuers in any market
capitalization range - large-cap, mid-cap and small-cap, and can buy
securities having short-, medium-, or long-term maturities.
The Fund's foreign investments can include debt securities of issuers
in developed markets and emerging markets. The Fund also uses derivative
investments for hedging purposes or to seek its investment objective. These
include options, futures, forward contracts, CMOs and "structured" notes. The
Fund's investments are more fully explained in "About the Fund's
Investments," below.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities to buy or sell for the Fund, the Fund's portfolio
manager analyzes the overall investment opportunities and risks among the
three sectors in which the Fund invests. Their overall strategy is to build a
broadly-diversified portfolio of debt securities to help moderate the special
risks of investing in high-yield debt securities and foreign securities. The
Fund may try to take advantage of any lack of correlation in the movement of
securities prices among the three sectors from time to time. When buying or
selling securities, the portfolio manager currently focuses on the factors
below (some of which may vary in particular cases and may change over time),
looking for:
o Securities offering high current income,
o Overall portfolio diversification by seeking securities whose market
prices tend to move in different directions, and
o Relative values among the three major market sectors in which the Fund
invests.
The Fund's portfolio manager may sell securities from the portfolio
when the analytics underlying the factors discussed above no longer appear
favorable to the Fund. The Fund's diversification strategies, both with
respect to securities in different sectors, and securities issued by
different companies and governments, are intended to help reduce the
volatility of the Fund's share prices while seeking current income.
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking high current income from a fund that normally diversifies its
portfolio by investing in a variety of domestic and foreign debt securities,
including government securities and lower-grade debt securities. Those
investors should be willing to assume the risks of short-term share price
fluctuations that are typical for a fund that invests in debt securities,
particularly high-yield and foreign securities. Since the Fund's income level
will fluctuate, it is not designed for investors needing an assured level of
current income. Also, the Fund does not seek capital appreciation. The Fund
is designed as a long-term investment and may be appropriate as a part of an
investor's retirement plan portfolio. However, the Fund is not a complete
investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments are subject
to changes in their value from a number of factors described below. There is
also the risk that poor security selection by the Manager will cause the Fund
to under perform other funds having a similar objective.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk is the
risk that the issuer of a debt security might not make interest and principal
payments on the security as they become due. If the issuer fails to pay
interest, the Fund's income might be reduced, and if the issuer fails to
repay principal, the value of that security and of the Fund's shares might
fall. A downgrade in an issuer's credit rating or other adverse news about an
issuer can reduce the market value of that issuer's securities. While the
Fund's investments in U.S. government securities are subject to little credit
risk, the Fund's other investments in debt securities, particularly
high-yield, lower-grade debt securities, are subject to risks of default.
Special Risks of Lower-Grade Securities. Because the Fund can invest without
limit in securities below investment grade to seek high income, the
Fund's credit risks are greater than those of funds that buy only
investment-grade bonds. Lower-grade debt securities may be subject to
greater market fluctuations and greater risks of loss of income and
principal than investment-grade debt securities (particularly during
general economic downturns). Securities that are (or that have fallen)
below investment grade are exposed to a greater risk that the issuers
of those securities might not meet their debt obligations. The market
for these securities may be less liquid, making it difficult for the
Fund to value or sell them at an acceptable price. These risks can
reduce the Fund's share prices and the income it earns.
RISKS OF FOREIGN INVESTING. The Fund can invest without limit in foreign
government and corporate debt securities in both developed and emerging
markets. The Fund will normally invest significant amounts of its assets in
foreign securities. While foreign securities may offer special investment
opportunities, they also have special risks that can reduce the Fund's share
prices and income.
The change in value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in that
foreign currency. Currency rate changes can also affect the distributions
the Fund makes from the income it receives from foreign securities if foreign
currency values change against the U.S. dollar. Foreign investing can result
in higher transaction and operating costs for the Fund. Foreign issuers are
not subject to the same accounting and disclosure requirements that U.S.
companies are subject to.
The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic
or monetary policy in the U.S. or abroad, or other political and economic
factors.
Special Risks of Emerging Markets. The Fund can buy securities in emerging
and developing markets. They present risks not found in more mature
markets. Those securities may be more difficult to value and sell at an
acceptable price and their prices may be more volatile than securities
of issuers in more developed markets. Settlements of trades may be
subject to greater delays so that the Fund might not receive the sale
proceeds of a security on a timely basis.
Emerging markets might have less developed trading markets and
exchanges than developed markets, and less developed legal and accounting
systems. Investments may be subject to greater risks of government
restrictions on withdrawing the sales proceeds of securities from the
country. Economies of developing countries may be more dependent on
relatively few industries that may be highly vulnerable to local and global
changes. Governments may be more unstable and present greater risks of
nationalization or restrictions on foreign ownership of securities of local
companies. These investments may be substantially more volatile than debt
securities of issuers in the U.S. and other developed countries and may be
very speculative.
Additionally, if the Fund invests a significant amount of its assets in
foreign securities, it might expose the fund to "time-zone arbitrage"
attempts by investors seeking to take advantage of the differences in value
of foreign securities that might result from events that occur after the
close of the foreign securities market on which a foreign security is traded
and the close of the New York Stock Exchange (the "NYSE") that day, when the
Fund's net asset value is calculated. If such time-zone arbitrage were
successful, it might dilute the interests of other shareholders. However, the
Fund's use of "fair value pricing" to adjust the closing market prices of
foreign securities under certain circumstances, to reflect what the Manager
and the Board believe to be their fair value, may help deter those
activities.
INTEREST RATE RISKS. The values of debt securities, including U.S. government
securities, are subject to change when prevailing interest rates change.
When interest rates fall, the values of already-issued debt securities
generally rise. When interest rates rise, the values of already-issued debt
securities generally fall, and they may sell at a discount from their face
amount. The magnitude of these fluctuations will often be greater for debt
securities having longer maturities than for shorter-term debt securities.
The Fund's share prices can go up or down when interest rates change because
of the effect of the changes on the value of the Fund's investments in debt
securities. Also, if interest rates fall, the Fund's investments in new
securities at lower yields will reduce the Fund's income.
PREPAYMENT RISK. Prepayment risk is the risk that the issuer of a security
can prepay the principal prior to the security's expected maturity. The
prices and yields of mortgage-related securities are determined, in part, by
assumptions about the cash flows from the rate of payments of the underlying
mortgages. Changes in interest rates may cause the rate of expected
prepayments of those mortgages to change. In general, prepayments increase
when general interest rates fall and decrease when general interest rates
rise. Securities subject to prepayment risk, including the mortgage-related
securities that the Fund buys, have greater potential for losses when
interest rates rise than other types of debt securities.
The impact of prepayments on the price of a security may be difficult
to predict and may increase the volatility of the price. Interest-only and
principal-only "stripped" securities can be particularly volatile when
interest rates change. If the Fund buys mortgage-related securities at a
premium, accelerated prepayments on those securities could cause the Fund to
lose a portion of its principal investment represented by the premium the
Fund paid.
If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be
reduced. If interest rates rise rapidly, prepayments may occur at slower
rates than expected, which could have the effect of lengthening the expected
maturity of a short- or medium-term security. That could cause its value to
fluctuate more widely in response to changes in interest rates. In turn, this
could cause the value of the Fund's shares to fall more.
RISKS OF DERIVATIVE INVESTMENTS. In general terms, a derivative investment is
an investment contract whose value depends on (or is derived from) the value
of an underlying asset, interest rate or index. Options, futures, structured
notes and mortgage-related securities are some of the derivatives the Fund
typically uses.
If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment. Also, the underlying security or investment
on which the derivative is based, and the derivative itself, might not
perform the way the Manager expected it to perform. If that happens, the
Fund's share prices could fall, and the Fund could get less income than
expected, or its hedge might be unsuccessful. Some derivatives may be
illiquid, making it difficult to value or sell them at an acceptable price.
Using derivatives can increase the volatility of the Fund's share prices.
SECTOR ALLOCATION RISKS. In allocating the Fund's investments among the three
principal sectors in which the Fund invests to seek to take advantage of the
lack of correlation of the performance of these sectors, the Manager's
expectations about the relative performance of those sectors may be
inaccurate, and the Fund's returns might be less than other funds using
similar strategies.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively form
the overall risk profile of the Fund and can affect the value of the Fund's
investments, its investment performance and its prices per share. Particular
investments and investment strategies also have risks. These risks mean that
you can lose money by investing in the Fund. When you redeem your shares,
they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objective.
In the short term, the values of debt securities can fluctuate
substantially because of interest rate changes. Prices of foreign debt
securities, particularly in emerging markets, and of high-yield securities
can be volatile, and the prices of the Fund's shares and its income can go up
and down substantially because of events affecting foreign markets or issuers
or events affecting the high-yield market. In the OppenheimerFunds spectrum,
the Fund is generally more aggressive and has more risks than funds that
focus on U. S. government securities and
investment-grade bonds, but its sector diversification strategy may help make
it less volatile than funds that focus solely on investments in high-yield
bonds or a single foreign sector, such as emerging markets.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in
the Fund, by showing changes in the Fund's performance (for its Class A
shares) from year to year for the last 10 calendar years and by showing how
the average annual total returns of the Fund's shares, both before and after
taxes, compared to those of broad-based market indices. The after-tax
returns for the other classes of shares will vary.
The after-tax returns are shown for Class A shares only and are calculated
using the historical highest individual federal marginal income tax rates in
effect during the periods shown, and do not reflect the impact of state or
local taxes. In certain cases, the figure representing "Return After Taxes
on Distributions and Sale of Fund Shares" may be higher than the other return
figures for the same period. A higher after-tax return results when a capital
loss occurs upon redemption and translates into an assumed tax deduction that
benefits the shareholder. The after-tax returns are calculated based on
certain assumptions mandated by regulation and your actual after-tax returns
may differ from those shown, depending on your individual tax situation. The
after-tax returns set forth below are not relevant to investors who hold
their fund shares through tax-deferred arrangements such as 401(k) plans or
IRAs or to institutional investors not subject to tax. The Fund's past
investment performance, both before and after taxes, is not necessarily an
indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
Sales charges and taxes are not included in the calculations of return in
this bar chart, and if those charges and taxes were included, the returns may
be less than those shown.
For the period from 1/1/05 through 12/31/05, the cumulative return (not
annualized) before taxes for Class A shares was 4.16%.
During the period shown in the bar chart, the highest return (not annualized)
before taxes for a calendar quarter was 6.55% (2ndQTR'03) and the lowest
return (not annualized) before taxes for a calendar quarter was -3.41%
(3rdQTR'98).
- ----------------------------------------------------------------------------------
- -------------------------------- 1 Year 5 Years (or 10 Years (or
Average Annual Total Returns Life of Class, Life of Class,
for the periods ended December if Less) if Less)
31, 2005
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Class A Shares (inception
10/16/89) -0.79% 7.54% 6.61%
Return Before Taxes -3.29% 4.90% 3.48%
Return After Taxes on
Distributions -0.52% 4.82% 3.63%
Return After Taxes on
Distributions and Sale of Fund
Shares
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond
Index (reflects no deduction 2.43% 5.87% 6.16%
for fees, expenses or taxes)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Citigroup World Government Bond
Index (reflects no deduction -6.88% 6.92% 4.99%
for fees, expenses or taxes)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Class B Shares (inception -1.46% 7.42% 6.65%
11/30/92)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Class C Shares (inception 2.40% 7.75% 6.32%
5/26/95)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Class N Shares (inception 2.72% 7.70% N/A
3/1/01)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Class Y Shares (inception 4.41% 8.69% 6.48%
1/26/98)
- ----------------------------------------------------------------------------------
The Fund's average annual total returns include applicable sales charges:
for Class A shares, the current maximum initial sales charge of 4.75%; for
Class B shares, the contingent deferred sales charges of 5% (1-year) and 2%
(5-year); and for Class C and Class N shares, the 1% contingent deferred
sales charge for the 1-year period. There is no sales charge for Class Y
shares. Because Class B shares convert to Class A shares 72 months after
purchase, Class B "life-of-class" performance does not include any
contingent deferred sales charge and uses Class A performance for the
period after conversion. The returns measure the performance of a
hypothetical account and assume that all dividends and capital gains
distributions have been reinvested in additional shares. The performance
of the Fund's Class A shares is compared to the Lehman Brothers Aggregate
Bond Index, an unmanaged index of U.S. corporate and government bonds, and
the Citigroup World Government Bond Index, an unmanaged index of debt
securities of major foreign government bond markets. The indices'
performance includes reinvestment of income but does not reflect
transaction costs, fees, expenses or taxes. The Fund's investments vary
from those in the indices.
Fees and Expenses of the Fund
The following tables are provided to help you understand the fees and
expenses you may pay if you buy and hold shares of the Fund. The Fund pays a
variety of expenses directly for management of its assets, administration,
distribution of its shares and other services. Those expenses are subtracted
from the Fund's assets to calculate the Fund's net asset values per share.
All shareholders therefore pay those expenses indirectly. Shareholders pay
other transaction expenses directly, such as sales charges. The numbers below
are based on the Fund's expenses during its fiscal year ended September 30,
2005.
Shareholder Fees (charges paid directly from your investment):
- --------------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Maximum Sales Charge 4.75% None None None None
(Load) on purchases
(as % of offering price)
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Maximum Deferred Sales
Charge (Load) (as % of
the lower of the None(1) 5%(2) 1%(3) 1%(4) None
original offering price
or redemption proceeds)
- --------------------------------------------------------------------------------------
1. A contingent deferred sales charge may apply to redemptions of
investments of $1 million or more ($500,000 for certain retirement plan
accounts) of Class A shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent
deferred sales charge gradually declines from 5% to 1% in years one
through six and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement plan's first
purchase of Class N shares
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
- -------------------------------------------------------------------------------------
Class A Class B Class C Class N Class Y
Shares Shares Shares Shares Shares
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Management Fees 0.53% 0.53% 0.53% 0.53% 0.53%
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Distribution and/or Service 0.25% 1.00% 1.00% 0.50% N/A
(12b-1) Fees
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Other Expenses 0.16% 0.16% 0.16% 0.37% 0.63%
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Total Annual Operating Expenses 0.94% 1.69% 1.69% 1.40% 1.16%
- -------------------------------------------------------------------------------------
Expenses may vary in future years. "Other Expenses" include transfer agent
fees, custodial fees, and accounting and legal expenses that the Fund pays.
The "Other Expenses" in the table are based on, among other things, the fees
the Fund would have paid if the transfer agent had not waived a portion of
its fee under a voluntary undertaking to the Fund to limit these fees to
0.35% of average daily net assets per fiscal year for all classes. That
undertaking may be amended or withdrawn at any time. After the waiver, the
actual "Other Expenses" and "Total Annual Operating Expenses" were 0.27% and
0.80% for Class Y and as shown above for all classes.
Examples. The following examples are intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in a class of shares of the Fund
for the time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end
of those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that
the class's operating expenses remain the same. Your actual costs may be
higher or lower because expenses will vary over time. Based on these
assumptions your expenses would be as follows:
- ---------------------------------------------------------------------------------
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class A Shares $567 $762 $973 $1,580
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class B Shares $673 $837 $1,125 $1,627(1)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class C Shares $273 $537 $925 $2,014
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class N Shares $244 $446 $771 $1,691
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class Y Shares $119 $371 $642 $1,417
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
If shares are not 1 Year 3 Years 5 Years 10 Years
redeemed:
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class A Shares $567 $762 $973 $1,580
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class B Shares $173 $537 $925 $1,627(1)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class C Shares $173 $537 $925 $2,014
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class N Shares $144 $446 $771 $1,691
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class Y Shares $119 $371 $642 $1,417
- ---------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A
and the applicable Class B, Class C and Class N contingent deferred sales
charges. In the second example, the Class A expenses include the sales
charge, but Class B, Class C and Class N expenses do not include the
contingent deferred sales charges. There is no sales charge on Class Y
shares.
1 Class B expenses for years 7 through 10 are based on Class A expenses
because Class B shares automatically convert to Class A shares 72 months
after purchase.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES AND RISKS. The allocation of the
Fund's portfolio among different investments will vary over time based upon
the Manager's evaluation of economic and market trends. The Fund's portfolio
might not always include all of the different types of investments described
below. At times the Fund might increase the relative emphasis of its
investments in one or two sectors because of the Manager's belief that there
are greater opportunities for high current income from debt securities of
issuers in those sectors relative to other sectors. The Statement of
Additional Information contains more detailed information about the Fund's
investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of securities of
any one issuer and by not investing too great a percentage of the Fund's
assets in any one company. Also, the Fund does not concentrate 25% or more
of its total assets in investments in the securities of any one foreign
government or in securities of companies in any one industry. However,
changes in the overall market prices of securities and the income they pay
can occur at any time. The Fund's share prices and yields will change daily
based on changes in market prices of securities and market conditions and in
response to other economic events.
The Fund can invest in different types of debt securities, as described
above. The debt securities the Fund buys may be rated by
nationally-recognized rating organizations or they may be unrated securities
assigned an equivalent rating by the Manager. The Fund can buy
investment-grade securities, although it normally invests a substantial part
of its assets in debt securities below investment-grade, and can do so
without limit.
U.S. Government Securities. The Fund normally invests some of its assets in
securities issued or guaranteed by the U.S. Treasury or other
government agencies or federally-chartered corporate entities referred
to as "instrumentalities." These are referred to as "U.S. government
securities" in this Prospectus.
U.S. Treasury Obligations. These include Treasury bills (having maturities of
one year or less when issued), Treasury notes (having maturities of
more than one and up to ten years when issued), and Treasury bonds
(having maturities of more than ten years when issued). Treasury
securities are backed by the full faith and credit of the United States
as to timely payments of interest and repayments of principal. The Fund
can buy U. S. Treasury securities that have been "stripped" of their
coupons by a Federal Reserve Bank, and zero-coupon U.S. Treasury
securities described below.
o Obligations of U.S. Government Agencies or Instrumentalities. These
include direct obligations and mortgage-related securities that have
different levels of credit support from the U.S. government. Some are
supported by the full faith and credit of the U.S. government, such as
Government National Mortgage Association pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of
the issuer to borrow from the U.S. Treasury under certain
circumstances, such as Federal National Mortgage Association bonds
("Fannie Maes"). Others are supported only by the credit of the entity
that issued them, such as Federal Home Loan Mortgage Corporation
obligations ("Freddie Macs"). Securities issued by Fannie Mae, Freddie
Mac and the Federal Home Loan Banks are neither guaranteed nor issued
by the U.S. government.
o Mortgage-Related U.S. Government Securities. Pools of residential or
commercial mortgages, in the form of CMOs and other "pass-through"
mortgage securities that are U.S. government securities, have
collateral to secure payment of interest and principal. They may be
issued in different series each having different interest rates and
maturities.
The collateral is either in the form of mortgage pass-through
certificates issued or guaranteed by a U.S. agency or instrumentality
or mortgage loans insured by a U.S. government agency or
instrumentality.
The Fund may enter into "forward roll" (also referred to as "mortgage
dollar rolls") transactions with respect to mortgage-related
securities. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to
repurchase a similar security at a later date at a set price.
During the period between the sale and the purchase, the Fund will not
be entitled to receive interest and principal payments on the
securities that have been sold. It is possible that the market value
of the securities the Fund sells may decline below the price at which
the Fund is obligated to repurchase securities, or that the
counterparty might default in its obligation.
High-Yield, Lower-Grade Debt Securities. The Fund can purchase a variety of
lower-grade, high-yield debt securities of U.S. and foreign issuers,
including bonds, debentures, notes, preferred stocks, loan
participation interests, structured notes, asset-backed securities,
among others, to seek high current income. These securities are
sometimes called "junk bonds."
Lower-grade debt securities are rated below "Baa" by Moody's Investors
Service, Inc. ("Moody's") or lower than "BBB" by Standard & Poor's
Rating Service ("S&P") or have comparable ratings by other
nationally-recognized rating organizations. The Fund can invest in
securities rated as low as "C" or "D" or which are in default at the
time the Fund buys them. While securities rated "Baa" by Moody's or
"BBB" by S&P are considered "investment grade," they have some
speculative characteristics.
The Manager does not rely solely on ratings issued by rating
organizations when selecting investments for the Fund, and it can buy
unrated securities. The Manager may assign a rating to an unrated
security that the Manager believes is equivalent to that of a rated
security that offers comparable yields and risks.
Private-Issuer Mortgage-Backed Securities. CMOs and other mortgage-related
securities issued by private issuers are not U.S. government
securities, and are subject to greater credit risks than
mortgage-related securities that are U.S. government securities. The
Fund can invest in mortgage-backed securities issued by private
issuers. Primarily these include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks,
savings and loans, mortgage bankers and other non-governmental issuers.
Private issuer mortgage-backed securities are subject to the credit
risks of the issuers (as well as interest rate risks and prepayment
risks), although in some cases they may be supported by insurance or
guarantees.
Asset-Backed Securities. The Fund can buy asset-backed securities, which are
fractional interests in pools of loans collateralized by the loans or
other assets or receivables. They are issued by trusts and special
purpose corporations that pass the income from the underlying pool to
the buyer of the interest. These securities are subject to the risk of
default by the issuer as well as by the borrowers of the underlying
loans in the pool, as well as interest rate and prepayment risks.
Foreign Securities. The Fund can buy a variety of debt securities issued by
foreign governments and companies, as well as "supra-national"
entities, such as the World Bank. They can include bonds, debentures,
and notes, including derivative investments called "structured" notes,
described below. The Fund's foreign debt investments can be denominated
in U.S. dollars or in foreign currencies.
o Investments in Emerging and Developing Markets. The Fund can buy bonds
issued out of emerging market countries which are typically denominated
in U.S. dollars but may be denominated in any currency. They are
typically issued by emerging markets countries and are considered
speculative securities with higher risks of default.
Investments By "Funds of Funds." Class Y shares of the Fund are offered as an
investment to other Oppenheimer funds that act as "funds of funds." The
Fund's Board of Trustees has approved making the Fund's shares
available as an investment to those funds. Those funds of funds may
invest significant portions of their assets in shares of the Fund, as
described in their respective prospectuses. Those other funds,
individually and/or collectively, may own significant amounts of the
Fund's shares from time to time. Those funds of funds typically use
asset allocation strategies under which they may increase or reduce the
amount of their investment in the Fund frequently, which may occur on a
daily basis under volatile market conditions. Depending on a number of
factors, such as the flows of cash into and from the Fund as a result
of the activity of other investors and the Fund's then-current
liquidity, those purchases and redemptions of the Fund's shares by
funds of funds could require the Fund to purchase or sell portfolio
securities, increasing its transaction costs and possibly reducing its
performance, if the size of those purchases and redemptions were
significant relative to the size of the Fund. For a further discussion
of the possible effects of frequent trading in the Fund's shares,
please refer to "Are There Limitations On Exchanges?"
CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies cannot be changed without the approval
of a majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can use the
investment techniques and strategies described below. The Fund might not
always use all of them. These techniques have risks, although some are
designed to help reduce overall investment or market risks. The Fund can
invest in common and preferred stocks and other equity securities such as
warrants and rights of foreign and U.S. companies. However, the Fund does not
anticipate having a substantial percentage of its assets invested in those
types of securities as part of its normal portfolio strategies.
Zero-Coupon and "Stripped" Securities. The Fund can buy government and
corporate zero-coupon bonds that pay no interest. They are issued at a
substantial discount from their face value. The Fund can invest up to
50% of its total assets in zero-coupon securities issued by either the
U.S. government or U.S. companies. The Fund also can buy "stripped"
securities that are the separate income or principal components of a
debt security. Some CMOs or other mortgage-related securities may be
stripped, with each component having a different proportion of
principal or interest payments. One class might receive all the
interest and the other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations
in price from interest rate changes than interest-bearing securities.
The Fund may have to pay out the imputed income on zero-coupon
securities without receiving the actual cash currently. The values of
interest-only and principal-only mortgage-related securities are also
very sensitive to prepayments of underlying mortgages and changes in
interest rates. When prepayments tend to fall, the timing of the cash
flows to these securities increases, making them more sensitive to
changes in interest rates. The market for some of these securities may
be limited, making it difficult for the Fund to dispose of its holdings
quickly at an acceptable price.
Participation Interests in Loans. These securities represent an undivided
fractional interest in a loan obligation of a borrower. They are
typically purchased from banks or dealers that have made the loan or
are members of the loan syndicate. The loans may be to foreign or U.S.
companies. They are subject to the risk of default by the borrower as
well as credit risks of the servicing agent of the participation
interest, which can cause the Fund to lose money on its investment. The
Fund can also buy interests in trusts and other entities that hold loan
obligations. In that case the Fund will be subject to the trust's
credit risks. The Fund does not invest more than 5% of its net assets
in participation interests of any one borrower.
Equity Securities. Equity securities include common stocks, as well as
"equity equivalents" such as preferred stocks and securities
convertible into common stock. Preferred stock has a set dividend rate
and ranks after bonds and before common stocks in its claim for
dividends and on assets if the issuer is liquidated or becomes
bankrupt. The Manager considers some convertible securities to be
"equity equivalents" because of the conversion feature and in that case
their rating has less impact on the investment decision than in the
case of debt securities.
Illiquid and Restricted Securities. Investments may be illiquid because they
do not have an active trading market, making it difficult to value them
or dispose of them promptly at an acceptable price. Restricted
securities may have terms that limit their resale to other investors or
may require registration under applicable securities laws before they
may be sold publicly. The Fund will not invest more than 10% of its
net assets in illiquid or restricted securities. The Board can
increase that limit to 15%. Certain restricted securities that are
eligible for resale to qualified institutional purchasers may not be
subject to that limit. The Manager monitors holdings of illiquid
securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.
Derivative Investments. The Fund can invest in a number of different kinds of
"derivative investments." Options, futures contracts, structured
notes, mortgage-related securities and forward contracts are examples
of "derivative investments" the Fund uses. In addition to using
derivatives to hedge risks, the Fund can use other derivative
investments because they offer the potential for increased income.
Interest rate and stock market changes in the U.S. and abroad may
influence the performance of derivatives.
o "Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed debt investments with principal payments or interest
payments that are linked to the value of an index (such as a currency
or securities index) or commodity. The terms of the instrument may be
"structured" by the purchaser (the Fund) and the borrower issuing the
note.
The values of these notes will fall or rise in response to the changes
in the values of the underlying security or index. They are subject to
both credit and interest rate risks. Therefore the Fund could receive
more or less than it originally invested when a note matures, or it
might receive less interest than the stated coupon payment if the
underlying investment or index does not perform as anticipated. The
prices of these notes may be very volatile and they may have a limited
trading market, making it difficult for the Fund to value them or to
sell its investment quickly at an acceptable price.
Hedging. The Fund can buy and sell futures contracts, put and call options,
and forward contracts. These are all referred to as "hedging
instruments." The Fund is not required to use hedging instruments to
seek its objective. The Fund does not use hedging instruments for
speculative purposes and has limits on its use of them.
The Fund could buy and sell options, futures and forward contracts for
a number of purposes. It might do so to try to hedge against falling
prices of its portfolio securities or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It might do so to try to manage its exposure to changing
interest rates. Forward contracts and currency options can be used to
try to manage foreign currency risks on the Fund's foreign investments.
The Fund could write covered call options to seek cash for liquidity
purposes or to distribute to shareholders.
Hedging has risks. Options trading involves the payment of premiums and
increases portfolio turnover. If a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will
be required to sell the investment at the call price and will not be
able to realize any profit if the investment has increased in value
above the call price. In writing a put, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous
price. If the Manager used a hedging instrument at the wrong time or
judged market conditions incorrectly, the strategy could reduce the
Fund's return. The Fund could also experience losses if it could not
close out a position because of an illiquid market.
"When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
securities on a "when-issued" basis and may purchase or sell securities
on a "delayed-delivery" basis. These terms refer to securities that
have been created and for which a market exists, but which are not
available for immediate delivery. There might be a risk of loss to the
Fund if the value of the security declines prior to the settlement
date.
Portfolio Turnover. The Fund may engage in short-term trading to try to
achieve its objective. Increased portfolio turnover creates higher
brokerage and transaction costs for the Fund (and may reduce
performance); however, most of the Fund's portfolio transactions are
principal trades that do not entail brokerage fees. If the Fund
realizes capital gains when it sells its portfolio investments, it must
generally pay those gains out to shareholders, increasing their taxable
distributions. The Financial Highlights table at the end of this
Prospectus shows the Fund's portfolio turnover rates during recent
fiscal years.
Temporary Defensive and Interim Investments. In times of adverse or unstable
market, economic or political conditions, the Fund can invest up to
100% of its assets in temporary investments that are inconsistent with
the Fund's principal investment strategies. Generally they would be
U.S. government securities, highly-rated commercial paper, bank
deposits or repurchase agreements. The Fund may also hold these types
of securities pending the investment of proceeds from the sale of Fund
shares or portfolio securities or to meet anticipated redemptions of
Fund shares. To the extent the Fund invests defensively in these
securities, it may not achieve its investment objective.
Loans of Portfolio Securities. The Fund has entered into a Securities
Lending Agreement with JP Morgan Chase. Under the agreement,
portfolio securities of the Fund may be loaned to brokers, dealers
and other financial institutions. The Securities Lending Agreement
provides that loans must be adequately collateralized and may be
made only in conformity with the Fund's Securities Lending
Guidelines, adopted by the Fund's Board of Trustees. The value of
the securities loaned may not exceed 25% of the value of the Fund's
net assets.
PORTFOLIO HOLDINGS. The Fund's portfolio holdings are included in semi-annual
and annual reports that are distributed to shareholders of the Fund
within 60 days after the close of the period for which such report is
being made. The Fund also discloses its portfolio holdings in its
Statements of Investments on Form N-Q, which are filed with the
Securities and Exchange Commission (the "SEC") no later than 60 days
after the close of its first and third fiscal quarters. These required
filings are publicly available at the SEC. Therefore, portfolio
holdings of the Fund are made publicly available no later than 60 days
after the close of each of the Fund's fiscal quarters.
A description of the Fund's policies and procedures with respect to the
disclosure of the Fund's portfolio securities is available in the
Fund's Statement of Additional Information.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities. The agreement
sets the fees the Fund pays to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.
The Manager has been an investment advisor since January 1960. The
Manager and its subsidiaries and controlled affiliates managed more than $200
billion in assets as of December 31, 2005, including other Oppenheimer funds
with more than 6 million shareholder accounts. The Manager is located at Two
World Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008.
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional
assets as the Fund grows: 0.75% of the first $200 million of average
annual net assets of the Fund, 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, 0.50% of the next $4.0 billion, and 0.48% of the
average annual net assets in excess of $5 billion. The Fund's
management fee for its last fiscal year ended September 30, 2005 was
0.53% of average annual net assets for each class of shares.
A discussion regarding the basis for the Board of Trustees' approval of the
Fund's investment advisory contract is available in the Fund's Annual Report
to shareholders for the year ended September 30, 2005.
.. The Fund's portfolio is managed by Arthur P. Steinmetz. Mr. Steinmetz has
been the person who has been principally responsible for the day-to-day
management of the Fund's portfolio since October 1989 and sole
portfolio manager since May 2003. Mr. Steinmetz has been a Senior Vice
President of the Manager since March 1993 and of HarbourView Asset
Management Corporation since March 2000. He is an officer of other
portfolios and other accounts in the OppenheimerFunds complex..
The Statement of Additional Information provides additional information
about the Portfolio Manager's compensation, other accounts he manages
and his ownership of Fund shares.
Pending Litigation. A consolidated amended complaint has been filed as
putative derivative and class actions against the Manager, Distributor and
Transfer Agent, as well as 51 of the Oppenheimer funds (collectively the
"funds") including the Fund, 30 present and former Directors or Trustees and
8 present and former officers of certain of the funds. This complaint,
initially filed in the U.S. District Court for the Southern District of New
York on January 10, 2005 and amended on March 4, 2005, consolidates into a
single action and amends six individual previously-filed putative derivative
and class action complaints. Like those prior complaints, the complaint
alleges that the Manager charged excessive fees for distribution and other
costs, improperly used assets of the funds in the form of directed brokerage
commissions and 12b-1 fees to pay brokers to promote sales of the funds, and
failed to properly disclose the use of fund assets to make those payments in
violation of the Investment Company Act and the Investment Advisers Act of
1940. Also, like those prior complaints, the complaint further alleges that
by permitting and/or participating in those actions, the Directors/Trustees
and the officers breached their fiduciary duties to Fund shareholders under
the Investment Company Act and at common law. The complaint seeks
unspecified compensatory and punitive damages, rescission of the funds'
investment advisory agreements, an accounting of all fees paid, and an award
of attorneys' fees and litigation expenses.
The defendants believe the claims asserted in these law suits to be
without merit, and intend to defend the suits vigorously. The Manager and the
Distributor do not believe that the pending actions are likely to have a
material adverse effect on the Fund or on their ability to perform their
respective investment advisory or distribution agreements with the Fund.
ABOUT YOUR ACCOUNT
How to Buy Shares
You can buy shares several ways, as described below. The Fund's Distributor,
OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept
purchase (and redemption) orders. The Distributor, in its sole discretion,
may reject any purchase order for the Fund's shares.
Buying Shares Through Your Dealer. You can buy shares through any dealer,
broker or financial institution that has a sales agreement with the
Distributor. Your dealer will place your order with the Distributor on
your behalf. A broker or dealer may charge for that service.
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 do not list a dealer on the application, Class A
shares are your only purchase option. The Distributor will act as your
agent in buying Class A shares. However, we recommend that you discuss
your investment with a financial advisor before you make a purchase to
be sure that the Fund is appropriate for you. Class B, Class C or Class
N shares may not be purchased by a new investor directly from the
Distributor without the investor designating another registered
broker-dealer. If a current investor no longer has another
broker-dealer of record for an existing Class B, Class C or Class N
account, the Distributor is automatically designated as the
broker-dealer of record, but solely for the purpose of acting as the
investor's agent to purchase the shares.
o Paying by Federal Funds Wire. Shares purchased through the Distributor
may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department
at 1.800.225.5677 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
you pay for shares by electronic funds transfers from your bank
account. Shares are purchased for your account by a transfer of money
from your bank account through the Automated Clearing House (ACH)
system. You can provide those instructions automatically, under an
Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to
"AccountLink," below for more details.
o Buying Shares Through Asset Builder Plans. You may purchase shares of
the Fund automatically from your account at a bank or other financial
institution under an Asset Builder Plan with AccountLink. Details are
in the Asset Builder Application and the Statement of Additional
Information.
WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
o If you establish one of the many types of retirement plan accounts that
OppenheimerFunds offers, more fully described below under "Special
Investor Services," you can start your account with as little as $500.
o By using an Asset Builder Plan or Automatic Exchange Plan (details are
in the Statement of Additional Information), or government allotment
plan, you can make subsequent investments (after making the initial
investment of $500) for as little as $50. For any type of account
established under one of these plans prior to November 1, 2002, the
minimum additional investment will remain $25.
o The minimum investment requirement does not apply to reinvesting
dividends from the Fund or other Oppenheimer funds (a list of them
appears in the Statement of Additional Information, or you can ask your
dealer or call the Transfer Agent), or reinvesting distributions from
unit investment trusts that have made arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which
is the net asset value per share plus any initial sales charge that applies.
The offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the
Distributor receives the purchase order at its offices in Colorado, or after
any agent appointed by the Distributor receives the order.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of the NYSE on each day the NYSE is open for
trading (referred to in this Prospectus as a "regular business day").
The NYSE normally closes at 4:00 p.m., Eastern time, but may close
earlier on some days. All references to time in this Prospectus mean
"Eastern time."
The net asset value per share for a class of shares on a "regular
business day" is determined by dividing the value of the Fund's net
assets attributable to that class by the number of shares of that class
outstanding on that day. To determine net asset values, the Fund
assets are valued primarily on the basis of current market quotations.
If market quotations are not readily available or do not accurately
reflect fair value for a security (in the Manager's judgment) or if a
security's value has been materially affected by events occurring after
the close of the exchange or market on which the security is
principally traded, that security may be valued by another method that
the Board of Trustees believes accurately reflects the fair value.
Because some foreign securities trade in markets and on exchanges that
operate on weekends and U.S. holidays, the values of some of the Fund's
foreign investments may change on days when investors cannot buy or
redeem Fund shares.
The Board has adopted valuation procedures for the Fund and has
delegated the day-to-day responsibility for fair value determinations
to the Manager's Valuation Committee. Fair value determinations by the
Manager are subject to review, approval and ratification by the Board
at its next scheduled meeting after the fair valuations are
determined. In determining whether current market prices are readily
available and reliable, the Manager monitors the information it
receives in the ordinary course of its investment management
responsibilities for significant events that it believes in good faith
will affect the market prices of the securities of issuers held by the
Fund. Those may include events affecting specific issuers (for
example, a halt in trading of the securities of an issuer on an
exchange during the trading day) or events affecting securities markets
(for example, a foreign securities market closes early because of a
natural disaster). The Fund uses fair value pricing procedures to
reflect what the Manager and the Board believe to be more accurate
values for the Fund's portfolio securities, although it may not always
be able to accurately determine such values. In addition, the
discussion of "time zone arbitrage" describes effects that the Fund's
fair value pricing policy is intended to counteract.
If, after the close of the principal market on which a security held by
the Fund is traded and before the time as of which the Fund's net asset
values are calculated that day, a significant event occurs that the
Manager learns of and believes in the exercise of its judgment will
cause a material change in the value of that security from the closing
price of the security on the principal market on which it is traded,
the Manager will use its best judgment to determine a fair value for
that security.
The Manager believes that foreign securities values may be affected by
volatility that occurs in U.S. markets on a trading day after the close
of foreign securities markets. The Manager's fair valuation procedures
therefore include a procedure whereby foreign securities prices may be
"fair valued" to take those factors into account.
The Offering Price. To receive the offering price for a particular day, in
most cases, the Distributor or its designated agent must receive your
order by the time the NYSE closes that day. If your order is received
on a day when the NYSE is closed or after it has closed, the order will
receive the next offering price that is determined after your order is
received.
Buying Through a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of the NYSE (normally 4:00 p.m.) and
transmit it to the Distributor so that it is received before the
Distributor's close of business on a regular business day (normally
5:00 p.m.) to receive that day's offering price, unless your dealer has
made alternative arrangements with the Distributor. Otherwise, the
order will receive the next offering price that is determined.
- ------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors five
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject
to different expenses and will likely have different share prices. When you
buy shares, be sure to specify the class of shares. If you do not choose a
class, your investment will be made in Class A shares.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge
(on investments up to $1 million for regular accounts or lesser amounts
for certain retirement plans). The amount of that sales charge will
vary depending on the amount you invest. The sales charge rates are
listed in "How Can You Buy Class A Shares?" below.
- ------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the
time of purchase, but you will pay an annual asset-based sales charge.
If you sell your shares within 6 years of buying them, you will
normally pay a contingent deferred sales charge. That contingent
deferred sales charge varies depending on how long you own your shares,
as described in "How Can You Buy Class B Shares?" below.
- ------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the
time of purchase, but you will pay an annual asset-based sales charge.
If you sell your shares within 12 months of buying them, you will
normally pay a contingent deferred sales charge of 1.0%, as described
in "How Can You Buy Class C Shares?" below.
- ------------------------------------------------------------------------------
Class N Shares. If you buy Class N shares (available only through certain
retirement plans), you pay no sales charge at the time of purchase, but
you will pay an annual asset-based sales charge. If you sell your
shares within 18 months of the retirement plan's first purchase of
Class N shares, you may pay a contingent deferred sales charge of 1.0%,
as described in "How Can You Buy Class N Shares?" below.
Class Y Shares. Class Y shares are offered only to certain institutional
investors that have a special agreement with the Distributor.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
best suited to your needs depends on a number of factors that you should
discuss with your financial advisor. Some factors to consider are how much
you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares. The Fund's operating costs that apply to a class of
shares and the effect of the different types of sales charges on your
investment will vary your investment results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are
different. The discussion below assumes that you will purchase only one class
of shares and not a combination of shares of different classes. Of course,
these examples are based on approximations of the effects of current sales
charges and expenses projected over time, and do not detail all of the
considerations in selecting a class of shares. You should analyze your
options carefully with your financial advisor before making that choice.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will
also depend on how much you plan to invest. For example, the reduced
sales charges available for larger purchases of Class A shares may,
over time, offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-based
expenses on shares of Class B, Class C or Class N. For retirement plans
that qualify to purchase Class N shares, Class N shares will generally
be more advantageous than Class B and Class C shares.
o Investing for the Shorter Term. While the Fund is meant to be a
long-term investment, if you have a relatively short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should most likely invest in Class A or Class C shares
rather than Class B shares. That is because of the effect of the Class
B contingent deferred sales charge if you redeem within six years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares
might be the appropriate choice (especially for investments of less
than $100,000), because there is no initial sales charge on Class C
shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then as your investment horizon increases toward six years, Class C
shares might not be as advantageous as Class A shares. That is because
the annual asset-based sales charge on Class C shares will have a
greater impact on your account over the longer term than the reduced
front-end sales charge available for larger purchases of Class A
shares.
If you 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 more than $100,000 of Class B shares or $1 million
or more of Class C shares from a single investor. Dealers or other
financial intermediaries purchasing shares for their customers in
omnibus accounts are responsible for compliance with those limits.
o Investing for the Longer Term. If you are investing less than $100,000
for the longer-term, for example for retirement, and do not expect to
need access to your money for seven years or more, Class B shares may
be appropriate.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B, Class C and Class N
shareholders. Other features may not be advisable (because of the
effect of the contingent deferred sales charge) for Class B, Class C
and Class N shareholders. Therefore, you should carefully review how
you plan to use your investment account before deciding which class of
shares to buy.
Additionally, the dividends payable to Class B, Class C and Class N
shareholders will be reduced by the additional expenses borne by those
classes that are not borne by Class A or Class Y shares, such as the
Class B, Class C and Class N asset-based sales charge described below
and in the Statement of Additional Information. Also, checkwriting is
not available on Class Y accounts or accounts subject to a contingent
deferred sales charge.
How Do Share Classes Affect Payments to Your Broker? A financial advisor may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B, Class
C and Class N contingent deferred sales charges and asset-based sales
charges have the same purpose as the front-end sales charge on sales of
Class A shares: to compensate the Distributor for concessions and
expenses it pays to dealers and financial institutions for selling
shares. The Distributor may pay additional compensation from its own
resources to securities dealers or financial institutions based upon
the value of shares of the Fund owned by the dealer or financial
institution for its own account or for its customers.
HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales charge.
However, in some cases, described below, purchases are not subject to an
initial sales charge, and the offering price will be the net asset value. In
other cases, reduced sales charges may be available, as described below or in
the Statement of Additional Information. Out of the amount you invest, the
Fund receives the net asset value to invest for your account.
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated
to your dealer as a concession. The Distributor reserves the right to reallow
the entire concession to dealers. The current sales charge rates and
concessions paid to dealers and brokers are as follows:
-------------------------------------------------------------------------------
Amount of Purchase Front-End Sales Front-End Sales Concession As a
Charge As a
Charge As a Percentage of
Percentage of Net 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 4.50% 4.71% 3.75%
less than $100,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
$100,000 or more but 3.50% 3.63% 2.75%
less than $250,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
-------------------------------------------------------------------------------
Due to rounding, the actual sales charge for a particular transaction may be
higher or lower than the rates listed above.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified
retirement plan arrangements or in other special types of transactions. To
receive a waiver or special sales charge rate, you must advise the
Distributor when purchasing shares or the Transfer Agent when redeeming
shares that a special condition applies.
Can You Reduce Class A Sales Charges? You and your spouse may be eligible to
buy Class A shares of the Fund at reduced sales charge rates set forth in the
table above under the Fund's "Right of Accumulation" or a "Letter of Intent."
The Fund reserves the right to modify or to cease offering these programs at
any time.
o Right of Accumulation. To qualify for the reduced Class A sales charge
that would apply to a larger purchase than you are currently
making (as shown in the table above), you can add the value of
any Class A, Class B or, Class C shares of the Fund or other
Oppenheimer funds that you or your spouse currently own, or
are currently purchasing, to the value of your Class A share
purchase. Your Class A shares of Oppenheimer Money Market
Fund, Inc. or Oppenheimer Cash Reserves on which you have not
paid a sales charge will not be counted for this purpose. In
totaling your holdings, you may count shares held in your
individual accounts (including IRAs and 403(b) plans), your
joint accounts with your spouse, or accounts you or your
spouse hold as trustees or custodians on behalf of your
children who are minors. A fiduciary can count all shares
purchased for a trust, estate or other fiduciary account that
has multiple accounts (including employee benefit plans for
the same employer). If you are buying shares directly from
the Fund, you must inform the Distributor of your eligibility
and holdings at the time of your purchase in order to qualify
for the Right of Accumulation. If you are buying shares
through your financial intermediary you must notify your
intermediary of your eligibility for the Right of Accumulation
at the time of your purchase.
To count shares of eligible Oppenheimer funds held in
accounts at other intermediaries under this Right of
Accumulation, you may be requested to provide the Distributor
or your current intermediary with a copy of all account
statements showing your current holdings of the Fund or other
eligible Oppenheimer funds, including statements for accounts
held by you and your spouse or in retirement plans or trust or
custodial accounts for minor children as described above. The
Distributor or intermediary through which you are buying
shares will calculate the value of your eligible Oppenheimer
fund shares, based on the current offering price, to determine
which Class A sales charge rate you qualify for on your
current purchase
o Letters of Intent. You may also qualify for reduced Class A sales
charges by submitting a Letter of Intent to the Distributor. A
Letter of Intent is a written statement of your intention to
purchase a specified value of Class A, Class B or Class C
shares of the Fund or other Oppenheimer funds over a 13-month
period. The total amount of your intended purchases of Class
A, Class B and Class C shares will determine the reduced sales
charge rate that will apply to your Class A share purchases of
the Fund during that period. You can choose to include
purchases made up to 90 days before the date that you submit a
Letter. Your Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves on which you have not paid a
sales charge will not be counted for this purpose. Submitting
a Letter of Intent does not obligate you to purchase the
specified amount of shares. You may also be able to apply the
Right of Accumulation to these purchases.
If you do not complete the Letter of Intent, the front-end
sales charge you paid on your purchases will be recalculated
to reflect the actual value of shares you purchased. A
certain portion of your shares will be held in escrow by the
Fund's Transfer Agent for this purpose. Please refer to "How
to Buy Shares - Letters of Intent" in the Fund's Statement of
Additional Information for more complete information.
Other Special Sales Charge Arrangements and Waivers. The Fund and the
Distributor offer other opportunities to purchase shares without
front-end or contingent deferred sales charges under the programs
described below. The Fund reserves the right to amend or discontinue
these programs at any time without prior notice.
o Dividend Reinvestment. Dividends and/or capital gains distributions
received by a shareholder from the Fund may be reinvested in
shares of the Fund or any of the other Oppenheimer funds
without sales charge, at the net asset value per share in
effect on the payable date. You must notify the Transfer Agent
in writing to elect this option and must have an existing
account in the fund selected for reinvestment.
o Exchanges of Shares. Shares of the Fund may be exchanged for shares of
certain other Oppenheimer funds at net asset value per share at
the time of exchange, without sales charge, and shares of the
Fund can be purchased by exchange of shares of certain other
Oppenheimer funds on the same basis. Please refer to "How to
Exchange Shares" in this Prospectus and in the Statement of
Additional Information for more details, including a discussion
of circumstances in which sales charges may apply on exchanges.
o Reinvestment Privilege. Within six months of a redemption of certain
Class A and Class B shares, the proceeds may be reinvested in
Class A shares of the Fund, or any of the other Oppenheimer
funds into which shares of the Fund may be exchanged, without
sales charge. This privilege applies to redemptions of Class A
shares that were subject to an initial sales charge or Class A
or Class B shares that were subject to a contingent deferred
sales charge when redeemed. The investor must ask the Transfer
Agent for that privilege at the time of reinvestment and must
identify the account from which the redemption was made.
o Other Special Reductions and Waivers. The Fund and the Distributor
offer additional arrangements to reduce or eliminate front-end
sales charges or to waive contingent deferred sales charges for
certain types of transactions and for certain classes of
investors (primarily retirement plans that purchase shares in
special programs through the Distributor). These are described
in greater detail in Appendix C to the Statement of Additional
Information, which may be ordered by calling 800.225.5677 or
through the OppenheimerFunds website, at
www.oppenheimerfunds.com (follow the hyperlinks "Access
Accounts and Services" - "Forms & Literature" - "Order
Literature" - "Statements of Additional Information"). A
description of these waivers and special sales charge
arrangements is also available for viewing on the
OppenheimerFunds website (follow the hyperlinks: "Research
Funds" - "Fund Documents" - "View a description..."). To receive a
waiver or special sales charge rate under these programs, the
purchaser must notify the Distributor (or other financial
intermediary through which shares are being purchased) at the
time of purchase or notify the Transfer Agent with at the time
of redeeming shares for those waivers that apply to contingent
deferred sales charges.
o Purchases by Certain Retirement Plans. There is no initial sales charge
on purchases of Class A shares of the Fund by retirement plans
that have $5 million or more in plan assets. In that case the
Distributor may pay from its own resources, at the time of
sale, concessions in an amount equal to 0.25% of the purchase
price of Class A shares purchased within the first six months
of account establishment by those retirement plans to dealers
of record, subject to certain exceptions described in
"Retirement Plans" in the Statement of Additional Information.
There is also no initial sales charge on purchases of Class A
shares of the Fund by certain retirement plans that are part
of a retirement plan or platform offered by banks,
broker-dealers, financial advisors, insurance companies or
recordkeepers. No contingent deferred sales charge is charged
upon the redemption of such shares.
Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the
Oppenheimer funds aggregating $1 million or more, or on purchases
of Class A shares by certain retirement plans that satisfied
certain requirements prior to March 1, 2001 ("grandfathered
retirement accounts"). However, those Class A shares may be
subject to a Class A contingent deferred sales charge, as
described below. Retirement plans holding shares of Oppenheimer
funds in an omnibus account(s) for the benefit of plan
participants in the name of a fiduciary or financial intermediary
(other than OppenheimerFunds-sponsored Single DB Plus plans) are
not permitted to make initial purchases of Class A shares subject
to a contingent deferred sales charge.
The Distributor pays dealers of record concessions in an amount equal
to 1.0% of purchases of $1 million or more other than purchases by
grandfathered retirement accounts. For grandfathered retirement
accounts, the concession is 0.75% of the first $2.5 million of
purchases plus 0.25% of purchases in excess of $2.5 million. In either
case, the concession will not be paid on purchases of shares by
exchange or that were previously subject to a front-end sales charge
and dealer concession.
If you redeem any of those shares within an 18-month "holding period"
measured from the beginning of the calendar month of their purchase, a
contingent deferred sales charge (called the "Class A contingent
deferred sales charge") may be deducted from the redemption proceeds.
That sales charge will be equal to 1.0% of the lesser of:
o the aggregate net asset value of the redeemed shares at the time of
redemption (excluding shares purchased by reinvestment of dividends or
capital gain distributions); or
o the original net asset value of the redeemed shares.
The Class A contingent deferred sales charge will not exceed the
aggregate amount of the concessions the Distributor paid to your dealer
on all purchases of Class A shares of all Oppenheimer funds you made
that were subject to the Class A contingent deferred sales charge.
HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at net asset value
per share without an initial sales charge. However, if Class B shares are
redeemed within six years from the beginning of the calendar month of their
purchase, a contingent deferred sales charge will be deducted from the
redemption proceeds. The Class B contingent deferred sales charge is paid to
compensate the Distributor for its expenses of providing distribution-related
services to the Fund in connection with the sale of Class B shares.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule for the Class B contingent deferred sales
charge holding period:
- -------------------------------------------------------------------------------
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Purchase Order was Accepted Redemptions in That Year
(As % of Amount Subject to Charge)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
0 - 1 5.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1 - 2 4.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2 - 3 3.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3 - 4 3.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4 - 5 2.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5 - 6 1.0%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
More than 6 None
- -------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the contingent
deferred sales charge, all purchases are considered to have been made on the
first regular business day of the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert
to Class A shares 72 months after you purchase them. This conversion
feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and
Service Plan, described below. The conversion is based on the relative
net asset value of the two classes, and no sales load or other charge
is imposed. When any Class B shares that you hold convert, any other
Class B shares that were acquired by reinvesting dividends and
distributions on the converted shares will also convert to Class A
shares. For further information on the conversion feature and its tax
implications, see "Class B Conversion" in the Statement of Additional
Information.
HOW CAN YOU BUY CLASS C SHARES? Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C shares are
redeemed within a holding period of 12 months from the beginning of the
calendar month of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C contingent
deferred sales charge is paid to compensate the Distributor for its expenses
of providing distribution-related services to the Fund in connection with the
sale of Class C shares.
HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered for sale to
retirement plans (including IRAs and 403(b) plans) that purchase $500,000 or
more of Class N shares of one or more Oppenheimer funds or to group
retirement plans (which do not include IRAs and 403(b) plans) that have
assets of $500,000 or more or 100 or more eligible participants. See
"Availability of Class N shares" in the Statement of Additional Information
for other circumstances where Class N shares are available for purchase.
Class N shares are sold at net asset value without an initial sales
charge. A contingent deferred sales charge of 1.0% will be imposed upon the
redemption of Class N shares, if:
o The group retirement plan is terminated or Class N shares of all
Oppenheimer funds are terminated as an investment option of the plan
and Class N shares are redeemed within 18 months after the plan's first
purchase of Class N shares of any Oppenheimer fund, or
o With respect to an IRA or 403(b) plan, Class N shares are redeemed
within 18 months of the plan's first purchase of Class N shares of any
Oppenheimer fund.
Retirement plans that offer Class N shares may impose charges on plan
participant accounts. The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than the time those
orders must be received by the Distributor or Transfer Agent in Colorado) and
the special account features applicable to purchasers of those other classes
of shares described elsewhere in this Prospectus do not apply to Class N
shares offered through a group retirement plan. Instructions for buying,
selling, exchanging or transferring Class N shares offered through a group
retirement plan must be submitted by the plan, not by plan participants for
whose benefit the shares are held.
WHO CAN BUY CLASS Y SHARES? Class Y shares are sold at net asset value per
share without a sales charge directly to institutional investors that have
special agreements with the Distributor for this purpose. They may include
insurance companies, registered investment companies, employee benefit plans
and Section 529 plans, among others. Individual investors cannot buy Class Y
shares directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares
(other than the time those orders must be received by the Distributor or
Transfer Agent at their Colorado office) and the special account features
available to investors buying those other classes of shares do not apply to
Class Y shares. Instructions for buying, selling, exchanging or transferring
Class Y shares must be submitted by the institutional investor, not by its
customers for whose benefit the shares are held.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for
Class A shares. It reimburses the Distributor for a portion of its
costs incurred for services provided to accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate of up to
0.25% of the average annual net assets of Class A shares of the Fund.
The Distributor currently uses all of those fees to pay dealers,
brokers, banks and other financial institutions periodically for
providing personal service and maintenance of accounts of their
customers that hold Class A shares. With respect to Class A shares
subject to a Class A contingent deferred sales charge purchased by
grandfathered retirement accounts, the Distributor pays the 0.25%
service fee to dealers in advance for the first year after the shares
are sold by the dealer. The Distributor retains the first year's
service fee paid by the Fund. After the shares have been held by
grandfathered retirement accounts for a year, the Distributor pays the
service fee to dealers on a periodic basis.
Distribution and Service Plans for Class B, Class C and Class N Shares. The
Fund has adopted Distribution and Service Plans for Class B, Class C
and Class N shares to pay the Distributor for its services and costs in
distributing Class B, Class C and Class N shares and servicing
accounts. Under the plans, the Fund pays the Distributor an annual
asset-based sales charge of 0.75% on Class B and Class C shares and
0.25% on Class N shares. The Distributor also receives a service fee of
0.25% per year under the Class B, Class C and Class N plans.
The asset-based sales charge and service fees increase Class B and
Class C expenses by 1.0% and increase Class N expenses by 0.50% of the
net assets per year of the respective class. Because these fees are
paid out of the Fund's assets on an on-going basis, over time these
fees will increase the cost of your investment and may cost you more
than other types of sales charges.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B, Class C or
Class N shares. The Distributor normally pays the 0.25% service fees to
dealers in advance for the first year after the shares are sold by the
dealer. After the shares have been held for a year, the Distributor
pays the service fees to dealers on a periodic basis.
The Distributor currently pays a sales concession of 3.75% of the
purchase price of Class B shares to dealers from its own resources at
the time of sale. Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the time of sale of
Class B shares is therefore 4.00% of the purchase price. The
Distributor normally retains the Class B asset-based sales charge. See
the Statement of Additional Information for exceptions.
The Distributor currently pays a sales concession of 0.75% of the
purchase price of Class C shares to dealers from its own resources at
the time of sale. Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the time of sale of
Class C shares is therefore 1.0% of the purchase price. The Distributor
pays the asset-based sales charge as an ongoing concession to the
dealer on Class C shares that have been outstanding for a year or more.
The Distributor normally retains the asset-based sales charge on Class
C shares during the first year after the purchase of Class C shares.
See the Statement of Additional Information for exceptions.
The Distributor currently pays a sales concession of 0.75% of the
purchase price of Class N shares to dealers from its own resources at
the time of sale. Including the advance of the service fee, the total
amount paid by the Distributor to the dealer at the time of sale of
Class N shares is therefore 1.0% of the purchase price. The Distributor
normally retains the asset-based sales charge on Class N shares. See
the Statement of Additional Information for exceptions.
For certain group retirement plans held in omnibus accounts
circumstances, the Distributor will pay the full Class C or Class N
asset-based sales charge and the service fee to the dealer beginning in
the first year after purchase of such shares in lieu of paying the
dealer the sales concession and the advance of the first year's service
fee at the time of purchase. New group omnibus plans may not purchase
class B shares.
For Class C shares purchased through the OppenheimerFunds Recordkeeper
Pro program, the Distributor will pay the Class C asset-based sales
charge to the dealer of record in the first year after the purchase of
such shares in lieu of paying the dealer a sales concession at the time
of purchase. The Distributor will use the service fee it receives from
the Fund on those shares to reimburse FASCorp for providing personal
services to the Class C accounts holding those shares.
OTHER PAYMENTS TO FINANCIAL INTERMEDIARIES AND SERIVCE PROVIDERS. The
Manager and the Distributor, in their discretion, also may pay dealers
or other financial intermediaries and service providers for
distribution and/or shareholder servicing activities. These payments
are made out of the Manager's and/or the Distributor's own resources,
including from the profits derived from the advisory fees the manager
receives from the Fund. These cash payments, which may be substantial,
are paid to many firms having business relationships with the Manager
and Distributor. These payments are in addition to any distribution
fees, servicing fees, or transfer agency fees paid directly or
indirectly by the Fund to these financial intermediaries and any
commissions the Distributor pays to these firms out of the sales
charges paid by investors. These payments by the Manager or Distributor
from their own resources are not reflected in the tables in the section
called "Fees and Expenses of the Fund" in this Prospectus because they
are not paid by the Fund.
"Financial intermediaries" are firms that offer and sell Fund
shares to their clients, or provide shareholder services to the Fund,
or both, and receive compensation for doing so. Your securities dealer
or financial adviser, for example, is a financial intermediary, and
there are other types or financial intermediaries that receive payments
relating to the sale or servicing of the Fund's shares. In addition to
dealers, the financial intermediaries that may receive payments include
sponsors of fund "supermarkets," sponsors of fee-based advisory or wrap
fee programs, sponsors of college and retirement savings programs,
banks and trust companies offering products that hold Fund shares, and
insurance companies that offer variable annuity or variable life
insurance products.
In general, these payments to financial intermediaries can be
categorized as "distribution-related" or "servicing" payments. Payments
for distribution-related expenses, such as marketing or promotional
expenses, are often referred to as "revenue sharing." Revenue sharing
payments may be made on the basis of the sales of shares attributable
to that dealer, the average net assets of the Fund and other
Oppenheimer funds attributable to the accounts of that dealer and its
clients, negotiated lump sum payments for distribution services
provided, or sales support fees. In some circumstances, revenue sharing
payments may create an incentive for a dealer or financial intermediary
or its representatives to recommend or offer shares of the Fund or
other Oppenheimer funds to its customers. These payments also may give
an intermediary an incentive to cooperate with the Distributor's
marketing efforts. A revenue sharing payment may, for example, qualify
the fund for preferred status with the intermediary receiving the
payment or provide representatives of the Distributor with access to
representatives of the intermediary's sales force, in some cases on a
preferential basis over funds of competitors. Additionally, as firm
support, the Manager or Distributor may reimburse expenses related to
educations seminars and "due diligence" or training meetings (to the
extent permitted by applicable laws or the rules of the NASD) designed
to increase sales representatives' awareness about Oppenheimer funds,
including travel and lodging expenditures. However, the Manager does
not consider a financial intermediary's sale of shares of the Fund or
other Oppenheimer funds when selecting brokers or dealers to effect
portfolio transactions for the fund.
Various factors are used to determine whether to make revenue
sharing payments. Possible considerations include, without limitation,
the types of services provided by the intermediary, sales of Fund
shares, the redemption rates on accounts of clients of the intermediary
or overall asset levels of Oppenheimer funds held for or by clients of
the intermediary, the willingness of the intermediary to allow the
Distributor to provide educational and training support for the
intermediary's sales personnel relating to the Oppenheimer funds, the
availability of the Oppenheimer funds on the intermediary's sales
system, as well as the overall quality of the services provided by the
intermediary and the Manager or Distributor's relationship with the
intermediary. The Manager and Distributor have adopted guidelines for
assessing and implementing each prospective revenue sharing
arrangement. To the extent that financial intermediaries receiving
distribution-related payments from the manager or Distributor sell more
shares of the Oppenheimer funds or retain more shares of the fund in
the client accounts, the manager and the Distributor benefit from the
incremental management and other fees they receive with respect to
those assets.
Payments may also be made by the Manager, the Distributor or the
Transfer Agent to financial intermediaries to compensate or reimburse
them for administrative or other client services provided such a
sub0transfer agency services for shareholders or retirement plan
participants, omnibus accounting or sub-accounting, participation in
networking arrangements, account set-up, recordkeeping and other
shareholder services. Payments may also be made for administrative
services related to the distribution of Fund shares through the
intermediary. Firms that may receive servicing fees include retirement
plan administrators, qualified tuition program sponsors, banks and
trust companies, and others. These fees may be sued by the service
provider to offset or reduce fees that would otherwise be paid directly
to them by certain account holders, such as retirement plans.
The Statement of Additional Information contains more information
about revenue sharing and service payments made by the manager or the
Distributor. Your dealer may charge you fees or commissions in addition
to those disclosed in the Prospectus. You should ask your dealer or
financial intermediary for details about any such payments it receives
from the Manager or the Distributor and their affiliates, or any other
fees or expenses it charges.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through
a service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends
and distributions directly to your bank account. Please call the
Transfer Agent for more information.
You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1.800.225.5677. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer.
After your account is established, you can request AccountLink privileges by
sending signature-guaranteed instructions and proper documentation to the
Transfer Agent. AccountLink privileges will apply to each shareholder listed
in the registration on your account as well as to your dealer representative
of record unless and until the Transfer Agent receives written instructions
terminating or changing those privileges. After you establish AccountLink for
your account, any change you make to the bank account information must be
made by signature-guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.
PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions
automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification
Number (PIN), by calling the PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by
phone, by calling 1.800.225.5677. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these
purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling
the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares,"
below for details.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier).
Please call 1.800.225.5677 for information about which transactions may be
handled this way. Transaction requests submitted by fax are subject to the
same rules and restrictions as written and telephone requests described in
this Prospectus.
OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet website, at
www.oppenheimerfunds.com. Additionally, shareholders listed in the account
registration (and the dealer of record) may request certain account
transactions through a special section of that website. To perform account
transactions or obtain account information online, you must first obtain a
user I.D. and password on that website. If you do not want to have Internet
account transaction capability for your account, please call the Transfer
Agent at 1.800.225.5677. At times, the website may be inaccessible or its
transaction features may be unavailable.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis. Please call the Transfer Agent
or consult the Statement of Additional Information for details.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that
individuals and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs and rollover IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer Agent. The Fund
lets you sell your shares by writing a letter, by wire, by using the Fund's
checkwriting privilege, or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. If you have questions
about any of these procedures, and especially if you are redeeming shares in
a special situation, such as due to the death of the owner or from a
retirement plan account, please call the Transfer Agent first, at
1.800.225.5677, for assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund
from fraud, the following redemption requests must be in writing and
must include a signature guarantee (although there may be other
situations that also require a signature guarantee):
o You wish to redeem more than $100,000 and receive a check.
o The redemption check is not payable to all shareholders listed on the
account statement.
o The redemption check is not sent to the address of record on your
account statement,
o Shares are being transferred to a Fund account with a different owner
or name.
o Shares are being redeemed by someone (such as an Executor) other than
the owners.
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept
a guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities
or government securities, or
o a U.S. national securities exchange, a registered securities
association or a clearing agency.
If you are signing on behalf of a corporation, partnership or other
business or as a fiduciary, you must also include your title in the
signature.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must
ask the plan trustee or administrator to request the sale of the Fund
shares in your plan account.
Receiving Redemption Proceeds by Wire. While the Fund normally sends your
money by check, you can arrange to have the proceeds of shares you sell
sent by Federal Funds wire to a bank account you designate. It must be
a commercial bank that is a member of the Federal Reserve wire system.
The minimum redemption you can have sent by wire is $2,500. There is a
$10 fee for each request. To find out how to set up this feature on
your account or to arrange a wire, call the Transfer Agent at
1.800.225.5677.
CHECKWRITING. To write checks against your Fund account, request that
privilege on your account application, or contact the Transfer Agent for
signature cards. They must be signed (with a signature guarantee) by all
owners of the account and returned to the Transfer Agent so that checks can
be sent to you to use. Shareholders with joint accounts can elect in writing
to have checks paid over the signature of one owner. If you previously signed
a signature card to establish checkwriting in another Oppenheimer fund,
simply call 1.800.225.5677 to request checkwriting for an account in this
Fund with the same registration as the other account.
o Checks can be written to the order of whomever you wish, but may not be
cashed at the bank the checks are payable through or the Fund's
custodian bank.
o Checkwriting privileges are not available for accounts holding shares
that are subject to a contingent deferred sales charge.
o Checks must be written for at least $500. Checks written below the
stated amount on the check will not be accepted. However, if you have
existing checks indicating a $100 minimum, you may still use them for
amounts of $100 or more.
o Checks cannot be paid if they are written for more than your account
value. Remember, your shares fluctuate in value and you should not
write a check close to the total account value.
o You may not write a check that would require the Fund to redeem shares
that were purchased by check or Asset Builder Plan payments within the
prior 10 days.
o Don't use your checks if you changed your Fund account number, until
you receive new checks.
HOW DO YOU SELL SHARES BY MAIL? Write a letter of instruction that includes:
o Your name,
o The Fund's name,
o Your Fund account number (from your account statement),
o The dollar amount or number of shares to be redeemed,
o Any special payment instructions,
o Any share certificates for the shares you are selling,
o The signatures of all registered owners exactly as the account is
registered, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for Send courier or express mail
requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption
price calculated on a particular regular business day, your call must be
received by the Transfer Agent by the close of the NYSE 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-sponsored qualified retirement plan
account or under a share certificate by telephone.
o To redeem shares through a service representative or automatically on
PhoneLink, call 1.800.225.5677.
Whichever method you use, you may have a check sent to the address on
the account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by
telephone in any seven-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
Telephone Redemptions Through AccountLink or by Wire. There are no dollar
limits on telephone redemption proceeds sent to a bank account
designated when you establish AccountLink. Normally the ACH transfer to
your bank is initiated on the business day after the redemption. You do
not receive dividends on the proceeds of the shares you redeemed while
they are waiting to be transferred.
If you have requested Federal Funds wire privileges for your account,
the wire of the redemption proceeds will normally be transmitted on the
next bank business day after the shares are redeemed. There is a
possibility that the wire may be delayed up to seven days to enable the
Fund to sell securities to pay the redemption proceeds. No dividends
are accrued or paid on the proceeds of shares that have been redeemed
and are awaiting transmittal by wire.
CAN YOU SELL SHARES THROUGH YOUR DEALER? The Distributor has made
arrangements to repurchase Fund shares from dealers and brokers on behalf of
their customers. Brokers or dealers may charge for that service. If your
shares are held in the name of your dealer, you must redeem them through your
dealer.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase
shares subject to a Class A, Class B, Class C or Class N contingent deferred
sales charge and redeem any of those shares during the applicable holding
period for the class of shares, the contingent deferred sales charge will be
deducted from the redemption proceeds (unless you are eligible for a waiver
of that sales charge based on the categories listed in Appendix C to the
Statement of Additional Information and you advise the Transfer Agent of your
eligibility for the waiver when you place your redemption request.)
A contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or the
original net asset value. A contingent deferred sales charge is not imposed
on:
o the amount of your account value represented by an increase in net
asset value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether a contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for the holding period that applies to the class, and
3. shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange
shares of the Fund for shares of other Oppenheimer funds. However, if you
exchange them within the applicable contingent deferred sales charge holding
period, the holding period will carry over to the fund whose shares you
acquire. Similarly, if you acquire shares of this Fund by exchanging shares
of another Oppenheimer fund that are still subject to a contingent deferred
sales charge holding period, that holding period will carry over to this Fund.
How to Exchange Shares
If you want to change all or part of your investment from one Oppenheimer
fund to another, you can exchange your shares for shares of the same class of
another Oppenheimer fund that offers the exchange privilege. For example, you
can exchange Class A shares of the Fund only for Class A shares of another
fund. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectus of the selected fund must offer the exchange privilege.
o When you establish an account, you must hold the shares you buy for at
least seven days before you can exchange them. After your account is
open for seven days, you can exchange shares on any regular business
day, subject to the limitations described below.
o You must meet the minimum purchase requirements for the selected fund.
o Generally, exchanges may be made only between identically registered
accounts, unless all account owners send written exchange instructions
with a signature guarantee.
o Before exchanging into a fund, you must obtain its prospectus and
should read it carefully.
For tax purposes, an exchange of shares of the Fund is considered a
sale of those shares and a purchase of the shares of the fund into which you
are exchanging. An exchange may result in a capital gain or loss.
You can find a list of the Oppenheimer funds that are currently
available for exchanges in the Statement of Additional Information or you can
obtain a list by calling a service representative at 1.800.225.5677. The
funds available for exchange can change from time to time.
A contingent deferred sales charge (CDSC) is not charged when you
exchange shares of the Fund for shares of another Oppenheimer fund. However,
if you exchange your shares during the applicable CDSC holding period, the
holding period will carry over to the fund shares that you acquire.
Similarly, if you acquire shares of the Fund in exchange for shares of
another Oppenheimer fund that are subject to a CDSC holding period, that
holding period will carry over to the acquired shares of the Fund. In either
of these situations, a CDSC may be imposed if the acquired shares are
redeemed before the end of the CDSC holding period that applied to the
exchanged shares.
There are a number of other special conditions and limitations that
apply to certain types of exchanges. These conditions and circumstances are
described in detail in the "How to Exchange Shares" section in the Statement
of Additional Information.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing,
by telephone or internet, or by establishing an Automatic Exchange Plan.
Written Exchange Requests. Send a request letter, signed by all owners of the
account, to the Transfer Agent at the address on the back cover.
Exchanges of shares for which share certificates have been issued
cannot be processed unless the Transfer Agent receives the certificates
with the request letter.
Telephone and Internet Exchange Requests. Telephone exchange requests may be
made either by calling a service representative or by using PhoneLink
by calling 1.800.225.5677. You may submit internet exchange requests on
the OppenheimerFunds internet website, at www.oppenheimerfunds.com. You
must have obtained a user I.D. and password to make transactions on
that website. Telephone and/or internet exchanges may be made only
between accounts that are registered with the same name(s) and address.
Shares for which share certificates have been issued may not be
exchanged by telephone or the internet.
Automatic Exchange Plan. Shareholders can authorize the Transfer Agent to
exchange a pre-determined amount of shares automatically on a monthly,
quarterly, semi-annual or annual basis.
Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
ARE THERE LIMITATIONS ON FREQUENT PURCHASES, REDEMPTIONS AND EXCHANGES?
Risks from Excessive Purchase, Redemption and Short-Term Exchange Activity.
The OppenheimerFunds exchange privilege affords investors the ability to
switch their investments among Oppenheimer funds if their investment needs
change. However, there are limits on that privilege. Frequent purchases,
redemptions and exchanges of fund shares may interfere with the Manager's
ability to manage the fund's investments efficiently, increase the fund's
transaction and administrative costs and/or affect the fund's performance,
depending on various factors, such as the size of the fund, the nature of its
investments, the amount of fund assets the portfolio manager maintains in
cash or cash equivalents, the aggregate dollar amount and the number and
frequency of trades. If large dollar amounts are involved in exchange and/or
redemption transactions, the Fund might be required to sell portfolio
securities at unfavorable times to meet redemption or exchange requests, and
the Fund's brokerage or administrative expenses might be increased.
Therefore, the Manager and the Fund's Board of Trustees have adopted the
following policies and procedures to detect and prevent frequent and/or
excessive exchanges, and/or purchase and redemption activity, while balancing
the needs of investors who seek liquidity from their investment and the
ability to exchange shares as investment needs change. There is no guarantee
that the policies and procedures described below will be sufficient to
identify and deter excessive short-term trading.
o Timing of Exchanges. Exchanged shares are normally redeemed from one
fund and the proceeds are reinvested in the fund selected for
exchange on the same regular business day on which the Transfer
Agent or its agent (such as a financial intermediary holding the
investor's shares in an "omnibus" or "street name" account) receives
an exchange request that conforms to these policies. The request
must be received by the close of the NYSE that day, which is
normally 4:00 p.m. Eastern time, but may be earlier on some days, in
order to receive that day's net asset value on the exchanged shares.
Exchange requests received after the close of the NYSE will receive
the next net asset value calculated after the request is received.
However, the Transfer Agent may delay transmitting the proceeds from
an exchange for up to five business days if it determines, in its
discretion, that an earlier transmittal of the redemption proceeds
to the receiving fund would be detrimental to either the fund from
which the exchange is being made or the fund into which the exchange
is being made. The proceeds will be invested in the fund into which
the exchange is being made at the next net asset value calculated
after the proceeds are received. In the event that such a delay in
the reinvestment of proceeds occurs, the Transfer Agent will notify
you or your financial representative.
o Limits on Disruptive Activity. The Transfer Agent may, in its
discretion, limit or terminate trading activity by any person, group
or account that it believes would be disruptive, even if the
activity has not exceeded the policy outlined in this Prospectus.
The Transfer Agent may review and consider the history of frequent
trading activity in all accounts in the Oppenheimer funds known to
be under common ownership or control as part of the Transfer Agent's
procedures to detect and deter excessive trading activity.
o Exchanges of Client Accounts by Financial Advisers. The Fund and the
Transfer Agent permit dealers and financial intermediaries to submit
exchange requests on behalf of their customers (unless the customer
has revoked that authority). The Distributor and/or the Transfer
Agent have agreements with a number of financial intermediaries that
permit them to submit exchange orders in bulk on behalf of their
clients. Those intermediaries are required to follow the exchange
policies stated in this Prospectus and to comply with additional,
more stringent restrictions. Those additional restrictions include
limitations on the funds available for exchanges, the requirement to
give advance notice of exchanges to the Transfer Agent, and limits
on the amount of client assets that may be invested in a particular
fund. A fund or the Transfer Agent may limit or refuse bulk exchange
requests submitted by such financial intermediaries if, in the
Transfer Agent's judgment, exercised in its discretion, the
exchanges would be disruptive to any of the funds involved in the
transaction.
o Redemptions of Shares. These exchange policy limits do not apply to
redemptions of shares. Shareholders are permitted to redeem their
shares on any regular business day, subject to the terms of this
Prospectus. Further details are provided under "How to Sell Shares."
o Right to Refuse Exchange and Purchase Orders. The Distributor and/or
the Transfer Agent may refuse any purchase or exchange order in
their discretion and are not obligated to provide notice before
rejecting an order. The Fund may amend, suspend or terminate the
exchange privilege at any time. You will receive 60 days' notice of
any material change in the exchange privilege unless applicable law
allows otherwise.
o Right to Terminate or Suspend Account Privileges. The Transfer Agent
may send a written warning to direct shareholders that the Transfer
Agent believes may be engaging in excessive purchases, redemptions
and/or exchange activity and reserves the right to suspend or
terminate the ability to purchase shares and/or exchange privileges
for any account that the Transfer Agent determines, in carrying out
these policies and in the exercise of its discretion, has engaged in
disruptive or excessive trading activity, with or without such
warning.
o Omnibus Accounts. If you hold your shares of the Fund through a
financial intermediary such as a broker-dealer, a bank, an insurance
company separate account, an investment adviser, an administrator or
trustee of a retirement plan or 529 plan, that holds your shares in
an account under its name (these are sometimes referred to as
"omnibus" or "street name" accounts), that financial intermediary
may impose its own restrictions or limitations to discourage
short-term or excessive trading. You should consult your financial
intermediary to find out what trading restrictions, including
limitations on exchanges, may apply.
While the Fund, the Distributor, the Manager and the Transfer Agent encourage
financial intermediaries to apply the Fund's policies to their customers who
invest indirectly in the Fund, the Transfer Agent may not be able to detect
excessive short term trading activity facilitated by, or in accounts
maintained in, the "omnibus" or "street name" accounts of a financial
intermediary. Therefore the Transfer Agent might not be able to apply this
policy to accounts such as (a) accounts held in omnibus form in the name of a
broker-dealer or other financial institution, or (b) omnibus accounts held in
the name of a retirement plan or 529 plan trustee or administrator, or (c)
accounts held in the name of an insurance company for its separate
account(s), or (d) other accounts having multiple underlying owners but
registered in a manner such that the underlying beneficial owners are not
identified to the Transfer Agent.
However, the Transfer Agent will attempt to monitor overall purchase and
redemption activity in those accounts to seek to identify patterns that may
suggest excessive trading by the underlying owners. If evidence of possible
excessive trading activity is observed by the Transfer Agent, the financial
intermediary that is the registered owner will be asked to review account
activity, and to confirm to the Transfer Agent and the fund that appropriate
action has been taken to curtail any excessive trading activity. However, the
Transfer Agent's ability to monitor and deter excessive short-term trading in
omnibus or street name accounts ultimately depends on the capability and
cooperation of the financial intermediaries controlling those accounts.
Additional Policies and Procedures. The Fund's Board has adopted the
following additional policies and procedures to detect and prevent frequent
and/or excessive exchanges and purchase and redemption activity:
o 30-Day Limit. A direct shareholder may exchange some or all of the
shares of the Fund held in his or her account to another eligible
Oppenheimer fund once in a 30 calendar-day period. When shares are
exchanged into a fund account, that account will be "blocked" from
further exchanges into another fund for a period of 30 calendar days
from the date of the exchange. The block will apply to the full
account balance and not just to the amount exchanged into the
account. For example, if a shareholder exchanged $1,000 from one
fund into another fund in which the shareholder already owned shares
worth $10,000, then, following the exchange, the full account
balance ($11,000 in this example) would be blocked from further
exchanges into another fund for a period of 30 calendar days. A
"direct shareholder" is one whose account is registered on the
Fund's books showing the name, address and tax ID number of the
beneficial owner.
o Exchanges Into Money Market Funds. A direct shareholder will be
permitted to exchange shares of a stock or bond fund for shares of a
money market fund at any time, even if the shareholder has exchanged
shares into the stock or bond fund during the prior 30 days.
However, all of the shares held in that money market fund would then
be blocked from further exchanges into another fund for 30 calendar
days.
o Dividend Reinvestments/B Share Conversions. Reinvestment of dividends
or distributions from one fund to purchase shares of another fund
and the conversion of Class B shares into Class A shares will not be
considered exchanges for purposes of imposing the 30-day limit.
o Asset Allocation. Third-party asset allocation and rebalancing
programs will be subject to the 30-day limit described above. Asset
allocation firms that want to exchange shares held in accounts on
behalf of their customers must identify themselves to the Transfer
Agent and execute an acknowledgement and agreement to abide by these
policies with respect to their customers' accounts. "On-demand"
exchanges outside the parameters of portfolio rebalancing programs
will be subject to the 30-day limit. However, investment programs by
other Oppenheimer "funds-of-funds" that entail rebalancing of
investments in underlying Oppenheimer funds will not be subject to
these limits.
o Automatic Exchange Plans. Accounts that receive exchange proceeds
through automatic or systematic exchange plans that are established
through the Transfer Agent will not be subject to the 30-day block
as a result of those automatic or systematic exchanges (but may be
blocked from exchanges, under the 30-day limit, if they receive
proceeds from other exchanges).
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information.
A $12 annual "Minimum Balance Fee" is assessed on each Fund account with a
value of less than $500. The fee is automatically deducted from each
applicable Fund account annually in September. See the Statement of
Additional Information to learn how you can avoid this fee and for
circumstances under which this fee will not be assessed.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is
in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may
be modified, suspended or terminated by the Fund at any time. The Fund
will provide you notice whenever it is required to do so by applicable
law. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone
privileges apply to each owner of the account and the dealer
representative of record for the account unless the Transfer Agent
receives cancellation instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the
Fund will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements
for redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients by participating
in NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders
of the Fund if the dealer performs any transaction erroneously or
improperly.
The redemption price for shares will vary from day to day because the value
of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally differ for
each class of shares. The redemption value of your shares may be more
or less than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
check, or through AccountLink or by Federal Funds wire (as elected by
the shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual
circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the
name of a broker-dealer, payment will normally be forwarded within
three business days after redemption.
The Transfer Agent may delay processing any type of redemption payment as
described under "How to Sell Shares" for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by Federal Funds wire or certified
check, or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the
account value has fallen below $500 for reasons other than the fact
that the market value of shares has dropped. In some cases, involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
Shares may be "redeemed in kind" under unusual circumstances (such as a lack
of liquidity in the Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with liquid securities from
the Fund's portfolio. If the Fund redeems your shares in kind, you may
bear transaction costs and will bear market risks until such time as
such securities are converted into cash.
Federal regulations may require the Fund to obtain your name, your date of
birth (for a natural person), your residential street address or
principal place of business and your Social Security Number, Employer
Identification Number or other government issued identification when
you open an account. Additional information may be required in certain
circumstances or to open corporate accounts. The Fund or the Transfer
Agent may use this information to attempt to verify your identity. The
Fund may not be able to establish an account if the necessary
information is not received. The Fund may also place limits on account
transactions while it is in the process of attempting to verify your
identity. Additionally, if the Fund is unable to verify your identity
after your account is established, the Fund may be required to redeem
your shares and close your account.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund your correct, certified Social Security
or Employer Identification Number when you sign your application, or if
you under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus, annual and semi-annual report
and annual notice of the Fund's privacy policy to shareholders having
the same last name and address on the Fund's records. The consolidation
of these mailings, called householding, benefits the Fund through
reduced mailing expense.
If you want to receive multiple copies of these materials, you may call
the Transfer Agent at 1.800.225.5677. You may also notify the Transfer
Agent in writing. Individual copies of prospectuses, reports and
privacy notices will be sent to you commencing within 30 days after the
Transfer Agent receives your request to stop householding.
Dividends, Capital Gains and Taxes
DIVIDENDS. The Fund intends to declare dividends separately for each
class of shares from net investment income on each regular business day
and to pay those dividends to shareholders monthly on a date selected
by the Board of Trustees. The amount of those dividends may vary over
time, depending on market conditions, the composition of the Fund's
portfolio, and expenses borne by the particular class of shares. Daily
dividends will not be declared or paid on newly-purchased shares until
Federal Funds are available to the Fund from the purchase payment for
the shares. Dividends and distributions paid on Class A and Class Y
shares will generally be higher than dividends for Class B, Class C and
Class N shares, which normally have higher expenses than Class A and
Class Y. The Fund has no fixed dividend rate and cannot guarantee that
it will pay any dividends or distributions.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term
or long-term capital gains each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends
and distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all
dividends and capital gains distributions in additional shares of the
Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital
gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through
AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your
bank through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state
or local taxes. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Long-term capital gains are
taxable as long-term capital gains when distributed to shareholders. It does
not matter how long you have held your shares. Whether you reinvest your
distributions in additional shares or take them in cash, the tax treatment is
the same.
Mutual fund distributions of interest income from U.S. government
securities are generally free from state and local income taxes. However,
particular states may limit that benefit, and some types of securities, such
as repurchase agreements and asset-backed securities, may not qualify for
that benefit.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information
the Fund sends you after the end of the calendar year.
The Fund intends each year to qualify as a "regulated investment
company" under the Internal Revenue Code, but reserves the right not to
qualify. It qualified during its last fiscal year. The Fund, as a regulated
investment company, will not be subject to Federal income taxes on any of its
income, provided that it satisfies certain income, diversification and
distribution requirements.
Avoid "Buying a Distribution." If you buy shares on or just before the Fund
declares a capital gains distribution, you will pay the full price for
the shares and then receive a portion of the price back as a taxable
capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share prices
fluctuate, you may have a capital gain or loss when you sell or
exchange your shares. A capital gain or loss is the difference between
the price you paid for the shares and the price you received when you
sold them. Any capital gain is subject to capital gains tax.
Returns of Capital Can Occur. In certain cases, distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax
situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP,
the Fund's independent registered public accounting firm, whose report, along
with the Fund's financial statements, is included in the Statement of
Additional Information, which is available upon request.
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------
- ---------
CLASS A YEAR ENDED SEPTEMBER 30, 2006
2005 2004 2003 2002
- -----------------------------------------------------------------------
- -----------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------
- -----------------------------------------------------
Net asset value, beginning of period $ 4.34 $
4.23 $ 4.08 $ 3.64 $ 3.72
- -----------------------------------------------------------------------
- -----------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 1
..21 1 .20 .26 .32
Net realized and unrealized gain (loss) (.05)
..19 .15 .43 (.08)
---------------------
- -----------------------------------------------------
Total from investment operations .16
..40 .35 .69 .24
- -----------------------------------------------------------------------
- -----------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.32)
(.29) (.20) (.25) (.30)
Tax return of capital distribution --
- -- -- -- (.02)
---------------------
- -----------------------------------------------------
Total dividends and/or distributions
to shareholders (.32)
(.29) (.20) (.25) (.32)
- -----------------------------------------------------------------------
- -----------------------------------------------------
Net asset value, end of period $ 4.18 $
4.34 $ 4.23 $ 4.08 $ 3.64
=======================================================================
===
- -----------------------------------------------------------------------
- -----------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.77%
9.77% 8.73% 19.59% 6.63%
- -----------------------------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
- -----------------------------------------------------
Net assets, end of period (in thousands) $5,077,400
$4,766,576 $4,117,666 $3,873,018 $3,202,825
- -----------------------------------------------------------------------
- -----------------------------------------------------
Average net assets (in thousands) $4,888,392
$4,392,321 $4,025,554 $3,521,307 $3,263,490
- -----------------------------------------------------------------------
- -----------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.03%
4.82% 4.69% 6.60% 7.91%
Total expenses 0.93%
0.94% 0.95% 0.95% 1.01%
Expenses after payments and waivers and
reduction to custodian expenses 0.92%
0.94% 0.95% 0.95% 1.01%
- -----------------------------------------------------------------------
- -----------------------------------------------------
Portfolio turnover rate 96% 4
103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE
TRANSACTIONS
- -----------------------------------------------------------------------
- ---------
Year Ended September 30, 2006 $4,097,005,267
$4,231,030,059
Year Ended September 30, 2005 $4,436,804,790
$4,469,108,355
Year Ended September 30, 2004 $5,593,936,243
$5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS B YEAR ENDED SEPTEMBER 30, 2006
2005 2004 2003 2002
- -----------------------------------------------------------------------
- ---------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------
- ---------------------------------------------------
Net asset value, beginning of period $ 4.35 $
4.24 $ 4.10 $ 3.66 $ 3.73
- -----------------------------------------------------------------------
- ---------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1
..17 1 .16 .22 .28
Net realized and unrealized gain (loss) (.05)
..20 .15 .44 (.05)
---------------------
- ---------------------------------------------------
Total from investment operations .13
..37 .31 .66 .23
- -----------------------------------------------------------------------
- ---------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28)
(.26) (.17) (.22) (.28)
Tax return of capital distribution --
- -- -- -- (.02)
---------------------
- ---------------------------------------------------
Total dividends and/or distributions
to shareholders (.28)
(.26) (.17) (.22) (.30)
- -----------------------------------------------------------------------
- ---------------------------------------------------
Net asset value, end of period $ 4.20 $
4.35 $ 4.24 $ 4.10 $ 3.66
=======================================================================
=
- -----------------------------------------------------------------------
- ---------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.23%
8.94% 7.66% 18.62% 6.11%
- -----------------------------------------------------------------------
- ---------------------------------------------------
- -----------------------------------------------------------------------
- ---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
- ---------------------------------------------------
Net assets, end of period (in thousands) $718,742 $
918,651 $1,163,555 $1,686,295 $1,847,182
- -----------------------------------------------------------------------
- ---------------------------------------------------
Average net assets (in thousands) $802,936
$1,021,022 $1,424,322 $1,757,152 $2,056,449
- -----------------------------------------------------------------------
- ---------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.25%
4.05% 4.16% 5.92% 7.22%
Total expenses 1.71%
1.70% 1.69% 1.68% 1.75%
Expenses after payments and waivers and
reduction to custodian expenses 1.71%
1.69% 1.69% 1.68% 1.75%
- -----------------------------------------------------------------------
- ---------------------------------------------------
Portfolio turnover rate 96% 4
103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business 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. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE
TRANSACTIONS
- -----------------------------------------------------------------------
- ---------
Year Ended September 30, 2006 $4,097,005,267
$4,231,030,059
Year Ended September 30, 2005 $4,436,804,790
$4,469,108,355
Year Ended September 30, 2004 $5,593,936,243
$5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- -----------------------------------------------------------------------
- ---------
CLASS C YEAR ENDED SEPTEMBER 30, 2006
2005 2004 2003 2002
- -----------------------------------------------------------------------
- ---------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------
- ---------------------------------------------------
Net asset value, beginning of period $ 4.33 $
4.22 $ 4.07 $ 3.64 $ 3.71
- -----------------------------------------------------------------------
- ---------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1
..17 1 .17 .23 .29
Net realized and unrealized gain (loss) (.05)
..20 .15 .42 (.06)
---------------------
- ---------------------------------------------------
Total from investment operations .13
..37 .32 .65 .23
- -----------------------------------------------------------------------
- ---------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28)
(.26) (.17) (.22) (.28)
Tax return of capital distribution -- -
- - -- -- (.02)
---------------------
- ---------------------------------------------------
Total dividends and/or distributions
to shareholders (.28)
(.26) (.17) (.22) (.30)
- -----------------------------------------------------------------------
- ---------------------------------------------------
Net asset value, end of period $ 4.18 $
4.33 $ 4.22 $ 4.07 $ 3.64
=======================================================================
=
- -----------------------------------------------------------------------
- ---------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.22%
8.96% 7.95% 18.45% 6.15%
- -----------------------------------------------------------------------
- ---------------------------------------------------
- -----------------------------------------------------------------------
- ---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
- ---------------------------------------------------
Net assets, end of period (in thousands) $857,843
$788,217 $710,085 $698,196 $568,487
- -----------------------------------------------------------------------
- ---------------------------------------------------
Average net assets (in thousands) $814,425
$748,199 $716,206 $623,598 $571,292
- -----------------------------------------------------------------------
- ---------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.27%
4.07% 4.06% 5.85% 7.15%
Total expenses 1.68% 4
1.69% 4 1.69% 4,5 1.69% 4 1.75% 4
- -----------------------------------------------------------------------
- ---------------------------------------------------
Portfolio turnover rate 96% 6
103% 6 90% 6 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE
TRANSACTIONS
- -----------------------------------------------------------------------
- ---------
Year Ended September 30, 2006 $4,097,005,267
$4,231,030,059
Year Ended September 30, 2005 $4,436,804,790
$4,469,108,355
Year Ended September 30, 2004 $5,593,936,243
$5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS N YEAR ENDED SEPTEMBER 30, 2006
2005 2004 2003 2002
- -----------------------------------------------------------------------
- -----------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------
- -----------------------------------------------------
Net asset value, beginning of period $ 4.34 $
4.23 $ 4.08 $ 3.65 $ 3.72
- -----------------------------------------------------------------------
- -----------------------------------------------------
Income (loss) from investment operations:
Net investment income .19 1
..19 1 .17 .25 .30
Net realized and unrealized gain (loss) (.04)
..19 .16 .42 (.05)
---------------------
- -----------------------------------------------------
Total from investment operations .15
..38 .33 .67 .25
- -----------------------------------------------------------------------
- -----------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30)
(.27) (.18) (.24) (.30)
Tax return of capital distribution --
- -- -- -- (.02)
---------------------
- -----------------------------------------------------
Total dividends and/or distributions
to shareholders (.30)
(.27) (.18) (.24) (.32)
- -----------------------------------------------------------------------
- -----------------------------------------------------
Net asset value, end of period $ 4.19 $
4.34 $ 4.23 $ 4.08 $ 3.65
=======================================================================
===
- -----------------------------------------------------------------------
- -----------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.60%
9.27% 8.28% 18.82% 6.70%
- -----------------------------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
- -----------------------------------------------------
Net assets, end of period (in thousands) $ 108,324 $
83,287 $ 52,969 $ 30,110 $ 15,508
- -----------------------------------------------------------------------
- -----------------------------------------------------
Average net assets (in thousands) $ 94,281 $
69,480 $ 40,043 $ 22,627 $ 8,954
- -----------------------------------------------------------------------
- -----------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.62%
4.37% 4.19% 6.08% 7.07%
Total expenses 1.33% 4
1.40% 4 1.38% 4,5 1.34% 4 1.22% 4
- -----------------------------------------------------------------------
- -----------------------------------------------------
Portfolio turnover rate 96% 6
103% 6 90% 6 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE
TRANSACTIONS
- -----------------------------------------------------------------------
- ---------
Year Ended September 30, 2006 $4,097,005,267
$4,231,030,059
Year Ended September 30, 2005 $4,436,804,790
$4,469,108,355
Year Ended September 30, 2004 $5,593,936,243
$5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- -----------------------------------------------------------------------
- ---------
CLASS Y YEAR ENDED SEPTEMBER 30, 2006
2005 2004 2003 2002
- -----------------------------------------------------------------------
- ------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------
- ------------------------------------------------
Net asset value, beginning of period $ 4.32 $
4.22 $ 4.07 $ 3.64 $ 3.71
- -----------------------------------------------------------------------
- ------------------------------------------------
Income (loss) from investment operations:
Net investment income .22 1
..21 1 .21 .26 .32
Net realized and unrealized gain (loss) (.04)
..19 .14 .42 (.06)
---------------------
- ------------------------------------------------
Total from investment operations .18
..40 .35 .68 .26
- -----------------------------------------------------------------------
- ------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.33)
(.30) (.20) (.25) (.31)
Tax return of capital distribution --
- -- -- -- (.02)
---------------------
- ------------------------------------------------
Total dividends and/or distributions
to shareholders (.33)
(.30) (.20) (.25) (.33)
- -----------------------------------------------------------------------
- ------------------------------------------------
Net asset value, end of period $ 4.17 $
4.32 $ 4.22 $ 4.07 $ 3.64
=====================================================================
- -----------------------------------------------------------------------
- ------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.35%
9.73% 8.80% 19.33% 7.06%
- -----------------------------------------------------------------------
- ------------------------------------------------
- -----------------------------------------------------------------------
- ------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
- ------------------------------------------------
Net assets, end of period (in thousands) $ 179,309 $
62,824 $ 150,699 $ 240,296 $ 152,767
- -----------------------------------------------------------------------
- ------------------------------------------------
Average net assets (in thousands) $ 118,239 $
68,656 $ 213,632 $ 194,308 $ 127,992
- -----------------------------------------------------------------------
- ------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.38%
4.84% 4.80% 6.57% 7.86%
Total expenses 0.58%
1.16% 1.29% 1.41% 1.74%
Expenses after payments and waivers and
reduction to custodian expenses 0.58%
0.80% 0.90% 0.91% 0.90%
- -----------------------------------------------------------------------
- ------------------------------------------------
Portfolio turnover rate 96% 4
103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE
TRANSACTIONS
- -----------------------------------------------------------------------
- ---------
Year Ended September 30, 2006 $4,097,005,267
$4,231,030,059
Year Ended September 30, 2005 $4,436,804,790
$4,469,108,355
Year Ended September 30, 2004 $5,593,936,243
$5,563,251,032
INFORMATION AND SERVICES
For More Information on Oppenheimer Strategic Income Fund
The following additional information about the Fund is available without
charge upon request:
STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It
is incorporated by reference into this Prospectus (which means it is legally
part of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and
other information about the Fund or your account:
- ------------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.525.7048
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
By Mail: Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
On the Internet: You can request these documents by e-mail or
through the OppenheimerFunds website. You may
also read or download documents on the
OppenheimerFunds website:
www.oppenheimerfunds.com
- ------------------------------------------------------------------------------
Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1.202.942.8090. Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet
website at www.sec.gov. Copies may be obtained after payment of a duplicating
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any
state or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by: [logo] OppenheimerFunds
Distributor, Inc.
The Fund's SEC File No.: 811-5724
PR0230.001.0106
Printed on recycled paper
Appendix to Prospectus of
Oppenheimer Strategic Income Fund
Graphic material included in the Prospectus of Oppenheimer Strategic
Income Fund under the heading "Annual Total Returns (Class A)(% as of 12/31
each year)":
A bar chart will be included in the Prospectus of Oppenheimer Strategic
Income Fund (the "Fund") depicting the annual total returns of a hypothetical
investment in Class A shares of the Fund for each of the past ten calendar
years, without deducting sales charges or taxes. Set forth below are the
relevant data points that will appear in the bar chart:
Calendar Annual
Year Ended Total Returns
12/31/96 12.59%
12/31/97 8.36%
12/31/98 1.67%
12/31/99 4.04%
12/31/00 2.21%
12/31/01 3.52%
12/31/02 6.85%
12/31/03 19.60%
12/31/04 9.62%
12/31/05 4.16%
Oppenheimer Strategic Income Fund
6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.CALL OPP (225.5677)
Statement of Additional Information dated January 27, 2006
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 27, 2006, as supplemented from
time to time. It should be read together with the Prospectus. You can obtain
the Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217, or by calling the
Transfer Agent at the toll-free number shown above, or by downloading it from
the OppenheimerFunds Internet website at www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks......
The Fund's Investment Policies.........................................
Other Investment Techniques and Strategies.............................
Investment Restrictions................................................
Disclosure of Portfolio Holdings.......................................
How the Fund is Managed....................................................
Organization and History...................................................
Trustees and Officers..................................................
The Manager............................................................
Brokerage Policies of the Fund.............................................
Distribution and Service Plans.............................................
Payments to Fund Intermediaries............................................
Performance of the Fund....................................................
About Your Account
How To Buy Shares..........................................................
How To Sell Shares.........................................................
How To Exchange Shares.....................................................
Dividends, Capital Gains and Taxes.........................................
Additional Information About the Fund......................................
Financial Information About the Fund
Report of the Independent Registered Public Accounting Firm................
Financial Statements.......................................................
Appendix A: Ratings Definitions.........................................A-1
Appendix B: Industry Classifications....................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers...............C-1
A B O U T T H E F U N D
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Fund's investment manager,
OppenheimerFunds, Inc. (the "Manager"), can select for the Fund. Additional
information is also provided about the strategies that the Fund may use to
try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and
the techniques and strategies that the Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below in seeking its goal. It
may use some of the investment techniques and strategies at some times or not
at all.
In selecting securities for the Fund's portfolio, the Manager evaluates
the merits of particular securities primarily through the exercise of its own
investment analysis. That process may include, among other things, evaluation
of the issuer's historical operations, prospects for the industry of which
the issuer is part, the issuer's financial condition, its pending product
developments and business (and those of its competitors), the effect of
general market and economic conditions on the issuer's business, and
legislative proposals that might affect the issuer.
Additionally, in analyzing a particular issuer, the Manager may
consider the trading activity in the issuer's securities, present and
anticipated cash flow, estimated current value of its assets in relation to
their historical cost, the issuer's experience and managerial expertise,
responsiveness to changes in interest rates and business conditions, debt
maturity schedules, current and future borrowing requirements, and any change
in the financial condition of an issuer and the issuer's continuing ability
to meet its future obligations. The Manager also may consider anticipated
changes in business conditions, levels of interest rates of bonds as
contrasted with levels of cash dividends, industry and regional prospects,
the availability of new investment opportunities and the general economic,
legislative and monetary outlook for specific industries, the nation and the
world.
|X| Foreign Securities. The Fund expects to have substantial investments in
foreign securities. For the most part, these will be debt securities issued
or guaranteed by foreign companies or governments, including "supra-national"
entities. "Foreign securities" include equity and debt securities of
companies organized under the laws of countries other than the United States
and debt securities issued or guaranteed by governments other than the U.S.
government or by foreign supra-national entities. They also include
securities of companies (including those that are located in the U.S. or
organized under U.S. law) that derive a significant portion of their revenue
or profits from foreign businesses, investments or sales, or that have a
significant portion of their assets abroad. They may be traded on foreign
securities exchanges or in the foreign over-the-counter markets.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary over time depending on a number of factors. Those
factors may include the relative yields of foreign and U.S. securities, the
economies of foreign countries, the condition of a country's financial
markets, the interest rate climate of particular foreign countries and the
relationship of particular foreign currencies to the U.S. dollar. The
Manager analyzes fundamental economic criteria (for example, relative
inflation levels and trends, growth rate forecasts, balance of payments
status, and economic policies) as well as technical and political data.
Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are not considered "foreign
securities" for the purpose of the Fund's investment allocations, because
they are not subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of such foreign currency against the U.S.
dollar will result in a change in the amount of income the Fund has available
for distribution. Because a portion of the Fund's investment income may be
received in foreign currencies, the Fund will be required to compute its
income in U.S. dollars for distribution to shareholders, and therefore the
Fund will absorb the cost of currency fluctuations. After the Fund has
distributed income, subsequent foreign currency losses may result in the
Fund's having distributed more income in a particular fiscal period than was
available from investment income, which could result in a return of capital
to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer high income
potential, or in foreign countries with economic policies or business cycles
different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign securities markets that do not move in a
manner parallel to U.S. markets. The Fund will hold foreign currency only in
connection with the purchase or sale of foreign securities.
o Foreign Debt Obligations. The debt obligations of foreign governments
and entities may or may not be supported by the full faith and credit of the
foreign government. The Fund may buy securities issued by certain
supra-national entities, which include entities designated or supported by
governments to promote economic reconstruction or development, international
banking organizations and related government agencies. Examples are the
International Bank for Reconstruction and Development (commonly called the
"World Bank"), the Asian Development bank and the Inter-American Development
Bank.
The governmental members of these supra-national entities are
"stockholders" that typically make capital contributions and may be committed
to make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able
or willing to honor their capitalization commitments for those entities.
The Fund can invest in U.S. dollar-denominated "Brady Bonds." These
foreign debt obligations may be fixed-rate par bonds or floating-rate
discount bonds. They are generally collateralized in full as to repayment of
principal at maturity by U.S. Treasury zero-coupon obligations that have the
same maturity as the Brady Bonds. Brady Bonds can be viewed as having three
or four valuation components: (i) the collateralized repayment of principal
at final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity. Those uncollateralized amounts constitute what is
called the "residual risk."
If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero-coupon U.S.
Treasury securities held as collateral for the payment of principal will not
be distributed to investors, nor will those obligations be sold to distribute
the proceeds. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds. The defaulted bonds will
continue to remain outstanding, and the face amount of the collateral will
equal the principal payments which would have then been due on the Brady
Bonds in the normal course. Because of the residual risk of Brady Bonds and
the history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds, Brady Bonds are considered
speculative investments.
o Risks of Foreign Investing. Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in
domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency
rates or currency control regulations (for example,
currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards
in foreign countries comparable to those applicable to
domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the
U.S.;
o less governmental regulation of foreign issuers, stock exchanges and
brokers than in the U.S.;
o foreign exchange contracts;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or
loss of certificates for portfolio securities;
o foreign withholding taxes on interest and dividends;
o possibilities in some countries of expropriation, nationalization,
confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and
o unfavorable differences between the U.S. economy and foreign economies.
In the past, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.
Passive Foreign Investment Companies. Some securities of corporations
domiciled outside the U.S. which the Fund may purchase, may be considered
passive foreign investment companies ("PFICs") under U.S. tax laws. PFICs are
those foreign corporations which generate primarily passive income. They tend
to be growth companies or "start-up" companies. For federal tax purposes, a
corporation is deemed a PFIC if 75% or more of the foreign corporation's
gross income for the income year is passive income or if 50% or more of its
assets are assets that produce or are held to produce passive income. Passive
income is further defined as any income to be considered foreign personal
holding company income within the subpart F provisions defined by IRCss.954.
Investing in PFICs involves the risks associated with investing in
foreign securities, as described above. There are also the risks that the
Fund may not realize that a foreign corporation it invests in is a PFIC for
federal tax purposes. Federal tax laws impose severe tax penalties for
failure to properly report investment income from PFICs. Following industry
standards, the Fund makes every effort to ensure compliance with federal tax
reporting of these investments. PFICs are considered foreign securities for
the purposes of the Fund's minimum percentage requirements or limitations of
investing in foreign securities.
Subject to the limits under the Investment Company Act of 1940 (the
"Investment Company Act") and under its own non-fundamental policies, the
Fund may also invest in foreign mutual funds which are also deemed PFICs
(since nearly all of the income of a mutual fund is generally passive
income). Investing in these types of PFICs may allow exposure to varying
countries because some foreign countries limit, or prohibit, all direct
foreign investment in the securities of companies domiciled therein.
In addition to bearing their proportionate share of a fund's expenses
(management fees and operating expenses), shareholders will also indirectly
bear similar expenses of such entities. Additional risks of investing in
other investment companies are described below under "Investment in Other
Investment Companies."
o Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for investing but have greater
risks than more developed foreign markets, such as those in Europe, Canada,
Australia, New Zealand and Japan. There may be even less liquidity in their
securities markets, and settlements of purchases and sales of securities may
be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be
subject to the risk of greater political and economic instability, which can
greatly affect the volatility of prices of securities in those countries. The
Manager will consider these factors when evaluating securities in these
markets, because the selection of those securities must be consistent with
the Fund's investment objective.
|X| Debt Securities. The Fund can invest in a variety of debt
securities to seek its objective. Foreign debt securities are subject to the
risks of foreign securities described above. In general, debt securities are
also subject to two additional types of risk: credit risk and interest rate
risk.
o Credit Risks. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater
extent that lower-yield, higher-quality bonds.
The Fund's debt investments can include high-yield,
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., at least "BBB" by Standard & Poor's Ratings Group or Duff &
Phelps, Inc., or that have comparable ratings by another
nationally-recognized rating organization.
In making investments in debt securities, the Manager may rely to some
extent on the ratings of ratings organizations or it may use its own research
to evaluate a security's credit-worthiness. If securities the Fund buys are
unrated, they are assigned a rating by the Manager of comparable quality to
bonds having similar yield and risk characteristics within a rating category
of a rating organization.
The Fund does not have investment policies establishing specific
maturity ranges for the Fund's investments, and they may be within any
maturity range (short, medium or long) depending on the Manager's evaluation
of investment opportunities available within the debt securities markets. The
Fund may shift its investment focus to securities of longer maturity as
interest rates decline and to securities of shorter maturity as interest
rates rise.
o Interest Rate Risk. Interest rate risk refers to the fluctuations in
value of fixed-income securities resulting from the inverse relationship
between price and yield. For example, an increase in general interest rates
will tend to reduce the market value of already-issued fixed-income
investments, and a decline in general interest rates will tend to increase
their value. In addition, debt securities with longer maturities, which tend
to have higher yields, are subject to potentially greater fluctuations in
value from changes in interest rates than obligations with shorter
maturities.
While the changes in value of the Fund's portfolio securities after
they are purchased will be reflected in the net asset value of the Fund's
shares, those changes normally do not affect the interest income paid by
those securities (unless the security's interest is paid at a variable rate
pegged to particular interest rate changes). However, those price
fluctuations will be reflected in the valuations of the securities, and
therefore the Fund's net asset values will be affected by those fluctuations.
o Special Risks of Lower-Grade Securities. The Fund can invest without
limit in lower-grade debt securities, if the Manager believes it is
consistent with the Fund's objective. Because lower-rated securities tend to
offer higher yields than investment grade securities, the Fund may invest in
lower-grade securities to try to achieve higher income.
"Lower-grade" debt securities are those rated below "investment grade"
which means they have a rating lower than "Baa" by Moody's or lower than
"BBB" by Standard & Poor's or Duff & Phelps, or similar ratings by other
rating organizations. If they are unrated, and are determined by the Manager
to be of comparable quality to debt securities rated below investment grade,
they are considered part of the Fund's portfolio of lower-grade securities.
The Fund can invest in securities rated as low as "C" or "D" or which may be
in default at the time the Fund buys them.
Some of the special credit risks of lower-grade securities are
discussed below. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of
investment grade securities. The issuer's low creditworthiness may increase
the potential for its insolvency. An overall decline in values in the
high-yield bond market is also more likely during a period of a general
economic downturn. An economic downturn or an increase in interest rates
could severely disrupt the market for high-yield bonds, adversely affecting
the values of outstanding bonds as well as the ability of issuers to pay
interest or repay principal. In the case of foreign high-yield bonds, these
risks are in addition to the special risk of foreign investing discussed in
the Prospectus and in this Statement of Additional Information.
To the extent they can be converted into stock, convertible securities
may be less subject to some of these risks than non-convertible high-yield
bonds, since stock may be more liquid and less affected by some of these risk
factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's
or Duff & Phelps are investment grade and are not regarded as junk bonds,
those securities may be subject to special risks, and have some speculative
characteristics. Definitions of the debt security ratings categories of the
principal rating organizations are included in Appendix A to this Statement
of Additional Information.
|X| Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or instrumentalities or by private issuers.
These securities include collateralized mortgage obligations ("CMOs"),
mortgage pass-through securities, stripped mortgage pass-through securities,
interests in real estate mortgage investment conduits ("REMICs") and other
real estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies
or instrumentalities
of the U.S. government have relatively little credit risk (depending on the
nature of the issuer) but are subject to interest rate risks and prepayment
risks, as described in the Prospectus. Mortgage-related securities issued by
private issuers have greater credit risk.
As with other debt securities, the prices of mortgage-related
securities tend to move inversely to changes in interest rates. The Fund can
buy mortgage-related securities that have interest rates that move inversely
to changes in general interest rates, based on a multiple of a specific
index. Although the value of a mortgage-related security may decline when
interest rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened
by unscheduled prepayments on the underlying mortgages, and it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. As a result, these securities
may be less effective as a means of "locking in" attractive long-term
interest rates, and they may have less potential for appreciation during
periods of declining interest rates, than conventional bonds with comparable
stated maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all
or part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes
or prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment
than were anticipated, the Fund may fail to recoup its initial investment on
the security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on
the Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related
securities may be affected by changes in the market's perception of the
creditworthiness of the entity issuing the securities or guaranteeing them.
Their values may also be affected by changes in government regulations and
tax policies.
o Collateralized Mortgage Obligations. CMOs are multi-class bonds that
are backed by pools of mortgage loans or mortgage pass-through certificates.
They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie
Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of
Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities, or
(5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal
and interest on the underlying mortgages may be allocated among the several
classes of a series of a CMO in different ways. One or more tranches may have
coupon rates that reset periodically at a specified increase over an index.
These are floating rate CMOs, and typically have a cap on the coupon rate.
Inverse floating rate CMOs have a coupon rate that moves in the opposite
direction of an applicable index. The coupon rate on these CMOs will increase
as general interest rates decrease. These are usually much more volatile than
fixed rate CMOs or floating rate CMOs.
o Forward Rolls. The Fund can enter into "forward roll" transactions
with respect to mortgage-related securities (also referred to as "mortgage
dollar rolls"). In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase
a similar security (the same type of security, and having the same coupon and
maturity) at a later date at a set price. The securities that are
repurchased will have the same interest rate as the securities that are sold,
but typically will be collateralized by different pools of mortgages (with
different prepayment histories) than the securities that have been sold.
Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from
the forward roll transaction, are expected to generate income to the Fund in
excess of the yield on the securities that have been sold.
The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books liquid
assets in an amount equal to the payment obligation under the roll.
These transactions have risks. During the period between the sale and
the repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities that have been sold. It is possible
that the market value of the securities the Fund sells may decline below the
price at which the Fund is obligated to repurchase securities.
|X| U.S. Government Securities. These are securities issued or
guaranteed by the U.S. Treasury or other government agencies or
federally-charted corporate entities referred to as "instrumentalities." The
obligations of U.S. government agencies or instrumentalities in which the
Fund may invest may or may not be guaranteed or supported by the "full faith
and credit" of the United States. "Full faith and credit" means generally
that the taxing power of the U.S. government is pledged to the payment of
interest and repayment of principal on a security. If a security is not
backed by the full faith and credit of the United States, the owner of the
security must look principally to the agency issuing the obligation for
repayment. The owner might not be able to assert a claim against the United
States if the issuing agency or instrumentality does not meet its
commitment. The Fund will invest in securities of U.S. government agencies
and instrumentalities only if the Manager is satisfied that the credit risk
with respect to the agency or instrumentality is minimal.
o U.S. Treasury Obligations. These include Treasury bills (maturities of
one year or less when issued), Treasury notes (maturities of one to ten
years), and Treasury bonds (maturities of more than ten years). Treasury
securities are backed by the full faith and credit of the United States as to
timely payments of interest and repayments of principal. They also can
include U. S. Treasury securities that have been "stripped" by a Federal
Reserve Bank, zero-coupon U.S. Treasury securities described below, and
Treasury Inflation-Protection Securities ("TIPS").
o Treasury Inflation-Protection Securities. The Fund can buy these TIPS,
which are designed to provide an investment vehicle that is not vulnerable to
inflation. The interest rate paid by TIPS is fixed. The principal value rises
or falls semi-annually based on changes in the published Consumer Price
Index. If inflation occurs, the principal and interest payments on TIPS are
adjusted to protect investors from inflationary loss. If deflation occurs,
the principal and interest payments will be adjusted downward, although the
principal will not fall below its face amount at maturity.
o Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such
as Government National Mortgage Association ("GNMA") pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").
|X| U.S. Government Mortgage-Related Securities. The Fund can invest in a
variety of mortgage-related securities that are issued by U.S. government
agencies or instrumentalities, some of which are described below.
o GNMA Certificates. The Government National Mortgage Association is a
wholly-owned corporate instrumentality of the United States within the U.S.
Department of Housing and Urban Development. GNMA's principal programs
involve its guarantees of privately-issued securities backed by pools of
mortgages. Ginnie Maes are debt securities representing an interest in one
mortgage or a pool of mortgages that are insured by the Federal Housing
Administration or the Farmers Home Administration or guaranteed by the
Veterans Administration
The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie
Maes will receive timely monthly payments of the pro-rata share of the
scheduled principal payments on the underlying mortgages, whether or not
those amounts are collected by the issuers. Amounts paid include, on a pro
rata basis, any prepayment of principal of such mortgages and interest (net
of servicing and other charges) on the aggregate unpaid principal balance of
the Ginnie Maes, whether or not the interest on the underlying mortgages has
been collected by the issuers.
The Ginnie Maes purchased by the Fund are guaranteed as to timely
payment of principal and interest by GNMA. In giving that guaranty, GNMA
expects that payments received by the issuers of Ginnie Maes on account of
the mortgages backing the Ginnie Maes will be sufficient to make the required
payments of principal of and interest on those Ginnie Maes. However, if those
payments are insufficient, the guaranty agreements between the issuers of the
Ginnie Maes and GNMA require the issuers to make advances sufficient for the
payments. If the issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under
any guaranty issued by GNMA as to such mortgage pools. An opinion of an
Assistant Attorney General of the United States, dated December 9, 1969,
states that such guaranties "constitute general obligations of the United
States backed by its full faith and credit." GNMA is empowered to borrow
from the United States Treasury to the extent necessary to make any payments
of principal and interest required under those guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to
the extent of payments received by the issuers on account of such mortgages,
Ginnie Maes do not constitute a liability of those issuers, nor do they
evidence any recourse against those issuers. Recourse is solely against
GNMA. Holders of Ginnie Maes (such as the Fund) have no security interest in
or lien on the underlying mortgages.
Monthly payments of principal will be made, and additional prepayments
of principal may be made, to the Fund with respect to the mortgages
underlying the Ginnie Maes owned by the Fund. All of the mortgages in the
pools relating to the Ginnie Maes in the Fund are subject to prepayment
without any significant premium or penalty, at the option of the mortgagors.
While the mortgages on 1-to-4-family dwellings underlying certain Ginnie Maes
have a stated maturity of up to 30 years, it has been the experience of the
mortgage industry that the average life of comparable mortgages, as a result
of prepayments, refinancing and payments from foreclosures, is considerably
less.
o Federal Home Loan Mortgage Corporation ("FHLMC") Certificates. FHLMC, a
corporate instrumentality of the United States, issues FHLMC Certificates
representing interests in mortgage loans. FHLMC guarantees to each
registered holder of a FHLMC Certificate timely payment of the amounts
representing a holder's proportionate share in:
(i) interest payments less servicing and guarantee fees,
(ii) principal prepayments, and
(iii) the ultimate collection of amounts representing the holder's
proportionate interest in principal payments on the
mortgage loans in the pool represented by the FHLMC
Certificate, in each case whether or not such amounts
are actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.
o Federal National Mortgage Association (Fannie Mae) Certificates.
Fannie Mae, a federally-chartered and privately-owned corporation, issues
Fannie Mae Certificates which are backed by a pool of mortgage loans. Fannie
Mae guarantees to each registered holder of a Fannie Mae Certificate that the
holder will receive amounts representing the holder's proportionate interest
in scheduled principal and interest payments, and any principal prepayments,
on the mortgage loans in the pool represented by such Certificate, less
servicing and guarantee fees, and the holder's proportionate interest in the
full principal amount of any foreclosed or other liquidated mortgage loan. In
each case the guarantee applies whether or not those amounts are actually
received. The obligations of Fannie Mae under its guarantees are obligations
solely of Fannie Mae and are not backed by the full faith and credit of the
United States or any of its agencies or instrumentalities other than Fannie
Mae.
|X| Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon
U.S. government securities. These will typically be U.S. Treasury Notes and
Bonds that have been stripped of their unmatured interest coupons, the
coupons themselves, or certificates representing interests in those stripped
debt obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are
sold at a deep discount from their face value at maturity. The buyer
recognizes a rate of return determined by the gradual appreciation of the
security, which is redeemed at face value on a specified maturity date. This
discount depends on the time remaining until maturity, as well as prevailing
interest rates, the liquidity of the security and the credit quality of the
issuer. The discount typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound
semi-annually at the rate fixed at the time of their issuance, their value is
generally more volatile than the value of other debt securities that pay
interest. Their value may fall more dramatically than the value of
interest-bearing securities when interest rates rise. When prevailing
interest rates fall, zero-coupon securities tend to rise more rapidly in
value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives
any cash payments on the zero-coupon investment. To generate cash to satisfy
those distribution requirements, the Fund may have to sell portfolio
securities that it otherwise might have continued to hold or to use cash
flows from other sources such as the sale of Fund shares.
|X| Portfolio Turnover. "Portfolio turnover" describes the rate at
which the Fund traded its portfolio securities during its last fiscal year.
For example, if a fund sold all of its securities during the year, its
portfolio turnover rate would have been 100%. The Fund's portfolio turnover
rate will fluctuate from year to year, and the Fund may continue to have a
portfolio turnover rate of more than 100% annually.
Increased portfolio turnover creates higher brokerage and transaction
costs for the Fund, which may reduce its overall performance. Additionally,
the realization of capital gains from selling portfolio securities may result
in distributions of taxable long-term capital gains to shareholders, since
the Fund will normally distribute all of its capital gains realized each
year, to avoid excise taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the
Fund may from time to time use the types of investment strategies and
investments described below. It is not required to use all of these
strategies at all times and at times may not use them.
Investment in Other Investment Companies. The Fund can also invest in the
securities of other investment companies, which can include open-end funds,
closed-end funds and unit investment trusts, subject to the limits set forth
in the Investment Company Act of 1940 (the "Investment Company Act") that
apply to those types of investments, and the following additional limitation:
the Fund can not invest in paragraph (F) or (G) of section 12(d)(1) of the
Investment Company Act. For example, the Fund can invest in Exchange-Traded
Funds, which are typically open-end funds or unit investment trusts, listed
on a stock exchange. The Fund might do so as a way of gaining exposure to
the segments of the equity or fixed-income markets represented by the
Exchange-Traded Funds' portfolio, at times when the Fund may not be able to
buy those portfolio securities directly.
Investing in another investment company may involve the payment of
substantial premiums above the value of such investment company's portfolio
securities and is subject to limitations under the Investment Company Act.
The Fund does not intend to invest in other investment companies unless the
Manager believes that the potential benefits of the investment justify the
payment of any premiums or sales charges. As a shareholder of an investment
company, the Fund would be subject to its ratable share of that investment
company's expenses, including its advisory and administration expenses. The
Fund does not anticipate investing a substantial amount of its net assets in
shares of other investment companies.
|X| Other Zero-Coupon Securities. The Fund may buy zero-coupon and
delayed-interest securities, and "stripped" securities of corporations and of
foreign government issuers. These are similar in structure to zero-coupon
and "stripped" U.S. government securities, but in the case of foreign
government securities, they may or may not be backed by the "full faith and
credit" of the issuing foreign government. Zero-coupon securities issued by
foreign governments and by corporations will be subject to greater credit
risks than U.S. government zero-coupon securities.
|X| "Stripped" Mortgage-Related Securities. The Fund may invest in
stripped mortgage-related securities that are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class
receives some interest and some principal. However, they may be completely
stripped. In that case all of the interest is distributed to holders of one
type of security, known as an "interest-only" security, or "I/O," and all of
the principal is distributed to holders of another type of security, known as
a "principal-only" security or "P/O." Strips can be created for pass-through
certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
|X| Preferred Stocks. Unlike common stock, preferred stock typically
has a stated dividend rate payable from the corporation's earnings.
Preferred stock dividends may be cumulative or non-cumulative, participating,
or auction rate. "Cumulative" dividend provisions require all or a portion of
prior unpaid dividends to be paid.
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, which can be a negative feature when interest
rates decline. 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. Preferred stock may be "participating" stock,
which means that it may be entitled to a dividend exceeding the stated
dividend in certain cases. The rights of preferred stock on distribution of
a corporation's assets in the event of a liquidation are generally
subordinate to the rights associated with a corporation's debt securities.
|X| Floating Rate and Variable Rate Obligations. Some securities the
Fund can purchase have variable or floating interest rates. Variable rates
are adjusted at stated periodic intervals. Variable rate obligations can
have a demand feature that allows the Fund to tender the obligation to the
issuer or a third party prior to its maturity. The tender may be at par value
plus accrued interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is adjusted
automatically according to a stated prevailing market rate, such as a bank's
prime rate, the 91-day U.S. Treasury Bill rate, or some other standard. The
instrument's rate is adjusted automatically each time the base rate is
adjusted. The interest rate on a variable rate note is also based on a stated
prevailing market rate but is adjusted automatically at specified intervals
of not less than one year. Generally, the changes in the interest rate on
such securities reduce the fluctuation in their market value. As interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same
maturity. The Manager may determine that an unrated floating rate or variable
rate demand obligation meets the Fund's quality standards by reason of being
backed by a letter of credit or guarantee issued by a bank that meets those
quality standards.
Floating rate and variable rate demand notes that have a stated
maturity in excess of one year may have features that permit the holder to
recover the principal amount of the underlying security at specified
intervals not exceeding one year and upon no more than 30 days' notice. The
issuer of that type of note normally has a corresponding right in its
discretion, after a given period, to prepay the outstanding principal amount
of the note plus accrued interest. Generally, the issuer must provide a
specified number of days' notice to the holder.
|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund can
purchase securities on a "when-issued" basis, and may purchase or sell
securities on a "delayed-delivery" basis. "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.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date. The
securities are subject to change in value from market fluctuations during the
period until settlement. The value at delivery may be less than the purchase
price. For example, changes in interest rates in a direction other than that
expected by the Manager before settlement will affect the value of such
securities and may cause a loss to the Fund. During the period between
purchase and settlement, the Fund makes no payment to the issuer and no
interest accrues to the Fund from the investment until it receives the
security at settlement. There is a risk of loss to the Fund if the value of
the security changes prior to the settlement date, and there is the risk that
the other party may not perform.
The Fund may engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time the
obligation is entered into. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to complete the
transaction. Its failure to do so may cause the Fund to lose the opportunity
to obtain the security at a price and yield the Manager considers to be
advantageous.
When the Fund engages in when-issued and delayed-delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies for its portfolio or for delivery
pursuant to options contracts it has entered into, and not for the purposes
of investment leverage. Although the Fund will enter into when-issued or
delayed-delivery purchase transactions to acquire securities, the Fund may
dispose of a commitment prior to settlement. If the Fund chooses to dispose
of the right to acquire a when-issued security prior to its acquisition or to
dispose of its right to deliver or receive against a forward commitment, it
may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a
security on a when-issued or delayed-delivery basis, it records the
transaction on its books and reflects the value of the security purchased in
determining the Fund's net asset value. In a sale transaction, it records
the proceeds to be received. The Fund will identify on its books liquid
assets at least equal in value to the value of the Fund's purchase
commitments until the Fund pays for the investment.
When-issued and delayed-delivery transactions can be used by the Fund
as a defensive technique to hedge against anticipated changes in interest
rates and prices. For instance, in periods of rising interest rates and
falling prices, the Fund might sell securities in its portfolio on a forward
commitment basis to attempt to limit its exposure to anticipated falling
prices. In periods of falling interest rates and rising prices, the Fund
might sell portfolio securities and purchase the same or similar securities
on a when-issued or delayed-delivery basis to obtain the benefit of currently
higher cash yields.
|X| Participation Interests. The Fund may invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan
made by the issuing financial institution in the proportion that the buyers
participation interest bears to the total principal amount of the loan. No
more than 5% of the Fund's net assets can be invested in participation
interests of the same borrower. The issuing financial institution may have
no obligation to the Fund other than to pay the Fund the proportionate amount
of the principal and interest payments it receives.
Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan. There is a risk that a
borrower may have difficulty making payments. If a borrower fails to pay
scheduled interest or principal payments, the Fund could experience a
reduction in its income. The value of that participation interest might also
decline, which could affect the net asset value of the Fund's shares. If the
issuing financial institution fails to perform its obligations under the
participation agreement, the Fund might incur costs and delays in realizing
payment and suffer a loss of principal and/or interest.
|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet
anticipated redemptions of Fund shares, or pending the investment of the
proceeds from sales of Fund shares, or pending the settlement of portfolio
securities transactions, or for temporary defensive purposes, as described
below.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an
agreed-upon future date. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect. Approved vendors include
U.S. commercial banks, U.S. branches of foreign banks, or broker-dealers that
have been designated as primary dealers in government securities. They must
meet credit requirements set by the Manager from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the
purchase. Repurchase agreements having maturity beyond seven days are subject
to the Fund's limits on holding illiquid investments. The Fund will not enter
into a repurchase agreement that causes more than 10% of its net assets to be
subject to repurchase agreements having a maturity beyond seven days. There
is no limit on the amount of the Fund's net assets that may be subject to
repurchase agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price
to fully collateralize the repayment obligation. However, if the vendor fails
to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay
in its ability to do so. The Manager will monitor the vendor's
creditworthiness to confirm that the vendor is financially sound and will
monitor the collateral's value on an on-going basis.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission (the "SEC"), the Fund, along with other affiliated entities
managed by the Manager, may transfer uninvested cash balances into one or
more joint repurchase accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities that
are pledged as collateral for repurchase agreements are held by a custodian
bank until the agreements mature. Each joint repurchase arrangement requires
that the market value of the collateral be sufficient to cover payments of
interest and principal; however, in the event of default by the other party
to the agreement, retention or sale of the collateral may be subject to legal
proceedings.
|X| Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. To enable the
Fund to sell its holdings of a restricted security not registered under the
Securities Act of 1933, the Fund may have to cause those securities to be
registered. The expenses of registering restricted securities may be
negotiated by the Fund with the issuer at the time the Fund buys the
securities. When the Fund must arrange registration because the Fund wishes
to sell the security, a considerable period may elapse between the time the
decision is made to sell the security and the time the security is registered
so that the Fund could sell it. The Fund would bear the risks of any downward
price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to
qualified institutional purchasers under Rule 144A of the Securities Act of
1933, if those securities have been determined to be liquid by the Manager
under Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of reliable pricing
information, among other factors. If there is a lack of trading interest in
a particular Rule 144A security, the Fund's holdings of that security may be
considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable
within seven days.
|X| Investments in Equity Securities. The Fund can invest limited amounts
of its assets in securities other than debt securities, including certain
types of equity securities of both foreign and U.S. companies. However, it
does not anticipate investing significant amounts of its assets in these
securities as part of its normal investment strategy. Those equity securities
include preferred stocks (described above), rights and warrants, and
securities convertible into common stock. Certain equity securities may be
selected because they may provide dividend income.
o Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. To the extent that the Fund
invests in equity securities, the value of the Fund's portfolio will be
affected by changes in the stock markets. Market risk can affect the Fund's
net asset value per share, which will fluctuate as the values of the Fund's
portfolio securities change. The prices of individual stocks do not all move
in the same direction uniformly or at the same time. Different stock markets
may behave differently from each other.
Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the issuer
or its industry. The Fund can invest in securities of large companies and
mid-size companies, but may also buy stocks of small companies, which may
have more volatile stock prices than large companies.
o Convertible Securities. While some convertible securities are a form
of debt security, in many cases their conversion feature (allowing conversion
into equity securities) causes them to be regarded by the Manager more as
"equity equivalents." As a result, the rating assigned to the security has
less impact on the Manager's investment decision with respect to convertible
securities than in the case of non-convertible debt fixed-income securities.
Convertible securities are subject to the credit risks and interest rate
risks described above.
The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security and the
security's price will likely increase when interest rates fall and decrease
when interest rates rise. If the conversion value exceeds the investment
value, the security will behave more like an equity security. In that case,
it will likely sell at a premium over its conversion value and its price will
tend to fluctuate directly with the price of the underlying security.
To determine whether convertible securities should be regarded as
"equity equivalents," the Manager examines the following factors:
(1) whether, at the option of the investor, the convertible security can be
exchanged for a fixed number of shares of common stock of the
issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible
securities), and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any
appreciation in the price of the issuer's common stock.
o Rights and Warrants. The Fund can invest up to 5% of its total assets
in warrants or rights. That limit does not apply to warrants and rights the
Fund has acquired as part of units of securities or that are attached to
other securities that the Fund buys. The Fund does not expect that it will
have significant investments in warrants and rights.
Warrants basically are options to purchase equity securities at
specific prices valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and warrants
have no voting rights, receive no dividends and have no rights with respect
to the assets of the issuer.
Loans of Portfolio Securities. The Fund may lend its portfolio
securities pursuant to the Securities Lending Agreement (the "Securities
Lending Agreement") with JP Morgan Chase, subject to the restrictions stated
in the Prospectus. The Fund will lend such portfolio securities to attempt
to increase the Fund's income. Under the Securities Lending Agreement and
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value of the
loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities), or
other cash equivalents in which the Fund is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay to JP
Morgan Chase, as agent, amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms of the letter of credit and the issuing bank
must be satisfactory to JP Morgan Chase and the Fund. The Fund will receive,
pursuant to the Securities Lending Agreement, 80% of all annual net income
(i.e., net of rebates to the Borrower) from securities lending transactions.
JP Morgan Chase has agreed, in general, to guarantee the obligations of
borrowers to return loaned securities and to be responsible for expenses
relating to securities lending. The Fund will be responsible, however, for
risks associated with the investment of cash collateral, including the risk
that the issuer of the security in which the cash collateral has been
invested in defaults. The Securities Lending Agreement may be terminated by
either JP Morgan Chase or the Fund on 30 days' written notice. The terms of
the Fund's loans must also meet applicable 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.
There are some risks in connection with securities lending. The Fund
might experience a delay in receiving additional collateral to secure a
loan, or a delay in recovery of the loaned securities if the borrower
defaults. The Fund must receive collateral for a loan. Under current
applicable regulatory requirements (which are subject to change), on each
business day the loan collateral must be at least equal to the value of the
loaned securities. It must consist of cash, bank letters of credit,
securities of the U.S. government or its agencies or instrumentalities, or
other cash equivalents in which the Fund is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Fund if the demand meets the terms of the letter.
The terms of the letter of credit and the issuing bank both must be
satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the
dividends or interest on loaned securities. It also receives one or more of
(a) negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on any short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finders', custodian and administrative fees in
connection with these loans. The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.
|X| Borrowing for Leverage. The Fund has the ability to borrow from
banks on an unsecured basis to invest the borrowed funds in portfolio
securities. This speculative technique is known as "leverage." The Fund
cannot borrow money in excess of 33% of the value of its total assets
(including the amount borrowed). The Fund may borrow only from banks and/or
affiliated investment companies. Borrowing may entail "leverage," and may be
a speculative investment strategy. Any borrowing will be made only from
banks and, pursuant to the 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, in the manner set forth in the
Investment Company Act of 1940. If the value of the Fund's assets fails to
meet this 300% asset coverage requirement, the Fund will reduce its bank debt
within three days to meet the requirement. To do so, the Fund might have to
sell a portion of its investments at a disadvantageous time.
The Fund will pay interest on these loans, and that interest expense
will raise the overall expenses of the Fund and reduce its returns. If it
does borrow, its expenses will be greater than comparable funds that do not
borrow for leverage. Additionally, the Fund's net asset value per share might
fluctuate more than that of funds that do not borrow. Currently, the Fund
does not contemplate using this technique in the next year but if it does so,
it will not likely be to a substantial degree.
|X| Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer
loans. They are issued by trusts or special-purpose corporations. They are
similar to mortgage-backed securities, described above, and are backed by a
pool of assets that consist of obligations of individual borrowers. The
income from the pool is passed through to the holders of participation
interest in the pools. The pools may offer a credit enhancement, such as a
bank letter of credit, to try to reduce the risks that the underlying debtors
will not pay their obligations when due. However, the enhancement, if any,
might not be for the full par value of the security. If the enhancement is
exhausted and any required payments of interest or repayments of principal
are not made, the Fund could suffer losses on its investment or delays in
receiving payment.
The value of an asset-backed security is affected by changes in the
market's perception of the asset backing the security, the creditworthiness
of the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected
if any credit enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately related to payment of consumer loans
by the individual borrowers. As a purchaser of an asset-backed security, the
Fund would generally have no recourse to the entity that originated the loans
in the event of default by a borrower. The underlying loans are subject to
prepayments, which may shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as in the case of
mortgage-backed securities and CMOs, described above. Unlike mortgage-backed
securities, asset-backed securities typically do not have the benefit of a
security interest in the underlying collateral.
|X| Derivatives. The Fund can invest in a variety of derivative
investments to seek income or for hedging purposes. Some derivative
investments the Fund can use are the hedging instruments described below in
this Statement of Additional Information.
Among the derivative investments the Fund can invest in are structured
notes called "index-linked" or "currency-linked" notes. Principal and/or
interest payments on index-linked notes depend on the performance of an
underlying index. Currency-indexed securities are typically short-term or
intermediate-term debt securities. Their value at maturity or the rates at
which they pay income are determined by the change in value of the U.S.
dollar against one or more foreign currencies or an index. In some cases,
these securities may pay an amount at maturity based on a multiple of the
amount of the relative currency movements. This type of index security
offers the potential for increased income or principal payments but at a
greater risk of loss than a typical debt security of the same maturity and
credit quality.
Other derivative investments the Fund can use include "debt
exchangeable for common stock" of an issuer or "equity-linked debt
securities" of an issuer. At maturity, the debt security is exchanged for
common stock of the issuer or it is payable in an amount based on the price
of the issuer's common stock at the time of maturity. Both alternatives
present a risk that the amount payable at maturity will be less than the
principal amount of the debt because the price of the issuer's common stock
might not be as high as the Manager expected.
|X| Credit Derivatives. The Fund may enter into credit default swaps, both
directly ("unfunded swaps") and indirectly in the form of a swap embedded
within a structured note ("funded swaps"), to protect against the risk that a
security will default. Unfunded and funded credit default swaps may be on a
single security, or on a basket of securities. The Fund pays a fee to enter
into the swap and receives a fixed payment during the life of the swap. The
Fund may take a short position in the credit default swap (also known as
"buying credit protection"), or may take a long position in the credit
default swap note (also known as "selling credit protection").
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. If the short credit default swap is against a
corporate issue, the Fund must own that corporate issue. However, if the
short credit default swap is against sovereign debt, the Fund may own either:
(i) the reference obligation, (ii) any sovereign debt of that foreign
country, or (iii) sovereign debt of any country that the Manager determines
is closely correlated as an inexact bona fide hedge.
If the Fund takes a short position in the credit default swap, if there
is a credit event (including bankruptcy, failure to timely pay interest or
principal, or a restructuring), the Fund will deliver the defaulted bonds and
the swap counterparty will pay the par amount of the bonds. An associated
risk is adverse pricing when purchasing bonds to satisfy the delivery
obligation. If the swap is on a basket of securities, the notional amount of
the swap is reduced by the par amount of the defaulted bond, and the fixed
payments are then made on the reduced notional amount.
Taking a long position in the credit default swap note (i.e.,
purchasing the "funded swap") would increase the Fund's exposure to specific
high yield corporate issuers. The goal would be to increase liquidity in
that market sector via the swap note and its associated increase in the
number of trading instruments, the number and type of market participants,
and market capitalization.
If the Fund takes a long position in the credit default swap note, if
there is a credit event the Fund will pay the par amount of the bonds and the
swap counterparty will deliver the bonds. If the swap is on a basket of
securities, the notional amount of the swap is reduced by the par amount of
the defaulted bond, and the fixed payments are then made on the reduced
notional amount.
The Fund will invest no more than 25% of its total assets in "unfunded"
credit default swaps. The Fund will limit its investments in "funded" credit
default swap notes to no more than 10% of its total assets.
Other risks of credit default swaps include the cost of paying for
credit protection if there are no credit events, pricing transparency when
assessing the cost of a credit default swap, counterparty risk, and the need
to fund the delivery obligation (either cash or the defaulted bonds,
depending on whether the Fund is long or short the swap, respectively).
|X| Hedging. The Fund can use hedging instruments. It is not
obligated to use them in seeking its objective although it can write covered
calls to seek high current income if the Manager believes that it is
appropriate to do so. To attempt to protect against declines in the market
value of the Fund's portfolio, to permit the Fund to retain unrealized gains
in the value of portfolio securities that have appreciated, or to facilitate
selling securities for investment reasons, the Fund could:
o sell futures contracts,
o buy puts on such futures or on securities, or
o write covered calls on securities or futures. Covered calls may also
be used to increase the Fund's income.
The Fund can use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In
that case, the Fund would normally seek to purchase the securities and then
terminate that hedging position. The Fund might also use this type of hedge
to attempt to protect against the possibility that its portfolio securities
would not be fully included in a rise in value of the market. To do so the
Fund could:
o buy futures, or
o buy calls on such futures or on securities.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The
Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The
Fund may employ new hedging instruments and strategies when they are
developed, if those investment methods are consistent with the Fund's
investment objective and are permissible under applicable regulations
governing the Fund.
o Futures. The Fund can buy and sell futures contracts that relate to
(1) broadly-based securities indices (these are referred to as "financial
futures"), (2) commodities (these are referred to as "commodity index
futures"), (3) debt securities (these are referred to as "interest rate
futures"), (4) foreign currencies (these are referred to as "forward
contracts") and (5) an individual stock ("single stock futures").
A broadly-based stock index is used as the basis for trading stock
index futures. They may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the securities included in the index and its value fluctuates in
response to the changes in value of the underlying securities. A stock index
cannot be purchased or sold directly. Bond index futures are similar
contracts based on the future value of the basket of securities that comprise
the index. These contracts obligate the seller to deliver, and the purchaser
to take, cash to settle the futures transaction. There is no delivery made of
the underlying securities to settle the futures obligation. Either party may
also settle the transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the
purchaser to take) cash or a specified type of debt security to settle the
futures transaction. Either party could also enter into an offsetting
contract to close out the position. Similarly, a single stock future
obligates the seller to deliver (and the purchaser to take) cash or a
specified equity security to settle the futures transaction. Either party
could also enter into an offsetting contract to close out the position.
Single stock futures trade on a very limited number of exchanges, with
contracts typically not fungible among the exchanges.
Similarly, a single stock future obligates the seller to deliver (and
the purchaser to take) cash or a specified equity security to settle the
futures transaction. Either party could also enter into an offsetting
contract to close out the position. Single stock futures trade on a very
limited number of exchanges, with contracts typically not fungible among the
exchanges.
The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within five main
commodity groups:
(1) energy, which includes crude oil, natural gas, gasoline and heating
oil;
(2) livestock, which includes cattle and hogs;
(3) agriculture, which includes wheat, corn, soybeans, cotton, coffee,
sugar and cocoa;
(4) industrial metals, which includes aluminum, copper, lead, nickel, tin
and zinc; and
(5) precious metals, which includes gold, platinum and silver. The Fund
may purchase and sell commodity futures contracts, options on
futures contracts and options and futures on commodity indices
with respect to these five main commodity groups and the
individual commodities within each group, as well as other types
of commodities.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required
to deposit an initial margin payment with the futures commission merchant
(the "futures broker"). Initial margin payments will be deposited with the
Fund's Custodian bank in an account registered in the futures broker's name.
However, the futures broker can gain access to that account only under
specified conditions. As the future is marked to market (that is, its value
on the Fund's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or by
the futures broker daily.
At any time prior to expiration of the future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be
paid by or released to the Fund. Any loss or gain on the future is then
realized by the Fund for tax purposes. All futures transactions, except
forward contracts, are effected through a clearinghouse associated with the
exchange on which the contracts are traded.
o Put and Call Options. The Fund may buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options, and
options on the other types of futures described above.
o Writing Covered Call Options. The Fund may write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered. That
means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
liquid assets identified on the Fund's books to enable the Fund to satisfy
its obligations if the call is exercised. There is no limit on the amount of
the Fund's total assets that may be subject to covered calls the Fund writes.
When the Fund writes a call on a security, it receives cash (a
premium). The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may
differ from the market price of the underlying security. The Fund has the
risk of loss that the price of the underlying security may decline during the
call period. That risk may be offset to some extent by the premium the Fund
receives. If the value of the investment does not rise above the call price,
it is likely that the call will lapse without being exercised. In that case
the Fund would keep the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium).
If the buyer of the call exercises it, the Fund will pay an amount of cash
equal to the difference between the closing price of the call and the
exercise price, multiplied by the specified multiple that determines the
total value of the call for each point of difference. If the value of the
underlying investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would
keep the cash premium.
The Fund's custodian, or a securities depository acting for the
custodian, will act as the Fund's escrow agent, through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions.
OCC will release the securities on the expiration of the option or when the
Fund enters into a closing transaction.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. government securities dealer which
will establish a formula price at which the Fund will have the absolute right
to repurchase that OTC option. The formula price will generally be based on
a multiple of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying security
(that is, the option is "in the money"). When the Fund writes an OTC option,
it will treat as illiquid (for purposes of its restriction on holding
illiquid securities) the mark-to-market value of any OTC option it holds,
unless the option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund
will then realize a profit or loss, depending upon whether the net of the
amount of the option transaction costs and the premium received on the call
the Fund wrote is more or less than the price of the call the Fund purchases
to close out the transaction. The Fund may realize a profit if the call
expires unexercised, because the Fund will retain the underlying security and
the premium it received when it wrote the call. Any such profits are
considered short-term capital gains for federal income tax purposes, as are
the premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income. If the Fund cannot effect a closing purchase transaction
due to the lack of a market, it will have to hold the callable securities
until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at
the time the call is written, the Fund must cover the call by identifying an
equivalent dollar amount of liquid assets on its books. The Fund will
identify additional liquid assets if the value of the identified assets drops
below 100% of the current value of the future. Because of this identified
requirement, in no circumstances would the Fund's receipt of an exercise
notice as to that future require the Fund to deliver a futures contract. It
would simply put the Fund in a short futures position, which is permitted by
the Fund's hedging policies.
o Writing Put Options. The Fund may sell put options on securities,
broadly-based securities indices, foreign currencies and futures. 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. 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 options.
If the Fund writes a put, the put must be covered by liquid assets
identified on the Fund's books. The premium the Fund receives from writing a
put represents a profit, as long as the price of the underlying investment
remains equal to or above the exercise price of the put. However, the Fund
also assumes the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even if the value
of the investment falls below the exercise price.
If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If
the put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed
the market value of the investment at that time. In that case, the Fund may
incur a loss if it sells the underlying investment. That loss will be equal
to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs the
Fund incurred.
When writing a put option on a security, to secure its obligation to
pay for the underlying security the Fund will deposit in escrow liquid assets
with a value equal to or greater than the exercise price of the underlying
securities. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was
sold. That notice will require the Fund to take delivery of the underlying
security and pay the exercise price. The Fund has no control over when it
may be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation as
the writer of the put. That obligation terminates upon expiration of the
put. It may also terminate if, before it receives an exercise notice, the
Fund effects a closing purchase transaction by purchasing a put of the same
series as it sold. Once the Fund has been assigned an exercise notice, it
cannot effect a closing purchase transaction.
The Fund may decide to effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent the
underlying security from being put. Effecting a closing purchase transaction
will also permit the Fund to write another put option on the security, or to
sell the security and use the proceeds from the sale for other investments.
The Fund will realize a profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or more than the
premium received from writing the put option. Any profits from writing puts
are considered short-term capital gains for Federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.
o Purchasing Calls and Puts. The Fund can purchase calls on securities,
broadly-based securities indices, foreign currencies and futures. It may do
so to protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When the Fund
buys a call (other than in a closing purchase transaction), it pays a
premium. The Fund then has the right to buy the underlying investment from a
seller of a corresponding call on the same investment during the call period
at a fixed exercise price.
The Fund benefits only if it sells the call at a profit or if, during
the call period, the market price of the underlying investment is above the
sum of the call price plus the transaction costs and the premium paid for the
call and the Fund exercises the call. If the Fund does not exercise the call
or sell it (whether or not at a profit), the call will become worthless at
its expiration date. In that case the Fund will have paid the premium but
lost the right to purchase the underlying investment.
The Fund can buy puts on securities, broadly-based securities indices,
foreign currencies and futures, whether or not it owns the underlying
investment. When the Fund purchases a put, it pays a premium and, except as
to puts on indices, has the right to sell the underlying investment to a
seller of a put on a corresponding investment during the put period at a
fixed exercise price.
Buying a put on an investment the Fund does not own (such as an index
or future) permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to the price of the underlying investment. If the market price of
the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date.
Buying a put on securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling the
underlying investment at the exercise price to a seller of a corresponding
put. If the market price of the underlying investment is equal to or above
the exercise price and, as a result, the put is not exercised or resold, the
put will become worthless at its expiration date. In that case the Fund will
have paid the premium but lost the right to sell the underlying investment.
However, the Fund may sell the put prior to its expiration. That sale may or
may not be at a profit.
When the Fund purchases a call or put on an index or future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally)
rather than on price movements in individual securities or futures contracts.
The Fund may 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 reference or base interest rate, currency or asset. The risks
associated with spread options are similar to those of interest rate options,
foreign exchange options and debt or equity options.
The Fund may buy a call or put only if, after the purchase, the value
of all call and put options held by the Fund will not exceed 5% of the Fund's
total assets.
o Buying and Selling Options on Foreign Currencies. The Fund can buy and
sell calls and puts on foreign currencies. They include puts and calls that
trade on a securities or commodities exchange or in the over-the-counter
markets or are quoted by major recognized dealers in such options. The Fund
could use these calls and puts to try to protect against declines in the
dollar value of foreign securities and increases in the dollar cost of
foreign securities the Fund wants to acquire.
If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased
cost of those securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If the Manager anticipates a decline
in the dollar value of a foreign currency, the decline in the dollar value of
portfolio securities denominated in that currency might be partially offset
by writing calls or purchasing puts on that foreign currency. However, the
currency rates could fluctuate in a direction adverse to the Fund's position.
The Fund will then have incurred option premium payments and transaction
costs without a corresponding benefit.
A call the Fund writes on a foreign currency is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute
and immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration from liquid
assets identified on the Fund's books upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns
or has the right to acquire and which is denominated in the currency
underlying the option. That decline might be one that occurs due to an
expected adverse change in the exchange rate. In those circumstances, the
Fund covers the option by identifying liquid assets on its books having a
value equal to the aggregate amount of the Fund's commitment under such
option position.
o Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques
that are different than what is required for normal portfolio management. If
the Manager uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments.
The Fund's option activities could affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund might
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause the
sale of underlying investments, increasing portfolio turnover. Although the
decision whether to exercise a put it holds is within the Fund's control,
holding a put might cause the Fund to sell the related investments for
reasons that would not exist in the absence of the put.
The Fund could pay a brokerage commission each time it buys a call or
put, sells a call or put, or buys or sells an underlying investment in
connection with the exercise of a call or put. Those commissions could be
higher on a relative basis than the commissions for direct purchases or sales
of the underlying investments. Premiums paid for options are small in
relation to the market value of the underlying investments. Consequently, put
and call options offer large amounts of leverage. The leverage offered by
trading in options could result in the Fund's net asset value being more
sensitive to changes in the value of the underlying investment.
If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment
at the call price. It will not be able to realize any profit if the
investment has increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance
that a liquid secondary market will exist for any particular option. The
Fund might experience losses if it could not close out a position because of
an illiquid market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against
declines in the value of the Fund's portfolio securities. The risk is that
the prices of the futures or the applicable index will correlate imperfectly
with the behavior of the cash prices of the Fund's securities. For example,
it is possible that while the Fund has used hedging instruments in a short
hedge, the market might advance and the value of the securities held in the
Fund's portfolio might decline. If that occurred, the Fund would lose money
on the hedging instruments and also experience a decline in the value of its
portfolio securities. However, while this could occur for a very brief period
or to a very small degree, over time the value of a diversified portfolio of
securities will tend to move in the same direction as the indices upon which
the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the price
of the portfolio securities being hedged and movements in the price of the
hedging instruments, the Fund might use hedging instruments in a greater
dollar amount than the dollar amount of portfolio securities being hedged. It
might do so if the historical volatility of the prices of the portfolio
securities being hedged is more than the historical volatility of the
applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit
and maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
market may cause temporary price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund
does so the market might decline. If the Fund then concludes not to invest
in securities because of concerns that the market might decline further or
for other reasons, the Fund will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the securities purchased.
o 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 possible losses from changes in the relative values of
the U.S. dollar and a foreign currency. The Fund limits its exposure in
foreign currency exchange contracts in a particular foreign currency to the
amount of its assets denominated in that currency or a closely-correlated
currency. The Fund 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.
Under a forward contract, one party agrees to purchase, and another
party agrees to sell, a specific currency at a future date. That date may be
any fixed number of days from the date of the contract agreed upon by the
parties. The transaction price is set at the time the contract is entered
into. These contracts are traded in the inter-bank market conducted directly
among currency traders (usually large commercial banks) and their customers.
The Fund may use forward contracts to protect against uncertainty in
the level of future exchange rates. The use of forward contracts does not
eliminate the risk of fluctuations in the prices of the underlying securities
the Fund owns or intends to acquire, but it does fix a rate of exchange in
advance. Although forward contracts may reduce the risk of loss from a
decline in the value of the hedged currency, at the same time they limit any
potential gain if the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent of the
dividend payments. To do so, the Fund could enter into a forward contract
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction, in a fixed amount of U.S. dollars per unit of the
foreign currency. This is called a "transaction hedge." The transaction
hedge will protect the Fund against a loss from an adverse change in the
currency exchange rates during the period between the date on which the
security is purchased or sold or on which the payment is declared, and the
date on which the payments are made or received.
The Fund could also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge." When the
Fund believes that foreign currency might suffer a substantial decline
against the U.S. dollar, it could enter into a forward contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in that foreign currency. When the
Fund believes that the U.S. dollar might suffer a substantial decline against
a foreign currency, it could enter into a forward contract to buy that
foreign currency for a fixed dollar amount. Alternatively, the Fund could
enter into a forward contract to sell a different foreign currency for a
fixed U.S. dollar amount if the Fund believes that the U.S. dollar value of
the foreign currency to be sold pursuant to its forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated. That is referred to as a
"cross hedge."
The Fund will cover its short positions in these cases by identifying
liquid assets on its books having a value equal to the aggregate amount of
the Fund's commitment under forward contracts. The Fund will not enter into
forward contracts or maintain a net exposure to such contracts if the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency or another currency that is the
subject of the hedge.
However, to avoid excess transactions and transaction costs, the Fund
may maintain a net exposure to forward contracts in excess of the value of
the Fund's portfolio securities or other assets denominated in foreign
currencies if the excess amount is "covered" by liquid securities denominated
in any currency. The cover must be at least equal at all times to the amount
of that excess. As one alternative, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency being hedged
by a forward sale contract at a price no higher than the forward contract
price. As another alternative, the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward purchase
contract at a price as high or higher than the forward contract price.
The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is
entered into and the date it is sold. In some cases the Manager might decide
to sell the security and deliver foreign currency to settle the original
purchase obligation. If the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver, the Fund might
have to purchase additional foreign currency on the "spot" (that is, cash)
market to settle the security trade. If the market value of the security
instead exceeds the amount of foreign currency the Fund is obligated to
deliver to settle the trade, the Fund might have to sell on the spot market
some of the foreign currency received upon the sale of the security. There
will be additional transaction costs on the spot market in those cases.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the Fund to
sustain losses on these contracts and to pay additional transactions costs.
The use of forward contracts in this manner might reduce the Fund's
performance if there are unanticipated changes in currency prices to a
greater degree than if the Fund had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to
sell a currency, the Fund might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract. Under that contract the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund might close out a forward contract
requiring it to purchase a specified currency by entering into a second
contract entitling it to sell the same amount of the same currency on the
maturity date of the first contract. The Fund would realize a gain or loss
as a result of entering into such an offsetting forward contract under either
circumstance. The gain or loss will depend on the extent to which the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and offsetting contract.
The costs to the Fund of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into on a principal basis, no brokerage fees or commissions
are involved. Because these contracts are not traded on an exchange, the
Fund must evaluate the credit and performance risk of the counterparty under
each forward contract.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time to
time, and will incur costs in doing so. Foreign exchange dealers do not
charge a fee for conversion, but they do seek to realize a profit based on
the difference between the prices at which they buy and sell various
currencies. Thus, a dealer might offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange if the Fund
desires to resell that currency to the dealer.
o Interest Rate Swap Transactions. The Fund can enter into interest rate
swap agreements. In an interest rate swap, the Fund and another party
exchange their right to receive or their obligation to pay interest on a
security. For example, they might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns or as a hedge against a basket of securities held by
the Fund that the Manager deems to be closely correlated with the swap
transaction. The Fund will not enter into swaps with respect to more than 25%
of its total assets. Also, the Fund will identify on its books liquid assets
(such as cash or U.S. government securities) to cover any amounts it could
owe under swaps that exceed the amounts it is entitled to receive, and it
will adjust that amount daily, as needed.
Swap agreements entail both interest rate risk and credit risk. There
is a risk that, based on movements of interest rates in the future, the
payments made by the Fund under a swap agreement will be greater than the
payments it received. Credit risk arises from the possibility that the
counterparty will default. If the counterparty defaults, the Fund's loss
will consist of the net amount of contractual interest payments that the Fund
has not yet received. The Manager will monitor the creditworthiness of
counterparties to the Fund's interest rate swap transactions on an ongoing
basis.
The Fund can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides
that all swaps done between the Fund and that counterparty shall be regarded
as parts of an integral agreement. If amounts are payable on a particular
date in the same currency in respect of one or more swap transactions, the
amount payable on that date in that currency shall be the net amount. In
addition, the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty can terminate all of the swaps
with that party. Under these agreements, if a default results in a loss to
one party, the measure of that party's damages is calculated by reference to
the average cost of a replacement swap for each swap. It is measured by the
mark-to-market value at the time of the termination of each swap. The gains
and losses on all swaps are then netted, and the result is the counterparty's
gain or loss on termination. The termination of all swaps and the netting of
gains and losses on termination is generally referred to as "aggregation."
o Foreign Exchange Volatility Swap Contracts. The Fund may enter into a
foreign exchange volatility swap transaction to hedge the direction of a
volatility in a particular currency, or for other non-speculative purposes.
In foreign exchange volatility swaps, counterparties agree to buy or sell
volatility at a specific volatility level over a fixed period. Payment is
normally made on the basis of a currency amount per percentage point above or
below the volatility strike level at maturity. Because the principal amount
is no exchanged, it represents neither an asset nor a liability to either
counterparty, and is referred to as a notional principal amount. The Fund
records a daily increase or decrease to unrealized gain (loss) based on
changes in the amount due to or owed by the Fund at the expiration date of
the swap. Foreign exchange volatility swaps are subject to credit risks (if
the counterparty fails to meet its obligations).
o Swaption Transactions. The Fund may enter into a swaption transaction,
which is a contract that grants the holder, in return for payment of the
purchase price (the "premium") of the option, the right, but not the
obligation, to enter into an interest rate swap at a preset rate within a
specified period of time, with the writer of the contract. The writer of the
contract receives the premium and bears the risk of unfavorable changes in
the preset rate on the underlying interest rate swap. Unrealized
gains/losses on swaptions are reflected in investment assets and investment
liabilities in the Fund's statement of financial condition.
o Regulatory Aspects of Hedging Instruments. The Commodities Futures
Trading Commission (the "CFTC") recently eliminated limitations on futures
trading by certain regulated entities including registered investment
companies and consequently registered investment companies may engage in
unlimited futures transactions and options thereon provided that the Fund
claims an exclusion from regulation as a commodity pool operator. The Fund
has claimed such an exclusion from registration as a commodity pool operator
under the Commodity Exchange Act ("CEA"). The Fund may use futures and
options for hedging and non-hedging purposes to the extent consistent with
its investment objective, internal risk management guidelines adopted by the
Fund's investment advisor (as they may be amended from time to time), and as
otherwise set forth in the Fund's prospectus or this statement of additional
information.
Transactions in options by the Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number
of options that may be written or held by a single investor or group of
investors acting in concert. Those limits apply regardless of whether the
options were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different exchanges or
through one or more brokers. Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same adviser as the Fund (or
an adviser that is an affiliate of the Fund's adviser). The exchanges also
impose position limits on futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future,
less the margin deposit applicable to it.
o Tax Aspects of Certain Hedging Instruments. Certain foreign currency
exchange contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code. In general, gains or losses
relating to Section 1256 contracts are characterized as 60% long-term and 40%
short-term capital gains or losses under the Code. However, foreign currency
gains or losses arising from Section 1256 contracts that are forward
contracts generally are treated as ordinary income or loss. In addition,
Section 1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market," and unrealized gains or losses are treated as though they
were realized. These contracts also may be marked-to-market for purposes of
determining the excise tax applicable to investment company distributions and
for other purposes under rules prescribed pursuant to the Internal Revenue
Code. An election can be made by the Fund to exempt those transactions from
this marked-to-market treatment.
Certain forward contracts the Fund enters into may result in
"straddles" for Federal income tax purposes. The straddle rules may affect
the character and timing of gains (or losses) recognized by the Fund on
straddle positions. Generally, a loss sustained on the disposition of a
position making up a straddle is allowed only to the extent that the loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there is
no unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, the following gains or losses are
treated as ordinary income or loss:
(1) gains or losses attributable to fluctuations in exchange rates that
occur between the
time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency
and the time the Fund actually collects such receivables or pays
such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign
currency
between the date of acquisition of a debt security denominated in
a foreign currency or foreign currency forward contracts and the
date of disposition.
Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the
amount of the Fund's investment income available for distribution to its
shareholders.
|X| Temporary Defensive and Interim Investments. When market conditions
are unstable, or the Manager believes it is otherwise appropriate to reduce
holdings in stocks, the Fund can invest in a variety of debt securities for
defensive purposes. The Fund can also purchase these securities for liquidity
purposes to meet cash needs due to the redemption of Fund shares, or to hold
while waiting to reinvest cash received from the sale of other portfolio
securities. The Fund's temporary defensive investments can include the
following short-term (maturing in one year or less) dollar-denominated debt
obligations:
o obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
o commercial paper (short-term, unsecured promissory notes) of domestic
or foreign companies,
o debt obligations of domestic or foreign corporate issuers,
o certificates of deposit and bankers' acceptances of domestic and
foreign banks having total assets in excess of $1 billion, and
o repurchase agreements.
Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly,
are not generally subject to significant fluctuations in principal value and
their value will be less subject to interest rate risk than longer-term debt
securities.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities. Under the Investment Company Act, a "majority" vote is defined
as the vote of the holders of the lesser of:
o 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or
o more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval.
However, significant changes to investment policies will be described in
supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's most significant investment policies
are described in the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
o The Fund cannot buy securities issued or guaranteed by any one issuer
if more than 5% of its total assets would be invested in securities of that
issuer or it would then own more than 10% of that issuer's voting
securities. This limit applies to 75% of the Fund's total assets. The limit
does not apply to securities issued by the U.S. government or any of its
agencies or instrumentalities, or securities of other investment companies.
o The Fund cannot invest 25% or more of its total assets in any one
industry. That limit does not apply to securities issued or guaranteed by
the U.S. government or its agencies and instrumentalities. Each foreign
government is treated as an "industry" and utilities are divided according to
the services they provide.
o The Fund cannot borrow money in excess of 331/3% of the value of its
total assets (including the amount borrowed). The Fund may borrow only from
banks and/or affiliated investment companies. With respect to this
fundamental policy, the Fund can borrow only if it maintains a 300% ratio of
assets to borrowings at all times in the manner set forth in the Investment
Company Act of 1940.
o The Fund cannot make loans except (a) through lending of securities,
(b) through the purchase of debt instruments or similar evidences of
indebtedness, (c) through an inter-fund lending program with other affiliated
funds, provided that no such loan may be made if, as a result, the aggregate
of such loans would exceed 33 1/3% of the value of its total assets (taken at
market value at the time of such loans), and (d) through repurchase
agreements.
o The Fund cannot invest in real estate, physical commodities or
commodity contracts. However, the Fund may: (1) invest in debt securities
secured by real estate or interests in real estate, or issued by companies,
including real estate investment trusts, that invest in real estate or
interests in real estate; (2) invest in hedging instruments permitted by any
of its other investment policies; and (3) buy and sell options, futures,
securities or other instruments backed by, or the investment return from
which is linked to changes in the price of, physical commodities or
currencies.
o The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities
Act of 1933 when reselling any securities held in its own portfolio.
o The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include
borrowing money, reverse repurchase agreements, delayed-delivery and
when-issued arrangements for portfolio securities transactions, and contracts
to buy or sell derivatives, hedging instruments, options or futures.
Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment (except in the case of
borrowing and investments in illiquid securities). 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.
|X| Does the Fund Have Additional Restrictions That Are Not "Fundamental"
Policies?
The Fund has additional operating policies, which are stated below, that
are not "fundamental," and which can be changed by the Board of Trustees
without shareholder approval.
o The Fund cannot invest in the securities of other registered investment
companies or registered unit investment trusts in reliance
on sub-paragraph (F) or (G) of Section 12(d)(1) of the
Investment Company Act of 1940.
For purposes of the Fund's policy not to concentrate its investments,
the Fund has adopted the industry classifications set forth in Appendix B to
this Statement of Additional Information. This is not a fundamental policy.
Disclosure of Portfolio Holdings. The Fund has adopted policies and
procedures concerning the dissemination of information about its
portfolio holdings by employees, officers and/or directors of the
Manager, Distributor and Transfer Agent. These policies are designed to
assure that non-public information about portfolio securities is
distributed only for a legitimate business purpose, and is done in a
manner that (a) conforms to applicable laws and regulations and (b) is
designed to prevent that information from being used in a way that could
negatively affect the Fund's investment program or enable third parties
to use that information in a manner that is harmful to the Fund.
o Public Disclosure. The Fund's portfolio holdings are made publicly
available no later than 60 days after the close of each of the
Fund's fiscal quarters in semi-annual and annual reports to
shareholders, or in its Statements of Investments on Form N-Q,
which are publicly available at the SEC. In addition, the top 10
or more holdings are posted on the OppenheimerFunds' website at
www.oppenheimerfunds.com in the "Fund Profiles" section. Other
general information about the Fund's portfolio investments, such
as portfolio composition by asset class, industry, country,
currency, credit rating or maturity, may also be posted with a
15-day lag.
Until publicly disclosed, the Fund's portfolio holdings are
proprietary, confidential business information. While recognizing the
importance of providing Fund shareholders with information about their
Fund's investments and providing portfolio information to a variety of
third parties to assist with the management, distribution and
administrative process, the need for transparency must be balanced
against the risk that third parties who gain access to the Fund's
portfolio holdings information could attempt to use that information to
trade ahead of or against the Fund, which could negatively affect the
prices the Fund is able to obtain in portfolio transactions or the
availability of the securities that portfolio managers are trading on the
Fund's behalf.
The Manager and its subsidiaries and affiliates, employees, officers, and
directors, shall neither solicit nor accept any compensation or other
consideration (including any agreement to maintain assets in the Fund or
in other investment companies or accounts managed by the Manager or any
affiliated person of the Manager) in connection with the disclosure of
the Fund's non-public portfolio holdings. The receipt of investment
advisory fees or other fees and compensation paid to the Manager and its
subsidiaries pursuant to agreements approved by the Fund's Board shall
not be deemed to be "compensation" or "consideration" for these purposes.
It is a violation of the Code of Ethics for any covered person to release
holdings in contravention of portfolio holdings disclosure policies and
procedures adopted by the Fund.
A list of the top 10 or more portfolio securities holdings (based on
invested assets), listed by security or by issuer, as of the end of each
month may be disclosed to third parties (subject to the procedures below)
no sooner than 15 days after month-end.
Except under special limited circumstances discussed below, month-end
lists of the Fund's complete portfolio holdings may be disclosed no
sooner than 30-days after the relevant month-end, subject to the
procedures below. If the Fund's complete portfolio holdings have not been
disclosed publicly, they may be disclosed pursuant to special requests
for legitimate business reasons, provided that:
o The third-party recipient must first submit a request for release of
Fund portfolio holdings, explaining the business reason for the
request;
o Senior officers (a Senior Vice President or above) in the Manager's
Portfolio and Legal departments must approve the completed
request for release of Fund portfolio holdings; and
o The third-party recipient must sign the Manager's portfolio holdings
non-disclosure agreement before receiving the data, agreeing to
keep information that is not publicly available regarding the
Fund's holdings confidential and agreeing not to trade directly
or indirectly based on the information.
The Fund's complete portfolio holdings positions may be released to the
following categories of entities or individuals on an ongoing basis,
provided that such entity or individual either (1) has signed an
agreement to keep such information confidential and not trade on the
basis of such information or (2) is subject to fiduciary obligations, as
a member of the Fund's Board, or as an employee, officer and/or director
of the Manager, Distributor, or Transfer Agent, or their respective legal
counsel, not to disclose such information except in conformity with these
policies and procedures and not to trade for his/her personal account on
the basis of such information:
o Employees of the Fund's Manager, Distributor and Transfer Agent who
need to have access to such information (as determined by senior
officers of such entity),
o The Fund's certified public accountants and independent registered
public accounting firm,
o Members of the Fund's Board and the Board's legal counsel,
o The Fund's custodian bank,
o A proxy voting service designated by the Fund and its Board,
o Rating/ranking organizations (such as Lipper and Morningstar),
o Manager, to provide portfolio security prices, and
o Dealers, to obtain bids (price quotations if securities are not priced
by the Fund's regular pricing services).
Portfolio holdings information of the Fund may be provided, under limited
circumstances, to brokers and/or dealers with whom the Fund trades and/or
entities that provide investment coverage and/or analytical information
regarding the Fund's portfolio, provided that there is a legitimate
investment reason for providing the information to the broker, dealer or
other entity. Month-end portfolio holdings information may, under this
procedure, be provided to vendors providing research information and/or
analytics to the fund, with at least a 15-day delay after the month end,
but in certain cases may be provided to a broker or analytical vendor
with a 1-2 day lag to facilitate the provision of requested investment
information to the manager to facilitate a particular trade or the
portfolio manager's investment process for the Fund. Any third party
receiving such information must first sign the Manager's portfolio
holdings non-disclosure agreement as a pre-condition to receiving this
information.
Portfolio holdings information (which may include information on
individual securities positions or multiple securities) may be provided
to the entities listed below (1) by portfolio traders employed by the
Manager in connection with portfolio trading, and (2) by the members of
the Manager's Security Valuation Group and Accounting Departments in
connection with portfolio pricing or other portfolio evaluation purposes:
o Brokers and dealers in connection with portfolio transactions
(purchases and sales)
o Brokers and dealers to obtain bids or bid and asked prices (if
securities held by the Fund are not priced by the fund's regular
pricing services)
o Dealers to obtain price quotations where the fund is not identified as
the owner
Portfolio holdings information (which may include information on the
Fund's entire portfolio or individual securities therein) may be provided
by senior officers of the Manager or attorneys on the legal staff of the
Manager, Distributor, or Transfer Agent, in the following circumstances:
o Response to legal process in litigation matters, such as responses to
subpoenas or in class action matters where the Fund may be part
of the plaintiff class (and seeks recovery for losses on a
security) or a defendant,
o Response to regulatory requests for information (the SEC, NASD, state
securities regulators, and/or foreign securities authorities,
including without limitation requests for information in
inspections or for position reporting purposes),
o To potential sub-advisers of portfolios (pursuant to confidentiality
agreements),
o To consultants for retirement plans for plan sponsors/discussions at
due diligence meetings (pursuant to confidentiality agreements),
o Investment bankers in connection with merger discussions (pursuant to
confidentiality agreements)
Portfolio managers and analysts may, subject to the Manager's
policies on communications with the press and other media, discuss
portfolio information in interviews with members of the media, or in due
diligence or similar meetings with clients or prospective purchasers of
Fund shares or their financial intermediary representatives.
The Fund's shareholders may, under unusual circumstances (such as a lack
of liquidity in the Fund's portfolio to meet redemptions), receive
redemption proceeds of their Fund shares paid as pro rata shares of
securities held in the Fund's portfolio. In such circumstances,
disclosure of the Fund's portfolio holdings may be made to such
shareholders.
The Chief Compliance Officer of the Fund and the Manager, Distributor,
and Transfer Agent (the "CCO") shall oversee the compliance by the
Manager, Distributor, Transfer Agent, and their personnel with these
policies and procedures. At least annually, the CCO shall report to the
Fund's Board on such compliance oversight and on the categories of
entities and individuals to which disclosure of portfolio holdings of the
Funds has been made during the preceding year pursuant to these policies.
The CCO shall report to the Fund's Board any material violation of these
policies and procedures during the previous calendar quarter and shall
make recommendations to the Board as to any amendments that the CCO
believes are necessary and desirable to carry out or improve these
policies and procedures.
The Manager and/or the Fund have entered into ongoing arrangements to
make available information about the Fund's portfolio holdings. One or
more of the Oppenheimer funds may currently disclose portfolio holdings
information based on ongoing arrangements to the following parties:
---------------------------------------------------------
A.G. Edwards & Sons Keijser Securities
---------------------------------------------------------
---------------------------------------------------------
ABG Securities Kempen & Co. USA Inc.
---------------------------------------------------------
---------------------------------------------------------
ABN AMRO Kepler Equities/Julius
Baer Sec
---------------------------------------------------------
---------------------------------------------------------
Advest KeyBanc Capital Markets
---------------------------------------------------------
---------------------------------------------------------
AG Edwards Leerink Swan
---------------------------------------------------------
---------------------------------------------------------
American Technology Research Legg Mason
---------------------------------------------------------
---------------------------------------------------------
Auerbach Grayson Lehman
---------------------------------------------------------
---------------------------------------------------------
Banc of America Securities Lehman Brothers
---------------------------------------------------------
---------------------------------------------------------
Barclays Lipper
---------------------------------------------------------
---------------------------------------------------------
Baseline Loop Capital Markets
---------------------------------------------------------
---------------------------------------------------------
Bear Stearns MainFirst Bank AG
---------------------------------------------------------
---------------------------------------------------------
Belle Haven Makinson Cowell US Ltd
---------------------------------------------------------
---------------------------------------------------------
Bloomberg Maxcor Financial
---------------------------------------------------------
---------------------------------------------------------
BNP Paribas Merrill
---------------------------------------------------------
---------------------------------------------------------
BS Financial Services Merrill Lynch
---------------------------------------------------------
---------------------------------------------------------
Buckingham Research Group Midwest Research
---------------------------------------------------------
---------------------------------------------------------
Caris & Co. Mizuho Securities
---------------------------------------------------------
---------------------------------------------------------
CIBC World Markets Morgan Stanley
---------------------------------------------------------
---------------------------------------------------------
Citigroup Morningstar
---------------------------------------------------------
---------------------------------------------------------
Citigroup Global Markets Natexis Bleichroeder
---------------------------------------------------------
---------------------------------------------------------
Collins Stewart Ned Davis Research Group
---------------------------------------------------------
---------------------------------------------------------
Craig-Hallum Capital Group LLCNomura Securities
---------------------------------------------------------
---------------------------------------------------------
Credit Agricole Cheuvreux Pacific Crest
N.A. Inc.
---------------------------------------------------------
---------------------------------------------------------
Credit Suisse First Boston Pacific Crest Securities
---------------------------------------------------------
---------------------------------------------------------
Daiwa Securities Pacific Growth Equities
---------------------------------------------------------
---------------------------------------------------------
Davy Petrie Parkman
---------------------------------------------------------
---------------------------------------------------------
Deutsche Bank Pictet
---------------------------------------------------------
---------------------------------------------------------
Deutsche Bank Securities Piper Jaffray Inc.
---------------------------------------------------------
---------------------------------------------------------
Dresdner Kleinwort WassersteinPlexus
---------------------------------------------------------
---------------------------------------------------------
Emmet & Co Prager Sealy & Co.
---------------------------------------------------------
---------------------------------------------------------
Empirical Research Prudential Securities
---------------------------------------------------------
---------------------------------------------------------
Enskilda Securities Ramirez & Co.
---------------------------------------------------------
---------------------------------------------------------
Essex Capital Markets Raymond James
---------------------------------------------------------
---------------------------------------------------------
Exane BNP Paribas RBC Capital Markets
---------------------------------------------------------
---------------------------------------------------------
Factset RBC Dain Rauscher
---------------------------------------------------------
---------------------------------------------------------
Fidelity Capital Markets Research Direct
---------------------------------------------------------
---------------------------------------------------------
Fimat USA Inc. Robert W. Baird
---------------------------------------------------------
---------------------------------------------------------
First Albany Roosevelt & Cross
---------------------------------------------------------
---------------------------------------------------------
First Albany Corporation Russell Mellon
---------------------------------------------------------
---------------------------------------------------------
Fixed Income Securities Ryan Beck & Co.
---------------------------------------------------------
---------------------------------------------------------
Fortis Securities Sanford C. Bernstein
---------------------------------------------------------
---------------------------------------------------------
Fox-Pitt, Kelton Scotia Capital Markets
---------------------------------------------------------
---------------------------------------------------------
Friedman, Billing, Ramsey SG Cowen & Co.
---------------------------------------------------------
---------------------------------------------------------
Fulcrum Global Partners SG Cowen Securities
---------------------------------------------------------
---------------------------------------------------------
Garp Research Soleil Securities Group
---------------------------------------------------------
---------------------------------------------------------
George K Baum & Co. Standard & Poors
---------------------------------------------------------
---------------------------------------------------------
Goldman Stone & Youngberg
---------------------------------------------------------
---------------------------------------------------------
Goldman Sachs SWS Group
---------------------------------------------------------
---------------------------------------------------------
HSBC Taylor Rafferty
---------------------------------------------------------
---------------------------------------------------------
HSBC Securities Inc Think Equity Partners
---------------------------------------------------------
---------------------------------------------------------
ING Barings Thomas Weisel Partners
---------------------------------------------------------
---------------------------------------------------------
ISI Group UBS
---------------------------------------------------------
---------------------------------------------------------
Janney Montgomery Wachovia
---------------------------------------------------------
---------------------------------------------------------
Jefferies Wachovia Corp
---------------------------------------------------------
---------------------------------------------------------
Jeffries & Co. Wachovia Securities
---------------------------------------------------------
---------------------------------------------------------
JP Morgan Wescott Financial
---------------------------------------------------------
---------------------------------------------------------
JP Morgan Securities William Blair
---------------------------------------------------------
---------------------------------------------------------
JPP Eurosecurities Yieldbook
---------------------------------------------------------
---------------------------------------------------------
Keefe, Bruyette & Woods
---------------------------------------------------------
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of
beneficial interest. The Fund was organized as a Massachusetts business trust
in May, 1989.
|X| Classes of Shares. The Trustees are authorized, without shareholder
approval, to create new series and classes of shares, to reclassify unissued
shares into additional series or classes and to divide or combine the shares
of a class into a greater or lesser number of shares without changing the
proportionate beneficial interest of a shareholder in the Fund. Shares do not
have cumulative voting rights, preemptive rights or subscription rights.
Shares may be voted in person or by proxy at shareholder meetings.
The Fund currently has five classes of shares: Class A, Class B, Class
C, Class N and Class Y. All classes invest in the same investment portfolio.
Only retirement plans may purchase Class N shares. Only certain institutional
investors may purchase Class Y shares. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o will generally have a different net asset value,
o will generally have separate voting rights on matters in which
interests of one class are different from interests of another
class, and
o votes as a class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one
vote at shareholder meetings, with fractional shares voting proportionally,
on matters submitted to the vote of shareholders. Each share of the Fund
represents an interest in the Fund proportionately equal to the interest of
each other share of the same class.
|X| Meetings of Shareholders. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold, regular annual meetings
of shareholders, but may hold shareholder meetings from time to time on
important matters or when required to do so by the Investment Company Act or
other applicable law. Shareholders have the right, upon a vote or
declaration in writing of two-thirds of the outstanding shares of the Fund,
to remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Trustees will call a meeting of shareholders to vote on the removal
of a Trustee upon the written request of the record holders of 10% of its
outstanding shares. If the Trustees receive a request from at least 10
shareholders stating that they wish to communicate with other shareholders to
request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants' expense. The
shareholders making the request must have been shareholders for at least six
months and must hold shares of the Fund valued at $25,000 or more or
constituting at least 1% of the Fund's outstanding shares. The Trustees may
also take other action as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for its obligations. The Declaration of Trust also states that upon
request, the Fund shall assume the defense of any claim made against a
shareholder for any act or obligation of the Fund and shall satisfy any
judgment on that claim. Massachusetts law permits a shareholder of a business
trust (such as the Fund) to be held personally liable as a "partner" under
certain circumstances. However, the risk that a Fund shareholder will incur
financial loss from being held liable as a "partner" of the Fund is limited
to the relatively remote circumstances in which the Fund would be unable to
meet its obligations.
The Fund's contractual arrangements state that any person doing
business with the Fund (and each shareholder of the Fund) agrees under its
Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand that may arise out of any dealings with
the Fund and that the Trustees shall have no personal liability to any such
person, to the extent permitted by law.
Board of Trustees and Oversight Committees. The Fund is governed by a Board
of Trustees, which is responsible for protecting the interests of
shareholders under Massachusetts law. The Trustees meet periodically
throughout the year to oversee the Fund's activities, review its performance,
and review the actions of the Manager.
The Board of Trustees has an Audit Committee, a Review Committee and a
Governance Committee. Each committee is comprised solely of Trustees who are
not "interested person" under the Investment Company Act (the "Independent
Trustees"). The members of the Audit Committee are Edward L. Cameron
(Chairman), George C. Bowen, Robert J. Malone and F. William Marshall, Jr. The
Audit Committee held 8 meetings during the Fund's fiscal year ended September
30, 2005. The Audit Committee furnishes the Board with recommendations
regarding the selection of the Fund's independent registered public accounting
firm (also referred to as the "independent Auditors"). Other main functions of
the Audit Committee, outlined in the Audit Committee Charter, include, but are
not limited to: (i) reviewing the scope and results of financial statement
audits and the audit fees charged; (ii) reviewing reports from the Fund's
independent Auditors regarding the Fund's internal accounting procedures and
controls; (iii) reviewing reports from the Manager's Internal Audit
Department; (iv) reviewing certain reports from and meet periodically with
the Funds' Chief Compliance Officer; (v) maintaining a separate line of
communication between the Fund's independent Auditors and the Independent
Trustees; (vi) reviewing the independence of the Fund's independent Auditors;
and (vii) pre-approving the provision of any audit or non-audit services by
the Fund's independent Auditors, including tax services, that are not
prohibited by the Sarbanes-Oxley Act, to the Fund, the Manager and certain
affiliates of the Manager.
The Review Committee is comprised solely of Independent Trustees. The
members of the Review Committee are Jon S. Fossel (Chairman), Robert G. Avis,
Sam Freedman and Beverly L. Hamilton. The Review Committee held 6 meetings
during the Fund's fiscal year ended September 30, 2005. Among other duties, as
set forth in the Review Committee's Charter, the Review Committee reports and
makes recommendations to the Board concerning the fees paid to the Fund's
transfer agent and the Manager and the services provided to the Fund by the
transfer agent and the Manager. The Review Committee also reviews the Fund's
investment performance as well as the policies and procedures adopted by the
Fund to comply with the Investment Company Act and other applicable law.
The Governance Committee is comprised solely of Independent Trustees.
The members of the Governance Committee are, Robert J. Malone (Chairman),
William Armstrong, Beverly L. Hamilton and F. William Marshall, Jr. The
Governance Committee held 5 meetings during the Fund's fiscal year ended
September 30, 2005. The Governance Committee has adopted a charter setting
forth its duties and responsibilities. Among other duties, the Governance
Committee reviews and oversees the Fund's governance guidelines, the adequacy
of the Fund's Codes of Ethics and the nomination of Trustees, including
Independent Trustees. The Governance Committee has adopted a process for
shareholder submission of nominees for board positions. Shareholders may
submit names of individuals, accompanied by complete and properly supported
resumes, for the Governance Committee's consideration by mailing such
information to the Governance Committee in care of the Fund. The Governance
Committee may consider such persons at such time as it meets to consider
possible nominees. The Governance Committee, however, reserves sole
discretion to determine which candidates for Trustees and Independent
Trustees it will recommend to the Board and/or shareholders and it may
identify candidates other than those submitted by Shareholders. The
Governance Committee may, but need not, consider the advice and
recommendation of the Manager and/or its affiliates in selecting nominees.
The full Board elects new Trustees except for those instances when a
shareholder vote is required.
Shareholders who desire to communicate with the Board should address
correspondence to the Board or an individual Board member and may submit
their correspondence electronically at www.oppenheimerfunds.com under the
caption "contact us" or by mail to the Fund at the address below.
Trustees and Officers of the Fund. Except for Mr. Murphy, each of the
Trustees is an Independent Trustee. All of the Trustees are also trustees or
directors of the following Oppenheimer/Centennial funds (referred to as
"Board II Funds"):
Oppenheimer Cash Reserves Oppenheimer Principal Protected
Trust II
Oppenheimer Principal Protected
Oppenheimer Capital Income Fund Trust III
Oppenheimer Champion Income Fund Oppenheimer Real Asset Fund
Oppenheimer Senior Floating Rate
Oppenheimer Equity Fund, Inc. Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer Integrity Funds Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund
Centennial California Tax Exempt
Oppenheimer Main Street Funds, Inc. Trust
Oppenheimer Main Street Opportunity Fund Centennial Government Trust
Oppenheimer Main Street Small Cap Fund Centennial Money Market Trust
Centennial New York Tax Exempt
Oppenheimer Municipal Fund Trust
Oppenheimer Principal Protected Trust Centennial Tax Exempt Trust
Present or former officers, directors, trustees and employees
(and their immediate family members) of the Fund the Manager and its
affiliates, and retirement plans established by them for their employees are
permitted to purchase Class A shares of the Fund and the other Oppenheimer
funds at net asset value without sales charge. The sales charge on Class A
shares is waived for that group because of the reduced sales efforts realized
by the Distributor.
Messrs. Steinmetz, Gillespie, Murphy, Petersen, Szilagyi, Vandehey,
Wixted and Zack and Mss. Bloomberg and Ives, who are officers of the Fund,
hold the same offices with one or more of the other Board II Funds. As of
December __, 2005 the Trustees and officers of the Fund, as a group, owned of
record or beneficially less than 1% of any class of shares of the Fund. The
foregoing statement does not reflect ownership of shares held of record by an
employee benefit plan for employees of the Manager, other than the shares
beneficially owned under that plan by the officers of the Board II Funds. In
addition, none of the Independent Trustees (nor any of their immediate family
members) own securities of either the Manager or the Distributor or of any
entity directly or indirectly controlling, controlled by or under common
control with the Manager or the Distributor of the Board II Funds.
Biographical Information. The Trustees and officers, their positions
with the Fund, length of service in such position(s), and principal
occupations and business affiliations during at least the past five years are
listed in the charts below. The charts also include information about each
Trustee's beneficial share ownership in the Fund and in all of the registered
investment companies that the Trustee oversees in the Oppenheimer family of
funds ("Supervised Funds"). The address of each Trustee in the chart below is
6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for
an indefinite term, or until his or her resignation, retirement, death or
removal.
- ---------------------------------------------------------------------------------------------
Independent Trustees
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar
Range of
Shares
Range of Beneficially
Shares Owned in
with the Fund, Years; Other Trusteeships/Directorships Held; Beneficially All
Length of Service, Number of Portfolios in the Fund Complex Owned in Supervised
Age Currently Overseen the Fund Funds
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
As of December 31, 2005
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
William L. Chairman of the following private mortgage $0 Over
Armstrong, banking companies: Cherry Creek Mortgage $100,000
Chairman of the Company (since 1991), Centennial State
Board of Trustees Mortgage Company (since 1994), and The El
since 2003, Trustee Paso Mortgage Company (since 1993); Chairman
since 1999 of the following private companies:
Age: 68 Ambassador Media Corporation (since 1984) and
Broadway Ventures (since 1984); Director of
the following: Helmerich & Payne, Inc. (oil
and gas drilling/production company) (since
1992), Campus Crusade for Christ (since 1991)
and The Lynde and Harry Bradley Foundation,
Inc. (non-profit organization) (since 2002);
former Chairman of the following: Transland
Financial Services, Inc. (private mortgage
banking company) (1997-2003), Great Frontier
Insurance (insurance agency) (1995-2000),
Frontier Real Estate, Inc. (residential real
estate brokerage) (1994-2000) and Frontier
Title (title insurance agency) (1995-2000);
former Director of the following:
UNUMProvident (insurance company)
(1991-2004), Storage Technology Corporation
(computer equipment company) (1991-2003) and
International Family Entertainment
(television channel) (1992-1997); U.S.
Senator (January 1979-January 1991). Oversees
38 portfolios in the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Robert G. Avis, Director and President of A.G. Edwards $0 Over
Trustee since 1993 Capital, Inc. (General Partner of private $100,000
Age: 74 equity funds) (until February 2001);
Chairman, President and Chief Executive
Officer of A.G. Edwards Capital, Inc. (until
March 2000); Director of A.G. Edwards & Sons,
Inc. (brokerage company) (until 2000) and
A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and
Director of A.G. Edwards, Inc. (until March
1999); Vice Chairman of A.G. Edwards & Sons,
Inc. (until March 1999); Chairman of A.G.
Edwards Trust Company (until March 1999) and
A.G.E. Asset Management (investment adviser)
(until March 1999). Oversees 38 portfolios in
the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
George C. Bowen, Assistant Secretary and Director of $10,001-$50,0Over
Trustee since 2000 Centennial Asset Management Corporation $100,000
Age: 69 (December 1991-April 1999); President,
Treasurer and Director of Centennial Capital
Corporation (June 1989-April 1999); Chief
Executive Officer and Director of MultiSource
Services, Inc. (March 1996-April 1999); Mr.
Bowen held several positions with the Manager
and with subsidiary or affiliated companies
of the Manager (September 1987-April 1999).
Oversees 38 portfolios in the
OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Edward L. Cameron, Member of The Life Guard of Mount Vernon $0 Over
Trustee since 2000 (George Washington historical site) (since $100,000
Age: 67 June 2000); Director of Genetic ID, Inc.
(biotech company) (March 2001-May 2002);
Partner at PricewaterhouseCoopers LLP
(accounting firm) (July 1974-June 1999);
Chairman of Price Waterhouse LLP Global
Investment Management Industry Services Group
(July 1994-June 1998). Oversees 38 portfolios
in the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Jon S. Fossel, Director of UNUMProvident (insurance company) $0 Over
Trustee since 1990 (since June 2002); Director of Northwestern $100,000
Age: 63 Energy Corp. (public utility corporation)
(since November 2004); Director of P.R.
Pharmaceuticals (October 1999-October 2003);
Director of Rocky Mountain Elk Foundation
(non-profit organization) (February
1998-February 2003); Chairman and Director
(until October 1996) and President and Chief
Executive Officer (until October 1995) of the
Manager; President, Chief Executive Officer
and Director of the following: Oppenheimer
Acquisition Corp. ("OAC") (parent holding
company of the Manager), Shareholders
Services, Inc. and Shareholder Financial
Services, Inc. (until October 1995). Oversees
38 portfolios in the OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Sam Freedman, Director of Colorado Uplift (charitable $10,001-$50,0Over
Trustee since 1996 organization) (since September 1984). Mr. $100,000
Age: 65 Freedman held several positions with the
Manager and with subsidiary or affiliated
companies of the Manager (until October
1994). Oversees 38 portfolios in the
OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Beverly L. Hamilton, Trustee of Monterey Institute for $0 Over
Trustee since 2002 International Studies (educational $100,000
Age: 59 organization) (since February 2000); Board
Member of Middlebury College (educational
organization) (since 2005) Director of The
California Endowment (philanthropic
organization) (since April 2002); Director
(February 2002-2005) and Chairman of Trustees
(since 2006) of the Community Hospital of
Monterey Peninsula; Director (October
1991-2005) and Vice Chairman (since 2006) of
American Funds' Emerging Markets Growth Fund,
Inc. (mutual fund); President of ARCO
Investment Management Company (February
1991-April 2000); Member of the investment
committees of The Rockefeller Foundation and
The University of Michigan; Advisor at Credit
Suisse First Boston's Sprout venture capital
unit (venture capital fund) (1994-January
2005); Trustee of MassMutual Institutional
Funds (investment company) (1996-June 2004);
Trustee of MML Series Investment Fund
(investment company) (April 1989-June 2004);
Member of the investment committee of
Hartford Hospital (2000-2003); and Advisor to
Unilever (Holland) pension fund (2000-2003).
Oversees 38 portfolios in the
OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Robert J. Malone, Director of Jones International University Over Over
Trustee since 2002 (educational organization) (since August $100,000 $100,000
Age: 61 2005); Chairman, Chief Executive Officer and
Director of Steele Street State Bank
(commercial banking) (since August 2003);
Director of Colorado UpLIFT (charitable
organization) (since 1986); Trustee of the
Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman
of U.S. Bank-Colorado (subsidiary of U.S.
Bancorp and formerly Colorado National Bank)
(July 1996-April 1999); Director of
Commercial Assets, Inc. (real estate
investment trust) (1993-2000); Director of
Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and
gas exploration) (1997-February 2004).
Oversees 38 portfolios in the
OppenheimerFunds complex.
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
F. William Trustee of MassMutual Select Funds (formerly $10,001-$50,0Over
Marshall, Jr., MassMutual Institutional Funds) (investment $100,000
Trustee since 2000 company) (since 1996) and MML Series
Age: 63 Investment Fund (investment company) (since
1996) Trustee (since 2003) and Chairman
(1994- 2005) of the Investment Committee and
Trustee (since 2003) and Chairman
(1994-2005)of the Investment Committee of the
Worcester Polytech Institute (private
university); President and Treasurer of the
SIS Funds (private charitable fund) (since
January 1999); Chairman of SIS & Family Bank,
F.S.B. (formerly SIS Bank) (commercial bank)
(January 1999-July 1999); and Executive Vice
President of Peoples Heritage Financial
Group, Inc. (commercial bank) (January
1999-July 1999). Oversees 40 portfolios in
the OppenheimerFunds complex.*
- ---------------------------------------------------------------------------------------------
* Includes two open-end investment companies: MassMutual Select Funds and
MML Series Investment Fund. In accordance with the instructions for Form
N-1A, for purposes of this section only, MassMutual Select Funds and MML
Series Investment Fund are included in the "Fund Complex." The Manager
does not consider MassMutual Select Funds and MML Series Investment Fund
to be part of the OppenheimerFunds' "Fund Complex" as that term may be
otherwise interpreted.
The address of Mr. Murphy is Two World Financial Center, 225 Liberty Street,
11th Floor, New York, New York 10281-1008. Mr. Murphy serves as a Trustee for
an indefinite term, or until his resignation, retirement, death or removal
and as an officer for an annual term, or until his resignation, retirement,
death or removal. Mr. Murphy is an "Interested Trustee" because he is
affiliated with the Manager by virtue of his positions as an officer and
director of the Manager, and as a shareholder of its parent company. Mr.
Murphy was elected as a Trustee of the Fund with the understanding that in
the event he ceases to be the chief executive officer of the Manager, he will
resign as a Trustee of the Fund and the other Board II Funds (defined below)
for which he is a director or trustee.
- --------------------------------------------------------------------------------------------
Interested Trustee and Officer
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Range of Beneficially
Shares Owned in
Held with the Fund, Years; Other Trusteeships/Directorships Held; Beneficially All
Length of Service, Number of Portfolios in the Fund Complex Owned in Supervised
Age Currently Overseen the Fund Funds
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
As of December 31, 2005
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and $10,001-$50,Over
President, Director (since June 2001) and President $100,000
Principal Executive (since September 2000) of the Manager;
Officer and Trustee President and director or trustee of other
since 2001 Oppenheimer funds; President and Director of
Age: 56 OAC and of Oppenheimer Partnership Holdings,
Inc. (holding company subsidiary of the
Manager) (since July 2001); Director of
OppenheimerFunds Distributor, Inc.
(subsidiary of the Manager) (since November
2001); Chairman and Director of Shareholder
Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries
of the Manager) (since July 2001); President
and Director of OppenheimerFunds Legacy
Program (charitable trust program established
by the Manager) (since July 2001); Director
of the following investment advisory
subsidiaries of the Manager: OFI
Institutional Asset Management, Inc.,
Centennial Asset Management Corporation,
Trinity Investment Management Corporation and
Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset Management
Corporation and OFI Private Investments, Inc.
(since July 2001); President (since November
2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.;
Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent
company) (since February 1997); Director of
DLB Acquisition Corporation (holding company
parent of Babson Capital Management LLC)
(since June 1995); Member of the Investment
Company Institute's Board of Governors (since
October 3, 2003); Chief Operating Officer of
the Manager (September 2000-June 2001);
President and Trustee of MML Series
Investment Fund and MassMutual Select Funds
(open-end investment companies) (November
1999-November 2001); Director of C.M. Life
Insurance Company (September 1999-August
2000); President, Chief Executive Officer and
Director of MML Bay State Life Insurance
Company (September 1999-August 2000);
Director of Emerald Isle Bancorp and Hibernia
Savings Bank (wholly-owned subsidiary of
Emerald Isle Bancorp) (June 1989-June 1998).
Oversees 87 portfolios in the
OppenheimerFunds complex.
- --------------------------------------------------------------------------------------------
The addresses of the officers in the chart below are as follows: for
Messrs. Steinmetz, Gillespie, and Zack and Ms. Bloomberg, Two World Financial
Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs.
Petersen, Szilagyi, Vandehey, and Wixted and Ms. Ives, 6803 S. Tucson Way,
Centennial, Colorado 80112-3924. Each officer serves for an indefinite term
or until his or her resignation, retirement death or removal.
- -----------------------------------------------------------------------------------------
Other Officers of the Fund
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During Past 5 Years
Held with the Fund,
Length of Service, Age
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Arthur P. Steinmetz, Senior Vice President of the Manager (since March 1993) and of
Vice President and HarbourView Asset Management Corporation (since March 2000). An
Portfolio Manager officer of 4 portfolios in the OppenheimerFunds complex.
since 1989
Age: 47
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer of the
Vice President and Manager (since March 2004); Vice President of OppenheimerFunds
Chief Compliance Distributor, Inc., Centennial Asset Management Corporation and
Officer since 2004 Shareholder Services, Inc. (since June 1983); Vice President and
Age: 55 Director of Internal Audit of the Manager (1997-February 2004).
An officer of 87 portfolios in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer of the Manager (since March
Treasurer since 1999 1999); Treasurer of the following: HarbourView Asset Management
Age: 46 Corporation, Shareholder Financial Services, Inc., Shareholder
Services, Inc., Oppenheimer Real Asset Management Corporation,
and Oppenheimer Partnership Holdings, Inc. (since March 1999),
OFI Private Investments, Inc. (since March 2000),
OppenheimerFunds International Ltd. and OppenheimerFunds plc
(since May 2000), OFI Institutional Asset Management, Inc.
(since November 2000), and OppenheimerFunds Legacy Program
(since June 2003); Treasurer and Chief Financial Officer of OFI
Trust Company (trust company subsidiary of the Manager) (since
May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April
2000-June 2003); Principal and Chief Operating Officer of
Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 87 portfolios in the
OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager (since August 2002);
Assistant Treasurer Manager/Financial Product Accounting of the Manager (November
since 2004 1998-July 2002). An officer of 87 portfolios in the
Age: 35 OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Brian C. Szilagyi, Assistant Vice President of the Manager (since July 2004);
Assistant Treasurer Director of Financial Reporting and Compliance of First Data
since 2005 Corporation (April 2003-July 2004); Manager of Compliance of
Age: 35 Berger Financial Group LLC (May 2001-March 2003). An officer of
87 portfolios in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since 2001 Counsel (since March 2002) of the Manager; General Counsel and
Age: 57 Director of the Distributor (since December 2001); General
Counsel of Centennial Asset Management Corporation (since
December 2001); Senior Vice President and General Counsel of
HarbourView Asset Management Corporation (since December 2001);
Secretary and General Counsel of OAC (since November 2001);
Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December 2002); Director of
Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and Shareholder Services,
Inc. (since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior
Vice President (May 1985-December 2003), Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of the
following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November
2001), and OppenheimerFunds International Ltd. (September
1997-November 2001). An officer of 87 portfolios in the
OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager (since May
Assistant Secretary 2004); First Vice President (April 2001-April 2004), Associate
since 2004 General Counsel (December 2000-April 2004), Corporate Vice
Age: 37 President (May 1999-April 2001) and Assistant General Counsel
(May 1999-December 2000) of UBS Financial Services Inc.
(formerly, PaineWebber Incorporated). An officer of 87
portfolios in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary Assistant Secretary (since October 2003) of the Manager; Vice
since 2001 President (since 1999) and Assistant Secretary (since October
Age: 40 2003) of the Distributor; Assistant Secretary of Centennial
Asset Management Corporation (since October 2003); Vice
President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy
Program and Shareholder Financial Services, Inc. (since December
2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 87 portfolios in the OppenheimerFunds
complex.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the Manager
Assistant Secretary (since September 2004); First Vice President (2000-September
since 2004 2004), Director (2000-September 2004) and Vice President
Age: 41 (1998-2000) of Merrill Lynch Investment Management. An officer
of 87 portfolios in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------
Remuneration of the Officers and Trustees. The officers and the Interested
Trustee of the Fund who are affiliated with the Manager receive no salary or
fee from the Fund. The Independent Trustees received the compensation shown
below from the Fund for serving as a Trustee and member of a committee (if
applicable), with respect to the Fund's fiscal year ended September 30, 2005.
The total compensation, including accrued retirement benefits, from the Fund
and fund complex represents compensation received for serving as a Trustee
and member of a committee (if applicable) of the Boards of the Fund and other
funds in the OppenheimerFunds complex during the calendar year ended
December 31, 2005.
- ---------------------------------------------------------------------------------
Name of Trustee and Other Fund Aggregate Compensation Total Compensation
From the Fund and
Position(s) (as applicable) From the Fund((1)) Fund Complex(2)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
William L. Armstrong $19,542 $178,000
Chairman of the Board and
Governance Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert G. Avis $13,010 $118,500
Review Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
George C. Bowen $13,010 $118,500
Audit Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Edward L. Cameron $14,931 $136,000
Audit Committee Chairman
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Jon S. Fossel $14,931 $124,100
Review Committee Chairman
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Sam Freedman $13,010 $118,500
Review Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Beverly Hamilton $13,080(3) $107,175
Review Committee Member and
Governance Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert J. Malone $15,008(4) $134,868
Governance Committee Chairman
and
Audit Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
F. William Marshall, Jr. $13,010 $169,500((5))
Audit Committee Member and
Governance Committee Member
- ---------------------------------------------------------------------------------
1. "Aggregate Compensation From the Fund" includes fees and deferred
compensation, if any.
2. In accordance with SEC regulations, for purposes of this section only,
"Fund Complex" includes the Oppenheimer funds, the MassMutual
Institutional Funds, the MassMutual Select Funds and the MML Series
Investment Fund, the investment adviser for which is the indirect parent
company of the Fund's Manager also serves as the Sub-Advisor to the
following: MassMutual Premier International Equity Fund, MassMutual
Premier Main Street Fund, MassMutual Premier Strategic Income Fund,
MassMutual Premier Capital Appreciation Fund, and MassMutual Premier
Global Fund. The Manager does not consider MassMutual Institutional Funds,
MassMutual Select Funds and MML Series Investment Fund to be part of the
OppenheimerFunds' "Fund Complex" as that term may be otherwise interpreted.
3. Includes $13,080 deferred by Ms. Hamilton under the "Deferred
Compensation Plan" described below.
4. Includes $15,008 deferred by Mr. Malone under the "Deferred
Compensation Plan" described below.
5. Includes $51,000 compensation paid to Mr. Marshall for serving as a
Trustee for MassMutual Select Funds and MML Series Investment Fund.
Deferred Compensation Plan For Trustees. The Board of Trustees has
adopted a Deferred Compensation Plan for Independent Trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they
are entitled to receive from the Fund. Under the plan, the compensation
deferred by a Trustee is periodically adjusted as though an equivalent amount
had been invested in shares of one or more Oppenheimer funds selected by the
Trustee. The amount paid to the Trustee under the plan will be determined
based upon the amount of compensation deferred and the performance of the
selected funds.
Deferral of Trustees' fees under the plan will not materially affect
the Fund's assets, liabilities or net income per share. The plan will not
obligate the Fund to retain the services of any Trustee or to pay any
particular level of compensation to any Trustee. Pursuant to an Order
issued by the SEC, the Fund may invest in the funds selected by Trustees
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustees' deferred compensation account.
|X| Major Shareholders. As of December 30, 2005 the only persons or
entities who owned of record or were known by the Fund to own beneficially 5%
or more of any class of the Fund's outstanding securities were:
Charles Schwab & Co, Inc., Special Custody Account for the Exclusive
Benefit of Customers, 101 Montgomery St, San Francisco, CA
94104-4211, which owned 62,775,696.153 Class A shares (5.51% of the
Class A shares then outstanding).
Citigroup Global Markets Inc, 333 West 34th Street, New York, NY
10001-2483, which owned 10,582,328.430 Class B shares (5.17% of the
Class B shares then outstanding).
Citigroup Global Markts, Inc., 333 West 34th St, New York, NY
10001-2483, which owned 10,575,929.340 Class C shares (5.59% of the
Class C shares then outstanding).
MLPF&S for the Sole Benefit of its Customers, 4800 Deer Lake Dr. E.
Fl. #3, Jacksonville, FL 32246-6484, which owned 10,173,531.054 Class
C shares (5.38% of the Class C shares then outstanding).
MLPF&S for the Sole Benefit of its Customers, 4800 Deer Lake Dr. E.
Fl. #3, Jacksonville, FL 32246-6484, which owned 1,531,198.145 Class
N shares (7.27% of the Class N shares then outstanding).
Oppenheimer Portfolio Series Active Allocation, 6803 South Tucson
Way, Centennial, CO 80112-3924, which owned 10,608,554.043 Class Y
shares (52.01% of the Class Y shares then outstanding).
New Mexico Savings Plan-TEP, Moderate Portfolio, PO Box 5270, Denver,
CO 80217-5270, which owned 2,966,399.766 Class Y shares (14.54% of
the Class Y shares then outstanding).
New Mexico Savings Plan-TEP, Moderately Aggressive Portfolio, PO Box
5270, Denver, CO 80217-5270, which owned 1,851,251.765 Class Y shares
(9.07% of the Class Y shares then outstanding).
New Mexico Savings Plan-TEP Ultra Conservative Portfolio, PO Box
5270, Denver, CO 80217-5270, which owned 1,543,933.370 Class Y shares
(7.57% of the Class Y shares then outstanding).
Taynik & Co., c/o Investors Bank & Trust, PO Box 9130, Boston MA
02117-9130, which owned 1,307,548.437 Class Y shares (6.41% of the
Class Y shares then outstanding).
OFI Trust Company Tr, OppenheimerFunds, Inc., Deferred Compensation
Plan, 255 Liberty St. Fl. #11, New York, NY 10281-1024, which owned
1,023,763.389 Class Y shares (5.01% of the Class Y shares then
outstanding).
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company, a
global, diversified insurance and financial services organization.
|X| Code of Ethics. The Fund, the Manager and the Distributor have a Code
of Ethics. It is designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with or
take advantage of the Fund's portfolio transactions. Covered persons include
persons with knowledge of the investments and investment intentions of the
Fund and other funds advised by the Manager. The Code of Ethics does permit
personnel subject to the Code to invest in securities, including securities
that may be purchased or held by the Fund, subject to a number of
restrictions and controls. Compliance with the Code of Ethics is carefully
monitored and enforced by the Manager.
The Code of Ethics is an exhibit to the Fund's registration statement
filed with the SEC and can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. You can obtain information about the hours
of operation of the Public Reference Room by calling the SEC at
1.202.942.8090. The Code of Ethics can also be viewed as part of the Fund's
registration statement on the SEC's EDGAR database at the SEC's Internet
website at www.sec.gov. Copies may be obtained, after paying a duplicating
fee, by electronic request at the following E-mail address:
publicinfo@sec.gov., or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
|X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting
Policies and Procedures under which the Fund votes proxies relating to
securities ("portfolio proxies") held by the Fund. The Fund's primary
consideration in voting portfolio proxies is the financial interests of the
Fund and its shareholders. The Fund has retained an unaffiliated third-party
as its agent to vote portfolio proxies in accordance with the Fund's
Portfolio Proxy Voting Guidelines and to maintain records of such portfolio
proxy voting. The Portfolio Proxy Voting Policies and Procedures include
provisions to address conflicts of interest that may arise between the Fund
and the Manager or the Manager's affiliates or business relationships. Such
a conflict of interest may arise, for example, where the Manager or an
affiliate of the Manager manages or administers the assets of a pension plan
or other investment account of the portfolio company soliciting the proxy or
seeks to serve in that capacity. The Manager and its affiliates generally
seek to avoid such conflicts by maintaining separate investment decision
making processes to prevent the sharing of business objectives with respect
to proposed or actual actions regarding portfolio proxy voting decisions.
Additionally, the Manager employs the following two procedures: (1) if the
proposal that gives rise to the conflict is specifically addressed in the
Guidelines, the Manager will vote the portfolio proxy in accordance with the
Guidelines, provided that they do not provide discretion to the Manager on
how to vote on the matter; and (2) if such proposal is not specifically
addressed in the Guidelines or the Guidelines provide discretion to the
Manager on how to vote, the Manager will vote in accordance with the
third-party proxy voting agent's general recommended guidelines on the
proposal provided that the Manager has reasonably determined that there is no
conflict of interest on the part of the proxy voting agent. If neither of
the previous two procedures provides an appropriate voting recommendation,
the Manager may retain an independent fiduciary to advise the Manager on how
to vote the proposal or may abstain from voting. The Guidelines' provisions
with respect to certain routine and non-routine proxy proposals are
summarized below:
o The Fund generally votes with the recommendation of the issuer's
management on routine matters, including ratification of
independent registered public accounting firm, unless
circumstances indicate otherwise.
o The Fund evaluates nominees for director nominated by management on a
case-by-case basis, examining the following factors, among
others: Composition of the board and key board committees,
attendance at board meetings, corporate governance provisions and
takeover activity, long-term company performance and the
nominee's investment in the company.
o In general, the Fund opposes anti-takeover proposals and supports
elimination, or the ability of shareholders to vote on the
preservation or elimination, of anti-takeover proposals, absent
unusual circumstances.
o The Fund supports shareholder proposals to reduce a super-majority vote
requirement, and opposes management proposals to add a
super-majority vote requirement.
o The Fund opposes proposals to classify the board of directors.
o The Fund supports proposals to eliminate cumulative voting.
o The Fund opposes re-pricing of stock options without shareholder
approval.
o The Fund generally considers executive compensation questions such as
stock option plans and bonus plans to be ordinary business
activity. The Fund analyzes stock option plans, paying particular
attention to their dilutive effect. While the Fund generally
supports management proposals, the Fund opposes plans it
considers to be excessive.
The Fund is required to file new Form N-PX, with its complete proxy
voting record for the 12 months ended June 30th, no later than August 31st of
each year. The Fund's Form N-PX filing is available (i) without charge, upon
request, by calling the Fund toll-free at 1.800.525-7048 and (ii) on the
SEC's website at www.sec.gov.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities
for the Fund's portfolio and handles its day-to-day business. The portfolio
manager of the Fund is employed by the Manager and is the person who is
principally responsible for the day-to-day management of the Fund's
portfolio. Other members of the Manager's Fixed Income Portfolio Team provide
the portfolio managers with counsel and support in managing the Fund's
portfolio.
The agreement requires the Manager, at its expense, to provide the Fund with
adequate office space, facilities and equipment. It also requires the Manager
to provide and supervise the activities of all administrative and clerical
personnel required to provide effective administration for the Fund. Those
responsibilities include the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified reports,
and composition of proxy materials and registration statements for continuous
public sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses, custodian
and transfer agent expenses, share issuance costs, certain printing and
registration costs and non-recurring expenses, including litigation costs.
The management fees paid by the Fund to the Manager are calculated at the
rates described in the Prospectus, which are
applied to the assets of the Fund as a whole. The fees are allocated to each
class of shares based upon the relative proportion of the Fund's net assets
represented by that class. The management fees paid by the Fund to the
Manager during its last three fiscal years were:
- -------------------------------------------------------------------------------
Fiscal Year ended 9/30: Management Fees Paid to OppenheimerFunds,
Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2003 $32,424,727
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2004 $33,967,119
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2005 $33,309,652
- -------------------------------------------------------------------------------
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment
advisory agreement, the Manager is not liable for any loss the Fund sustains
for any good faith errors or omissions in connection with any matters to
which the investment advisory agreement relates..
The agreement permits the Manager to act as investment advisor for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
advisor or general distributor. If the Manager shall no longer act as
investment advisor to the Fund, the Manager may withdraw the right of the
Fund to use the name "Oppenheimer" as part of its name.
Portfolio Manager. The Fund's portfolio is managed by Arthur P. Steinmetz
(referred to as the "Portfolio Manager"). He is the person responsible for
the day-to-day management of the Fund's investments.
Other Accounts Managed. In addition to managing the
Fund's investment portfolio, Mr. Steinmetz also manages other
investment portfolios and other accounts on behalf of the Manager or
its affiliates. The following table provides information regarding the
other portfolios and accounts managed by Mr. Steinmetz as of September
30, 2005. No portfolio or account has an advisory fee based on
performance:
Registered Other Pooled
Investment Investment Other
Companies Vehicles Accounts**
------------------------------------------------------------------------
------------------------------------------------------------------------
6 3 4
Accounts Managed
------------------------------------------------------------------------
------------------------------------------------------------------------
$11,778.8 $56.4 $1,018.9
Total Assets Managed*
* In millions.
**Does not include personal accounts of portfolio managers and their
families, which are subject to the Code of Ethics.
As indicated above, the Portfolio Manager also manages other funds
and accounts. Potentially, at times, those responsibilities could
conflict with the interests of the Fund. That may occur whether the
investment objectives and strategies of the other funds and accounts
are the same as, or different from, the Fund's investment objectives
and strategies. For example he may need to allocate investment
opportunities between the Fund and another fund or account having
similar objectives or strategies, or he may need to execute
transactions for another fund or account that could have a negative
impact on the value of securities held by the Fund. Not all funds and
accounts advised by the Manager have the same management fee. If the
management fee structure of another fund or account is more
advantageous to the Manager than the fee structure of the Fund, the
Manager could have an incentive to favor the other fund or account.
However, the Manager's compliance procedures and Code of Ethics
recognize the Manager's fiduciary obligation to treat all of its
clients, including the Fund, fairly and equitably, and are designed to
preclude the portfolio manager from favoring one client over another.
It is possible, of course, that those compliance procedures and the
Code of Ethics may not always be adequate to do so. At different
times, the Portfolio Manager may manage other funds or accounts with
investment objectives and strategies similar to those of the Fund, or
he may manage funds or accounts with different investment objectives
and strategies.
Compensation of the Oppenheimer Portfolio Managers. The Fund's
Portfolio Manager is employed and compensated by the Manager, not the
Fund. Under the Manager's compensation program for its portfolio
managers and portfolio analysts, their compensation is based primarily
on the investment performance results of the funds and accounts they
manage, rather than on the financial success of the Manager. This is
intended to align the portfolio managers' and analysts' interests with
the success of the funds and accounts and their investors. The
Manager's compensation structure is designed to attract and retain
highly qualified investment management professionals and to reward
individual and team contributions toward creating shareholder value.
As of September 30, 2005, the portfolio managers' compensation
consisted of three elements: a base salary, an annual discretionary
bonus and eligibility to participate in long-term awards of options and
appreciation rights in regard to the common stock of the Manager's
holding company parent. Senior portfolio managers may also be eligible
to participate in the Manager's deferred compensation plan.
The base pay component of each portfolio manager is reviewed regularly
to ensure that it reflects the performance of the individual, is
commensurate with the requirements of the particular portfolio,
reflects any specific competence or specialty of the individual
manager, and is competitive with other comparable positions, to help
the Manager attract and retain talent. The annual discretionary bonus
is determined by senior management of the Manager and is based on a
number of factors, including a fund's pre-tax performance for periods
of up to five years, measured against an appropriate benchmark selected
by management. The Lipper benchmark with respect to the Fund is Lipper
- Multi-Sector Income Funds. Other factors include management quality
(such as style consistency, risk management, sector coverage, team
leadership and coaching) and organizational development. The Portfolio
Manager's compensation is not based on the total value of the Fund's
portfolio assets, although the Fund's investment performance may
increase those assets. The compensation structure is also intended to
be internally equitable and serve to reduce potential conflicts of
interest between the Fund and other funds and accounts managed by the
Portfolio Manager. The compensation structure of the other funds
managed by the Portfolio Manager is the same as the compensation
structure of the Fund, described above.
Ownership of Fund Shares. As of September 30, 2005,
the Portfolio Manager beneficially owned shares of the Fund as follows:
Range of Shares
Beneficially
Portfolio Manager Owned in the Fund
----------------------------------------------------------
----------------------------------------------------------
Arthur Steinmetz None
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties
of the Manager under the investment advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions. The Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated brokers," as that term is
defined in the Investment Company Act, that the Manager thinks, in its best
judgment based on all relevant factors, will implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution
at the most favorable price obtainable for the services provided. The Manager
need not seek competitive commission bidding. However, it is expected to be
aware of the current rates of eligible brokers and to minimize the
commissions paid to the extent consistent with the interests and policies of
the Fund as established by its Board of Trustees.
Under the investment advisory agreement, in choosing brokers to execute
portfolio transactions for the Fund, the Manager may select brokers (other
than affiliates) that provide both brokerage and research services to the
Fund. The commissions paid to those brokers may be higher than another
qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage
for the Fund subject to the provisions of the investment advisory agreement
and other applicable rules and procedures described below.
The Manager's portfolio traders allocate brokerage based upon
recommendations from the Manager's portfolio managers, together with the
portfolio traders' judgment as to the execution capability of the broker or
dealer. In certain instances, portfolio managers may directly place trades
and allocate brokerage. In either case, the Manager's executive officers
supervise the allocation of brokerage.
Most securities purchases made by the Fund are in principal
transactions at net prices. The Fund usually deals directly with the selling
or purchasing principal or market maker without incurring charges for the
services of a broker on its behalf unless the Manager determines that a
better price or execution may be obtained by using the services of a broker.
Therefore, the Fund does not incur substantial brokerage costs. Portfolio
securities purchased from underwriters include a commissions or concession
paid by the issuer to the underwriter in the price of the security. Portfolio
securities purchased from dealers include a spread between the bid and asked
price. In an option transaction the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the investment to
which the option relates.
Other accounts advised by the Manager have investment policies similar
to those of the Fund. Those other accounts may purchase or sell the same
securities as the Fund at the same time as the Fund, which could affect the
supply and price of the securities. If two or more accounts advised by the
Manager purchase the same security on the same day from the same dealer, the
transactions under those combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually placed for
each account. When possible, the Manager tries to combine concurrent orders
to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates. The transactions under those
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each account.
Rule 12b-1 under the Investment Company Act prohibits any fund from
compensating a broker or dealer for promoting or selling the fund's shares by
(1) directing to that broker or dealer any of the fund's portfolio
transactions, or (2) directing any other remuneration to that broker or
dealer, such as commissions, mark-ups, mark downs or other fees from the
fund's portfolio transactions, that were effected by another broker or dealer
(these latter arrangements are considered to be a type of "step-out"
transaction). In other words, a fund and its investment adviser cannot use
the fund's brokerage for the purpose of rewarding broker-dealers for selling
the fund's shares.
However, the Rule permits funds to effect brokerage transactions
through firms that also sell fund shares, provided that certain procedures
are adopted to prevent a quid pro quo with respect to portfolio brokerage
allocations. As permitted by the Rule, the Manager has adopted procedures
(and the Fund's Board of Trustees has approved those procedures) that permit
the Fund to direct portfolio securities transactions to brokers or dealers
that also promote or sell shares of the Fund, subject to the "best execution"
considerations discussed above. Those procedures are designed to prevent: (1)
the Manager's personnel who effect the Fund's portfolio transactions from
taking into account a broker's or dealer's promotion or sales of the Fund
shares when allocating the Fund's portfolio transactions, and (2) the Fund,
the Manager and the Distributor from entering into agreements or
understandings under which the Manager directs or is expected to direct the
Fund's brokerage directly, or through a "step-out" arrangement, to any broker
or dealer in consideration of that broker's or dealer's promotion or sale of
the Fund's shares or the shares of any of the other Oppenheimer funds.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. The research services provided by a
particular broker may be useful both to the Fund and to one or more of the
other accounts advised by the Manager or its affiliates. Investment research
may be supplied to the Manager by the broker or by a third party at the
instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, market quotations for portfolio evaluations, analytical
software and similar products and services. If a research service also
assists the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process
may be paid in commission dollars.
Although the Manager currently does not do so, the Board of Trustees
may permit the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research if the broker represents to the Manager
that: (i) the trade is not from or for the broker's own inventory, (ii) the
trade was executed by the broker on an agency basis at the stated commission,
and (iii) the trade is not a riskless principal transaction. The Board of
Trustees may also permit the Manager to use commissions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either
held in the Fund's portfolio or are being considered for purchase. The
Manager provides information to the Board about the commissions paid to
brokers furnishing such services, together with the Manager's representation
that the amount of such commissions was reasonably related to the value or
benefit of such services.
During the fiscal year ended September 30, 2005, the Fund executed no
transactions and paid no commissions to firms that provide research services.
---------------------------------------------------------------------
Total Brokerage Commissions Paid by the
Fiscal Year Ended 9/30: Fund*
---------------------------------------------------------------------
---------------------------------------------------------------------
2003 $1,061,756
---------------------------------------------------------------------
---------------------------------------------------------------------
2004 $1,150,143
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 $333,050
---------------------------------------------------------------------
*Amounts do not include spreads or commissions on principal
transactions on a net trade basis.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the Fund's classes of shares. The Distributor bears the expenses
normally attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders. The Distributor is not obligated to sell a specific number of
shares.
The sales charges and concessions paid to, or retained by, the
Distributor from the sale of shares and the contingent deferred sales charges
retained by the Distributor on the redemption of shares during the Fund's
three most recent fiscal years are shown in the tables below.
- ----------------------------------------------
Aggregate Class A
Front-End
Sales Charges Front-End Sales
Fiscal Year on Class A Charges Retained
Ended 9/30: Shares by Distributor(1)
- ----------------------------------------------
- ----------------------------------------------
2003 $5,134,030 $1,418,393
- ----------------------------------------------
- ----------------------------------------------
2004 $6,035,218 $1,886,271
- ----------------------------------------------
- ----------------------------------------------
2005 $7,698,135 $2,269,622
- ----------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a
parent of the Distributor.
- -----------------------------------------------------------------------------
Fiscal Concessions on Concessions on Concessions on Concessions on
Year Class A Shares Class B Shares Class C Shares Class N Shares
Ended Advanced by Advanced by Advanced by Advanced by
9/30: Distributor(1) Distributor(1) Distributor(1) Distributor(1)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2003 $594,870 $6,186,560 $1,150,531 $122,428
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2004 $424,340 $3,391,476 $1,122,696 $199,149
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2005 $484,436 $2,599,144 $1,237,921 $192,208
- -----------------------------------------------------------------------------
1. The Distributor advances concession payments to financial
intermediaries for certain sales of Class A shares and for sales of
Class B, Class C and Class N shares from its own resources at the time
of sale.
- ------------------------------------------------------------------------------
Class A
Class B Class C Class N
Contingent Contingent Contingent Contingent
Deferred Deferred Sales Deferred Sales Deferred Sales
Fiscal Year Sales Charges Charges Charges Charges
Ended 9/30: Retained by Retained by Retained by Retained by
Distributor Distributor Distributor Distributor
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
2003 $115,085 $6,274,772 $97,016 $41,724
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
2004 $73,000 $3,803,185 $117,463 $22,540
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
2005 $9,298 $2,114,614 $121,168 $44,508
- ------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class
A shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent Trustees(1), cast in person
at a meeting called for the purpose of voting on that plan.
Under the Plans, the Manager and the Distributor may make payments to
affiliates. In their sole discretion, they may also from time to time make
substantial payments from their own resources, which include the profits the
Manager derives from the advisory fees it receives from the Fund, to
compensate brokers, dealers, financial institutions and other intermediaries
for providing distribution assistance and/or administrative services or that
otherwise promote sales of the Fund's shares. These payments, some of which
may be referred to as "revenue sharing," may relate to the Fund's inclusion
on a financial intermediary's preferred list of funds offered to its clients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount
of payments to be made under a plan must be approved by shareholders of the
class affected by the amendment. Because Class B shares of the Fund
automatically convert into Class A shares 72 months after purchase, the Fund
must obtain the approval of both Class A and Class B shareholders for a
proposed material amendment to the Class A the plan that would materially
increase payments under the plan. That approval must be by a majority of the
shares of each class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each plan states that while it is in effect, the selection and
nomination of those Trustees of the Fund who are not "interested persons" of
the Fund is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in the selection and nomination
process as long as the final decision as to selection or nomination is
approved by a majority of the Independent Trustees.
Under the plans for a class, no payment will be made to any recipient
in any period in which the aggregate net asset value of all Fund shares of
that class held by the recipient for itself and its customers does not exceed
a minimum amount, if any, that may be set from time to time by a majority of
the Independent Trustees.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as
"recipients") for personal services and account maintenance services they
provide for their customers who hold Class A shares. The services include,
among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's
investment plans available and providing other services at the request of the
Fund or the Distributor. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares. The Board has set the rate at that level. The Distributor
does not receive or retain the service fee on Class A shares in accounts for
which the Distributor has been listed as the broker-dealer of record. While
the plan permits the Board to authorize payments to the Distributor to
reimburse itself for services under the plan, the Board has not yet done so,
except in the case of the special arrangement described below, regarding
grandfathered retirement accounts. The Distributor makes payments to
recipients periodically at an annual rate not to exceed 0.25% of the average
annual net assets consisting of Class A shares held in the accounts of the
recipients or their customers.
With respect to purchases of Class A shares subject to a contingent
deferred sales charge by certain retirement plans that purchased such shares
prior to March 1, 2001 ("grandfathered retirement accounts"), the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after the shares are purchased. During the first year the shares
are sold, the Distributor retains the service fee to reimburse itself for the
costs of distributing the shares. After the first year shares are
outstanding, the Distributor makes service fee payments to recipients
periodically on those shares. The advance payment is based on the net asset
value of shares sold. Shares purchased by exchange do not qualify for the
advance service fee payment. If Class A shares purchased by grandfathered
retirement accounts are redeemed during the first year after their purchase,
the recipient of the service fees on those shares will be obligated to repay
the Distributor a pro rata portion of the advance payment of the service fee
made on those shares.
For the fiscal year ended September 30, 2005 payments under the Class A
plan totaled $10,768,143, of which $31,844 was retained by the Distributor
under the arrangement described above, regarding grandfathered retirement
accounts, and included $604,386 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. The Distributor may not use payments received under the
Class A plan to pay any of its interest expenses, carrying charges, or other
financial costs, or allocation of overhead.
|X| Class B, Class C and Class N Distribution and Service Plan Fees. Under
each plan, distribution and service fees are computed on the average of the
net asset value of shares in the respective class, determined as of the close
of each regular business day during the period. Each plan provides for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund
under the plan during the period for which the fee is paid. The types of
services that recipients provide are similar to the services provided under
the Class A service plan, described above.
Each plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a
periodic basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after Class B, Class C and Class N shares are purchased. After the
first year Class B, Class C or Class N shares are outstanding, after their
purchase, the Distributor makes service fee payments periodically on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee
payment. If Class B, Class C or Class N shares are redeemed during the first
year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance
payment of the service fee made on those shares. Class B, Class C or Class N
shares may not be purchased by an investor directly from the Distributor
without the investor designating another broker-dealer of record. If the
investor no longer has another broker-dealer of record for an existing
account, the Distributor is automatically designated as the broker-dealer of
record, but solely for the purpose of acting as the investor's agent to
purchase the shares. In those cases, the Distributor retains the asset-based
sales charge paid on Class B, Class C and Class N shares, but does not retain
any service fees as to the assets represented by that account.
The asset-based sales charge and service fees increase Class B and
Class C expenses by 1.00% and the asset-based sales charge and service fees
increase Class N expenses by 0.50% of the net assets per year of the
respective classes.
The Distributor retains the asset-based sales charge on Class B and
Class N shares. The Distributor retains the asset-based sales charge on Class
C shares during the first year the shares are outstanding. It pays the
asset-based sales charge as an ongoing concession to the recipient on Class C
shares outstanding for a year or more. If a dealer has a special agreement
with the Distributor, the Distributor will pay the Class B, Class C or Class
N service fee and the asset-based sales charge to the dealer periodically in
lieu of paying the sales concession and service fee in advance at the time of
purchase.
The asset-based sales charge on Class B, Class C and Class N shares
allow investors to buy shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The Fund pays
the asset-based sales charge to the Distributor for its services rendered in
distributing Class B, Class C and Class N shares. The payments are made to
the Distributor in recognition that the Distributor:
o pays sales concessions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales concessions and/or the advance of the
service fee payment to recipients under the plans, or may provide
such financing from its own resources or from the resources of an
affiliate,
o employs personnel to support distribution of Class B, Class C and Class
N shares,
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue
sky" registration fees and certain other distribution expenses,
o may not be able to adequately compensate dealers that sell Class B,
Class C and Class N shares without receiving payment under the plans
and therefore may not be able to offer such Classes for sale absent
the plans,
o receives payments under the plans consistent with the service fees and
asset-based sales charges paid by other non-proprietary funds that
charge 12b-1 fees,
o may use the payments under the plan to include the Fund in various
third-party distribution programs that may increase sales of Fund
shares,
o may experience increased difficulty selling the Fund's shares if
payments under the plan are discontinued because most competitor
funds have plans that pay dealers for rendering distribution
services as much or more than the amounts currently being paid by
the Fund, and
o may not be able to continue providing, at the same or at a lesser cost,
the same quality distribution sales efforts and services, or to
obtain such services from brokers and dealers, if the plan payments
were to be discontinued.
The Distributor's actual expenses in selling Class B, Class C and Class
N shares may be more than the payments it receives from the contingent
deferred sales charges collected on redeemed shares and from the Fund under
the plans. If either the Class B, Class C or Class N plan is terminated by
the Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for distributing shares
before the plan was terminated.
- --------------------------------------------------------------------------------
Distribution and Service Fees Paid to the Distributor for the Fiscal Year
Ended 9/30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Payments Retained by Expenses Under of Net Assets
Under Plan Distributor Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $10,198,995 $7,808,819(1) $95,359,491 10.38%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $7,471,089 $1,046,009(2) $22,928,061 2.91%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N Plan $345,046 $214,515(3) $1,074,287 1.29%
- --------------------------------------------------------------------------------
1. Includes $87,098 paid to an affiliate of the Distributor's parent
company.
2. Includes $202,293 paid to an affiliate of the Distributor's parent
company.
3. Includes $11,935 paid to an affiliate of the Distributor's parent
company.
All payments under the Class B, Class C and Class N plans are subject
to the limitations imposed by the Conduct Rules of the National Association
of Securities Dealers, Inc. on payments of asset-based sales charges and
service fees.
Payments to Fund Intermediaries
Financial intermediaries may receive various forms of compensation or
reimbursement from the Fund in the form of 12b-1 plan payments as described
in the preceding section of this Statement of Additional Information. They
may also receive payments or concessions from the Distributor, derived from
sales charges paid by the clients of the financial intermediary, also as
described in this Statement of Additional Information. Additionally, the
Manager and/or the Distributor (including their affiliates) may make payments
to financial intermediaries in connection with their offering and selling
shares of the Fund and other Oppenheimer funds, providing marketing or
promotional support, transaction processing and/or administrative services.
Among the financial intermediaries that may receive these payments are
brokers and dealers who sell and/or hold shares of the Fund, banks (including
bank trust departments), registered investment advisers, insurance companies,
retirement plan and qualified tuition program administrators, third party
administrators, and other institutions that have selling, servicing or
similar arrangements with the Manager or Distributor. The payments to
intermediaries vary by the types of product sold, the features of the Fund
share class and the role played by the intermediary.
Possible types of payments to financial intermediaries include, without
limitation, those discussed below.
o Payments made by the Fund, or by an investor buying or selling shares
of the Fund may include:
o depending on the share class that the investor selects, contingent
deferred sales charges or initial front-end sales charges, all
or a portion of which front-end sales charges are payable by
the Distributor to financial intermediaries (see "About Your
Account" in the Prospectus);
o ongoing asset-based payments attributable to the share class selected,
including fees payable under the Fund's distribution and/or
service plans adopted under Rule 12b-1 under the Investment
Company Act, which are paid from the Fund's assets and
allocated to the class of shares to which the plan relates (see
"About the Fund -- Distribution and Service Plans" above);
o shareholder servicing payments for providing omnibus accounting,
recordkeeping, networking, sub-transfer agency or other
administrative or shareholder services, including retirement
plan and 529 plan administrative services fees, which are paid
from the assets of a Fund as reimbursement to the Manager or
Distributor for expenses they incur on behalf of the Fund.
o Payments made by the Manager or Distributor out of their respective
resources and assets, which may include profits the Manager derives
from investment advisory fees paid by the Fund. These payments are
made at the discretion of the Manager and/or the Distributor. These
payments, often referred to as "revenue sharing" payments, may be in
addition to the payments by the Fund listed above.
o These types of payments may reflect compensation for marketing support,
support provided in offering the Fund or other Oppenheimer
funds through certain trading platforms and programs,
transaction processing or other services;
o The Manager and Distributor each may also pay other compensation to the
extent the payment is not prohibited by law or by any
self-regulatory agency, such as the NASD. Payments are made
based on the guidelines established by the Manager and
Distributor, subject to applicable law.
These payments may provide an incentive to financial intermediaries to
actively market or promote the sale of shares of the Fund or other
Oppenheimer funds, or to support the marketing or promotional efforts of the
Distributor in offering shares of the Fund or other Oppenheimer funds. In
addition, some types of payments may provide a financial intermediary with an
incentive to recommend the Fund or a particular share class. Financial
intermediaries may earn profits on these payments, since the amount of the
payment may exceed the cost of providing the service. Certain of these
payments are subject to limitations under applicable law. Financial
intermediaries may categorize and disclose these arrangements to their
clients and to members of the public in a manner different from the
disclosures in the Fund's prospectus and this Statement of Additional
Information. You should ask your financial intermediary for information about
any payments it receives from the Fund, the Manager or the Distributor and
any services it provides, as well as the fees and commissions it charges.
Although brokers or dealers that sell Fund shares may also act as a
broker or dealer in connection with the execution of the purchase or sale of
portfolio securities by the Fund or other Oppenheimer funds, a financial
intermediary's sales of shares of the Fund or such other Oppenheimer funds is
not a consideration for the Manager when choosing brokers or dealers to
effect portfolio transactions for the Fund or such other Oppenheimer funds.
Revenue sharing payments can pay for distribution-related or asset
retention items including, without limitation,
o transactional support, one-time charges for setting up access for the
Fund or other Oppenheimer funds on particular trading systems, and
paying the intermediary's networking fees;
o program support, such as expenses related to including the Oppenheimer
funds in retirement plans, college savings plans, fee-based advisory
or wrap fee programs, fund "supermarkets", bank or trust company
products or insurance companies' variable annuity or variable life
insurance products;
o placement on the dealer's list of offered funds and providing
representatives of the Distributor with access to a financial
intermediary's sales meetings, sales representatives and management
representatives.
Additionally, the Manager or Distributor may make payments for firm
support, such as business planning assistance, advertising, and educating a
financial intermediary's sales personnel about the Oppenheimer funds and
shareholder financial planning needs.
For the year ended December 31, 2004, the following financial
intermediaries that are broker-dealers offering shares of the Oppenheimer
funds, and/or their respective affiliates, received revenue sharing or
similar distribution-related payments from the Manager or Distributor for
marketing or program support:
Advest Inc. Aegon
A.G. Edwards & Sons, Inc AIG Network
Allianz Life Insurance Company Allstate Life Insurance Company
Ameritas Life Insurance Corporation American Centurian Life Insurance
American Enterprise Life Insurance American Express Financial Advisors
Inc.
American Portfolios Annuity Investors Life
AXA Advisors Banc One Securities Corporation
Bank of New York Cadaret Grant & Co. Inc.
Charter One Securities Inc. Chase Investment Services
Citigroup Financial Network CitiStreet
Citizens Bank of Rhode Island CJM Planning Corp.
Columbus Life Insurance Company Commonwealth Financial Network
CUNA Brokerage Services Inc. CUSO Financial Services, L.P.
Federal Kemper First Allied Securities Inc
First Global Capital GE Financial Assurance
GlenBrook Life and Annuity Co. Great West Life & Annuity Co., Inc.
HD Vest Hewitt Associates
HSBC Brokerage (USA) Inc. ING Network
Jefferson Pilot Securities Corporation John Hancock Variable Life Insurance
Company
Kemper Life Assurance Company Legend Equities Corporation
Legg Mason Wood Walker, Incorporated Lincoln National Life Insurance
Company
Lincoln Financial Advisors Corporation Lincoln Investment Planning
Linsco/Private Ledger Corp. MassMutual Financial Group and
affiliates
McDonald Investments, Inc. Merrill Lynch & Co., Inc. and
affiliates
Metlife and affiliates Minnesota Life Insurance Company
Morgan Stanley DW Inc. NPH Network
Nationwide and affiliates New York Life Securities, LLC
PacLife Network Park Avenue Securities LLC
Planmember Securities Corporation Prime Capital Services, Inc.
Princor Financial Services Corporation Protective Life Insurance Co.
Provident Mutual Insurance Company Prudential Investment Management
Services LLC
Raymond James Financial Services, Inc. Raymond James & Associates, Inc.
RBC Dain Rauscher Inc. Securities America, Inc.
Security Benefit Life Insurance Company Signator Investments
Sun Life Insurance Company Suntrust Investment Services, Inc.
Tower Square Securities, Inc Travelers Life & Annuity Co., Inc.
UBS Financial Services Inc. Union Central Life Insurance Company
Wachovia Securities LLC Wells Fargo Investments, LLC
For the year ended December 31, 2004, the following firms, which in
some cases are broker-dealers, received payments from the Manager or
Distributor for administrative or other services provided (other than revenue
sharing arrangements), as described above:
ABN AMRO ADP
Alliance Benefit Group AMVESCAP Retirement Plans
American Stock & Transfer Baden Retirement
BCG Benefit Administration Co., LLC
Benefit Administration, Inc. Benefit Plans Administrative Services
Benetech, Inc. BISYS Retirement Services
Boston Financial Data Services Ceridian
Circle Trust Company Citigroup
CitiStreet CPI
Daily Access.Com, Inc. Digital Retirement Solutions
Dyatech ERISA Administrative Services, Inc.
ExpertPlan.com FAScore
FBD Consulting Federated Investors
Fidelity Institutional First National Bank of Omaha
First Trust Corp. Franklin Templeton
Geller Group Gold K
Great West Financial Services Hartford Life Insurance Co.
Equities, Inc.
ICMA - RC Services In West Pension Mgmt
Independent Plan Coordinators Ingham Group
Interactive Retirement Systems, Ltd. Invesmart, Inc.
Kaufman & Goble Leggette & Co., Inc.
Manulife MassMutual Financial Group and
affiliates
Matrix Settlement & Clearance Services Mellon HR Solutions
Merrill Lynch & Co., Inc. Metavante
Metlife Securities Inc. MFS Investment Management
Mid Atlantic Capital Corp. Milliman USA
Morgan Stanley DW Inc. National City Bank
National Financial Services Corp. National Investors Services Corp.
Nationwide Investment Service Corp. New York Life Investment Management,
Inc.
Northwest Plan Services Pension Administration and Consulting
PFPC, Inc. PSMI Group
Putnam Fiduciary Trust Company Quads Trust Company
RSM McGladrey SAFECO
Charles Schwab & Co., Inc. Security Trust Company
Sentinel / National Life Standard Insurance Co
Stanley, Hunt, Dupree & Rhine State Street Bank & Trust Company
Suntrust Investment Services, Inc. Swerdlin & Co.
T. Rowe Price Brokerage Services, L.P. Taylor, Perky & Parker, LLC
The 401k Company The Investment Center, Inc.
Trusource Union Bank and Trust Co.
USI Consulting Group Vanguard Group
Web401K.com Wilmington Trust Company
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how
total returns are calculated is set forth below. The charts below show the
Fund's performance as of the Fund's most recent fiscal year end. You can
obtain current performance information by calling the Fund's Transfer Agent
at 1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the SEC. Those rules describe the types of performance
data that may be used and how it is to be calculated. In general, any
advertisement by the Fund of its performance data must include the average
annual total returns for the advertised class of shares of the Fund.
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other
investments:
o Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the
performance of each shareholder's account. Your account's
performance will vary from the model performance data if your
dividends are received in cash, or you buy or sell shares during the
period, or you bought your shares at a different time and price than
the shares used in the model.
o The Fund's performance returns may not reflect the effect of taxes on
dividends and capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, its yields and total returns
are not guaranteed and normally will fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be worth more or less
than their original cost.
o Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future yields or returns.
The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The yields and
total returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of debt
investments, the types of investments the Fund holds, and its operating
expenses that are allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because
of the different expenses that affect each class.
o Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a class of shares for a stated 30-day period.
It is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments for that period. It may
therefore differ from the "dividend yield" for the same class of shares,
described below.
Standardized yield is calculated using the following formula set forth
in rules adopted by the SEC, designed to assure uniformity in the way that
all funds calculate their yields:
Standardized Yield = 2[( a - b +1)(6) -1 ]
------
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense assumptions).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day
of the period, adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized
yield for a 30-day period occurs at a constant rate for a six-month period
and is annualized at the end of the six-month period. Additionally, because
each class of shares is subject to different expenses, it is likely that the
standardized yields of the Fund's classes of shares will differ for any
30-day period.
o Dividend Yield. The Fund may quote a "dividend yield" for each class of
its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and
the sum is multiplied by 12 (to annualize the yield) and divided by the
maximum offering price on the last day of the dividend period. The formula is
shown below:
Dividend Yield = dividends paid x 12/maximum offering price (payment date)
The maximum offering price for Class A shares includes the current
maximum initial sales charge. The maximum offering price for Class B, Class C
and Class N shares is the net asset value per share, without considering the
effect of contingent deferred sales charges. There is no sales charge on
Class Y shares. The Class A dividend yield may also be quoted without
deducting the maximum initial sales charge.
- --------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 9/30/05
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Class of Standardized Yield Dividend Yield
Shares
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Class A 4.83% 4.59% 4.68% 4.45%
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Class B 4.07% N/A 3.92% N/A
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Class C 4.07% N/A 3.93% N/A
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Class N 4.39% N/A 4.26% N/A
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Class Y 5.09% N/A 4.94% N/A
- --------------------------------------------------------------------
|X| Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. Because of differences in expenses for each class of shares, the
total returns for each class are separately measured. The cumulative total
return measures the change in value over the entire period (for example, 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 actual
year-by-year performance. The Fund uses standardized calculations for its
total returns as prescribed by the SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P" in the formula below) (unless the return is
shown without sales charge, as described below). For Class B shares, payment
of the applicable contingent deferred sales charge is applied, depending on
the period for which the return is shown: 5.0% in the first year, 4.0% in the
second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0%
in the sixth year and none thereafter. For Class C shares, the 1.0%
contingent deferred sales charge is deducted for returns for the one-year
period. For Class N shares, the 1.0% contingent deferred sales charge is
deducted for returns for the one-year period, and total returns for the
periods prior to 03/01/01 (the inception date for Class N shares) are based
on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1
fees. There is no sales charge on Class Y shares.
o Average Annual Total Return. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in
value of a hypothetical initial investment of $1,000 ("P" in the formula
below) held for a number of years ("n" in the formula) to achieve an Ending
Redeemable Value ("ERV" in the formula) of that investment, according to the
following formula:
ERV l/n - 1 Average Annual Total
Return
P
o Average Annual Total Return (After Taxes on Distributions). The
"average annual total return (after taxes on distributions)" of Class A
shares is an average annual compounded rate of return for each year in a
specified number of years, adjusted to show the effect of federal taxes
(calculated using the highest individual marginal federal income tax rates in
effect on any reinvestment date) on any distributions made by the Fund during
the specified period. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking into account the
effect of taxes on Fund distributions, but not on the redemption of Fund
shares, according to the following formula:
- 1 = Average Annual Total Return (After Taxes on
ATVD l/n Distributions)
P
o Average Annual Total Return (After Taxes on Distributions and
Redemptions). The "average annual total return (after taxes on distributions
and redemptions)" of Class A shares is an average annual compounded rate of
return for each year in a specified number of years, adjusted to show the
effect of federal taxes (calculated using the highest individual marginal
federal income tax rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period and the effect of
capital gains taxes or capital loss tax benefits (each calculated using the
highest federal individual capital gains tax rate in effect on the redemption
date) resulting from the redemption of the shares at the end of the period.
It is the rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an ending value ("ATVDR" in the
formula) of that investment, after taking into account the effect of taxes on
Fund distributions and on the redemption of Fund shares, according to the
following formula:
ATVDR - 1 = Average Annual Total Return (After Taxes on Distributions
l/n and Redemptions)
P
o Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:
ERV - P = Total Return
- -----------
P
o Total Returns at Net Asset Value. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class N
shares. There is no sales charge on Class Y shares. Each is based on the
difference in net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
- ---------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 9/30/05
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns (10
years or
Shares life-of-class)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of (or life of
class if less) class if less)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class 97.30% 107.13% 4.55% 9.77% 7.32% 8.37% 7.03% 7.55%
A(1)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class
B(2) 98.46% 98.46% 3.94% 8.94% 7.25% 7.55% 7.09% 7.09%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class
C(3) 91.95% 91.95% 7.96% 8.96% 7.58% 7.58% 6.74%(3) 6.74%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class
N(4) 43.07% 43.07% 8.27% 9.27% 8.13%(4) 8.13%(4) N/A N/A
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class
Y(5) 63.79% 63.79% 9.73% 9.73% 8.46% 8.46_% 6.64%(5) 6.64%
- ---------------------------------------------------------------------------------
1. Inception of Class A: 10/16/1989
2. Inception of Class B: 11/30/1992
3. Inception of Class C: 5/26/1995
4. Inception of Class N: 3/1/2001
5. Inception of Class Y: 1/26/1998
- -----------------------------------------------------------------------------
Average Annual Total Returns for Class A(1) Shares (After Sales Charge)
For the Periods Ended 9/30/05
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of (or life of
class if less) class if less)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
After Taxes on Distributions 2.13% 4.74% 3.94%
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
After Taxes on 2.92% 4.63% 4.01%
Distributions and
Redemption of Fund Shares
- -----------------------------------------------------------------------------
1. Inception of Class A: 10/16/1989
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer
Agent at the addresses or telephone numbers shown on the cover of this
Statement of Additional Information. The Fund may also compare its
performance to that of other investments, including other mutual funds, or
use rankings of its performance by independent ranking entities. Examples of
these performance comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the
ranking of the performance of its classes of shares by Lipper, Inc.
("Lipper"). Lipper is a widely-recognized independent mutual fund monitoring
service. Lipper monitors the performance of regulated investment companies,
including the Fund, and ranks their performance for various periods in
categories based on investment styles. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes
into consideration. Lipper also publishes "peer-group" indices of the
performance of all mutual funds in a category that it monitors and averages
of the performance of the funds in particular categories.
|X| Morningstar Ratings. From time to time the Fund may publish the star
rating of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar rates mutual funds in
their specialized market sector. The Fund is rated among the multi-sector
bond category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. For each fund with at least a three-year history,
Morningstar calculates a Morningstar Rating(TM)based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in a fund's monthly
performance (including the effects of sales charges, loads, and redemption
fees), placing more emphasis on downward variations and rewarding consistent
performance. The top 10% of funds in each category receive 5 stars, the next
22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2
stars, and the bottom 10% receive 1 star. (Each share class is counted as a
fraction of one fund within this scale and rated separately, which may cause
slight variations in the distribution percentages.) The Overall Morningstar
Rating for a fund is derived from a weighted average of the performance
figures associated with its three-, five-and ten-year (if applicable)
Morningstar Rating metrics.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements
and sales literature performance information about the Fund cited in
newspapers and other periodicals such as The New York Times, The Wall Street
Journal, Barron's, or similar publications. That information may include
performance quotations from other sources, including Lipper and Morningstar.
The performance of the Fund's classes of shares may be compared in
publications to the performance
of various market indices or other investments, and averages, performance
rankings or other benchmarks prepared by recognized mutual fund statistical
services.
Investors may also wish to compare the returns on the Fund's share
classes to the return on fixed-income investments available from banks and
thrift institutions. Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or insured by
the FDIC or any other agency and will fluctuate daily, while bank depository
obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is
backed by the full faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the
Manager or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder and
investor services by third parties may include comparisons of their services
to those provided by other mutual fund families selected by the rating or
ranking services. They may be based upon the opinions of the rating or
ranking service itself, using its research or judgment, or based upon surveys
of investors, brokers, shareholders or others.
From time to time the Fund may include in its advertisements and sales
literature the total return performance of a hypothetical investment account
that includes shares of the Fund and other Oppenheimer funds. The combined
account may be part of an illustration of an asset allocation model or
similar presentation. The account performance may combine total return
performance of the Fund and the total return performance of other Oppenheimer
funds included in the account. Additionally, from time to time, the Fund's
advertisements and sales literature may include, for illustrative or
comparative purposes, statistical data or other information about general or
specific market and economic conditions. That may include, for example,
o information about the performance of certain securities or commodities
markets or segments of those markets,
o information about the performance of the economies of particular
countries or regions,
o the earnings of companies included in segments of particular
industries, sectors, securities markets, countries or regions,
o the availability of different types of securities or offerings of
securities,
o information relating to the gross national or gross domestic product of
the United States or other countries or regions,
o comparisons of various market sectors or indices to demonstrate
performance, risk, or other characteristics of the Fund.
ABOUT YOUR ACCOUNT
How to Buy Shares
Additional information is presented below about the methods that can be used
to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances
in which sales charges may be reduced or waived for certain classes of
investors.
When you purchase shares of the Fund, your ownership interest in the shares
of the Fund will be recorded as a book entry on the records of the Fund. The
Fund will not issue or re-register physical share certificates.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $50 and shareholders must invest at least $500 before an
Asset Builder Plan (described below) can be established on a new account.
Accounts established prior to November 1, 2002 will remain at $25 for
additional purchases. Shares will be purchased on the regular business day
the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of the New York Stock Exchange (the "NYSE"). The NYSE normally closes
at 4:00 p.m., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the NYSE, the shares will be
purchased and dividends will begin to accrue on the next regular business
day. The proceeds of ACH transfers are normally received by the Fund three
days after the transfers are initiated. If the proceeds of the ACH transfer
are not received on a timely basis, the Distributor reserves the right to
cancel the purchase order. The Distributor and the Fund are not responsible
for any delays in purchasing shares resulting from delays in ACH
transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and
Letters of Intent because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers making such sales.
No sales charge is imposed in certain other circumstances described in
Appendix C to this Statement of Additional Information because the
Distributor or dealer or broker incurs little or no selling expenses.
The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for which
the Distributor acts as the distributor and currently include the following:
Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer Main Street Fund
Oppenheimer Balanced Fund Oppenheimer Main Street Opportunity Fund
Oppenheimer Core Bond Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund Oppenheimer MidCap Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Principal Protected Main
Oppenheimer Champion Income Fund Street Fund
Oppenheimer Principal Protected Main
Oppenheimer Convertible Securities Fund Street Fund II
Oppenheimer Principal Protected Main
Oppenheimer Developing Markets Fund Street Fund III
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Balanced Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Discovery Fund Inc.
Oppenheimer Quest International Value
Oppenheimer Dividend Growth Fund Fund, Inc.
Oppenheimer Emerging Growth Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Emerging Technologies Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Enterprise Fund Oppenheimer Real Asset Fund
Oppenheimer Equity Fund, Inc. Oppenheimer Real Estate Fund
Oppenheimer Global Fund Oppenheimer Rochester National Municipals
Oppenheimer Global Opportunities Fund Oppenheimer Select Value Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund Oppenheimer Total Return Bond Fund
Oppenheimer International Diversified
Fund Oppenheimer U.S. Government Trust
Oppenheimer International Growth Fund Oppenheimer Value Fund
Oppenheimer International Small Company
Fund Limited-Term New York Municipal Fund
Oppenheimer International Value Fund Rochester Fund Municipals
Oppenheimer Limited Term California Fund Oppenheimer Portfolio Series:
Active Allocation Fund
Aggressive Investor Fund
Conservative Investor Fund
Oppenheimer Limited-Term Government Fund Moderate Investor Fund
And the following money market funds:
Oppenheimer Cash Reserves Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds.
Under certain circumstances described in this Statement of Additional
Information, redemption proceeds of certain money market fund shares may be
subject to a contingent deferred sales charge.
Letters of Intent. Under a Letter of Intent ("Letter"), you can reduce the
sales charge rate that applies to your purchases of Class A shares if you
purchase Class A, Class B or Class C shares of the Fund or other Oppenheimer
funds during a 13-month period. The total amount of your purchases of Class
A, Class B and Class C shares will determine the sales charge rate that
applies to your Class A share purchases during that period. You can choose to
include purchases that you made up to 90 days before the date of the Letter.
Class A shares of Oppenheimer Money Market Fund, Inc. and Oppenheimer Cash
Reserves on which you have not paid a sales charge and any Class N shares you
purchase, or may have purchased, will not be counted towards satisfying the
purchases specified in a Letter.
A Letter is an investor's statement in writing to the Distributor of
his or her intention to purchase a specified value of Class A, Class B and
Class C shares of the Fund and other Oppenheimer funds during a 13-month
period (the "Letter period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of purchases of
shares which will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or capital gains distributions
and purchases made at net asset value (i.e. without paying a front-end or
contingent deferred sales charge) do not count toward satisfying the amount
of the Letter.
Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that would apply to a single
lump-sum purchase of shares in the amount intended to be purchased under the
Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter
period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms
of Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the application used
for a Letter. If those terms are amended, as they may be from time to time by
the Fund, the investor agrees to be bound by the amended terms and that those
amendments will apply automatically to existing Letters.
If the total eligible purchases made during the Letter period do not
equal or exceed the intended purchase amount, the concessions previously paid
to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to
actual total purchases. If total eligible purchases during the Letter period
exceed the intended purchase amount and exceed the amount needed to qualify
for the next sales charge rate reduction set forth in the Prospectus, the
sales charges paid will be adjusted to the lower rate. That adjustment will
be made only if and when the dealer returns to the Distributor the excess of
the amount of concessions allowed or paid to the dealer over the amount of
concessions that apply to the actual amount of purchases. The excess
concessions returned to the Distributor will be used to purchase additional
shares for the investor's account at the net asset value per share in effect
on the date of such purchase, promptly after the Distributor's receipt
thereof.
The Transfer Agent will not hold shares in escrow for purchases of
shares of the Fund and other Oppenheimer funds by OppenheimerFunds prototype
401(k) plans under a Letter. If the intended purchase amount under a Letter
entered into by an OppenheimerFunds prototype 401(k) plan is not purchased by
the plan by the end of the Letter period, there will be no adjustment of
concessions paid to the broker-dealer or financial institution of record for
accounts held in the name of that plan.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter when placing any purchase
orders for the investor during the Letter period. All of such purchases must
be made through the Distributor.
|X| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by
the Transfer Agent. For example, if the intended purchase amount is $50,000,
the escrow shall be shares valued in the amount of $2,500 (computed at the
offering price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the investor's
account.
2. If the total minimum investment specified under the Letter is
completed within the 13-month Letter period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the 13-month Letter period the total purchases
pursuant to the Letter are less than the intended purchase amount specified
in the Letter, the investor must remit to the Distributor an amount equal to
the difference between the dollar amount of sales charges actually paid and
the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request
from the Distributor or the dealer, the Distributor will, within sixty days
of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption
any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(a) Class A shares sold with a front-end sales charge or subject to a Class
A contingent deferred sales charge,
(b) Class B and Class C shares of other Oppenheimer funds acquired subject
to a contingent deferred sales charge, and
(c) Class A, Class B or Class C shares acquired by exchange of either (1)
Class A shares of one of the other Oppenheimer funds that were
acquired subject to a Class A initial or contingent deferred
sales charge or (2) Class B or Class C shares of one of the other
Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow
will be transferred to that other fund.
Asset Builder Plans. As explained in the Prospectus, you must initially
establish your account with $500. Subsequently, you can establish an Asset
Builder Plan to automatically purchase additional shares directly from a bank
account for as little as $50. For those accounts established prior to
November 1, 2002 and which have previously established Asset Builder Plans,
additional purchases will remain at $25. Shares purchased by Asset Builder
Plan payments from bank accounts are subject to the redemption restrictions
for recent purchases described in the Prospectus. Asset Builder Plans are
available only if your bank is an ACH member. Asset Builder Plans may not be
used to buy shares for OppenheimerFunds employer-sponsored qualified
retirement accounts.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit
will be made two business days prior to the investment dates you selected on
your application. Neither the Distributor, the Transfer Agent nor the Fund
shall be responsible for any delays in purchasing shares that result from
delays in ACH transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by
writing to the Transfer Agent. The Transfer Agent requires a reasonable
period (approximately 10 days) after receipt of your instructions to
implement them. The Fund reserves the right to amend, suspend or discontinue
offering Asset Builder plans at any time without prior notice.
Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charges or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to
retirement plans whose records are maintained on a daily valuation basis by
Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent
record keeper that has a contract or special arrangement with Merrill Lynch.
If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has less than $1 million in assets invested in
applicable investments (other than assets invested in money market funds),
then the retirement plan may purchase only Class C shares of the Oppenheimer
funds. If on the date the plan sponsor signed the Merrill Lynch record
keeping service agreement the plan has $1 million or more in assets but less
than $5 million in assets invested in applicable investments (other than
assets invested in money market funds), then the retirement plan may purchase
only Class N shares of the Oppenheimer funds. If on the date the plan
sponsor signed the Merrill Lynch record keeping service agreement the plan
has $5 million or more in assets invested in applicable investments (other
than assets invested in money market funds), then the retirement plan may
purchase only Class A shares of the Oppenheimer funds.
OppenheimerFunds has entered into arrangements with certain record
keepers whereby the Transfer Agent compensates the record keeper for its
record keeping and account servicing functions that it performs on behalf of
the participant level accounts of a retirement plan. While such compensation
may act to reduce the record keeping fees charged by the retirement plan's
record keeper, that compensation arrangement may be terminated at any time,
potentially affecting the record keeping fees charged by the retirement
plan's record keeper.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset values of the Fund's
shares on the cancellation date is less than on the purchase date. That loss
is equal to the amount of the decline in the net asset value per share
multiplied by the number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the Fund for
the loss, the Distributor will do so. The Fund may reimburse the Distributor
for that amount by redeeming shares from any account registered in that
investor's name, or the Fund or the Distributor may seek other redress.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has
different shareholder privileges and features. The net income attributable to
Class B, Class C or Class N shares and the dividends payable on Class B,
Class C or Class N shares will be reduced by incremental expenses borne
solely by that class. Those expenses include the asset-based sales charges to
which Class B, Class C and Class N shares are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant circumstances. Class
A shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and
Class N shares is the same as that of the initial sales charge on Class A
shares - to compensate the Distributor and brokers, dealers and financial
institutions that sell shares of the Fund. A salesperson who is entitled to
receive compensation from his or her firm for selling Fund shares may receive
different levels of compensation for selling one class of shares rather than
another.
The Distributor will not accept purchase order of more than $100,000
for Class B shares or a purchase order of $1 million or more to purchase
Class C shares on behalf of a single investor (not including dealer "street
name" or omnibus accounts).
Class B, Class C or Class N shares may not be purchased by an investor
directly from the Distributor without the investor designating another
registered broker-dealer.
|X| Class A Shares Subject to a Contingent Deferred Sales
Charge. For purchases of Class A shares at net asset value whether or not
subject to a contingent deferred sales charge as described in the Prospectus,
no sales concessions will be paid to the broker-dealer of record, as
described in the Prospectus, on sales of Class A shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan. Additionally, that concession will not be
paid on purchases of Class A shares by a retirement plan made with the
redemption proceeds of Class N shares of one or more Oppenheimer funds held
by the plan for more than 18 months.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of
Class B shares to Class A shares 72 months after purchase is not treated as a
taxable event for the shareholder. If those laws or the IRS interpretation of
those laws should change, the automatic conversion feature may be suspended.
In that event, no further conversions of Class B shares would occur while
that suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the
two classes, without the imposition of a sales charge or fee, such exchange
could constitute a taxable event for the shareholder, and absent such
exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.
|X| Availability of Class N Shares. In addition to the description of
the types of retirement plans which may purchase Class N shares contained in
the prospectus, Class N shares also are offered to the following:
o to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),
o to all rollover contributions made to Individual 401(k) plans,
Profit-Sharing Plans and Money Purchase Pension Plans,
o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and
Ascender retirement plans,
o to all trustee-to-trustee IRA transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix C to this Statement
of Additional Information) which have entered into a special
agreement with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a) or 401(k) of the
Internal Revenue Code, the recordkeeper or the plan sponsor for
which has entered into a special agreement with the Distributor,
o to Retirement Plans of a plan sponsor where the aggregate assets of all
such plans invested in the Oppenheimer funds is $500,000 or more,
o to Retirement Plans with at least 100 eligible employees or $500,000 or
more in plan assets,
o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
purchase with the redemption proceeds of Class A shares of one or
more Oppenheimer funds, and
o to certain customers of broker-dealers and financial advisors that are
identified in a special agreement between the broker-dealer or
financial advisor and the Distributor for that purpose.
The sales concession and the advance of the service fee, as described
in the Prospectus, will not be paid to dealers of record on sales of Class N
shares on:
o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption
proceeds of Class A shares of one or more Oppenheimer funds
(other than rollovers from an OppenheimerFunds-sponsored Pinnacle
or Ascender 401(k) plan to any IRA invested in the Oppenheimer
funds),
o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption
proceeds of Class C shares of one or more Oppenheimer funds held
by the plan for more than one year (other than rollovers from an
OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to
any IRA invested in the Oppenheimer funds), and
o on purchases of Class N shares by an OppenheimerFunds-sponsored
Pinnacle or Ascender 401(k) plan made with the redemption
proceeds of Class A shares of one or more Oppenheimer funds.
No sales concessions will be paid to the broker-dealer of record, as
described in the Prospectus, on sales of Class N shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.
|X| Allocation of Expenses. The Fund pays expenses related to its
daily operations, such as custodian fees, Trustees' fees, transfer agency
fees, legal fees and auditing costs. Those expenses are paid out of the
Fund's assets and are not paid directly by shareholders. However, those
expenses reduce the net asset values of shares, and therefore are indirectly
borne by shareholders through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are
allocated pro rata to the shares of all classes. The allocation is based on
the percentage of the Fund's total assets that is represented by the assets
of each class, and then equally to each outstanding share within a given
class. Such general expenses include management fees, legal, bookkeeping and
audit fees, printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, fees to unaffiliated Trustees, custodian expenses, share
issuance costs, organization and start-up costs, interest, taxes and
brokerage commissions, and non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of
such expenses include distribution and service plan (12b-1) fees, transfer
and shareholder servicing agent fees and expenses, and shareholder meeting
expenses (to the extent that such expenses pertain only to a specific class).
Fund Account Fees. As stated in the Prospectus, a $12 annual "Minimum Balance
Fee" is assessed on each Fund account with a share balance valued under $500.
The Minimum Balance Fee is automatically deducted from each such Fund account
in September.
Listed below are certain cases in which the Fund has elected, in its
discretion, not to assess the Fund Account Fees. These exceptions are
subject to change:
o A fund account whose shares were acquired after September 30th of the
prior year;
o A fund account that has a balance below $500 due to the automatic
conversion of shares from Class B to Class A shares. However,
once all Class B shares held in the account have been converted
to Class A shares the new account balance may become subject to
the Minimum Balance Fee;
o Accounts of shareholders who elect to access their account documents
electronically via eDoc Direct;
o A fund account that has only certificated shares and, has a balance
below $500 and is being escheated;
o Accounts of shareholders that are held by broker-dealers under the NSCC
Fund/SERV system;
o Accounts held under the Oppenheimer Legacy Program and/or holding
certain Oppenheimer Variable Account Funds;
o Omnibus accounts holding shares pursuant to the Pinnacle, Ascender,
Custom Plus, Recordkeeper Pro and Pension Alliance Retirement
Plan programs; and
o A fund account that falls below the $500 minimum solely due to market
fluctuations within the 12-month period preceding the date the
fee is deducted.
To access account documents electronically via eDocs Direct, please
visit the Service Center on our website at www.oppenheimerfunds.com or call
1.888.470.0862 for instructions.
The Fund reserves the authority to modify Fund Account Fees in its
discretion.
Determination of Net Asset Values Per Share. The net asset values per share
of each class of shares of the Fund are determined as of the close of
business of the NYSE on each day that the NYSE is open. The calculation is
done by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The NYSE normally
closes at 4:00 p.m., Eastern time, but may close earlier on some other days
(for example, in case of weather emergencies or on days falling before a U.S.
holiday). All references to time in this Statement of Additional Information
mean "Eastern time." The NYSE's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days.
Dealers other than NYSE members may conduct trading in certain
securities on days on which the NYSE is closed (including weekends and
holidays) or after 4:00 p.m. on a regular business day. Because the Fund's
net asset values will not be calculated on those days, the Fund's net asset
values per share may be significantly affected on such days when shareholders
may not purchase or redeem shares. Additionally, trading on European and
Asian stock exchanges and over-the-counter markets normally is completed
before the close of the NYSE.
Changes in the values of securities traded on foreign exchanges or
markets as a result of events that occur after the prices of those securities
are determined, but before the close of the NYSE, will not be reflected in
the Fund's calculation of its net asset values that day unless the Manager
determines that the event is likely to effect a material change in the value
of the security. The Manager, or an internal valuation committee established
by the Manager, as applicable, may establish a valuation, under procedures
established by the Board and subject to the approval, ratification and
confirmation by the Board at its next ensuing meeting
|X| Securities Valuation. The Fund's Board of Trustees has
established procedures for the valuation of the Fund's securities. In general
those procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on NASDAQ(R)
are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which
they are traded or on NASDAQ(R), as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the valuation
date if it is within the spread of the closing "bid" and
"asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
o Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of the
principal exchange on which the security is traded at its last
trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
o Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
o The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60
days or less.
o The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
o Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined by
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information
is not generally available, the Manager may use pricing services approved by
the Board of Trustees. The pricing service may use "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield and
maturity. Other special factors may be involved (such as the tax-exempt
status of the interest paid by municipal securities). The Manager will
monitor the accuracy of the pricing services. That monitoring may include
comparing prices used for portfolio valuation to actual sales prices of
selected securities.
The closing prices in the New York foreign exchange market on a
particular business day that are provided to the Manager by a bank, dealer or
pricing service that the Manager has determined to be reliable are used to
value foreign currency, including forward contracts, and to convert to U.S.
dollars securities that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on NASDAQ(R), as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last
sale price on the preceding trading day if it is within the spread of the
closing "bid" and "asked" prices on the principal exchange or on NASDAQ(R)on
the valuation date. If not, the value shall be the closing bid price on the
principal exchange or on NASDAQ(R)on the valuation date. If the put, call or
future is not traded on an exchange or on NASDAQ(R), it shall be valued by the
mean between "bid" and "asked" prices obtained by the Manager from two active
market makers. In certain cases that may be at the "bid" price if no "asked"
price is available.
When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the
option. In determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by the Fund expires, the Fund has a gain
in the amount of the premium. If the Fund enters into a closing purchase
transaction, it will have a gain or loss, depending on whether the premium
received was more or less than the cost of the closing transaction. If the
Fund exercises a put it holds, the amount the Fund receives on its sale of
the underlying investment is reduced by the amount of premium paid by the
Fund.
How to Sell Shares
The information below supplements the terms and conditions for redeeming
shares set forth in the Prospectus.
Checkwriting. When a check is presented to United Missouri Bank (the "Bank")
for clearance, the Bank will ask the Fund to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount
of the check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's custodian
bank. This limitation does not affect the use of checks for the payment of
bills or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time. The Fund
will provide you notice whenever it is required to do so by applicable law.
In choosing to take advantage of the Checkwriting privilege, by signing
the account application or by completing a Checkwriting card, each individual
who signs:
(1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or
other fiduciary or agent, as applicable, duly authorized to act on
behalf of the registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the
Fund account of such person(s) and to redeem a sufficient amount of
shares from that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or
other entities, the signature of any one signatory on a check will
be sufficient to authorize payment of that check and redemption from
the account, even if that account is registered in the names of more
than one person or more than one authorized signature appears on the
Checkwriting card or the application, as applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably believed
by them to be genuine, or for returning or not paying checks that
have not been accepted for any reason.
Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemption proceeds may be delayed if the Fund's custodian bank is not open
for business on a day when the Fund would normally authorize the wire to be
made, which is usually the Fund's next regular business day following the
redemption. In those circumstances, the wire will not be transmitted until
the next bank business day on which the Fund is open for business. No
dividends will be paid on the proceeds of redeemed shares awaiting transfer
by Federal Funds wire.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
o Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
o Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. This privilege does not
apply to Class C, Class N or Class Y shares. The Fund may amend, suspend or
cease offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on
that gain. If there has been a capital loss on the redemption, some or all of
the loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the
sales charge, the shareholder's basis in the shares of the Fund that were
redeemed may not include the amount of the sales charge paid. That would
reduce the loss or increase the gain recognized from the redemption. However,
in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds.
Payments "In Kind". The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, under certain
circumstances, the Board of Trustees of the Fund may determine that it would
be detrimental to the best interests of the remaining shareholders of the
Fund to make payment of a redemption order wholly or partly in cash. In that
case, the Fund may pay the redemption proceeds in whole or in part by a
distribution "in kind" of liquid securities from the portfolio of the Fund,
in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. The Fund will value securities used to pay
redemptions in kind using the same method the Fund uses to value its
portfolio securities described above under "Determination of Net Asset Values
Per Share." That valuation will be made as of the time the redemption price
is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $500 or such lesser amount as
the Board may fix. The Board will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of such shares has
fallen below the stated minimum solely as a result of market fluctuations. If
the Board exercises this right, it may also fix the requirements for any
notice to be given to the shareholders in question (not less than 30 days).
The Board may alternatively set requirements for the shareholder to increase
the investment, or set other terms and conditions so that the shares would
not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not
an event that triggers the payment of sales charges. Therefore, shares are
not subject to the payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or entity. It does not
matter whether the transfer occurs by absolute assignment, gift or bequest,
as long as it does not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales charge are
transferred, the transferred shares will remain subject to the contingent
deferred sales charge. It will be calculated as if the transferee shareholder
had acquired the transferred shares in the same manner and at the same time
as the transferring shareholder.
If less than all shares held in an account are transferred, and some
but not all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class B,
Class C and Class N contingent deferred sales charge will be followed in
determining the order in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial
plans, 401(k) plans or pension or profit-sharing plans should be addressed to
"Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its
address listed in "How To Sell Shares" in the Prospectus or on the back cover
of this Statement of Additional Information. The request must:
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed plan sponsors) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign
the request.
Distributions from pension and profit sharing plans are subject to
special requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed and submitted to the
Transfer Agent before the distribution may be made. Distributions from
retirement plans are subject to withholding requirements under the Internal
Revenue Code, and IRS Form W-4P (available from the Transfer Agent) must be
submitted to the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided the Transfer
Agent with a certified tax identification number, the Internal Revenue Code
requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, and
the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized
dealers or brokers on behalf of their customers. Shareholders should contact
their broker or dealer to arrange this type of redemption. The repurchase
price per share will be the net asset value next computed after the
Distributor receives an order placed by the dealer or broker. However, if the
Distributor receives a repurchase order from a dealer or broker after the
close of the NYSE 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 NYSE closes. Normally, the NYSE closes at
4:00 p.m., but may do so earlier on some days. Additionally, the order must
have been transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 p.m.).
Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after the shares
have been redeemed upon the Distributor's receipt of the required redemption
documents in proper form. The signature(s) of the registered owners on the
redemption documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to $1,500
per month may be requested by telephone if payments are to be made by check
payable to all shareholders of record. Payments must also be sent to the
address of record for the account and the address must not have been changed
within the prior 30 days. Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis.
Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account designated
on the account application or by signature-guaranteed instructions sent to
the Transfer Agent. Shares are normally redeemed pursuant to an Automatic
Withdrawal Plan three business days before the payment transmittal date you
select in the account application. If a contingent deferred sales charge
applies to the redemption, the amount of the check or payment will be reduced
accordingly.
The Fund cannot guarantee receipt of a payment on the date requested.
The Fund reserves the right to amend, suspend or discontinue offering these
plans at any time without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make regular additional
Class A share purchases while participating in an Automatic Withdrawal Plan.
Class B, Class C and Class N shareholders should not establish automatic
withdrawal plans, because of the potential imposition of the contingent
deferred sales charge on such withdrawals (except where the Class B, Class C
or Class N contingent deferred sales charge is waived as described in
Appendix C to this Statement of Additional Information).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to
existing Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares
(of the same class) of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is $50.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of Additional
Information.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales charge
will be redeemed first. Shares acquired with reinvested dividends and capital
gains distributions will be redeemed next, followed by shares acquired with a
sales charge, to the extent necessary to make withdrawal payments. Depending
upon the amount withdrawn, the investor's principal may be depleted. Payments
made under these plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the plan
authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for
any action taken or not taken by the Transfer Agent in good faith to
administer the plan. Share certificates will not be issued for shares of the
Fund purchased for and held under the plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the plan application so that the shares
represented by the certificate may be held under the plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the
account may be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments at the net asset
value per share determined on the redemption date. Checks or AccountLink
payments representing the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment, according to the choice specified in writing by the Planholder.
Receipt of payment on the date selected cannot be guaranteed.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such
notification for the requested change to be put in effect. The Planholder
may, at any time, instruct the Transfer Agent by written notice to redeem
all, or any part of, the shares held under the plan. That notice must be in
proper form in accordance with the requirements of the then-current
Prospectus of the Fund. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect and
will mail a check for the proceeds to the Planholder.
The Planholder may terminate a plan at any time by writing to the
Transfer Agent. The Fund may also give directions to the Transfer Agent to
terminate a plan. The Transfer Agent will also terminate a plan upon its
receipt of evidence satisfactory to it that the Planholder has died or is
legally incapacitated. Upon termination of a plan by the Transfer Agent or
the Fund, shares that have not been redeemed will be held in uncertificated
form in the name of the Planholder. The account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his or her executor or
guardian, or another authorized person.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to
act as agent in administering the plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares
of the same class of other Oppenheimer funds. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A"
shares for this purpose. You can obtain a current list showing which funds
offer which classes of shares by calling the Distributor.
o All of the Oppenheimer funds currently offer Class A, B, C, N and Y
shares with the following exceptions:
The following funds only offer Class A shares:
Centennial California Tax Exempt Trust Centennial New York Tax Exempt
Trust
Centennial Government Trust Centennial Tax Exempt Trust
Centennial Money Market Trust
The following funds do not offer Class N shares:
Limited Term New York Municipal Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer AMT-Free Municipals Oppenheimer Principal Protected Main
Street Fund II
Oppenheimer AMT-Free New York Oppenheimer Pennsylvania Municipal Fund
Municipals
Oppenheimer California Municipal Fund Oppenheimer Rochester National
Municipals
Oppenheimer International Value Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Limited Term California Rochester Fund Municipals
Municipal Fund
Oppenheimer Limited Term Municipal Fund
Oppenheimer Money Market Fund, Inc.
The following funds do not offer Class Y shares:
Limited Term New York Municipal Fund Oppenheimer Limited Term California
Municipal Fund
Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund
Oppenheimer AMT-Free New York Oppenheimer New Jersey Municipal Fund
Municipals
Oppenheimer Balanced Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer California Municipal Fund Oppenheimer Principal Protected Main
Street Fund
Oppenheimer Capital Income Fund Oppenheimer Principal Protected Main
Street Fund II
Oppenheimer Cash Reserves Oppenheimer Principal Protected Main
Street Fund III
Oppenheimer Champion Income Fund Oppenheimer Quest Capital Value Fund,
Inc.
Oppenheimer Convertible Securities Fund Oppenheimer Quest International Value
Fund, Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Rochester National
Municipals
Oppenheimer Dividend Growth Fund Oppenheimer Total Return Bond Fund
Oppenheimer Gold & Special Minerals
Fund
o Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y
shares.
o 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.
o Class M shares of Oppenheimer Convertible Securities Fund may be
exchanged only for Class A shares of other Oppenheimer funds. They may
not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market
Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
shares.
o Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares
of any money market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered with a sales charge
upon payment of the sales charge. They may also be used to purchase
shares of Oppenheimer funds subject to an early withdrawal charge or
contingent deferred sales charge.
o Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of
any of the Oppenheimer funds.
o Shares of Oppenheimer Principal Protected Main Street Fund may be
exchanged at net asset value for shares of any of the Oppenheimer
funds. However, shareholders are not permitted to exchange shares of
other Oppenheimer funds for shares of Oppenheimer Principal Protected
Main Street Fund until after the expiration of the warranty period
(8/5/2010).
o Shares of Oppenheimer Principal Protected Main Street Fund II may be
exchanged at net asset value for shares of any of the Oppenheimer
funds. However, shareholders are not permitted to exchange shares of
other Oppenheimer funds for shares of Oppenheimer Principal Protected
Main Street Fund II until after the expiration of the warranty period
(3/3/2011).
o Shares of Oppenheimer Principal Protected Main Street Fund III may be
exchanged at net asset value for shares of any of the Oppenheimer
funds. However, shareholders are not permitted to exchange shares of
other Oppenheimer funds for shares of Oppenheimer Principal Protected
Main Street Fund III until after the expiration of the warranty period
(12/16/2011).
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days' notice prior to
materially amending or terminating the exchange privilege. That 60 day notice
is not required in extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any
class purchased subject to a contingent deferred sales charge, with the
following exceptions:
o When Class A shares of any Oppenheimer fund (other than Oppenheimer
Rochester National Municipals and Rochester Fund Municipals) acquired by
exchange of Class A shares of any Oppenheimer fund purchased subject to a
Class A contingent deferred sales charge are redeemed within 18 months
measured from the beginning of the calendar month of the initial purchase of
the exchanged Class A shares, the Class A contingent deferred sales charge is
imposed on the redeemed shares.
o When Class A shares of Oppenheimer Rochester National Municipals and
Rochester Fund Municipals acquired by exchange of Class A shares of any
Oppenheimer fund purchased subject to a Class A contingent deferred sales
charge are redeemed within 24 months of the beginning of the calendar month
of the initial purchase of the exchanged Class A shares, the Class A
contingent deferred sales charge is imposed on the redeemed shares.
o If any Class A shares of another Oppenheimer fund that are exchanged
for Class A shares of Oppenheimer Senior Floating Rate Fund are subject to
the Class A contingent deferred sales charge of the other Oppenheimer fund at
the time of exchange, the holding period for that Class A contingent deferred
sales charge will carry over to the Class A shares of Oppenheimer Senior
Floating Rate Fund acquired in the exchange. The Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in that exchange will be
subject to the Class A Early Withdrawal Charge of Oppenheimer Senior Floating
Rate Fund if they are repurchased before the expiration of the holding period.
o When Class A shares of Oppenheimer Cash Reserves and Oppenheimer Money
Market Fund, Inc. acquired by exchange of Class A shares of any Oppenheimer
fund purchased subject to a Class A contingent deferred sales charge are
redeemed within the Class A holding period of the fund from which the shares
were exchanged, the Class A contingent deferred sales charge of the fund from
which the shares were exchanged is imposed on the redeemed shares.
o Except with respect to the Class B shares described in the next two
paragraphs, the contingent deferred sales charge is imposed on Class B shares
acquired by exchange if they are redeemed within six years of the initial
purchase of the exchanged Class B shares.
o With respect to Class B shares of Oppenheimer Limited Term California
Municipal Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer Limited
Term Municipal Fund, Oppenheimer Limited Term New York Municipal Fund and
Oppenheimer Senior Floating Rate Fund, the Class B contingent deferred sales
charge is imposed on the acquired shares if they are redeemed within five
years of the initial purchase of the exchanged Class B shares.
o With respect to Class B shares of Oppenheimer Cash Reserves that were
acquired through the exchange of Class B shares initially purchased in the
Oppenheimer Capital Preservation Fund, the Class B contingent deferred sales
charge is imposed on the acquired shares if they are redeemed within five
years of that initial purchase.
o With respect to Class C shares, the Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.
o With respect to Class N shares, a 1% contingent deferred sales charge
will be imposed if the retirement plan (not including IRAs and 403(b) plans)
is terminated or Class N shares of all Oppenheimer funds are terminated as an
investment option of the plan and Class N shares are redeemed within 18
months after the plan's first purchase of Class N shares of any Oppenheimer
fund or with respect to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within 18 months of the plan's first purchase of Class N
shares of any Oppenheimer fund.
o When Class B, Class C or Class N shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the Prospectus
for the imposition of the Class B, Class C or Class N contingent deferred
sales charge will be followed in determining the order in which the shares
are exchanged. Before exchanging shares, shareholders should take into
account how the exchange may affect any contingent deferred sales charge that
might be imposed in the subsequent redemption of remaining shares.
Shareholders owning shares of more than one class must specify which
class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. The Fund reserves the right
to reject telephone or written exchange requests submitted in bulk by anyone
on behalf of more than one account.
|X| Telephone Exchange Requests. When exchanging shares by telephone,
a shareholder must have an existing account in the fund to which the exchange
is to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
|X| Processing Exchange Requests. Shares to be exchanged are redeemed on
the regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be
acquired are purchased on the Redemption Date, but such purchases may be
delayed by either fund up to five business days if it determines that it
would be disadvantaged by an immediate transfer of the redemption proceeds.
The Fund reserves
the right, in its discretion, to refuse any exchange request that may
disadvantage it. For example, if the receipt of multiple exchange requests
from a dealer might require the disposition of portfolio securities at a time
or at a price that might be disadvantageous to the Fund, the Fund may refuse
the request.
When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange
features such as Automatic Exchange Plans and Automatic Withdrawal Plans
cannot be switched to an account in Oppenheimer Senior Floating Rate Fund.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a
share certificate that is not tendered with the request. In those cases, only
the shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that
the fund selected is appropriate for his or her investment and should be
aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of one
fund and a purchase of shares of another. "Reinvestment Privilege," above,
discusses some of the tax consequences of reinvestment of redemption proceeds
in such cases. The Fund, the Distributor, and the Transfer Agent are unable
to provide investment, tax or legal advice to a shareholder in connection
with an exchange request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of
any capital gains. The dividends and distributions paid by a class of shares
will vary from time to time depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by the Fund or borne separately
by a class. Dividends are calculated in the same manner, at the same time,
and on the same day for each class of shares. However, dividends on Class B,
Class C and Class N shares are expected to be lower than dividends on Class A
and Class Y shares. That is because of the effect of the asset-based sales
charge on Class B, Class C and Class N shares. Those dividends will also
differ in amount as a consequence of any difference in the net asset values
of the different classes of shares.
Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund,
Inc. Reinvestment will be made as promptly as possible after the return of
such checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders
or their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares.
The federal tax treatment of the Fund's dividends and capital gains
distributions is briefly highlighted in the Prospectus. The following is only
a summary of certain additional tax considerations generally affecting the
Fund and its shareholders.
The tax discussion in the Prospectus and this Statement of Additional
Information is based on tax law in effect on the date of the Prospectus and
this Statement of Additional Information. Those laws and regulations may be
changed by legislative, judicial, or administrative action, sometimes with
retroactive effect. State and local tax treatment of ordinary income
dividends and capital gain dividends from regulated investment companies may
differ from the treatment under the Internal Revenue Code described below.
Potential purchasers of shares of the Fund are urged to consult their tax
advisers with specific reference to their own tax circumstances as well as
the consequences of federal, state and local tax rules affecting an
investment in the Fund.
|X| Qualification as a Regulated Investment Company. The Fund has
elected to be taxed as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended. As a regulated investment
company, the Fund is not subject to federal income tax on the portion of its
net investment income (that is, taxable interest, dividends, and other
taxable ordinary income, net of expenses) and capital gain net income (that
is, the excess of net long-term capital gains over net short-term capital
losses) that it distributes to shareholders. That qualification enables the
Fund to "pass through" its income and realized capital gains to shareholders
without having to pay tax on them. This avoids a "double tax" on that income
and capital gains, since shareholders normally will be taxed on the dividends
and capital gains they receive from the Fund (unless their Fund shares are
held in a retirement account or the shareholder is otherwise exempt from
tax).
The Internal Revenue Code contains a number of complex tests relating
to qualification that the Fund might not meet in a particular year. If it did
not qualify as a regulated investment company, the Fund would be treated for
tax purposes as an ordinary corporation and would receive no tax deduction
for payments made to shareholders.
To qualify as a regulated investment company, the Fund must distribute
at least 90% of its investment company taxable income (in brief, net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year. The Fund must also satisfy
certain other requirements of the Internal Revenue Code, some of which are
described below. Distributions by the Fund made during the taxable year or,
under specified circumstances, within 12 months after the close of the
taxable year, will be considered distributions of income and gains for the
taxable year and will therefore count toward satisfaction of the
above-mentioned requirement.
To qualify as a regulated investment company, the Fund must derive at
least 90% of its gross income from dividends, interest, certain payments with
respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies (to the extent such currency gains
are directly related to the regulated investment company's principal business
of investing in stock or securities) and certain other income.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under that test, at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items (including receivables), U.S. government
securities, securities of other regulated investment companies, and
securities of other issuers. As to each of those issuers, the Fund must not
have invested more than 5% of the value of the Fund's total assets in
securities of each such issuer and the Fund must not hold more than 10% of
the outstanding voting securities of each such issuer. No more than 25% of
the value of its total assets may be invested in the securities of any one
issuer (other than U.S. government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
For purposes of this test, obligations issued or guaranteed by certain
agencies or instrumentalities of the U.S. government are treated as U.S.
government securities.
|X| Excise Tax on Regulated Investment Companies. Under the Internal
Revenue Code, by December 31 each year, the Fund must distribute 98% of its
taxable investment income earned from January 1 through December 31 of that
year and 98% of its capital gains realized in the period from November 1 of
the prior year through October 31 of the current year. If it does not, the
Fund must pay an excise tax on the amounts not distributed. It is presently
anticipated that the Fund will meet those requirements. To meet this
requirement, in certain circumstances the Fund might be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability. However, the Board of Trustees and the Manager might determine in
a particular year that it would be in the best interests of shareholders for
the Fund not to make such distributions at the required levels and to pay the
excise tax on the undistributed amounts. That would reduce the amount of
income or capital gains available for distribution to shareholders.
|X| Taxation of Fund Distributions. The Fund anticipates distributing
substantially all of its investment company taxable income for each taxable
year. Those distributions will be taxable to shareholders as ordinary income
and treated as dividends for federal income tax purposes.
Special provisions of the Internal Revenue Code govern the eligibility
of the Fund's dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not eligible for the
deduction. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option
premiums, interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for the
deduction.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute
any such amounts. If net long term capital gains are distributed and
designated as a capital gain distribution, it will be taxable to shareholders
as a long-term capital gain and will be properly identified in reports sent
to shareholders in January of each year. Such treatment will apply no matter
how long the shareholder has held his or her shares or whether that gain was
recognized by the Fund before the shareholder acquired his or her shares.
If the Fund elects to retain its net capital gain, the Fund will be
subject to tax on it at the 35% corporate tax rate. If the Fund elects to
retain its net capital gain, the Fund will provide to shareholders of record
on the last day of its taxable year information regarding their pro rata
share of the gain and tax paid. As a result, each shareholder will be
required to report his or her pro rata share of such gain on their tax return
as long-term capital gain, will receive a refundable tax credit for his/her
pro rata share of tax paid by the Fund on the gain, and will increase the tax
basis for his/her shares by an amount equal to the deemed distribution less
the tax credit.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such
income. The Fund may be subject to U.S. Federal income tax, and an interest
charge, on certain distributions or gains from the sale of shares of a
foreign company considered to be a
PFIC, even if those amounts are paid out as dividends to shareholders. To
avoid imposition of the interest charge, the Fund may elect to
"mark-to-market" all PFIC shares that it holds at the end of each taxable
year. In that case, any increase or decrease in the value of those shares
would be recognized as ordinary income or as ordinary loss (but only to the
extent of previously recognized "mark-to-market" gains).
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain distributions will be treated as a return of
capital to the extent of the shareholder's tax basis in their shares. Any
excess will be treated as gain from the sale of those shares, as discussed
below. Shareholders will be advised annually as to the U.S. federal income
tax consequences of distributions made (or deemed made) during the year. If
prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of
the effect of the Fund's investment policies, they will be identified as such
in notices sent to shareholders.
Distributions by the Fund will be treated in the manner described above
regardless of whether the distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date.
The Fund will be required in certain cases to withhold 28% of ordinary
income dividends, capital gains distributions and the proceeds of the
redemption of shares, paid to any shareholder (1) who has failed to provide a
correct taxpayer identification number or to properly certify that number
when required, (2) who is subject to backup withholding for failure to report
the receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that the shareholder is not subject to backup withholding
or is an "exempt recipient" (such as a corporation). Any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and all income and any tax
withheld is identified in reports mailed to shareholders in January of each
year with a copy sent to the IRS.
|X| Tax Effects of Redemptions of Shares. If a shareholder redeems
all or a portion of his/her shares, the shareholder will recognize a gain or
loss on the redeemed shares in an amount equal to the difference between the
proceeds of the redeemed shares and the shareholder's adjusted tax basis in
the shares. All or a portion of any loss recognized in that manner may be
disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the redemption.
In general, any gain or loss arising from the redemption of shares of
the Fund will be considered capital gain or loss, if the shares were held as
a capital asset. It will be long-term capital gain or loss if the shares were
held for more than one year. However, any capital loss arising from the
redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on those shares. Special holding period rules under the Internal
Revenue Code apply in this case to determine the holding period of shares and
there are limits on the deductibility of capital losses in any year.
|X| Foreign Shareholders. Under U.S. tax law, taxation of a shareholder
who is a foreign person (to include, but not limited to, a nonresident alien
individual, a foreign trust, a foreign estate, a foreign corporation, or a
foreign partnership) primarily depends on whether the foreign person's income
from the Fund is effectively connected with the conduct of a U.S. trade or
business. Typically, ordinary income dividends paid from a mutual fund are
not considered "effectively connected" income.
Ordinary income dividends that are paid by the Fund (and are deemed not
"effectively connected income") to foreign persons will be subject to a U.S.
tax withheld by the Fund at a rate of 30%, provided the Fund obtains a
properly completed and signed Certificate of Foreign Status. The tax rate may
be reduced if the foreign person's country of residence has a tax treaty with
the U.S. allowing for a reduced tax rate on ordinary income dividends paid by
the Fund. Any tax withheld by the Fund is remitted by the Fund to the U.S.
Treasury and all income and any tax withheld is identified in reports mailed
to shareholders in March of each year with a copy sent to the IRS.
If the ordinary income dividends from the Fund are effectively
connected with the conduct of a U.S. trade or business, then the foreign
person may claim an exemption from the U.S. tax described above provided the
Fund obtains a properly completed and signed Certificate of Foreign Status.
If the foreign person fails to provide a certification of his/her foreign
status, the Fund will be required to withhold U.S. tax at a rate of 28% on
ordinary income dividends, capital gains distributions and the proceeds of
the redemption of shares, paid to any foreign person. Any tax withheld by
the Fund is remitted by the Fund to the U.S. Treasury and all income and any
tax withheld is identified in reports mailed to shareholders in January of
each year with a copy sent to the IRS.
The tax consequences to foreign persons entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisors or the U.S.
Internal Revenue Service with respect to the particular tax consequences to
them of an investment in the Fund, including the applicability of the U.S.
withholding taxes described above.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the
same class of any of the other Oppenheimer funds into which you may exchange
shares. Reinvestment will be made without sales charge at the net asset value
per share in effect at the close of business on the payable date of the
dividend or distribution. To elect this option, the shareholder must notify
the Transfer Agent in writing and must have an existing account in the fund
selected for reinvestment. Otherwise the shareholder first must obtain a
prospectus for that fund and an application from the Distributor to establish
an account. Dividends and/or distributions from shares of certain other
Oppenheimer funds may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and
other financial institutions that have a sales agreement with
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager that acts as
the Fund's Distributor. The Distributor also distributes shares of the other
Oppenheimer funds and is sub-distributor for funds managed by a subsidiary of
the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is
a division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It serves as the Transfer Agent for
an annual per account fee. It also acts as shareholder servicing agent for
the other Oppenheimer funds. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free numbers shown on
the back cover.
The Custodian. J.P. Morgan Chase Bank is the custodian of the Fund's assets.
The custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities and handling the delivery of such securities to
and from the Fund. It is the practice of the Fund to deal with the custodian
in a manner uninfluenced by any banking relationship the custodian may have
with the Manager and its affiliates. The Fund's cash balances with the
custodian in excess of $100,000 are not protected by federal deposit
insurance. Those uninsured balances at times may be substantial.
Independent Registered Public Accounting Firm. Deloitte & Touche LLP serves
as the independent registered public accounting firm for the Fund. Deloitte &
Touche LLP audits the Fund's financial statements and performs other related
audit services. Deloitte & Touche LLP also acts as the independent registered
public accounting firm for certain other funds advised by the Manager and its
affiliates. Audit and non-audit services provided by Deloitte & Touche LLP to
the Fund must be pre-approved by the Audit Committee.
..
OPPENHEIMER STRATEGIC INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER STRATEGIC INCOME FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Strategic Income Fund, including the statement of investments, as of
September 30, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 the standards of the Public
Company Accounting Oversight Board (United States). 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Strategic Income Fund as of September 30, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
November 15, 2006
99 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS September 30, 2006
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Ace Securities Corp., Home Equity Loan Pass-Through Certificates,
Series 2005-HE7, Cl. A2B, 5.51%, 11/25/35 1 $ 2,450,000 $ 2,452,626
- ------------------------------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 5.39%, 4/20/08 1 1,450,000 1,451,109
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.81%, 5/25/34 1 9,060,000 9,100,706
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2006-M3, Asset-Backed Pass-Through Certificates,
Series 2006-M3, Cl. A2B, 5.43%, 9/25/36 1 2,090,000 2,090,000
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2006-W5, Asset-Backed Pass-Through Certificates,
Series 2006-W5, Cl. A2B, 5.43%, 5/26/36 1 3,665,000 3,667,294
- ------------------------------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust 2005-A, Automobile Asset-Backed Securities,
Series 2005-A, Cl. A2, 3.66%, 12/26/07 675,171 674,954
- ------------------------------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust 2006-A, Automobile Asset-Backed Securities,
Series 2006-A, Cl. A2, 5.30%, 5/26/09 4,070,000 4,070,000
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust 2004-2, Automobile
Asset-Backed Securities, Series 2004-2, Cl. A3, 3.58%, 1/15/09 4,920,000 4,850,863
- ------------------------------------------------------------------------------------------------------------------------------------
Capital One Prime Auto Receivables Trust, Automobile Loan
Asset-Backed Securities, Series 2005-1, Cl. A2, 4.24%, 11/15/07 1,463,649 1,463,742
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-C, Asset-Backed Certificates,
Series 2005-C, Cl. AF1, 4.196%, 6/25/35 419,897 418,623
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-D, Asset-Backed Certificates:
Series 2005-D, Cl. AF1, 5.04%, 10/25/35 2,155,677 2,146,737
Series 2005-D, Cl. AV2, 5.60%, 10/25/35 1 250,000 250,274
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 5.43%, 5/16/36 1 4,590,000 4,592,873
- ------------------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 1,059,858 1,058,970
- ------------------------------------------------------------------------------------------------------------------------------------
CitiFinancial Mortgage Securities, Inc., Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 2004-1, Cl. AF2, 2.645%, 4/25/34 5,076,405 4,928,018
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc., Asset-Backed Pass-Through
Certificates, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 1 5,742,413 5,691,594
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Credit Reference Index Securities Program, Credit Card
Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 2 15,441,000 15,675,358
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-7, Asset-Backed Certificates,
Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 1 358,234 357,189
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-10, Asset-Backed Certificates,
Series 2005-10, Cl. AF1, 5.484%, 2/25/36 1 3,558,808 3,561,698
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 1 1,720,000 1,717,335
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset Backed Certificates,
Series 2005-17, Cl. 1AF1, 5.53%, 5/25/36 1 2,562,754 2,565,859
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates,
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 1 1,150,000 1,147,907
21 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates:
Series 2005-B, Cl. A2, 3.75%, 12/8/07 $ 741,690 $ 741,917
Series 2006-C, Cl. A2, 5.33%, 5/8/09 3 7,100,000 7,099,645
- ------------------------------------------------------------------------------------------------------------------------------------
DLJ Ltd., Collateralized Bond Obligations,
Series1A, Cl. C2, 11.96%, 4/15/11 4,5,15 15,000,000 1,500
- ------------------------------------------------------------------------------------------------------------------------------------
DVI Receivables Corp., Equipment Asset-Backed Certificates,
Series 2001-2, Cl. C, 4.405%, 11/11/09 5 3,083,887 510,769
- ------------------------------------------------------------------------------------------------------------------------------------
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts.,
Series 2000-A, Cl. B, 8/15/25 4,5,15 2,275,079 22,751
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl. A3, 5.54%, 11/25/35 1 7,200,000 7,207,662
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl. 2A1, 5.38%, 5/15/36 1 2,374,859 2,376,511
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl. 2A2, 5.434%, 7/7/36 1 1,850,000 1,851,158
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl. A3, 5.414%, 7/25/36 1 3,620,000 3,622,264
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A3, 3.48%, 11/17/08 2,702,984 2,683,117
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Asset Management CBO Ltd., Sub. Collateralized Bond
Obligations, Series 1A, Cl. D, 0.125%, 6/13/11 1,5 6,523,018 97,845
- ------------------------------------------------------------------------------------------------------------------------------------
Green Tree Financial Corp., Manufactured Housing Contract Sr. Sub.
Pass-Through Certificates, Series 1997-5, Cl. M1, 6.95%, 5/15/29 4,814,000 4,289,866
- ------------------------------------------------------------------------------------------------------------------------------------
Greenpoint Credit Manufactured Housing Contract Trust, Pass-Through
Certificates, Series 2000-3, Cl. IM1, 9.01%, 6/20/31 5,214,000 1,156,802
- ------------------------------------------------------------------------------------------------------------------------------------
GS Auto Loan Trust, Automobile Loan Asset-Backed Securities,
Series 2005-1, Cl. A2, 4.32%, 5/15/08 5,160,193 5,152,967
- ------------------------------------------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Receivable Obligations,
Series 2005-3, Cl. A2, 3.73%, 10/18/07 5 1,305,431 1,304,173
- ------------------------------------------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1, 5.59%, 1/20/35 1 2,565,543 2,569,540
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates:
Series 2005-2, Cl. 2A1B, 5.18%, 8/25/35 1 3,245,583 3,236,647
Series 2005-4, Cl. 2A1B, 5.17%, 10/25/35 2,557,223 2,545,710
- ------------------------------------------------------------------------------------------------------------------------------------
Madison Avenue CDO Ltd., Commercial Debt Obligations,
Series 2A, Cl. C1, 0.307%, 3/24/14 1,5 3,433,919 137,357
- ------------------------------------------------------------------------------------------------------------------------------------
Mastr Asset Backed Securities Trust 2006-WMC3, Mtg. Pass-Through
Certificates, Series 2006-WMC3, Cl. A3, 5.43%, 9/29/36 1 5,330,000 5,330,000
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley ABS Capital I, Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B, 5.59%, 7/25/35 1 2,230,000 2,235,127
- ------------------------------------------------------------------------------------------------------------------------------------
NC Finance Trust, CMO Pass-Through Certificates,
Series 1999-I, Cl. ECFD, 1.762%, 1/25/29 5 4,420,411 928,286
22 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.,
Series 2005-C, Cl. A2, 3.99%, 1/15/08 $ 4,583,384 $ 4,573,876
- ------------------------------------------------------------------------------------------------------------------------------------
Onyx Acceptance Owner Trust, Automobile Receivable Obligations,
Series 2005-B, Cl. A2, 4.03%, 4/15/08 359,922 359,967
- ------------------------------------------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Asset-Backed Certificates,
Series 2006-2, Cl. 2A2, 5.43%, 7/1/36 1 6,040,000 6,043,780
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2004-5, Mtg. Pass-Through
Certificates, Series 2004-5, Cl. AF2, 3.735%, 11/10/34 1 852,059 848,023
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-1, Mtg. Pass-Through
Certificates, Series 2005-1, Cl. AF2, 3.914%, 5/25/35 1 898,899 893,063
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-2, Mtg. Pass-Through
Certificates, Series 2005-2, Cl. AF2, 4.415%, 4/25/35 1 1,670,000 1,654,767
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-6, Mtg. Pass-Through
Certificates, Series 2005-6, Cl. A3, 5.68%, 1/25/36 1 1,810,000 1,808,909
- ------------------------------------------------------------------------------------------------------------------------------------
RAMP Series 2004-RS7 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2004-RS7, Cl. AI32 4.45%, 7/25/28 3,393,424 3,364,886
- ------------------------------------------------------------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-RS4, Cl. A1, 5.41%, 7/25/36 1 2,248,858 2,250,269
- ------------------------------------------------------------------------------------------------------------------------------------
RASC Series 2006-KS7 Trust, Home Equity Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-KS7, Cl. A2, 5.428%, 9/25/36 1 4,510,000 4,509,161
- ------------------------------------------------------------------------------------------------------------------------------------
Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 5.39%, 4/25/36 1 2,483,764 2,485,475
- ------------------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Mtg. Pass-Through Certificates:
Series 2003-25XS, Cl. A4, 4.51%, 8/25/33 136,436 135,787
Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 3,793,349 3,781,362
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust, Home
Equity Asset-Backed Certificates, Series 2006-2, Cl. A2, 5.424%, 7/25/36 1 3,600,000 3,602,251
----------------
Total Asset-Backed Securities (Cost $199,814,969) 165,346,919
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--14.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates,
Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30 4,599,837 4,627,190
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through
Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43 5,070,000 4,960,808
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 3,549,024 3,609,285
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 3,313,443 3,341,402
Series 2005-E, Cl. 2A2, 4.975%, 6/25/35 1 445,411 444,875
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 8.20%, 6/22/24 6 6,736,843 257,036
- ------------------------------------------------------------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multi-Class Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1B, 5.43%, 8/25/08 1 3,768,385 3,772,165
23 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust 2006-WF1, Asset-Backed Pass-Through
Certificates, Series 2006-WF1, Cl. A2B, 5.536%, 3/1/36 $ 1,311,000 $ 1,309,532
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Alternative Loan Trust, CMO:
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 7,915,636 7,999,740
Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 1,732,811 1,769,553
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, CMO,
Series 2006-AB2, Cl. A7, 5.961%, 6/25/36 7,315,671 7,309,386
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Alt-B Securities, Inc. Mortgage Loan Trust, CMO:
Series 2006-AB3, Cl. A7, 6.36%, 4/25/08 2,365,198 2,373,103
Series 2006-AB4, Cl. A1A, 6.005%, 6/25/08 7,520,000 7,525,875
- ------------------------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 1997-CF2, Cl. B30C, 5.543%, 10/15/30 1,5 36,400,000 10,920,000
- ------------------------------------------------------------------------------------------------------------------------------------
Fannie Mae Whole Loan, CMO Pass-Through Certificates,
Trust 2004-W9, Cl. 2A2, 7%, 2/25/44 2,453,592 2,533,242
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/19 6,107,550 5,899,495
5%, 10/1/36 17,996,000 17,309,903
6%, 4/1/17-9/1/24 26,308,932 26,682,938
6.50%, 4/1/18-8/1/32 14,311,669 14,640,092
7%, 8/1/21-10/1/31 6,796,664 7,005,349
7.50%, 2/1/32-4/1/36 10,589,431 11,007,495
8.50%, 8/1/31 717,091 769,579
10%, 4/1/20-5/1/20 198,147 219,456
10.50%, 5/1/20 295,302 330,723
11.50%, 10/1/16 222,587 241,408
12%, 5/1/10-6/1/17 706,487 770,305
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Multiclass Mtg.
Participation Certificates:
Series 2368, Cl. TG, 6%, 10/15/16 1,811,760 1,840,326
Series 3057, Cl. LG, 5%, 10/15/35 5,000,000 4,672,932
Series 3105, Cl. BD, 5.50%, 1/15/26 8,122,000 8,129,895
Series 3138, Cl. PA, 5.50%, 2/15/27 19,202,109 19,254,942
Series 3153, Cl. FJ, 5.71%, 5/15/36 1 2,338,201 2,344,981
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 1360, Cl. PZ, 7.50%, 9/15/22 9,528,668 9,709,957
Series 2002-66, Cl. FG, 6.33%, 9/25/32 1 8,892,727 9,047,178
Series 2055, Cl. ZM, 6.50%, 5/15/28 1,989,442 2,030,694
Series 2080, Cl. Z, 6.50%, 8/15/28 1,288,332 1,316,837
Series 2173, Cl. Z, 6.50%, 7/15/29 4,994,385 5,148,959
Series 2326, Cl. ZP, 6.50%, 6/15/31 1,434,006 1,471,726
Series 2387, Cl. PD, 6%, 4/15/30 968,030 969,194
Series 2500, Cl. FD, 5.83%, 3/15/32 1 840,263 849,026
Series 2526, Cl. FE, 5.73%, 6/15/29 1 1,074,995 1,079,569
Series 2551, Cl. FD, 5.73%, 1/15/33 1 842,687 851,893
24 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates: Continued
Series 2583, Cl. KA, 5.50%, 3/15/22 $ 1,459,863 $ 1,458,415
Series 2939, Cl. PE, 5%, 2/15/35 11,489,000 10,773,811
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 177, Cl. IO, 12.667%, 7/1/26 6 3,356,432 747,036
Series 183, Cl. IO, 8.234%, 4/1/27 6 1,349,217 293,166
Series 192, Cl. IO, 13.941%, 2/1/28 6 590,751 125,938
Series 200, Cl. IO, 13.272%, 1/1/29 6 713,211 156,137
Series 203, Cl. IO, 3.706%, 6/1/29 6 2,528,921 548,865
Series 204, Cl. IO, (6.142)%, 5/1/29 6 207,878 45,763
Series 205, Cl. IO, 10.148%, 9/1/29 6 3,216,207 715,616
Series 206, Cl. IO, (13.726)%, 12/1/29 6 1,110,456 258,545
Series 207, Cl. IO, (16.958)%, 4/1/30 6 1,256,119 281,834
Series 2074, Cl. S, 0.394%, 7/17/28 6 776,505 73,961
Series 2079, Cl. S, (0.624)%, 7/17/28 6 1,222,768 121,739
Series 208, Cl. IO, (2.557)%, 6/1/30 6 2,217,363 480,353
Series 212, Cl. IO, 5.047%, 5/1/31 6 5,061,704 1,108,318
Series 214, Cl. IO, (8.788)%, 6/1/31 6 1,207,038 268,231
Series 2003-13, Cl. I O, 9.767%, 3/25/33 6 6,057,153 1,334,273
Series 2003-26, Cl. I O, 10.614%, 4/25/33 6 4,826,175 1,061,575
Series 2003-118, Cl. S, 10.01%, 12/25/33 6 9,919,651 1,091,133
Series 2005-87, Cl. SG, 10.772%, 10/25/35 6 17,490,125 1,012,771
Series 2526, Cl. SE, 2.072%, 6/15/29 6 1,920,308 100,569
Series 2819, Cl. S, 0.785%, 6/15/34 6 17,324,305 1,242,080
Series 2920, Cl. S, (0.487)%, 1/15/35 6 10,196,523 491,200
Series 3000, Cl. SE, (4.389)%, 7/15/25 6 12,554,617 480,052
Series 3004, Cl. SB, 8.215%, 7/15/35 6 19,212,358 562,661
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/1/19 2,872,913 2,776,667
4.50%, 10/1/21 3 26,741,000 25,805,065
5%, 2/1/18-11/1/33 71,692,437 69,822,672
5%, 10/1/21-10/1/36 3 52,416,439 50,901,508
5.50%, 1/1/33-11/1/34 84,309,976 83,325,551
5.50%, 10/1/21-10/1/36 3 77,891,000 76,986,168
6%, 7/1/24-5/1/33 22,972,133 23,179,685
6%, 10/1/21-10/1/36 3 29,043,000 29,453,486
6.50%, 6/1/17-9/1/32 42,801,200 43,811,048
6.50%, 10/1/36 3 20,373,000 20,748,637
7%, 11/1/17-9/1/34 29,854,743 30,813,714
7.50%, 6/1/10-1/1/33 16,574,874 17,211,627
8.50%, 7/1/32 114,538 123,336
9.50%, 4/1/20-3/15/21 191,897 209,398
11%, 10/15/15-2/1/26 462,240 511,909
25 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.: Continued
13%, 6/1/15 $ 102,012 $ 114,242
15%, 4/15/13 401,873 458,351
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust:
CMO Interest-Only Stripped Mtg.-Backed Security,
Trust 2001-T10, Cl. IO, (1.986)%, 12/25/41 6 182,967,069 2,695,507
CMO Interest-Only Stripped Mtg.-Backed Security,
Trust 2001-T3, Cl. IO, 12.136%, 11/25/40 6 21,000,954 397,743
CMO Interest-Only Stripped Mtg.-Backed Security,
Trust 2001-T4, Cl. IO, 8.085%, 7/25/41 6 35,048,276 651,386
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1996-35, Cl. Z, 7%, 7/25/26 230,489 236,117
Trust 1997-45, Cl. CD, 8%, 7/18/27 2,627,896 2,783,616
Trust 1998-58, Cl. PC, 6.50%, 10/25/28 2,965,865 3,062,205
Trust 2001-50, Cl. NE, 6%, 8/25/30 484,352 485,455
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 214,810 219,252
Trust 2001-70, Cl. LR, 6%, 9/25/30 739,308 740,685
Trust 2001-72, Cl. NH, 6%, 4/25/30 306,162 306,024
Trust 2001-74, Cl. PD, 6%, 5/25/30 128,033 127,766
Trust 2002-9, Cl. PC, 6%, 3/25/17 5,174,162 5,252,948
Trust 2002-19, Cl. PE, 6%, 4/25/17 2,646,745 2,685,176
Trust 2002-21, Cl. PE, 6.50%, 4/25/32 6,057,949 6,236,461
Trust 2002-77, Cl. WF, 5.73%, 12/18/32 1 1,216,230 1,226,463
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 4,963,000 4,897,198
Trust 2003-23, Cl. EQ, 5.50%, 4/25/23 12,066,000 11,879,574
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 5,467,000 5,421,052
Trust 2003-84, Cl. PW, 3%, 6/25/22 4,650,000 4,551,334
Trust 2003-116, Cl. FA, 5.73%, 11/25/33 1 1,082,074 1,087,949
Trust 2004-101, Cl. BG, 5%, 1/25/20 4,201,000 4,107,038
Trust 2005-31, Cl. PB, 5.50%, 4/25/35 2,865,000 2,801,873
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 3,510,000 3,256,821
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25 2,910,000 2,815,628
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 9,270,000 9,301,734
Trust 2006-50, Cl. KS, 4.657%, 6/25/36 1 4,352,129 4,243,130
Trust 2006-50, Cl. SA, 4.657%, 6/25/36 1 5,043,548 4,880,712
Trust 2006-50, Cl. SK, 5.657%, 6/25/36 1 915,041 896,965
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 12,594,804 12,619,981
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Interest-Only
Stripped Mtg.-Backed Security:
Trust 2002-28, Cl. SA, 0.899%, 4/25/32 6 1,008,490 72,327
Trust 2002-38, Cl. SO, (3.515)%, 4/25/32 6 897,537 53,146
Trust 2002-39, Cl. SD, (1.665)%, 3/18/32 6 1,470,717 110,605
Trust 2002-48, Cl. S, 1.226%, 7/25/32 6 1,617,186 124,943
Trust 2002-52, Cl. SL, 1.23%, 9/25/32 6 959,728 76,547
Trust 2002-53, Cl. SK, (1.213)%, 4/25/32 6 917,065 78,398
26 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Interest-Only
Stripped Mtg.-Backed Security: Continued
Trust 2002-56, Cl. SN, 2.237%, 7/25/32 6 $ 2,217,399 $ 175,501
Trust 2002-77, Cl. IS, 1.501%, 12/18/32 6 1,529,137 122,020
Trust 2006-34, Cl. SK, 13.241%, 5/25/36 6 16,897,259 1,276,444
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Trust 221, Cl. 2, 12.052%, 5/1/23 6 1,238,495 284,508
Trust 240, Cl. 2, 20.817%, 9/1/23 6 2,004,394 446,103
Trust 247, Cl. 2, 13.627%, 10/1/23 6 251,048 59,994
Trust 301, Cl. 2, 6.416%, 4/1/29 6 1,968,421 421,809
Trust 303, Cl. IO, 11.777%, 11/1/29 6 1,189,618 278,272
Trust 313, Cl. 2, (6.97)%, 6/1/31 6 7,130,917 1,615,404
Trust 319, Cl. 2, 12.061%, 2/1/32 6 53,279 12,263
Trust 321, Cl. 2, 9.57%, 4/1/32 6 9,524,512 2,195,201
Trust 324, Cl. 2, 5.939%, 7/1/32 6 6,954,821 1,580,873
Trust 329, Cl. 2, 9.451%, 1/1/33 6 14,965,828 3,593,266
Trust 334, Cl. 12, 5.349%, 2/1/33 6 9,853,872 2,100,310
Trust 340, Cl. 2, 8.005%, 9/1/33 6 4,852,457 1,188,985
Trust 344, Cl. 2, 7.65%, 12/1/33 6 3,909,569 905,245
Trust 2001-61, Cl. SH, 8.995%, 11/18/31 6 5,943,121 559,775
Trust 2001-63, Cl. SD, 2.209%, 12/18/31 6 77,847 7,445
Trust 2001-68, Cl. SC, 2.546%, 11/25/31 6 54,929 4,809
Trust 2001-81, Cl. S, 2.648%, 1/25/32 6 1,449,081 109,190
Trust 2002-9, Cl. MS, 1.19%, 3/25/32 6 1,881,042 150,756
Trust 2002-65, Cl. SC, (3.835)%, 6/25/26 6 2,886,056 186,990
Trust 2002-77, Cl. SH, 2.876%, 12/18/32 6 1,704,584 162,673
Trust 2003-4, Cl. S, 9.966%, 2/25/33 6 3,143,628 357,303
Trust 2003-33, Cl. SP, 13.034%, 5/25/33 6 6,025,517 705,289
Trust 2005-40, Cl. SA, (2.733)%, 5/25/35 6 15,586,621 787,282
Trust 2005-40, Cl. SB, 0.265%, 5/25/35 6 6,982,455 301,101
Trust 2005-71, Cl. SA, 3.309%, 8/25/25 6 7,986,842 456,463
Trust 2006-33, Cl. SP, 13.681%, 5/25/36 6 8,478,579 661,211
Trust 2006-75, Cl. SA, 8.486%, 8/25/36 6 5,292,362 244,235
Trust 2682, Cl. TQ, 14.208%, 10/15/33 6 6,733,138 416,234
Trust 2981, Cl. BS, 14.201%, 5/15/35 6 12,913,052 596,964
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed
Security, Trust 340, Cl. 1, 5.181%, 9/1/33 7 4,852,457 3,516,105
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates,
Series 2005-C, Cl. A2, 4.24%, 3/15/08 2,491,609 2,486,640
- ------------------------------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 2,940,000 2,912,854
27 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc.,
Commercial Mtg. Pass-Through Certificates:
Series 1997-C1, Cl. A3, 6.869%, 7/15/29 $ 1,103,370 $ 1,111,664
Series 1998-C1, Cl. F, 7.185%, 5/15/30 1 2,000,000 2,115,158
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
4.75%, 7/20/27 1 11,879 11,981
7%, 1/15/28-1/20/30 2,806,146 2,897,033
8%, 1/15/28-9/15/28 1,226,126 1,300,394
11%, 10/20/19 29,778 32,847
12%, 11/20/13-9/20/15 44,616 49,934
12.50%, 12/15/13-11/15/15 1,741,367 1,936,383
13%, 10/15/15 2,658,467 2,974,165
13.50%, 6/15/15 3,571,550 4,023,524
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates:
Series 1999-32, Cl. ZB, 8%, 9/16/29 9,575,873 10,278,147
Series 2000-7, Cl. Z, 8%, 1/16/30 5,951,450 6,353,483
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Series 1998-6, Cl. SA, (1.078)%, 3/16/28 6 1,522,286 134,227
Series 1998-19, Cl. SB, (0.434)%, 7/16/28 6 2,470,926 242,921
Series 2006-47, Cl. SA, 16.226%, 8/16/36 6 5,468,503 327,374
- ------------------------------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%, 8/10/42 3,260,000 3,186,904
Series 2005-GG5, Cl. A2, 5.117%, 4/10/37 3,310,000 3,306,528
- ------------------------------------------------------------------------------------------------------------------------------------
JP Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32 10,200,699 10,810,782
- ------------------------------------------------------------------------------------------------------------------------------------
JP Morgan Mortgage Trust, CMO Pass-Through Certificates,
Series 2005-S2, Cl. 3A1, 6.731%, 2/25/32 1 7,399,705 7,496,952
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 1,220,000 1,196,804
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 4,310,000 4,251,593
- ------------------------------------------------------------------------------------------------------------------------------------
LB Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates, Series 1999-C2, Cl. C, 7.47%, 10/15/32 8,115,000 8,642,480
- ------------------------------------------------------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust, Commercial Mtg.
Pass-Through Certificates:
Series 2000-C3, Cl. A2, 7.95%, 5/15/25 9,627,000 10,405,758
Series 2005-C5, Cl. A2, 4.885%, 9/15/30 3,520,000 3,495,636
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Structured Securities Corp., CMO,
Series 2002-GE1, Cl. A, 2.514%, 7/26/24 5 519,449 379,198
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates,
Series 2005-10, Cl. 2A3B, 5.55%, 1/25/36 2,738,935 2,720,036
28 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 $ 5,045,368 $ 5,019,503
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 3,055,589 3,036,475
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I Trust, Commercial Mtg. Pass-Through
Certificates, Series 1997-XL1, Cl. G, 7.695%, 10/3/30 13,823,000 11,996,588
- ------------------------------------------------------------------------------------------------------------------------------------
PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 2001-C1, Cl. A2, 6.36%, 3/12/34 9,627,000 10,052,786
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Agricultural Credit, Inc., Farmer Mac Agricultural Real Estate
Trust Sr. Sub. Mtg. Pass-Through Certificates:
Series 1992-2, Cl. B2, 1/15/03 4,5,15 624,465 --
Series 1992-2, Cl. B3, 10.324%, 4/15/09 1,5 135,251 42
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through Certificates,
Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 380,000 408,271
- ------------------------------------------------------------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass Through Certificates,
Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 8,890,000 8,894,167
- ------------------------------------------------------------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg. Asset-BackedPass-Through Certificates,
Series 2006-QS5, Cl. 2A2, 6%, 4/25/08 8,743,213 8,737,324
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust 2006-A9CB, CMO Pass-Through Certificates,
Series 2006-A9CB, Cl. A5, 6%, 9/25/36 8,007,405 7,999,272
- ------------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Inc., CMO:
Series 2000-UP1, Cl. A2, 8%, 9/25/30 598,566 601,848
Series 2001-UP2, Cl. AF2, 7.25%, 10/25/31 455,022 464,780
- ------------------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney RV Trust, Recreational Vehicles Mtg. Obligations,
Series 2001-1, Cl. B, 6.64%, 4/15/18 2,407,000 2,418,026
- ------------------------------------------------------------------------------------------------------------------------------------
Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security:
Series 1992-2, Cl. IO, 4.286%, 9/15/22 6 18,392,200 449,268
Series 1995-2B, Cl. 2IO, 8.288%, 6/15/25 6 1,326,631 31,006
Series 1995-3, Cl. 1IO, (6.974)%, 9/15/25 6 42,214,929 374,940
- ------------------------------------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust, Commercial Mtg.
Obligations, Series 2005-C17, Cl. A2, 4.782%, 3/15/42 5,800,000 5,736,569
- ------------------------------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR5 Trust,
Series 2005-AR5, Cl. A1, 4.673%, 5/25/35 1 2,194,521 2,188,420
- ------------------------------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR8 Trust,
Series 2005-AR8, Cl. 2AB1, 5.58%, 7/25/45 1 2,883,587 2,892,126
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2004-DD Trust, CMO Mtg.
Pass-Through Certificates, Series 2004-DD, Cl. 2A1, 4.509%, 1/25/35 1 255,388 254,588
----------------
Total Mortgage-Backed Obligations (Cost $1,030,340,562) 1,009,936,331
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--9.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Fannie Mae Unsec. Nts., 3.69%, 10/5/07 8,9 61,690,000 58,586,253
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds, 3.50%, 11/15/07 9 150,000 147,444
29 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
4.125%, 7/12/10 9 $ 3,100,000 $ 3,019,115
5.25%, 7/18/11 80,930,000 82,152,286
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4%, 2/28/07 335,000 333,260
4.25%, 7/15/07 9 505,000 501,355
4.75%, 12/15/10 9 15,620,000 15,544,290
6%, 5/15/11 9 22,400,000 23,423,814
6%, 5/15/08 9,10 15,044,000 15,281,274
6.625%, 9/15/09 10 32,926,000 34,481,227
- ------------------------------------------------------------------------------------------------------------------------------------
Resolution Funding Corp. Bonds, Residual Funding STRIPS,
6.132%, 1/15/21 8,9 51,220,000 25,224,621
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 5.02%, 11/9/06 9,11,12 293,925,000 292,367,369
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
4.50%, 2/15/36 9 415,000 397,784
5.25%, 2/15/29 9 40,170,000 42,489,215
5.50%, 8/15/28 9,10 152,000 165,680
7.25%, 5/15/16 9,10 2,734,000 3,277,598
STRIPS, 4.941%, 2/15/16 8,10 23,586,000 15,248,302
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.625%, 8/31/11 9 29,711,000 29,752,803
5.125%, 6/30/11 9 13,327,000 13,625,298
----------------
Total U.S. Government Obligations (Cost $652,810,286) 656,018,988
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--23.0%
- ------------------------------------------------------------------------------------------------------------------------------------
ARGENTINA--1.5%
Argentina (Republic of) Bonds:
2%, 9/30/14 5 [ARP] 13,011,900 4,267,253
5.589%, 8/3/12 1 48,514,501 44,802,964
Series V, 7%, 3/28/11 52,430,000 49,587,122
- ------------------------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas,
Series PBA1, 4/1/07 4,5 [ARP] 208,251 90,145
- ------------------------------------------------------------------------------------------------------------------------------------
Central Bank of Argentina Bonds, 2%, 2/4/18 5 [ARP] 17,611,439 8,500,019
----------------
107,247,503
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--0.8%
New South Wales Treasury Corp. Gtd. Bonds, 8%, 3/1/08 [AUD] 70,980,000 54,276,524
- ------------------------------------------------------------------------------------------------------------------------------------
BELGIUM--0.6%
Belgium (Kingdom of) Bonds, Series 44, 5%, 3/28/35 [EUR] 9,450,000 14,120,896
- ------------------------------------------------------------------------------------------------------------------------------------
Belgium (Kingdom of) Treasury Bills, 3.192%, 12/14/06 8 [EUR] 22,950,000 28,918,176
----------------
43,039,072
30 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
BRAZIL--2.0%
Brazil (Federal Republic of) Bonds:
8%, 1/15/18 $ 26,600,000 $ 29,286,600
8.75%, 2/4/25 32,645,000 38,961,808
8.875%, 10/14/19 25,985,000 30,883,173
10.50%, 7/14/14 24,810,000 31,235,790
- ------------------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts., 7.875%, 3/7/15 7,950,000 8,733,075
----------------
139,100,446
- ------------------------------------------------------------------------------------------------------------------------------------
BULGARIA--0.2%
Bulgaria (Republic of) Bonds:
8.25%, 1/15/15 7,080,000 8,363,250
8.25%, 1/15/15 2 6,790,000 8,020,688
----------------
16,383,938
- ------------------------------------------------------------------------------------------------------------------------------------
CANADA--0.8%
Canada (Government of) Nts., 4%, 9/1/10 [CAD] 65,285,000 58,651,659
- ------------------------------------------------------------------------------------------------------------------------------------
COLOMBIA--1.4%
Colombia (Republic of) Bonds:
7.375%, 9/18/37 27,157,000 27,564,355
10.75%, 1/15/13 8,000,000 9,808,000
12%, 10/22/15 [COP] 49,296,000,000 23,498,351
- ------------------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Nts., 11.75%, 3/1/10 [COP] 23,854,260,000 10,633,740
- ------------------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Unsec. Bonds, 8.125%, 5/21/24 22,580,000 24,950,900
----------------
96,455,346
- ------------------------------------------------------------------------------------------------------------------------------------
DENMARK--0.2%
Denmark (Kingdom of) Bonds:
4%, 11/15/10 [DKK] 21,445,000 3,700,451
4%, 11/15/15 [DKK] 15,950,000 2,775,045
7%, 11/10/24 [DKK] 5,820,000 1,385,552
- ------------------------------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Nts., 4%, 8/15/08 [DKK] 23,020,000 3,940,710
----------------
11,801,758
- ------------------------------------------------------------------------------------------------------------------------------------
DOMINICAN REPUBLIC--0.0%
Dominican Republic Unsec. Unsub. Nts., Series REGS, 9.50%, 9/27/11 1,876,658 2,026,791
- ------------------------------------------------------------------------------------------------------------------------------------
EL SALVADOR--0.2%
El Salvador (Republic of) Bonds:
7.625%, 9/21/34 2 4,802,000 5,270,195
7.65%, 6/15/35 2 4,735,000 5,101,963
----------------
10,372,158
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE--1.9%
France (Government of) Bonds, 3.25%, 4/25/16 [EUR] 59,985,000 73,217,511
31 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE Continued
France (Government of) Obligations Assimilables du Tresor Bonds,
4%, 4/25/55 [EUR] 25,690,000 $ 33,269,855
- ------------------------------------------------------------------------------------------------------------------------------------
France (Government of) Treasury Bills, 3.195%, 12/14/06 8 [EUR] 18,630,000 23,472,652
----------------
129,960,018
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY--1.8%
Germany (Federal Republic of) Bonds, Series 05, 4%, 1/4/37 [EUR] 36,260,000 47,119,930
- ------------------------------------------------------------------------------------------------------------------------------------
Germany (Federal Republic of) Treasury Bills,
Series 0906, 3.359%, 3/14/07 8 [EUR] 62,930,000 78,613,623
----------------
125,733,553
- ------------------------------------------------------------------------------------------------------------------------------------
GREECE--0.4%
Greece (Republic of) Bonds, 4.60%, 5/20/13 [EUR] 21,830,000 28,889,504
- ------------------------------------------------------------------------------------------------------------------------------------
GUATEMALA--0.1%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11 2 2,972,000 3,514,390
10.25%, 11/8/11 1,205,000 1,424,913
----------------
4,939,303
- ------------------------------------------------------------------------------------------------------------------------------------
INDONESIA--0.2%
Indonesia (Republic of) Nts.:
6.75%, 3/10/14 2 2,670,000 2,730,075
7.25%, 4/20/15 2 4,450,000 4,689,188
- ------------------------------------------------------------------------------------------------------------------------------------
Indonesia (Republic of) Unsec. Nts., 8.50%, 10/12/35 2 6,210,000 7,288,988
----------------
14,708,251
- ------------------------------------------------------------------------------------------------------------------------------------
ISRAEL--0.4%
Israel (State of) Bonds, Series 2682, 7.50%, 3/31/14 [ILS] 101,230,000 25,226,569
- ------------------------------------------------------------------------------------------------------------------------------------
ITALY--1.5%
Italy (Republic of) Nts., Certificati di Credito del Tesoro, 3.40%, 7/1/09 1 [EUR] 40,215,000 51,219,165
- ------------------------------------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali,
4.25%, 2/1/19 [EUR] 42,280,000 54,835,703
----------------
106,054,868
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN--1.0%
Japan (Government of) Bonds:
10 yr., Series 268, 1.50%, 3/20/15 [JPY] 2,523,000,000 21,296,256
Series 7, 0.80%, 3/10/16 [JPY] 5,368,056,000 44,469,090
----------------
65,765,346
32 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA--0.4%
Johor Corp. Malaysia (Government of) Bonds, Series P3, 1%, 7/31/12 5 [MYR] 57,058,000 $ 17,173,097
- ------------------------------------------------------------------------------------------------------------------------------------
Malaysia (Government of) Bonds, Series 2/05, 4.72%, 9/30/15 [MYR] 26,605,000 7,246,400
----------------
24,419,497
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO--0.9%
Mexican Williams Sr. Nts., 6.03%, 11/15/08 1,5 1,500,000 1,545,938
- ------------------------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds:
7.50%, 4/8/33 35,543,000 41,087,708
8.30%, 8/15/31 2,000,000 2,499,000
11.375%, 9/15/16 45,000 64,688
- ------------------------------------------------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%, 1/14/12 18,630,000 20,493,000
----------------
65,690,334
- ------------------------------------------------------------------------------------------------------------------------------------
NIGERIA--0.1%
Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20 5 3,585,000 3,578,278
- ------------------------------------------------------------------------------------------------------------------------------------
Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 2,312,295 2,182,603
----------------
5,760,881
- ------------------------------------------------------------------------------------------------------------------------------------
PANAMA--0.7%
Panama (Republic of) Bonds:
6.70%, 1/26/36 39,951,000 39,751,245
9.375%, 4/1/29 5,500,000 7,122,500
----------------
46,873,745
- ------------------------------------------------------------------------------------------------------------------------------------
PERU--1.6%
Peru (Republic of) Bonds:
7.35%, 7/21/25 7,075,000 7,577,325
7.84%, 8/12/20 [PEN] 102,295,000 33,409,443
8.20%, 8/12/26 5 [PEN] 10,835,000 3,609,333
8.375%, 5/3/16 3,210,000 3,715,575
9.91%, 5/5/15 [PEN] 63,042,000 23,268,520
Series 7, 8.60%, 8/12/17 [PEN] 24,020,000 8,284,554
Series 8-1, 12.25%, 8/10/11 [PEN] 10,583,000 4,060,056
- ------------------------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 5%, 3/7/17 1 1,064,000 1,053,360
- ------------------------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts., 4.533%, 2/28/16 8 24,145,946 13,542,254
- ------------------------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Unsec. Unsub. Bonds, 8.75%, 11/21/33 11,120,000 13,677,600
----------------
112,198,020
33 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES--1.3%
Philippines (Republic of the) Bonds:
8%, 1/15/16 $ 38,400,000 $ 42,336,000
8.375%, 2/15/11 5,050,000 5,454,000
9.50%, 2/2/30 9,510,000 11,744,850
- ------------------------------------------------------------------------------------------------------------------------------------
Philippines (Republic of the) Unsec. Bonds, 7.75%, 1/14/31 27,181,000 28,506,074
----------------
88,040,924
- ------------------------------------------------------------------------------------------------------------------------------------
POLAND--0.7%
Poland (Republic of) Bonds:
Series 0K0807, 4.191%, 8/12/07 8 [PLZ] 36,350,000 11,172,606
Series DS1013, 5%, 10/24/13 [PLZ] 37,200,000 11,744,493
Series WS0922, 5.75%, 9/23/22 [PLZ] 8,540,000 2,744,177
Series 0511, 4.25%, 5/24/11 [PLZ] 77,135,000 23,499,001
----------------
49,160,277
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSIA--0.0%
Russian Ministry of Finance Debs., Series VII, 3%, 5/14/11 3,560,000 3,198,019
- ------------------------------------------------------------------------------------------------------------------------------------
TURKEY--0.4%
Turkey (Republic of) Bonds, 7%, 9/26/16 7,900,000 7,781,500
- ------------------------------------------------------------------------------------------------------------------------------------
Turkey (Republic of) Nts.:
7.25%, 3/15/15 9,675,000 9,771,750
9.50%, 1/15/14 6,050,000 6,912,125
11%, 1/14/13 2,590,000 3,128,979
----------------
27,594,354
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--1.3%
United Kingdom Treasury Bonds:
5%, 3/7/08 [GBP] 13,585,000 25,461,224
6%, 12/7/28 [GBP] 17,815,000 41,618,033
- ------------------------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 4%, 3/7/09 [GBP] 13,870,000 25,488,712
----------------
92,567,969
- ------------------------------------------------------------------------------------------------------------------------------------
URUGUAY--0.6%
Uruguay (Oriental Republic of) Bonds, 7.625%, 3/21/36 4,835,000 4,847,088
- ------------------------------------------------------------------------------------------------------------------------------------
Uruguay (Oriental Republic of) Unsec. Bonds:
5%, 9/14/18 [UYU] 222,660,000 9,560,630
8%, 11/18/22 23,935,000 25,371,100
----------------
39,778,818
----------------
Total Foreign Government Obligations (Cost $1,557,044,880) 1,595,915,445
34 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--28.0%
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--8.9%
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS--0.6%
Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts.,
Series B, 2/15/10 $ 2,729,000 $ 2,729,000
- ------------------------------------------------------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11 6,631,000 6,481,803
9% Sr. Unsec. Nts., 7/1/15 6,000,000 6,120,000
- ------------------------------------------------------------------------------------------------------------------------------------
Keystone Automotive Operations, Inc., 9.75% Sr. Unsec. Sub. Nts., 11/1/13 5 1,000,000 945,000
- ------------------------------------------------------------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 3,777,000 3,673,133
- ------------------------------------------------------------------------------------------------------------------------------------
Tenneco Automotive, Inc.:
8.625% Sr. Unsec. Sub. Nts., 11/15/14 4,051,000 4,020,618
10.25% Sr. Sec. Nts., Series B, 7/15/13 3,084,000 3,361,560
- ------------------------------------------------------------------------------------------------------------------------------------
United Components, Inc., 9.375% Sr. Sub. Nts., 6/15/13 1,700,000 1,691,500
- ------------------------------------------------------------------------------------------------------------------------------------
Visteon Corp.:
7% Sr. Unsec. Nts., 3/10/14 3,975,000 3,577,500
8.25% Sr. Unsec. Nts., 8/1/10 6,600,000 6,468,000
----------------
39,068,114
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES--1.1%
Ford Motor Co., 7.45% Bonds, 7/16/31 2,700,000 2,099,250
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.625% Nts., 10/1/08 5,400,000 5,182,753
5.80% Sr. Unsec. Nts., 1/12/09 800,000 762,008
7.375% Nts., 10/28/09 18,550,000 18,039,059
7.375% Unsec. Nts., 2/1/11 1,950,000 1,873,359
9.957% Nts., 4/15/12 1 9,615,000 10,074,059
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
6.875% Nts., 9/15/11 15,360,000 15,294,413
7.25% Nts., 3/2/11 3,500,000 3,523,289
8% Bonds, 11/1/31 10,590,000 11,103,318
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Corp.:
7.20% Nts., 1/15/11 4,000,000 3,705,000
8.375% Sr. Unsec. Debs., 7/15/33 1,400,000 1,218,000
- ------------------------------------------------------------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Nts., 1/1/14 2 940,000 989,350
10.50% Sr. Sub. Nts., 1/1/16 2 4,255,000 4,701,775
----------------
78,565,633
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
SGS International, Inc., 12% Sr. Unsec. Sub. Nts., 12/15/13 2,825,000 2,867,375
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Education Management LLC/Education Management Corp.,
10.25% Sr. Sub. Nts., 6/1/16 2 3,345,000 3,436,988
35 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.0%
American Casino & Entertainment Properties LLC,
7.85% Sr. Sec. Nts., 2/1/12 $ 1,900,000 $ 1,938,000
- ------------------------------------------------------------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 4,101,000 4,300,924
- ------------------------------------------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 4,566,000 4,817,130
- ------------------------------------------------------------------------------------------------------------------------------------
CCM Merger, Inc., 8% Unsec. Nts., 8/1/13 2 4,895,000 4,723,675
- ------------------------------------------------------------------------------------------------------------------------------------
Domino's, Inc., 8.25% Sr. Unsec. Sub. Nts., 7/1/11 2,391,000 2,522,505
- ------------------------------------------------------------------------------------------------------------------------------------
French Lick Resorts & Casino LLC, 10.75% First Mtg. Nts., 4/15/14 2 4,600,000 4,197,500
- ------------------------------------------------------------------------------------------------------------------------------------
Gaylord Entertainment Co.:
6.75% Sr. Unsec. Unsub. Nts., 11/15/14 700,000 672,875
8% Sr. Nts., 11/15/13 1,900,000 1,942,750
- ------------------------------------------------------------------------------------------------------------------------------------
Greektown Holdings, Inc., 10.75% Sr. Nts., 12/1/13 2 4,915,000 5,209,900
- ------------------------------------------------------------------------------------------------------------------------------------
Intrawest Corp., 7.50% Sr. Unsec. Nts., 10/15/13 3,382,000 3,648,333
- ------------------------------------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Unsec. Sub. Nts., 3/1/14 2,022,000 1,931,010
9% Sr. Sub. Nts., 3/15/12 7,132,000 7,479,685
- ------------------------------------------------------------------------------------------------------------------------------------
Mandalay Resort Group:
9.375% Sr. Sub. Nts., 2/15/10 3,370,000 3,618,538
10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 5,121,000 5,313,038
- ------------------------------------------------------------------------------------------------------------------------------------
MGM Mirage, Inc.:
6.75% Sr. Unsec. Nts., 4/1/13 3,200,000 3,160,000
8.375% Sr. Unsec. Sub. Nts., 2/1/11 6,110,000 6,400,531
9.75% Sr. Unsec. Sub. Nts., 6/1/07 1,200,000 1,234,500
- ------------------------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 1,670,000 1,640,775
6.375% Sr. Sub. Nts., 7/15/09 3,327,000 3,318,683
6.875% Sr. Unsec. Sub. Nts., 2/15/15 2,330,000 2,283,400
7.125% Sr. Unsec. Sub. Nts., 8/15/14 900,000 900,000
8% Sr. Sub. Nts., 4/1/12 2,950,000 3,068,000
- ------------------------------------------------------------------------------------------------------------------------------------
NCL Corp., 10.625% Sr. Unsub. Nts., 7/15/14 1,000,000 972,500
- ------------------------------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 7.875% Sr. Sub. Nts., 3/15/10 8,839,000 9,236,755
- ------------------------------------------------------------------------------------------------------------------------------------
Penn National Gaming, Inc., 6.75% Sr. Unsec. Sub. Nts., 3/1/15 1,665,000 1,629,619
- ------------------------------------------------------------------------------------------------------------------------------------
Pinnacle Entertainment, Inc., 8.25% Sr. Unsec. Sub. Nts., 3/15/12 6,950,000 7,071,625
- ------------------------------------------------------------------------------------------------------------------------------------
Pokagon Gaming Authority, 10.375% Sr. Nts., 6/15/14 2 2,265,000 2,426,381
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts., 3/15/08 4,5,15 10,800,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Unsec. Nts., 2/1/10 3,226,000 3,105,025
9.625% Sr. Nts., 6/1/14 1,368,000 1,224,360
9.75% Sr. Nts., 4/15/13 1,050,000 950,250
- ------------------------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 10,325,000 9,718,406
6.875% Sr. Unsec. Sub. Nts., 3/1/16 1,580,000 1,489,150
- ------------------------------------------------------------------------------------------------------------------------------------
Trump Entertainment Resorts, Inc., 8.50% Sec. Nts., 6/1/15 8,600,000 8,266,750
- ------------------------------------------------------------------------------------------------------------------------------------
Universal City Development Partners Ltd., 11.75% Sr. Nts., 4/1/10 3,858,000 4,176,285
36 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Vail Resorts, Inc., 6.75% Sr. Sub. Nts., 2/15/14 $ 1,500,000 $ 1,473,750
- ------------------------------------------------------------------------------------------------------------------------------------
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 6.625% Nts., 12/1/14 10,403,000 10,142,925
----------------
136,205,533
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.4%
Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 6,554,000 6,554,000
- ------------------------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub. Nts., 9/15/10 2,738,000 3,010,792
- ------------------------------------------------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12 2,803,000 2,760,955
- ------------------------------------------------------------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 2,474,000 2,547,898
9.50% Sr. Unsec. Sub. Nts., 2/15/11 1,200,000 1,231,500
- ------------------------------------------------------------------------------------------------------------------------------------
Sealy Mattress Co., 8.25% Sr. Sub. Nts., 6/15/14 1,971,000 2,020,275
- ------------------------------------------------------------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 2,025,000 1,964,250
- ------------------------------------------------------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 1,925,000 1,977,938
- ------------------------------------------------------------------------------------------------------------------------------------
WCI Communities, Inc., 9.125% Sr. Sub. Nts., 5/1/12 3,570,000 3,213,000
- ------------------------------------------------------------------------------------------------------------------------------------
William Lyon Homes, Inc., 10.75% Sr. Nts., 4/1/13 3,521,000 3,256,925
----------------
28,537,533
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Leslie's Poolmart, Inc., 7.75% Sr. Unsec. Nts., 2/1/13 3,450,000 3,415,500
- ------------------------------------------------------------------------------------------------------------------------------------
Steinway Musical Instruments, Inc., 7% Sr. Nts., 3/1/14 2 1,955,000 1,925,675
----------------
5,341,175
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA--3.8%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 4,15 1,400,000 857,500
8.125% Sr. Nts., Series B, 7/15/03 4,15 2,325,000 1,447,313
8.375% Sr. Nts., Series B, 2/1/08 4,15 4,236,000 2,636,910
9.25% Sr. Unsec. Nts., Series B, 10/1/02 4,15 6,065,000 3,760,300
9.875% Sr. Nts., Series B, 3/1/07 4,15 1,800,000 1,120,500
10.25% Sr. Unsec. Sub. Nts., 6/15/11 4,15 800,000 522,000
10.875% Sr. Unsec. Nts., 10/1/10 4,15 200,000 124,500
- ------------------------------------------------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/12 4,246,000 4,299,075
- ------------------------------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Unsec. Sub. Nts., 3/1/14 1,550,000 1,464,750
9.50% Sr. Unsec. Sub. Nts., 2/1/11 3,409,000 3,421,784
- ------------------------------------------------------------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11 975,000 860,438
10.25% Sr. Unsec. Sub. Nts., Series B, 5/1/09 3,750,000 3,506,250
- ------------------------------------------------------------------------------------------------------------------------------------
Block Communications, Inc., 8.25% Sr. Nts., 12/15/15 2 2,290,000 2,244,200
37 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA Continued
Charter Communications Holdings II LLC/Charter Communications
Holdings II Capital Corp.:
10.25% Sr. Unsec. Nts., 9/15/10 $ 1,300,000 $ 1,332,500
10.25% Sr. Unsec. Nts., Series B, 9/15/10 3,830,000 3,906,600
- ------------------------------------------------------------------------------------------------------------------------------------
Charter Communications Operating LLC/Charter Communications
Operating Capital Corp., 8.375% Sr. Nts., Second Lien, 4/30/14 2 20,029,000 20,454,616
- ------------------------------------------------------------------------------------------------------------------------------------
Cinemark USA, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/13 2,229,000 2,323,733
- ------------------------------------------------------------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr. Unsec. Disc. Nts., 3/15/14 13 7,129,000 5,721,023
- ------------------------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc.:
7.25% Sr. Nts., 4/15/12 2 2,950,000 2,953,688
7.625% Sr. Unsec. Debs., 7/15/18 900,000 925,875
7.625% Sr. Unsec. Unsub. Nts., Series B, 4/1/11 6,419,000 6,619,594
- ------------------------------------------------------------------------------------------------------------------------------------
Dex Media East LLC/Dex Media East Finance Co.,
9.875% Sr. Unsec. Nts., 11/15/09 4,240,000 4,489,100
- ------------------------------------------------------------------------------------------------------------------------------------
Dex Media West LLC/Dex Media West Finance Co.:
8.50% Sr. Nts., 8/15/10 2,509,000 2,603,088
9.875% Sr. Sub. Nts., 8/15/13 4,431,000 4,807,635
- ------------------------------------------------------------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec. Disc. Nts., 11/15/13 13 3,600,000 3,051,000
8% Unsec. Nts., 11/15/13 14,633,000 14,596,418
- ------------------------------------------------------------------------------------------------------------------------------------
DirecTV Holdings LLC/DirecTV Financing Co., Inc.,
6.375% Sr. Unsec. Nts., 6/15/15 2,700,000 2,551,500
- ------------------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp.:
6.625% Sr. Unsec. Nts., 10/1/14 6,188,000 5,901,805
7% Sr. Nts., 10/1/13 2,3 2,150,000 2,112,375
7.125% Sr. Nts., 2/1/16 2 2,200,000 2,136,750
- ------------------------------------------------------------------------------------------------------------------------------------
Emmis Operating Co., 6.875% Sr. Unsec. Sub. Nts., 5/15/12 3,296,000 3,308,360
- ------------------------------------------------------------------------------------------------------------------------------------
Entercom Radio LLC/Entercom Capital, Inc.,
7.625% Sr. Unsec. Sub. Nts., 3/1/14 1,925,000 1,888,906
- ------------------------------------------------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.75% Sr. Sec. Nts., 12/1/10 648,000 602,640
- ------------------------------------------------------------------------------------------------------------------------------------
Lamar Media Corp.:
6.625% Sr. Unsec. Sub. Nts., 8/15/15 4,023,000 3,877,166
7.25% Sr. Unsec. Sub. Nts., 1/1/13 1,800,000 1,820,250
- ------------------------------------------------------------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub. Nts., 5/15/13 3,233,000 3,030,938
- ------------------------------------------------------------------------------------------------------------------------------------
Marquee Holdings, Inc., 0%/12% Sr. Disc. Nts., 8/15/14 13 7,400,000 5,698,000
- ------------------------------------------------------------------------------------------------------------------------------------
Mediacom Broadband LLC, 8.50% Sr. Nts., 10/15/15 2,3 4,910,000 4,903,863
- ------------------------------------------------------------------------------------------------------------------------------------
Mediacom Broadband LLC/Mediacom Broadband Corp.,
8.50% Sr. Nts., 10/15/15 1,895,000 1,892,631
- ------------------------------------------------------------------------------------------------------------------------------------
Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts., 1/15/13 4,855,000 4,988,513
- ------------------------------------------------------------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 1,900,000 1,686,250
6.875% Sr. Unsec. Sub. Nts., 10/1/13 4,775,000 4,440,750
- ------------------------------------------------------------------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen Finance Co.:
0%/12.50% Sr. Sub. Disc. Nts., 8/1/16 2,13 5,360,000 3,169,100
10% Sr. Nts., 8/1/14 2 7,265,000 7,546,519
38 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA Continued
NTL Cable plc, 9.125% Sr. Nts., 8/15/16 $ 1,475,000 $ 1,530,313
- ------------------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.757% Sr. Sec. Nts., 1/15/13 1,5 4,225,000 4,277,813
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13 5,317,000 4,851,763
8.875% Sr. Unsec. Nts., 5/15/11 1,718,000 1,687,935
- ------------------------------------------------------------------------------------------------------------------------------------
Quebecor World Capital Corp., 8.75% Sr. Nts., 3/15/16 2 1,600,000 1,548,000
- ------------------------------------------------------------------------------------------------------------------------------------
R.H. Donnelley Corp.:
6.875% Sr. Disc. Nts., Series A-1, 1/15/13 10,815,000 9,922,763
6.875% Sr. Disc. Nts., Series A-2, 1/15/13 10,155,000 9,317,213
6.875% Sr. Nts., 1/15/13 6,800,000 6,239,000
8.875% Sr. Unsec. Nts., Series A-3, 1/15/16 11,110,000 11,193,325
- ------------------------------------------------------------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I, 10.875% Sr. Sub. Nts., 12/15/12 2 4,340,000 4,795,700
- ------------------------------------------------------------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 2,992,000 3,070,540
- ------------------------------------------------------------------------------------------------------------------------------------
Rainbow National Services LLC, 8.75% Sr. Nts., 9/1/12 2 1,999,000 2,148,925
- ------------------------------------------------------------------------------------------------------------------------------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27 [CAD] 14,037,000 13,429,808
- ------------------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Unsec. Sub. Nts., 3/15/12 11,275,000 11,486,406
8.75% Sr. Sub. Nts., 12/15/11 1,100,000 1,152,250
- ------------------------------------------------------------------------------------------------------------------------------------
Sirius Satellite Radio, Inc., 9.625% Sr. Unsec. Nts., 8/1/13 800,000 786,000
- ------------------------------------------------------------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 3,666,000 3,716,408
10.875% Sr. Unsec. Nts., Series B, 6/15/09 3,100,000 3,131,000
- ------------------------------------------------------------------------------------------------------------------------------------
Warner Music Group, 7.375% Sr. Sub. Bonds, 4/15/14 2,300,000 2,254,000
- ------------------------------------------------------------------------------------------------------------------------------------
WMG Holdings Corp., 0%/9.50% Sr. Disc. Nts., 12/15/14 13 9,185,000 6,888,750
- ------------------------------------------------------------------------------------------------------------------------------------
XM Satellite Radio, Inc., 9.75% Sr. Nts., 5/1/14 2 800,000 772,000
----------------
265,806,618
- ------------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL--0.2%
Bon-Ton Stores, Inc. (The), 10.25% Sr. Unsec. Unsub. Nts., 3/15/14 7,700,000 7,526,750
- ------------------------------------------------------------------------------------------------------------------------------------
Neiman Marcus Group, Inc. (The):
9% Sr. Unsec. Nts., 10/15/15 6,770,000 7,226,975
10.375% Sr. Unsec. Sub. Nts., 10/15/15 2,060,000 2,235,100
----------------
16,988,825
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--0.3%
Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 5,880,000 6,049,050
- ------------------------------------------------------------------------------------------------------------------------------------
Atlantic Broadband Finance LLC, 9.375% Sr. Unsec. Sub. Nts., 1/15/14 1,000,000 982,500
- ------------------------------------------------------------------------------------------------------------------------------------
Boise Cascade LLC, 7.125% Sr. Unsec. Sub. Nts., 10/15/14 3,327,000 3,119,063
- ------------------------------------------------------------------------------------------------------------------------------------
Just For Feet, Inc., 11% Sr. Sub. Nts., 5/1/09 4,5,15 4,300,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Linens 'N Things, Inc., 11.132% Sr. Sec. Nts., 1/15/14 1,2 4,635,000 4,495,950
39 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 5 $ 3,851,000 $ 4,082,060
- ------------------------------------------------------------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr. Unsec. Sub. Nts., Series B, 5/1/10 1,650,000 1,666,500
----------------
20,395,123
- ------------------------------------------------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.3%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 2 5,830,000 6,194,375
- ------------------------------------------------------------------------------------------------------------------------------------
Levi Strauss & Co.:
9.75% Sr. Unsec. Unsub. Nts., 1/15/15 3,888,000 4,053,240
10.258% Sr. Unsec. Unsub. Nts., 4/1/12 1 4,570,000 4,729,950
- ------------------------------------------------------------------------------------------------------------------------------------
Oxford Industries, Inc., 8.875% Sr. Nts., 6/1/11 5 1,650,000 1,691,250
- ------------------------------------------------------------------------------------------------------------------------------------
Quiksilver, Inc., 6.875% Sr. Unsec. Nts., 4/15/15 2,865,000 2,728,913
----------------
19,397,728
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--1.0%
- ------------------------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc.:
7.25% Sr. Nts., 9/1/16 1,635,000 1,661,569
8.125% Sr. Sub. Nts., 1/15/12 2,025,000 2,103,469
----------------
3,765,038
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.2%
Jean Coutu Group (PJC), Inc. (The), 8.50% Sr. Sub. Nts., 8/1/14 6,697,000 6,479,348
- ------------------------------------------------------------------------------------------------------------------------------------
Real Time Data Co., 11% Disc. Nts., 5/31/09 4,5,15 8,836,185 --
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10 3,801,000 3,829,508
9.50% Sr. Sec. Nts., 2/15/11 3,225,000 3,349,969
----------------
13,658,825
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts., 2/15/15 1,325,000 1,285,250
8.625% Sr. Sub. Nts., 12/15/12 3,955,000 4,167,581
- ------------------------------------------------------------------------------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09 1,838,000 1,805,835
8.875% Sr. Unsec. Nts., 3/15/11 623,000 599,638
- ------------------------------------------------------------------------------------------------------------------------------------
Hines Nurseries, Inc., 10.25% Sr. Unsec. Sub. Nts., 10/1/11 3,500,000 3,176,250
- ------------------------------------------------------------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08 3,336,000 3,402,720
8% Sr. Nts., Series B, 10/15/09 1,300,000 1,365,000
- ------------------------------------------------------------------------------------------------------------------------------------
United Biscuits Finance plc, 10.75% Sr. Sub. Nts., 4/15/11 [GBP] 4,351,000 8,594,832
----------------
24,397,106
40 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.1%
Church & Dwight Co., Inc., 6% Sr. Unsec. Sub. Nts., 12/15/12 $ 2,000,000 $ 1,925,000
- ------------------------------------------------------------------------------------------------------------------------------------
Nutro Products, Inc., 10.75% Sr. Sub. Nts., 4/15/14 2 1,460,000 1,569,500
- ------------------------------------------------------------------------------------------------------------------------------------
Spectrum Brands, Inc., 7.375% Sr. Unsec. Sub. Nts., 2/1/15 2,550,000 2,052,750
----------------
5,547,250
- ------------------------------------------------------------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.2%
Elizabeth Arden, Inc., 7.75% Sr. Unsec. Sub. Nts., 1/15/14 3,800,000 3,743,000
- ------------------------------------------------------------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11 3,092,000 3,223,410
9.375% Sr. Unsec. Sub. Nts., 6/1/11 3,588,000 3,767,400
----------------
10,733,810
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO--0.1%
Reynolds American, Inc., 7.25% Sr. Sec. Nts., 6/1/13 2 8,170,000 8,448,009
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY--3.7%
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.2%
Basic Energy Services, Inc., 7.125% Sr. Nts., 4/15/16 2 1,600,000 1,552,000
- ------------------------------------------------------------------------------------------------------------------------------------
Dresser, Inc., 9.875% Sr. Unsec. Sub. Nts., 4/15/11 1 1,829,000 1,922,736
- ------------------------------------------------------------------------------------------------------------------------------------
Hanover Compressor Co., 8.625% Sr. Unsec. Sub. Nts., 12/15/10 1,100,000 1,149,500
- ------------------------------------------------------------------------------------------------------------------------------------
Hanover Equipment Trust, 8.50% Sr. Sec. Nts., Series A, 9/1/08 807,000 821,123
- ------------------------------------------------------------------------------------------------------------------------------------
PHI, Inc., 7.125% Sr. Nts., 4/15/13 2 1,920,000 1,828,800
- ------------------------------------------------------------------------------------------------------------------------------------
RathGibson, Inc., 11.25% Sr. Nts., 2/15/14 2 1,590,000 1,645,650
- ------------------------------------------------------------------------------------------------------------------------------------
Universal Compression, Inc., 7.25% Sr. Unsec. Sub. Nts., 5/15/10 3,281,000 3,322,013
----------------
12,241,822
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS--3.5%
Arch Western Finance LLC, 6.75% Sr. Nts., 7/1/13 3,281,000 3,166,165
- ------------------------------------------------------------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125% Sr. Unsec. Nts., 12/15/15 1,635,000 1,671,788
- ------------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 2,000,000 1,920,000
6.875% Sr. Unsec. Nts., 1/15/16 6,473,000 6,359,723
- ------------------------------------------------------------------------------------------------------------------------------------
Clayton Williams Energy, Inc., 7.75% Sr. Unsec. Nts., 8/1/13 640,000 579,200
- ------------------------------------------------------------------------------------------------------------------------------------
Compton Petroleum Finance Corp., 7.625% Sr. Nts., 12/1/13 6,345,000 6,154,650
- ------------------------------------------------------------------------------------------------------------------------------------
Copano Energy LLC, 8.125% Sr. Unsec. Nts., 3/1/16 950,000 966,625
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Corp., 7.875% Sr. Unsec. Nts., 6/15/12 6,140,000 6,400,950
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Energy Corp., 7.625% Nts., 7/15/11 4,453,000 4,586,590
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Production Holding Co., 7.75% Sr. Unsec. Nts., 6/1/13 9,966,000 10,240,065
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 3,570,000 3,623,550
- ------------------------------------------------------------------------------------------------------------------------------------
Foundation PA Coal Co., 7.25% Sr. Unsec. Nts., 8/1/14 900,000 909,000
- ------------------------------------------------------------------------------------------------------------------------------------
Frontier Oil Corp., 6.625% Sr. Unsec. Nts., 10/1/11 2,775,000 2,788,875
41 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS Continued
Gaz Capital SA, 8.625% Sr. Unsec. Nts., 4/28/34 2 $ 23,680,000 $ 29,540,800
- ------------------------------------------------------------------------------------------------------------------------------------
Inergy LP/Inergy Finance Corp., 8.25% Sr. Unsec. Nts., 3/1/16 1,535,000 1,596,400
- ------------------------------------------------------------------------------------------------------------------------------------
Massey Energy Co., 6.875% Sr. Unsec. Nts., 12/15/13 1,620,000 1,474,200
- ------------------------------------------------------------------------------------------------------------------------------------
National Gas Co., 6.05% Nts., 1/15/36 2 8,195,000 7,893,162
- ------------------------------------------------------------------------------------------------------------------------------------
Newfield Exploration Co., 6.625% Sr. Unsec. Sub. Nts., 9/1/14 3,600,000 3,541,500
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Energy Partners LP/Pacific Energy Finance Corp.,
6.25% Sr. Unsec. Nts., 9/15/15 640,000 633,600
- ------------------------------------------------------------------------------------------------------------------------------------
Peabody Energy Corp., 6.875% Sr. Unsec. Nts., Series B, 3/15/13 3,377,000 3,343,230
- ------------------------------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust:
7.375% Unsec. Unsub. Nts., 12/15/14 8,661,000 9,384,194
8.50% Unsub. Nts., 2/15/08 3,586,000 3,717,786
9.125% Unsec. Unsub. Nts., 10/13/10 7,746,000 8,691,012
- ------------------------------------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV, 5.265% Sr. Nts., Cl. A3, 6/15/11 2 27,864,373 27,468,671
- ------------------------------------------------------------------------------------------------------------------------------------
Pogo Producing Co., 7.875% Sr. Sub. Nts., 5/1/13 2 1,610,000 1,648,238
- ------------------------------------------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 9.50% Sr. Nts., 2/1/13 5,314,000 5,792,249
- ------------------------------------------------------------------------------------------------------------------------------------
Quicksilver Resources, Inc., 7.125% Sr. Sub. Nts., 4/1/16 4,200,000 4,000,500
- ------------------------------------------------------------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 2,465,000 2,354,075
7.50% Sr. Sub. Nts., 5/15/16 6,525,000 6,590,250
- ------------------------------------------------------------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31 5,502,000 5,728,814
8% Sr. Unsub. Nts., 3/1/32 4,332,000 4,811,245
8.875% Sr. Nts., 3/15/10 2,599,000 2,738,475
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Energy Corp.:
6.75% Sr. Unsec. Sub. Nts., 12/15/14 3,150,000 3,165,750
8.25% Sr. Unsec. Sub. Nts., 12/15/11 1,000,000 1,017,500
- ------------------------------------------------------------------------------------------------------------------------------------
Targa Resources, Inc., 8.50% Sr. Nts., 11/1/13 2 3,265,000 3,273,163
- ------------------------------------------------------------------------------------------------------------------------------------
Teekay Shipping Corp., 8.875% Sr. Nts., 7/15/11 1,925,000 2,040,500
- ------------------------------------------------------------------------------------------------------------------------------------
Tengizchevroil LLP, 6.124% Nts., 11/15/14 2 17,587,000 17,499,065
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 12,126,000 12,831,685
- ------------------------------------------------------------------------------------------------------------------------------------
Tesoro Corp.:
6.25% Sr. Nts., 11/1/12 2 2,450,000 2,373,438
6.625% Sr. Nts., 11/1/15 2 3,750,000 3,628,125
- ------------------------------------------------------------------------------------------------------------------------------------
Transcontinental Gas Pipe Line Corp., 6.40% Sr. Nts., 4/15/16 2 2,240,000 2,226,000
- ------------------------------------------------------------------------------------------------------------------------------------
Whiting Petroleum Corp.:
7.25% Sr. Sub. Nts., 5/1/12 2,000,000 1,970,000
7.25% Sr. Unsec. Sub. Nts., 5/1/13 600,000 591,000
- ------------------------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11 9,762,000 10,054,860
7.625% Nts., 7/15/19 600,000 627,000
8.75% Unsec. Nts., 3/15/32 3,825,000 4,207,500
42 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS Continued
Williams Holdings of Delaware, Inc., 6.50% Nts., 12/1/08 5 $ 1,100,000 $ 1,094,500
----------------
246,915,668
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIALS--3.4%
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--0.2%
Berry Plastics Holding Corp.:
8.875% Sr. Sec. Nts., 9/15/14 2 2,450,000 2,474,500
9.265% Sr. Sec. Nts., 9/15/14 1,2 2,450,000 2,474,500
- ------------------------------------------------------------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts.,
Series B, 9/30/08 5 800,000 604,000
- ------------------------------------------------------------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Unsec. Nts., 9/15/13 1,956,000 2,009,790
8% Sr. Nts., 6/15/11 2,710,000 2,818,400
----------------
10,381,190
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--1.9%
Banco BMG SA, 9.15% Nts., 1/15/16 2 16,590,000 16,672,950
- ------------------------------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 5 4,012,000 4,312,900
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Bank plc:
9.751% Sr. Unsec. Nts., 7/8/09 8 16,420,000 9,852,000
11.601% Sr. Unsec. Nts., 1/12/10 8 21,550,000 10,947,400
12.278% Sr. Unsec. Nts., 3/9/09 8 16,420,000 9,342,980
- ------------------------------------------------------------------------------------------------------------------------------------
Inter-American Development Bank:
6.26% Nts., 12/8/09 1 [BRR] 7,210,000 3,140,527
7.889% Nts., 1/25/12 1 [COP] 7,054,142,895 3,140,448
- ------------------------------------------------------------------------------------------------------------------------------------
Kuznetski Capital SA/Bank of Moscow, 7.375% Nts., 11/26/10 5 12,565,000 12,879,125
- ------------------------------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/10 4,5,15 4,970,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
RSHB Capital SA/OJSC Russian Agricultural Bank, 7.175% Nts., 5/16/13 2 14,210,000 14,813,925
- ------------------------------------------------------------------------------------------------------------------------------------
Salisbury International Investments Ltd., 9.657% Sec. Nts.,
Series 2006-003, Tranche E, 7/20/11 1,5 4,800,000 4,800,000
- ------------------------------------------------------------------------------------------------------------------------------------
UBS Luxembourg SA, 6.23% Sub. Nts., 2/11/15 1 18,020,000 18,185,063
- ------------------------------------------------------------------------------------------------------------------------------------
VTB Capital SA, 6.25% Sr. Nts., 6/30/35 2 20,590,000 20,744,425
----------------
128,831,743
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE--0.0%
Ace Cash Express, Inc., 10.25% Sr. Nts., 10/1/14 2,3 615,000 625,763
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.9%
Affinia Group, Inc., 9% Sr. Unsec. Sub. Nts., 11/30/14 503,000 471,563
- ------------------------------------------------------------------------------------------------------------------------------------
Autopistas del Nordeste Cayman Ltd., 9.39% Nts., 1/15/26 5 10,758,721 10,489,753
- ------------------------------------------------------------------------------------------------------------------------------------
BCP Crystal US Holdings Corp., 9.625% Sr. Sub. Nts., 6/15/14 4,153,000 4,526,770
- ------------------------------------------------------------------------------------------------------------------------------------
Cloverie plc, 9.64% Sec. Nts., Series 2005-93, 12/20/10 1,5 6,400,000 6,408,960
43 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
Credit Suisse First Boston International, Export-Import Bank of Ukraine
Loan Participation Nts., 8.40%, 2/9/16 $ 12,520,000 $ 12,213,260
- ------------------------------------------------------------------------------------------------------------------------------------
Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp.,
0%/10.50% Sr. Unsec. Disc. Nts., Series B, 10/1/14 13 3,290,000 2,685,463
- ------------------------------------------------------------------------------------------------------------------------------------
Halyk Savings Bank Kazakhstan Europe BV, 7.75% Nts., 5/13/13 2 3,035,000 3,103,288
- ------------------------------------------------------------------------------------------------------------------------------------
Itabo Finance SA, 10.875% Nts., 10/5/13 2,3 2,602,000 2,649,096
- ------------------------------------------------------------------------------------------------------------------------------------
JSG Funding plc, 7.75% Sr. Unsec. Sub. Nts., 4/1/15 3,075,000 2,921,250
- ------------------------------------------------------------------------------------------------------------------------------------
Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 2 4,815,000 4,802,963
- ------------------------------------------------------------------------------------------------------------------------------------
Reachcom Public Ltd., Renaissance Consumer Finance Bank of Russia
Loan Participation Nts., 10.50%, 7/27/07 5 [RUR] 83,000,000 3,102,159
- ------------------------------------------------------------------------------------------------------------------------------------
Tiers-BSP, 0%/8.60% Collateralized Trust, Cl. A, 6/15/97 5,13 14,015,000 4,905,250
- ------------------------------------------------------------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 1,000,000 1,008,750
10.239% Sr. Unsec. Nts., 5/1/10 1 1,000,000 1,032,500
----------------
60,321,025
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE--0.1%
Felcor Lodging LP, 8.50% Sr. Nts., 6/1/11 1 4,011,000 4,266,701
- ------------------------------------------------------------------------------------------------------------------------------------
Host Marriott LP, 6.375% Sr. Nts., Series O, 3/15/15 3,825,000 3,729,375
- ------------------------------------------------------------------------------------------------------------------------------------
Ventas Realty LP/Ventas Capital Corp., 6.75% Sr. Nts., 4/1/17 1,835,000 1,855,644
----------------
9,851,720
- ------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.3%
Banco Hipotecario SA, 9.75% Sr. Unsec. Nts., 4/27/16 5 7,210,000 7,372,225
- ------------------------------------------------------------------------------------------------------------------------------------
Bankunited Capital Trust, 10.25% Capital Securities, 12/31/26 5 9,675,000 10,207,125
- ------------------------------------------------------------------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27 5 5,054,000 5,344,605
----------------
22,923,955
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--1.1%
- ------------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--0.0%
Angiotech Pharmaceuticals, Inc., 7.75% Sr. Sub. Nts., 4/1/14 2 1,605,000 1,532,775
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.1%
Inverness Medical Innovations, Inc., 8.75% Sr. Sub. Nts., 2/15/12 2,000,000 1,980,000
- ------------------------------------------------------------------------------------------------------------------------------------
Universal Hospital Services, Inc., 10.125% Sr. Unsec. Nts., 11/1/11 2,359,000 2,488,745
----------------
4,468,745
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.0%
AmeriPath, Inc., 10.50% Sr. Unsec. Sub. Nts., 4/1/13 2,796,000 2,977,740
- ------------------------------------------------------------------------------------------------------------------------------------
Community Health Systems, Inc., 6.50% Sr. Unsec. Sub. Nts., 12/15/12 3,231,000 3,105,799
- ------------------------------------------------------------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 3,330,000 3,267,563
7.25% Sr. Unsec. Sub. Nts., 3/15/15 5,260,000 5,194,250
44 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Extendicare Health Services, Inc.:
6.875% Sr. Sub. Nts., 5/1/14 $ 1,350,000 $ 1,451,250
9.50% Sr. Unsec. Sub. Nts., 7/1/10 1,929,000 2,032,684
- ------------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 4,067,000 4,148,340
- ------------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust III, 7.375% Nts., 2/1/08 5 [DEM] 1,700,000 1,140,764
- ------------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust IV, 7.875% Trust Preferred
Securities, 6/15/11 5 2,888,000 2,978,250
- ------------------------------------------------------------------------------------------------------------------------------------
Genesis HealthCare Corp., 8% Sr. Sub. Nts., 10/15/13 5 1,450,000 1,511,625
- ------------------------------------------------------------------------------------------------------------------------------------
HCA, Inc.:
6.30% Sr. Unsec. Nts., 10/1/12 4,007,000 3,400,941
6.375% Nts., 1/15/15 6,048,000 4,898,880
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp., 10.75% Sr. Nts., 6/15/16 2 2,545,000 2,611,806
- ------------------------------------------------------------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 1,295,000 1,265,863
6.875% Sr. Sub. Nts., 12/15/15 1,620,000 1,581,525
- ------------------------------------------------------------------------------------------------------------------------------------
Psychiatric Solutions, Inc., 7.75% Sr. Unsec. Sub. Nts., 7/15/15 1,605,000 1,572,900
- ------------------------------------------------------------------------------------------------------------------------------------
Select Medical Corp., 7.625% Sr. Unsec. Sub. Nts., 2/1/15 8,285,000 7,021,538
- ------------------------------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11 3,170,000 2,801,488
7.375% Nts., 2/1/13 118,000 106,938
9.875% Sr. Nts., 7/1/14 10,584,000 10,597,230
- ------------------------------------------------------------------------------------------------------------------------------------
Triad Hospitals, Inc., 7% Sr. Sub. Nts., 11/15/13 1,585,000 1,547,356
- ------------------------------------------------------------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 100,000 104,000
10.75% Sr. Unsec. Sub. Nts., 8/15/14 100,000 110,000
- ------------------------------------------------------------------------------------------------------------------------------------
Vanguard Health Holding Co. I LLC, 0%/11.25% Sr. Disc. Nts., 10/1/15 13 5,600,000 4,060,000
----------------
69,488,730
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--1.8%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.3%
Alliant Techsystems, Inc., 6.75% Sr. Sub. Nts., 4/1/16 3,200,000 3,160,000
- ------------------------------------------------------------------------------------------------------------------------------------
BE Aerospace, Inc., 8.875% Sr. Unsec. Sub. Nts., 5/1/11 2,047,000 2,139,115
- ------------------------------------------------------------------------------------------------------------------------------------
DRS Technologies, Inc.:
6.625% Sr. Nts., 2/1/16 3,735,000 3,688,313
7.625% Sr. Sub. Nts., 2/1/18 1,110,000 1,132,200
- ------------------------------------------------------------------------------------------------------------------------------------
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15 4,059,000 3,876,345
6.125% Sr. Unsec. Sub. Nts., 1/15/14 1,800,000 1,755,000
6.375% Sr. Unsec. Sub. Nts., Series B, 10/15/15 2,215,000 2,165,163
7.625% Sr. Sub. Nts., 6/15/12 600,000 621,000
45 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13 $ 2,024,000 $ 2,165,680
11% Sr. Sub. Nts., 2/15/13 1,720,000 1,883,400
----------------
22,586,216
- ------------------------------------------------------------------------------------------------------------------------------------
AIRLINES--0.0%
ATA Holdings Corp., 13% Sr. Unsec. Nts., 2/1/09 4,5,15 11,115,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS--0.2%
Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12 2,411,000 2,417,028
- ------------------------------------------------------------------------------------------------------------------------------------
Goodman Global Holding Co., Inc., 7.875% Sr. Unsec. Sub. Nts., 12/15/12 2,060,000 1,972,450
- ------------------------------------------------------------------------------------------------------------------------------------
Jacuzzi Brands, Inc., 9.625% Sr. Sec. Nts., 7/1/10 3,253,000 3,464,445
- ------------------------------------------------------------------------------------------------------------------------------------
Nortek, Inc., 8.50% Sr. Unsec. Unsub. Nts., 9/1/14 2,850,000 2,707,500
----------------
10,561,423
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.3%
Allied Waste North America, Inc.:
7.25% Sr. Nts., 3/15/15 815,000 812,963
7.375% Sr. Sec. Nts., Series B, 4/15/14 8,000,000 7,920,000
9.25% Sr. Sec. Debs., Series B, 9/1/12 267,000 286,024
- ------------------------------------------------------------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05 4,5,15 3,462,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Cenveo Corp., 7.875% Sr. Sub. Nts., 12/1/13 3,200,000 3,048,000
- ------------------------------------------------------------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 3,335,000 3,284,975
7.50% Sr. Nts., 5/1/11 1,500,000 1,541,250
- ------------------------------------------------------------------------------------------------------------------------------------
FTI Consulting, Inc., 7.75% Sr. Unsec. Nts., 10/1/16 2,3 2,150,000 2,182,250
- ------------------------------------------------------------------------------------------------------------------------------------
Mobile Services Group, Inc., 9.75% Sr. Nts., 8/1/14 2 490,000 504,700
----------------
19,580,162
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
IIRSA Norte Finance Ltd., 8.75% Sr. Nts., 5/30/24 5 9,750,000 10,115,625
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.2%
Belden & Blake Corp., 8.75% Sec. Nts., 7/15/12 550,000 567,875
- ------------------------------------------------------------------------------------------------------------------------------------
Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 2,407,000 2,274,615
- ------------------------------------------------------------------------------------------------------------------------------------
Eletropaulo Metropolitana SA, 19.125% Nts., 6/28/10 5 [BRR] 8,285,000 4,239,094
- ------------------------------------------------------------------------------------------------------------------------------------
General Cable Corp., 9.50% Sr. Nts., 11/15/10 1,000,000 1,075,000
- ------------------------------------------------------------------------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 2,411,000 2,543,605
----------------
10,700,189
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.0%
Covalence Specialty Materials Corp., 10.25% Sr. Sub. Nts., 3/1/16 2 1,950,000 1,901,250
- ------------------------------------------------------------------------------------------------------------------------------------
Great Lakes Dredge & Dock Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/13 360,000 336,600
----------------
2,237,850
46 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MACHINERY--0.2%
Case New Holland, Inc., 7.125% Sr. Unsec. Nts., 3/1/14 $ 2,550,000 $ 2,572,313
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas Dynamics LLC, 7.75% Sr. Nts., 1/15/12 2 2,714,000 2,578,300
- ------------------------------------------------------------------------------------------------------------------------------------
Greenbrier Cos., Inc., 8.375% Sr. Unsec. Nts., 5/15/15 2,990,000 3,049,800
- ------------------------------------------------------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The), 7.125% Sr. Nts., 11/1/13 5 650,000 643,500
- ------------------------------------------------------------------------------------------------------------------------------------
Milacron Escrow Corp., 11.50% Sr. Sec. Nts., 5/15/11 5 4,055,000 3,872,525
- ------------------------------------------------------------------------------------------------------------------------------------
Trinity Industries, Inc., 6.50% Sr. Nts., 3/15/14 2,050,000 2,014,125
- ------------------------------------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc.:
7.375% Sr. Nts., 8/1/08 2 600,000 513,000
10.50% Sr. Nts., 4/1/09 5 2,351,000 2,080,635
----------------
17,324,198
- ------------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL--0.2%
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.:
7.75% Sr. Nts., 5/15/16 2 1,595,000 1,547,150
7.905% Sr. Nts., 5/15/14 1,2 640,000 630,400
- ------------------------------------------------------------------------------------------------------------------------------------
Kansas City Southern Railway Co. (The), 7.50% Sr. Nts., 6/15/09 2,125,000 2,135,625
- ------------------------------------------------------------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 972,000 920,970
7.50% Sr. Unsec. Nts., 11/1/13 232,000 229,100
9.625% Sr. Nts., 12/1/12 5 3,820,000 4,125,600
- ------------------------------------------------------------------------------------------------------------------------------------
TDS Investor Corp., 11.875% Sr. Sub. Nts., 9/1/16 2 3,800,000 3,667,000
----------------
13,255,845
- ------------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.3%
Ashtead Capital, Inc., 9% Nts., 8/15/16 2 1,650,000 1,724,250
- ------------------------------------------------------------------------------------------------------------------------------------
H&E Equipment Services, Inc., 8.375% Sr. Nts., 7/15/16 2 1,815,000 1,869,450
- ------------------------------------------------------------------------------------------------------------------------------------
Interline Brands, Inc., 8.125% Sr. Sub. Nts., 6/15/14 1,645,000 1,673,788
- ------------------------------------------------------------------------------------------------------------------------------------
United Rentals, Inc., 7% Sr. Sub. Nts., 2/15/14 15,909,000 15,034,005
----------------
20,301,493
- ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.3%
Loral Skynet Corp., 14% Sr. Sec. Nts., 11/21/15 5,14 2,188,000 2,559,960
- ------------------------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 6.45% Unsec. Debs., 3/15/29 13,199,000 11,813,105
- ------------------------------------------------------------------------------------------------------------------------------------
Nortel Networks Ltd.:
9.731% Sr. Nts., 7/15/11 1,2 1,630,000 1,691,125
10.75% Sr. Nts., 7/15/16 2 1,300,000 1,397,500
- ------------------------------------------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 12.50% Sr. Unsub. Disc. Nts., 1/15/07 4,15 12,679,000 127
----------------
17,461,817
47 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.1%
Seagate Technology HDD Holdings:
6.375% Sr. Nts., 10/1/11 $ 3,060,000 $ 3,060,000
6.80% Sr. Nts., 10/1/16 920,000 920,000
8% Sr. Nts., 5/15/09 2,518,000 2,618,745
----------------
6,598,745
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.3%
Flextronics International Ltd., 6.25% Sr. Sub. Nts., 11/15/14 7,006,000 6,830,850
- ------------------------------------------------------------------------------------------------------------------------------------
RBS Global & Rexnord Corp.:
9.50% Sr. Nts., 8/1/14 5 3,280,000 3,345,600
11.75% Sr. Sub. Nts., 8/1/16 5 4,915,000 5,087,025
- ------------------------------------------------------------------------------------------------------------------------------------
Sanmina-SCI Corp.:
6.75% Unsec. Sub. Nts., 3/1/13 1,700,000 1,610,750
8.125% Sr. Sub. Nts., 3/1/16 3,970,000 3,910,450
- ------------------------------------------------------------------------------------------------------------------------------------
Solectron Global Finance Ltd., 8% Sr. Unsec. Sub. Nts., 3/15/16 2,225,000 2,213,875
----------------
22,998,550
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09 4,5,15 [EUR] 2,116,376 --
- ------------------------------------------------------------------------------------------------------------------------------------
NorthPoint Communications Group, Inc., 12.875% Nts., 2/15/10 4,5,15 2,081,799 --
- ------------------------------------------------------------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr. Unsec. Nts., 12/1/06 4,5,15 [EUR] 6,650,000 --
----------------
--
- ------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES--0.3%
DI Finance/DynCorp International LLC, 9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 4,340,000 4,513,600
- ------------------------------------------------------------------------------------------------------------------------------------
iPayment Holdings, Inc., 9.75% Sr. Sub. Nts., 5/15/14 5 1,900,000 1,947,500
- ------------------------------------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 7.75% Sr. Sub. Nts., 1/15/15 4,182,000 4,202,910
- ------------------------------------------------------------------------------------------------------------------------------------
SunGard Data Systems, Inc.:
9.125% Sr. Unsec. Nts., 8/15/13 4,370,000 4,544,800
10.25% Sr. Unsec. Sub. Nts., 8/15/15 8,150,000 8,435,250
----------------
23,644,060
- ------------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.2%
Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 11/1/12 6,701,000 6,818,268
- ------------------------------------------------------------------------------------------------------------------------------------
Amkor Technology, Inc., 7.75% Sr. Nts., 5/15/13 6,800,000 6,264,500
----------------
13,082,768
48 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MATERIALS--3.0%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.6%
Equistar Chemicals LP/Equistar Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09 $ 4,644,000 $ 4,829,760
10.125% Sr. Unsec. Nts., 9/1/08 118,000 125,523
10.625% Sr. Unsec. Nts., 5/1/11 1,351,000 1,455,703
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia Gulf Corp., 10.75% Sr. Sub. Nts., 10/15/16 4,910,000 4,836,350
- ------------------------------------------------------------------------------------------------------------------------------------
Huntsman International LLC:
8.375% Sr. Sub. Nts., 1/1/15 1,2 1,811,000 1,838,165
10.125% Sr. Unsec. Sub. Nts., 7/1/09 4,243,000 4,327,860
- ------------------------------------------------------------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 1 706,000 806,605
11.625% Sr. Unsec. Nts., 10/15/10 76,000 84,360
- ------------------------------------------------------------------------------------------------------------------------------------
IMC Global, Inc., 10.875% Sr. Unsec. Nts., 8/1/13 5 118,000 132,160
- ------------------------------------------------------------------------------------------------------------------------------------
Ineos Group Holdings plc, 8.50% Nts., 2/15/16 2 3,650,000 3,494,875
- ------------------------------------------------------------------------------------------------------------------------------------
Innophos, Inc., 8.875% Sr. Unsec. Sub. Nts., 8/15/14 1,090,000 1,087,275
- ------------------------------------------------------------------------------------------------------------------------------------
KI Holdings, Inc., 0%/9.875% Sr. Unsec. Sub. Disc. Nts., 11/15/14 13 2,650,000 1,961,000
- ------------------------------------------------------------------------------------------------------------------------------------
Lyondell Chemical Co.:
8% Sr. Unsec. Nts., 9/15/14 4,590,000 4,670,325
8.25% Sr. Unsec. Nts., 9/15/16 2,450,000 2,499,000
9.50% Sec. Nts., 12/15/08 70,000 72,363
10.50% Sr. Sec. Nts., 6/1/13 3,875,000 4,281,875
- ------------------------------------------------------------------------------------------------------------------------------------
Rockwood Specialties Group, Inc.:
7.50% Sr. Sub. Nts., 11/15/14 1,350,000 1,336,500
10.625% Sr. Unsec. Sub. Nts., 5/15/11 875,000 940,625
- ------------------------------------------------------------------------------------------------------------------------------------
Tronox Worldwide LLC/Tronox Finance Corp., 9.50% Sr. Unsec. Nts., 12/1/12 2 2,810,000 2,897,813
----------------
41,678,137
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.1%
NTK Holdings, Inc., 0%/10.75% Sr. Disc. Nts., 3/1/14 13 5,990,000 4,163,050
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--1.1%
Ball Corp., 6.625% Sr. Nts., 3/15/18 4,500,000 4,432,500
- ------------------------------------------------------------------------------------------------------------------------------------
Crown Americas, Inc., 7.75% Sr. Nts., 11/15/15 3,810,000 3,876,675
- ------------------------------------------------------------------------------------------------------------------------------------
Graham Packaging Co., Inc.:
8.50% Sr. Unsec. Nts., 10/15/12 1,300,000 1,293,500
9.875% Sr. Unsec. Sub. Nts., 10/15/14 5,614,000 5,543,825
- ------------------------------------------------------------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11 5,738,000 5,895,795
9.50% Sr. Sub. Nts., 8/15/13 2,555,000 2,625,263
- ------------------------------------------------------------------------------------------------------------------------------------
Jefferson Smurfit Corp., 8.25% Sr. Unsec. Nts., 10/1/12 3,950,000 3,801,875
- ------------------------------------------------------------------------------------------------------------------------------------
MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12 3,281,000 3,477,860
49 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING Continued
Owens-Brockway Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11 $ 2,792,000 $ 2,882,740
8.25% Sr. Unsec. Nts., 5/15/13 1,618,000 1,666,540
8.75% Sr. Sec. Nts., 11/15/12 7,702,000 8,164,120
8.875% Sr. Sec. Nts., 2/15/09 5,700,000 5,885,250
- ------------------------------------------------------------------------------------------------------------------------------------
Pliant Corp., 11.85% Sr. Sec. Nts., 6/15/09 4 2,143,765 2,401,017
- ------------------------------------------------------------------------------------------------------------------------------------
Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14 6,158,000 5,349,763
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12 3,145,000 3,034,925
9.75% Sr. Unsec. Nts., 2/1/11 6,879,000 7,119,765
- ------------------------------------------------------------------------------------------------------------------------------------
Tekni-Plex, Inc., 10.875% Sr. Sec. Nts., 8/15/12 2 960,000 1,080,000
- ------------------------------------------------------------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec. Sub. Nts., 6/15/12 6,543,000 6,084,990
----------------
74,616,403
- ------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.9%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12 3,768,000 3,687,930
7.875% Sr. Unsec. Nts., 2/15/09 1,379,000 1,380,724
- ------------------------------------------------------------------------------------------------------------------------------------
Alrosa Finance SA:
8.875% Nts., 11/17/14 17,015,000 19,397,100
8.875% Nts., 11/17/14 2 8,645,000 9,855,300
- ------------------------------------------------------------------------------------------------------------------------------------
Century Aluminum Co., 7.50% Sr. Unsec. Nts., 8/15/14 2,055,000 2,065,275
- ------------------------------------------------------------------------------------------------------------------------------------
Gibraltar Industries, Inc., 8% Sr. Unsec. Sub. Nts., Series B, 12/1/15 5 1,970,000 1,960,150
- ------------------------------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 13% Unsec. Sub. Nts., 2/1/08 4,5,15 1,586,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
IPSCO, Inc., 8.75% Sr. Nts., 6/1/13 1,000,000 1,070,000
- ------------------------------------------------------------------------------------------------------------------------------------
Ispat Inland ULC, 9.75% Sr. Sec. Nts., 4/1/14 2,974,000 3,354,003
- ------------------------------------------------------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 5,406,000 5,791,178
- ------------------------------------------------------------------------------------------------------------------------------------
Koppers Industry, Inc., 9.875% Sr. Sec. Nts., 10/15/13 2,172,000 2,362,050
- ------------------------------------------------------------------------------------------------------------------------------------
Northwest Pipeline Corp., 8.125% Sr. Nts., 3/1/10 1,100,000 1,149,500
- ------------------------------------------------------------------------------------------------------------------------------------
Novelis, Inc., 8.25% Sr. Nts., 2/15/15 1,2 7,180,000 6,856,900
- ------------------------------------------------------------------------------------------------------------------------------------
Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09 2,125,000 2,202,031
- ------------------------------------------------------------------------------------------------------------------------------------
United States Steel Corp.:
9.75% Sr. Nts., 5/15/10 1,949,000 2,090,303
10.75% Sr. Nts., 8/1/08 3,197,000 3,472,741
----------------
66,695,185
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.3%
Abitibi-Consolidated Co. of Canada, 8.375% Sr. Unsec. Sub. Nts., 4/1/15 3,900,000 3,568,500
- ------------------------------------------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc.:
8.55% Nts., 8/1/10 1,925,000 1,920,188
8.85% Unsec. Bonds, 8/1/30 1,200,000 1,014,000
- ------------------------------------------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.50% Sr. Nts., 10/1/13 1,500,000 1,511,250
50 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS Continued
Catalyst Paper Corp., 8.625% Sr. Unsec. Nts., Series D, 6/15/11 $ 1,100,000 $ 1,086,250
- ------------------------------------------------------------------------------------------------------------------------------------
Domtar, Inc., 7.125% Nts., 8/15/15 1,400,000 1,309,000
- ------------------------------------------------------------------------------------------------------------------------------------
Inland Fiber Group LLC, 9.625% Sr. Unsec. Nts., 11/15/07 4,5,15 6,414,000 4,008,750
- ------------------------------------------------------------------------------------------------------------------------------------
JSG Holding plc, 11.50% Sr. Nts., 10/1/15 2,14 [EUR] 1,157,197 1,500,404
- ------------------------------------------------------------------------------------------------------------------------------------
Mercer International, Inc., 9.25% Sr. Nts., 2/15/13 1,665,000 1,525,556
- ------------------------------------------------------------------------------------------------------------------------------------
Norske Skog Canada Ltd., 7.375% Sr. Unsec. Nts., 3/1/14 2,600,000 2,405,000
- ------------------------------------------------------------------------------------------------------------------------------------
Verso Paper Holdings LLC/Verson Paper, Inc.:
9.235%, Sr. Sec. Nts., 8/1/14 1,2 1,975,000 2,004,625
11.375% Sr. Sub. Nts., 8/1/16 2 1,975,000 1,970,063
----------------
23,823,586
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.3%
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.2%
Citizens Communications Co., 6.25% Sr. Nts., 1/15/13 2 12,700,000 12,414,250
- ------------------------------------------------------------------------------------------------------------------------------------
Exodus Communications, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/09 4,5,15 6,401,538 --
- ------------------------------------------------------------------------------------------------------------------------------------
Intelsat Bermuda Ltd., 11.25% Sr. Nts., 6/15/16 2 3,355,000 3,581,463
- ------------------------------------------------------------------------------------------------------------------------------------
Intelsat Subsidiary Holding Co. Ltd.:
8.25% Sr. Nts., 1/15/13 1 4,000,000 4,070,000
8.625% Sr. Nts., 1/15/15 1 3,595,000 3,693,863
- ------------------------------------------------------------------------------------------------------------------------------------
Level 3 Financing, Inc., 10.75% Sr. Unsec. Unsub. Nts., 10/15/11 800,000 841,000
- ------------------------------------------------------------------------------------------------------------------------------------
Nordic Telephone Co. Holdings ApS, 8.875% Sr. Nts., 5/1/16 2 1,590,000 1,679,438
- ------------------------------------------------------------------------------------------------------------------------------------
PanAmSat Corp.:
9% Sr. Nts., 6/15/16 2 3,280,000 3,394,800
9% Sr. Unsec. Nts., 8/15/14 5,470,000 5,675,125
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest Capital Funding, Inc.:
7.25% Unsec. Unsub. Nts., 2/15/11 2,200,000 2,211,000
7.90% Unsec. Nts., 8/15/10 5,197,000 5,365,903
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 7.25% Sr. Unsec. Sub. Nts., 2/15/11 1 1,500,000 1,507,500
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest Corp.:
7.50% Sr. Nts., 10/1/14 2 3,275,000 3,397,813
8.875% Unsec. Unsub. Nts., 3/15/12 1 13,690,000 15,007,663
- ------------------------------------------------------------------------------------------------------------------------------------
Telefonica del Peru SA, 8% Sr. Unsec. Bonds, 4/11/16 5 [PEN] 20,898,900 6,806,657
- ------------------------------------------------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 4,5,15 5,035,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Time Warner Telecom Holdings, Inc., 9.25% Sr. Unsec. Unsub. Nts., 2/15/14 7,670,000 8,111,025
- ------------------------------------------------------------------------------------------------------------------------------------
Valor Telecommunications Enterprises LLC, 7.75% Sr. Unsec. Sub. Nts., 2/15/15 1,665,000 1,781,550
- ------------------------------------------------------------------------------------------------------------------------------------
Windstream Corp.:
8.125% Sr. Nts., 8/1/13 2 2,445,000 2,606,981
8.625% Sr. Nts., 8/1/16 2 2,445,000 2,628,375
----------------
84,774,406
51 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.1%
Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12 $ 200,000 $ 214,000
11% Sr. Unsec. Nts., 7/31/10 118,000 129,505
- ------------------------------------------------------------------------------------------------------------------------------------
American Cellular Corp., 10% Sr. Nts., Series B, 8/1/11 6,820,000 7,178,050
- ------------------------------------------------------------------------------------------------------------------------------------
American Tower Corp.:
7.125% Sr. Unsec. Nts., 10/15/12 750,000 772,500
7.50% Sr. Nts., 5/1/12 5 3,247,000 3,352,528
- ------------------------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., Sr. Unsec. Disc. Nts., 10/1/07 4,5,15 21,702,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Centennial Cellular Operating Co. LLC/Centennial Communications Corp.,
10.125% Sr. Nts., 6/15/13 6,810,000 7,269,675
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Cellular Systems, Inc., 8.375% Sr. Sec. Nts., 11/1/11 1,010,000 1,054,188
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp.:
8.875% Sr. Nts., 10/1/13 3,294,000 3,281,648
9.757% Sr. Unsec. Nts., 10/15/12 1 955,000 978,875
- ------------------------------------------------------------------------------------------------------------------------------------
IWO Holdings, Inc., 9.257% Sr. Sec. Nts., 1/15/12 1 850,000 877,625
- ------------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 7.375% Sr. Nts., Series D, 8/1/15 10 18,460,000 19,065,100
- ------------------------------------------------------------------------------------------------------------------------------------
Nextel Partners, Inc., 8.125% Sr. Nts., 7/1/11 200,000 211,000
- ------------------------------------------------------------------------------------------------------------------------------------
Rogers Wireless, Inc.:
7.50% Sec. Nts., 3/15/15 4,931,000 5,288,498
8% Sr. Sub. Nts., 12/15/12 3,844,000 4,103,470
- ------------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp.:
9.75% Sr. Sub. Nts., 1/15/10 10,663,000 10,782,959
9.875% Sr. Nts., 2/1/10 5,468,000 5,727,730
- ------------------------------------------------------------------------------------------------------------------------------------
UbiquiTel Operating Co., 9.875% Sr. Nts., 3/1/11 2,503,000 2,728,270
----------------
73,015,621
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.6%
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.7%
Edison Mission Energy:
7.50% Sr. Nts., 6/15/13 2 1,610,000 1,634,150
7.75% Sr. Nts., 6/15/16 2 2,255,000 2,294,463
- ------------------------------------------------------------------------------------------------------------------------------------
ESI Tractebel Acquisition Corp., 7.99% Sec. Bonds, Series B, 12/30/11 403,000 417,681
- ------------------------------------------------------------------------------------------------------------------------------------
Midwest Generation LLC, 8.75% Sr. Sec. Nts., 5/1/34 10,991,000 11,787,848
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Americas Generation LLC, Escrow Shares, 5/1/07 5 2,214,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
MSW Energy Holdings LLC/MSW Energy Finance Co., Inc.,
8.50% Sr. Sec. Nts., 9/1/10 1,650,000 1,707,750
- ------------------------------------------------------------------------------------------------------------------------------------
National Power Corp., 9.625% Unsec. Bonds, 5/15/28 11,790,000 13,640,865
- ------------------------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc., 6.75% Sr. Sec. Nts., 12/15/14 900,000 860,625
- ------------------------------------------------------------------------------------------------------------------------------------
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10 1,970,000 2,053,725
9.50% Sr. Sec. Nts., 7/15/13 4,460,000 4,649,550
- ------------------------------------------------------------------------------------------------------------------------------------
Sierra Pacific Resources, 6.75% Sr. Unsec. Nts., 8/15/17 6,894,000 6,931,379
----------------
45,978,036
52 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY TRADERS--0.8%
AES Corp. (The), 8.75% Sr. Sec. Nts., 5/15/13 2 $ 8,898,000 $ 9,587,595
- ------------------------------------------------------------------------------------------------------------------------------------
Aes Dominicana Energia Finance SA, 11% Sr. Nts., 12/13/15 5 3,330,000 3,446,550
- ------------------------------------------------------------------------------------------------------------------------------------
AES Red Oak LLC, 8.54% Sr. Sec. Bonds, Series A, 11/30/19 2,647,706 2,833,045
- ------------------------------------------------------------------------------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts., 4/1/11 3,130,000 3,063,488
8.375% Sr. Unsec. Nts., 5/1/16 3,195,000 3,266,888
8.75% Sr. Nts., 2/15/12 1,335,000 1,390,069
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Americas Generation LLC:
8.30% Sr. Unsec. Nts., 5/1/11 13,900,000 13,986,875
8.50% Sr. Unsec. Nts., 10/1/21 1,300,000 1,267,500
9.125% Sr. Unsec. Nts., 5/1/31 2,700,000 2,760,750
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625% Sec. Pass-Through Certificates,
Series A, 6/30/12 3,384,693 3,589,890
- ------------------------------------------------------------------------------------------------------------------------------------
NRG Energy, Inc., 7.375% Sr. Nts., 2/1/16 14,525,000 14,470,531
----------------
59,663,181
- ------------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.0%
SEMCO Energy, Inc., 7.125% Sr. Nts., 5/15/08 1,300,000 1,298,951
- ------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.1%
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09 1,318,000 1,364,130
7.75% Sr. Nts., 8/1/10 1,650,000 1,740,750
8.50% Sr. Nts., 4/15/11 2,407,000 2,611,595
- ------------------------------------------------------------------------------------------------------------------------------------
NorthWestern Corp., 5.875% Sr. Sec. Nts., 11/1/14 670,000 662,432
----------------
6,378,907
----------------
Total Corporate Bonds and Notes (Cost $1,989,423,006) 1,943,278,223
SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg. 5,14,15 338,141 --
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp., 6% Cv., Series F (converts into Dobson
Communications Corp., Cl. A common stock), Non-Vtg. 2 8,195 1,372,663
- ------------------------------------------------------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable,
Series B, Non-Vtg. 5,15 43,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg. 5,14,15 5,773 --
- ------------------------------------------------------------------------------------------------------------------------------------
ION Media Networks, Inc.:
14.25% Cum., Non-Vtg. 5,14 1,873 15,642,725
9.75% Cv., Series AI 5,14,15 -- 3,173
- ------------------------------------------------------------------------------------------------------------------------------------
Loral Skynet Corp., 12% Cum., Series A, Non-Vtg. 5,14 19,310 3,871,655
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Real Estate Investment Trust, 11% 51,500 2,842,800
- ------------------------------------------------------------------------------------------------------------------------------------
PTV, Inc., 10% Cum., Series A, Non-Vtg. 300 885
53 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg. 5,14 2,511 $ 3,057,143
- ------------------------------------------------------------------------------------------------------------------------------------
Sovereign Real Estate Investment Trust, 12% Non-Cum., Series A 5 61,550 8,693,938
----------------
Total Preferred Stocks (Cost $45,340,232) 35,484,982
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
3i Group plc 75,701 1,325,962
- ------------------------------------------------------------------------------------------------------------------------------------
American Tower Corp. 15 90,209 3,292,629
- ------------------------------------------------------------------------------------------------------------------------------------
Anglo American plc 30,900 1,300,919
- ------------------------------------------------------------------------------------------------------------------------------------
ATA Holdings Corp. 5,15 30,231 453,465
- ------------------------------------------------------------------------------------------------------------------------------------
BASF AG 16,527 1,327,005
- ------------------------------------------------------------------------------------------------------------------------------------
Bayer AG 27,682 1,407,601
- ------------------------------------------------------------------------------------------------------------------------------------
Beverly Hills Bancorp, Inc. 539,100 4,399,056
- ------------------------------------------------------------------------------------------------------------------------------------
BNP Paribas SA 12,860 1,383,664
- ------------------------------------------------------------------------------------------------------------------------------------
British Airways plc 15 175,350 1,401,907
- ------------------------------------------------------------------------------------------------------------------------------------
British Land Co. plc 52,770 1,347,681
- ------------------------------------------------------------------------------------------------------------------------------------
Brixton plc 136,800 1,354,963
- ------------------------------------------------------------------------------------------------------------------------------------
Cebridge Connections Holding LLC 5,15 56,470 --
- ------------------------------------------------------------------------------------------------------------------------------------
Charles River Laboratories International, Inc. 15 43,520 1,889,203
- ------------------------------------------------------------------------------------------------------------------------------------
Charter plc 15 93,910 1,499,845
- ------------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp. 431,648 12,509,159
- ------------------------------------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc. 88,293 1,181,360
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 1,106 54,935
- ------------------------------------------------------------------------------------------------------------------------------------
Commerzbank AG 39,240 1,329,545
- ------------------------------------------------------------------------------------------------------------------------------------
Corus Group plc 183,620 1,333,943
- ------------------------------------------------------------------------------------------------------------------------------------
Covad Communications Group, Inc. 15 174,581 260,126
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Agricole SA 33,760 1,482,921
- ------------------------------------------------------------------------------------------------------------------------------------
Daiwa Securities Group, Inc. 116,000 1,359,847
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Boerse AG 9,001 1,352,530
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Lufthansa AG 69,285 1,467,214
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Telekom AG 93,817 1,490,632
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp., Cl. A 15 442,193 3,104,195
- ------------------------------------------------------------------------------------------------------------------------------------
Eagle Materials, Inc. 6,792 228,755
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Corp. 146,000 1,991,440
- ------------------------------------------------------------------------------------------------------------------------------------
Etablissements Economiques du Casino Guichard-Perrachon SA 15,990 1,288,551
- ------------------------------------------------------------------------------------------------------------------------------------
Euronext NV 15,250 1,482,244
- ------------------------------------------------------------------------------------------------------------------------------------
France Telecom SA 64,600 1,482,685
- ------------------------------------------------------------------------------------------------------------------------------------
Fujikura Ltd. 9 116,000 1,274,948
- ------------------------------------------------------------------------------------------------------------------------------------
Furukawa Electric Co., Ltd. (The) 199,762 1,325,710
54 | OPPENHEIMER STRATEGIC INCOME FUND
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Globix Corp. 15 107,797 $ 501,256
- ------------------------------------------------------------------------------------------------------------------------------------
Great Portland Estates plc 15 127,480 1,444,053
- ------------------------------------------------------------------------------------------------------------------------------------
Hammerson plc 56,620 1,390,879
- ------------------------------------------------------------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd. 15 300,766 1,759,481
- ------------------------------------------------------------------------------------------------------------------------------------
Investec plc 107,120 1,051,966
- ------------------------------------------------------------------------------------------------------------------------------------
iPCS, Inc. 15 81,469 4,362,665
- ------------------------------------------------------------------------------------------------------------------------------------
Ishikawajima-Harima Heavy Industries Co. Ltd. 474,000 1,456,082
- ------------------------------------------------------------------------------------------------------------------------------------
JFE Holdings, Inc. 9 33,800 1,324,817
- ------------------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp. 15 28,135 1,247,506
- ------------------------------------------------------------------------------------------------------------------------------------
Ladish Co., Inc. 15 30,000 866,400
- ------------------------------------------------------------------------------------------------------------------------------------
Leap Wireless International, Inc. 15 28,354 1,374,885
- ------------------------------------------------------------------------------------------------------------------------------------
Legal & General Group plc 5,320 14,194
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Global, Inc., Series A 15 117,510 3,024,707
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Global, Inc., Series C 15 119,172 2,986,450
- ------------------------------------------------------------------------------------------------------------------------------------
London Stock Exchange Group plc 62,470 1,445,691
- ------------------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. 15 136,709 3,598,181
- ------------------------------------------------------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 16,184 724,881
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Corp. 15 12,550 342,741
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchells & Butlers plc 1,260 13,907
- ------------------------------------------------------------------------------------------------------------------------------------
Mitsubishi Heavy Industries Ltd. 328,815 1,365,539
- ------------------------------------------------------------------------------------------------------------------------------------
Mitsubishi Materials Corp. 9 317,000 1,312,427
- ------------------------------------------------------------------------------------------------------------------------------------
Mittal Steel Co. NV 56,749 1,981,800
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley 20,600 1,501,946
- ------------------------------------------------------------------------------------------------------------------------------------
Muenchener Rueckversicherungs-Gesellschaft AG 9,050 1,431,617
- ------------------------------------------------------------------------------------------------------------------------------------
Nippon Kayaku Co. Ltd. 159,000 1,347,378
- ------------------------------------------------------------------------------------------------------------------------------------
Nippon Mining Holdings, Inc. 9 187,000 1,326,901
- ------------------------------------------------------------------------------------------------------------------------------------
Nomura Securities Co. Ltd. 71,300 1,255,484
- ------------------------------------------------------------------------------------------------------------------------------------
NTL, Inc. 602,120 15,311,912
- ------------------------------------------------------------------------------------------------------------------------------------
Odakyu Electric Railway Co. Ltd. 216,000 1,373,257
- ------------------------------------------------------------------------------------------------------------------------------------
Orbital Sciences Corp. 15 59,993 1,126,069
- ------------------------------------------------------------------------------------------------------------------------------------
PagesJaunes Groupe SA 47,810 1,358,015
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Corp. 72,071 1,273,007
- ------------------------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., Cl. A 15 16,137 415,528
- ------------------------------------------------------------------------------------------------------------------------------------
Prandium, Inc. 5,15,16 1,034,256 8,274
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Holdings Ltd. 5,15 799,833 --
- ------------------------------------------------------------------------------------------------------------------------------------
ProSieben Sat.1 Media AG 50,901 1,413,540
- ------------------------------------------------------------------------------------------------------------------------------------
Resolution plc 121,050 1,399,546
55 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Royal & Sun Alliance Insurance Group plc 520,050 $ 1,450,831
- ------------------------------------------------------------------------------------------------------------------------------------
Salzgitter AG 15,303 1,439,853
- ------------------------------------------------------------------------------------------------------------------------------------
Shinko Securities Co. Ltd. 342,000 1,359,165
- ------------------------------------------------------------------------------------------------------------------------------------
Showa Shell Sekiyu K.K. 122,000 1,359,170
- ------------------------------------------------------------------------------------------------------------------------------------
Societe Generale, Cl. A 8,500 1,352,697
- ------------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners LP 15 220 548
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. 5,15 10,861 142,279
- ------------------------------------------------------------------------------------------------------------------------------------
Sumitomo Metal Industries 9 334,960 1,289,041
- ------------------------------------------------------------------------------------------------------------------------------------
TVMAX Holdings, Inc. 5,15 59,250 59,250
- ------------------------------------------------------------------------------------------------------------------------------------
Vallourec SA 6,120 1,422,681
- ------------------------------------------------------------------------------------------------------------------------------------
Verizon Communications, Inc. 32,985 1,224,733
- ------------------------------------------------------------------------------------------------------------------------------------
Viatel Holding (Bermuda) Ltd. 5,15 43,569 1,743
- ------------------------------------------------------------------------------------------------------------------------------------
Vivendi SA 39,660 1,429,774
- ------------------------------------------------------------------------------------------------------------------------------------
Volkswagen AG, Preference 24,268 1,431,816
- ------------------------------------------------------------------------------------------------------------------------------------
Walter Industries, Inc. 57,800 2,466,904
- ------------------------------------------------------------------------------------------------------------------------------------
Western Forest Products, Inc. 9,15 680,382 998,279
- ------------------------------------------------------------------------------------------------------------------------------------
WRC Media Corp. 5,15 16,235 162
- ------------------------------------------------------------------------------------------------------------------------------------
XO Holdings, Inc. 15 40,006 195,229
- ------------------------------------------------------------------------------------------------------------------------------------
Xstrata plc 30,550 1,262,406
----------------
Total Common Stocks (Cost $138,859,194) 141,404,183
UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
ASAT Finance LLC Wts., Exp. 11/1/06 5,15 2,200 --
- ------------------------------------------------------------------------------------------------------------------------------------
ATA Holdings Corp. Wts., Exp. 2/28/11 15 2,497 18,543
- ------------------------------------------------------------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 5,15 6,650 --
- ------------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07 5,15 5,250 --
- ------------------------------------------------------------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 5,15 800 --
- ------------------------------------------------------------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/09 5,15 34,425 --
- ------------------------------------------------------------------------------------------------------------------------------------
iPCS, Inc. Wts., Exp. 6/15/10 5,15 6,600 --
- ------------------------------------------------------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/13/08 5,15 4,560 --
- ------------------------------------------------------------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 5,15 8,500 --
- ------------------------------------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp. 9/19/10 15 6,738 2,224
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts., Exp. 12/19/08 15 17,634 13
- ------------------------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Oil Linked Payment Obligation Wts.,
Exp. 4/15/20 5,15 9,035 329,778
- ------------------------------------------------------------------------------------------------------------------------------------
Verado Holdings, Inc., Cl. B Wts., Exp. 4/15/08 15 7,500 5,197
56 | OPPENHEIMER STRATEGIC INCOME FUND
VALUE
UNITS SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
XO Communications, Inc.:
Series A Wts., Exp. 1/16/10 15 80,025 $ 72,023
Series B Wts., Exp. 1/16/10 15 60,020 36,012
Series C Wts., Exp. 1/16/10 15 60,020 22,808
- ------------------------------------------------------------------------------------------------------------------------------------
Ziff Davis Holdings, Inc. Wts., Exp. 8/12/12 5,15 44,000 440
----------------
Total Rights, Warrants and Certificates (Cost $885,987) 487,038
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--14.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Aiolos Ltd. Catastrophe Linked Nts., 7.812%, 4/8/09 1,2 [EUR] 4,850,000 6,071,494
- ------------------------------------------------------------------------------------------------------------------------------------
Atlantic & Western Re Ltd. Catastrophe Linked Nts., Series B,
15.44%, 11/15/10 1 6,500,000 6,120,238
- ------------------------------------------------------------------------------------------------------------------------------------
Calabash Re Ltd. Catastrophe Linked Nts., Cl. A-1, 13.90%, 5/26/09 1,5 6,250,000 6,304,375
- ------------------------------------------------------------------------------------------------------------------------------------
Cascadia Ltd. Catastrophe Nts.:
8.515%, 6/13/08 1,2 2,750,000 2,715,103
9.40%, 8/31/09 1 3,950,000 3,942,298
- ------------------------------------------------------------------------------------------------------------------------------------
Cat-Mex Ltd. Catastrophe Linked Nts., Cl. A, 7.754%, 5/18/09 1,5 5,000,000 5,007,750
- ------------------------------------------------------------------------------------------------------------------------------------
Champlain Ltd. Catastrophe Linked Nts., Series A, 18.239%, 1/7/09 1 5,250,000 5,206,950
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc.:
Argentina (Republic of) Credit Linked Nts., 4%, 5/22/08 17 [ARP] 10,355,000 8,873,522
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR] 21,585,000 9,159,652
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR] 33,875,000 14,374,947
Brazil (Federal Republic of) Unsec. Credit Linked Nts.,
14.809%, 1/5/10 8 [BRR] 18,237,724 5,454,374
Brazil (Federal Republic of) Unsec. Credit Linked Nts.,
15.427%, 1/2/09 8 [BRR] 17,433,522 5,977,494
Brazil (Federal Republic of) Unsec. Credit Linked Nts.,
15.728%, 1/3/08 8 [BRR] 15,201,753 5,961,565
Colombia (Republic of) Credit Linked Bonds, 11%, 7/24/20 [COP] 7,230,000,000 3,335,636
Colombia (Republic of) Credit Linked Nts., Series II, 15%, 4/27/12 [COP] 4,311,848,685 2,198,245
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 10,085,000,000 5,141,484
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 8,162,000,000 4,161,110
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 6,891,000,000 3,513,135
Dominican Republic Unsec. Credit Linked Nts., 11.648%, 9/24/07
(linked to Dominican Republic Treasury Bills) 3,8 [DOP] 272,500,000 7,148,314
Dominican Republic Credit Linked Nts., 11.242%, 1/2/7
(linked to Dominican Republic Treasury Bills) 8 [DOP] 58,700,000 1,690,560
Dominican Republic Credit Linked Nts., 14.608%, 5/14/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 142,700,000 3,926,664
Dominican Republic Credit Linked Nts., 16.50%, 3/12/07
(linked to Dominican Republic Treasury Bills) [DOP] 132,800,000 3,736,882
Dominican Republic Credit Linked Nts., 17%, 3/12/07 [DOP] 145,400,000 4,396,257
Dominican Republic Credit Linked Nts., Series II, 15.603%, 4/23/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 56,010,000 1,553,189
57 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc.: Continued
Dominican Republic Unsec. Credit Linked Nts., 15.638%, 4/30/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 50,870,000 $ 1,407,046
Dominican Republic Unsec. Credit Linked Nts., Series II, 15.736%, 4/30/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 111,530,000 3,084,880
Egypt (The Arab Republic of) Credit Linked Nts., 8.70%, 7/12/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 32,570,000 5,283,982
Egypt (The Arab Republic of) Credit Linked Nts., 9.079%, 3/22/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 3,900,000 651,102
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.50%, 2/16/08
(linked to Egyptian Treasury Bills) [EGP] 23,760,000 4,095,538
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.775%, 2/22/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 31,030,000 5,215,899
Nigeria (Federal Republic of) Credit Linked Nts., 12.474%, 7/22/07 8 [NGN] 907,570,000 6,540,727
Nigeria (Federal Republic of) Credit Linked Nts., 14.50%, 3/1/11 [NGN] 1,761,000,000 14,159,620
Nigeria (Federal Republic of) Credit Linked Nts., Series II,
14.50%, 4/4/11 [NGN] 1,281,000,000 10,309,181
Ukraine Hryvnia Unsec. Credit Linked Nts., 11.94%, 1/4/10 [UAH] 6,470,000 1,402,177
Zambia (Republic of) Credit Linked Nts., 11%, 2/21/07
(linked to Zambian Treasury Bills) [ZMK] 16,410,000,000 3,737,549
Zambia (Republic of) Credit Linked Nts., Series II, 11%, 2/21/07
(linked to Zambian Treasury Bills) [ZMK] 6,700,000,000 1,525,995
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston International:
Indonesia (Republic of) Total Return Linked Nts., 12%, 9/16/11 [IDR] 68,000,000,000 7,750,157
Lukoil Credit Linked Nts., Series Fbi 105, 7.25%, 11/17/09 [RUR] 232,499,000 8,817,760
Moscow (City of) Credit Linked Nts., Series Fbi 101, 10%, 12/31/10 5 [RUR] 211,690,000 8,958,638
Moscow (City of) Credit Linked Nts., Series Fbi 98, 11%, 4/23/09 [RUR] 221,305,000 9,280,370
OAO Gazprom Credit Linked Nts., 8.11%, 1/21/07 [RUR] 230,095,000 8,798,134
Russian Unified Energy Systems Credit Linked Nts., Series Fbi 108,
8.80%, 12/20/07 [RUR] 553,980,000 21,808,478
South African Rand Interest Bearing Linked Nts., Series FBi 43, 5.175%, 5/23/22 1 14,280,000 14,387,100
Ukraine (Republic of) Credit Linked Nts., Series EMG 13, 11.94%, 12/30/09 [UAH] 15,823,000 3,511,699
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. (Nassau Branch):
Turkey (Republic of) Credit Linked Nts., Series 2, 20.853%, 7/16/08 3,8 [TRY] 25,240,000 11,663,963
Turkey (Republic of) Credit Linked Nts., Series EM 880, 20%, 10/18/07 9,712,912 9,355,802
Ukraine (Republic of) Credit Linked Nts., Series EMG 11, 11.94%, 12/30/09 [UAH] 4,771,000 1,058,858
Ukraine (Republic of) Credit Linked Nts., Series NPC 12, 11.94%, 12/30/09 [UAH] 30,720,000 6,817,886
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Argentina (Republic of) Credit Linked Nts., 4%, 12/21/11 [ARP] 19,110,000 15,331,099
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA
de CV Credit Linked Nts., 9.09%, 1/5/11 5 [MXN] 75,701,012 6,885,666
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA
de CV Credit Linked Nts., 9.65%, 1/5/11 5 [MXN] 49,570,093 4,525,740
Brazil Real Credit Linked Nts., 13.882%, 3/3/10 8 [BRR] 33,618,120 11,741,526
58 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG: Continued
Brazil Real Credit Linked Nts., 6%, 8/18/10 [BRR] 10,875,000 $ 7,175,646
Campania Total Return Linked Nts., 3.804%, 7/30/10 1,5 [EUR] 36,800,000 46,417,063
Campania Total Return Linked Nts., 3.846%, 7/30/10 1,5 [EUR] 31,000,000 39,156,364
Colombia (Republic of) Credit Linked Nts., 13.50%, 9/15/14 [COP] 8,506,000,000 4,281,863
Egypt (The Arab Republic of) Total Return Linked Nts., 8.328%, 12/12/06
(linked to Egyptian Treasury Bills) 8 [EGP] 46,890,000 8,007,732
Egypt (The Arab Republic of) Total Return Linked Nts., 9.170%, 1/30/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 18,000,000 3,060,814
European Investment Bank, Russian Federation Credit Linked Nts.,
5.502%, 1/19/10 8 5,580,000 4,752,207
Grupo TMM SA Credit Linked Nts., 6%, 9/7/12 5 10,485,000 10,499,522
Halyk Bank of Kazakhstan Total Return Linked Nts., Series I,
7.25%, 3/24/09 [KZT] 1,345,160,000 10,861,648
Indonesia (Republic of) Credit Linked Nts., 9.50%, 6/22/15 6,080,000 5,818,560
Indonesia (Republic of) Credit Linked Nts., Series III, 14.25%, 6/15/13 6,200,533 7,492,104
Nigeria (Federal Republic of) Credit Linked Nts., 12.50%, 2/24/09 [NGN] 352,600,000 2,785,361
Nigeria (Federal Republic of) Credit Linked Nts., 15%, 1/27/09 [NGN] 474,000,000 3,975,543
OAO Gazprom I Credit Nts., 8.36%, 10/20/07 7,455,000 8,039,276
OAO Gazprom II Credit Nts., 8.11%, 4/20/07 7,455,000 7,894,570
Peru (Republic of) Credit Linked Nts., 6.73%, 2/20/11 1 7,790,000 7,807,273
Romania (Republic of) Credit Linked Nts., 11.49%, 12/7/06 [RON] 6,161,250 2,434,508
Russian Federation Credit Linked Nts., 0.00%, 12/2/09 8 [RUR] 155,437,000 6,206,166
Russian Federation Total Return Linked Nts., Series II, 9%, 4/22/11 [RUR] 191,850,000 7,907,824
Ukraine (Republic of) 5 yr. Credit Linked Nts., 4.05%, 8/25/10 5,430,000 5,453,512
Ukraine (Republic of) 5.5 yr. Credit Linked Nts., 4.05%, 2/25/11 5,480,000 5,487,014
Ukraine (Republic of) 6 yr. Credit Linked Nts., 4.05%, 8/25/11 5,480,000 5,477,205
Ukraine (Republic of) 6.5 yr. Credit Linked Nts., 4.05%, 2/27/12 5,480,000 5,458,080
Ukraine (Republic of) 7 yr. Credit Linked Nts., 4.05%, 8/28/12 5,480,000 5,439,503
Ukraine (Republic of) Credit Linked Nts., 10.208%, 7/1/09 [UAH] 20,075,400 4,101,753
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH] 2,139,000 463,723
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH] 7,579,000 1,643,083
Ukraine (Republic of) Credit Linked Nts., 5.592%, 5/16/07 [UAH] 15,868,000 3,137,071
Ukraine (Republic of) Credit Linked Nts., Series A, 5.592%, 5/16/07 [UAH] 15,871,000 3,137,664
United Mexican States BORHIS Total Return Linked Nts.,
6.10%, 9/27/35 [MXN] 17,060,000 5,928,637
United Mexican States Credit Linked Nts., 9.52%, 1/5/11 5 [MXN] 49,642,956 4,521,103
Videocon International Ltd. Credit Linked Nts., 7.75%, 12/29/09 5 15,470,000 15,468,453
Volga Investments Ltd. Credit Linked Nts., Series III, 6.01%, 4/2/08 10,000,000 10,206,600
- ------------------------------------------------------------------------------------------------------------------------------------
Dow Jones CDX High Yield Index:
8.25% Pass-Through Certificates, Series 4-T1, 6/29/10 5 55,671,360 56,715,198
8.375% Pass-Through Certificates, Series 7-T1, 12/29/11 3,5 780,000 780,468
- ------------------------------------------------------------------------------------------------------------------------------------
Drewcat Capital Ltd. Catastrophe Linked Nts., Cl. A, 25.864%, 12/28/06 1,2 6,730,000 6,778,288
- ------------------------------------------------------------------------------------------------------------------------------------
Eurus Ltd. Catastrophe Linked Nts., 11.74%, 4/8/09 1,5 5,770,000 5,741,150
- ------------------------------------------------------------------------------------------------------------------------------------
Fhu-Jin Ltd. Catastrophe Linked Nts., Cl. B, 9.385%, 8/3/11 1,5 6,700,000 6,745,225
- ------------------------------------------------------------------------------------------------------------------------------------
Foundation RE Ltd. Catastrophe Linked Nts., 9.526%, 11/24/08 1,2 5,000,000 4,747,400
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International, Russian Federation Total Return
Linked Nts., 8%, 5/13/09 [RUR] 358,300,000 14,629,932
59 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
ING Bank NV, Ukraine (Republic of) Credit Linked Nts., Series 725,
11.89%, 12/30/09 5 [UAH] 36,698,000 $ 7,986,675
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Argentina (Republic of) Credit Linked Nts., 4%, 12/19/11 5 [ARP] 18,250,000 14,804,035
Brazil (Federal Republic of) Credit Linked Nts., 12.683%, 6/1/13 8 [BRR] 42,180,340 7,997,736
Brazil (Federal Republic of) Credit Linked Nts., 15.326%, 1/2/15 8 [BRR] 81,357,010 12,620,832
Brazil (Federal Republic of) Credit Linked Nts., 2.731%, 11/30/12 8 [ARP] 27,660,000 6,707,021
Brazil (Federal Republic of) Credit Linked Nts., 6%, 5/16/45 5 [BRR] 30,560,000 17,639,851
Brazil (Federal Republic of) Credit Linked Nts., Series II, 13.553%, 1/2/15 8 [BRR] 56,242,917 8,724,908
Brazil (Federal Republic of) Credit Linked Nts., 12.080%, 1/2/15 8 [BRR] 26,663,580 4,136,295
Colombia (Republic of) Credit Linked Bonds, 10.190%, 1/5/16 8 [COP] 115,400,000,000 17,645,944
Colombia (Republic of) Credit Linked Bonds, 11.198%, 8/3/20 8 [COP] 82,000,000,000 8,465,768
Peru (Republic of) Credit Linked Nts., 8.115%, 9/2/15 8 [PEN] 24,240,000 3,639,169
Swaziland (Kingdom of) Credit Linked Nts., 7.25%, 6/20/10 8,765,000 9,084,923
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers International:
Romania (Republic of) Total Return Linked Nts., 7.90%, 2/9/10
(linked to Romanian Treasury Bills) [RON] 6,092,000 2,474,751
Turkey (Republic of) Total Return Linked Nts., 20%, 10/17/07
(linked to Turkish Treasury Bills) 3,349,124 3,558,444
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
Romania (Republic of) Total Return Linked Nts., 6.50%, 3/10/10
(linked to Romanian Treasury Bills) [RON] 16,085,800 6,138,499
Romania (Republic of) Total Return Linked Nts., 6.75%, 3/11/08
(linked to Romanian Treasury Bills) [RON] 18,680,000 7,280,137
Romania (Republic of) Total Return Linked Nts., 7.25%, 4/18/10
(linked to Romanian Treasury Bills) [RON] 1,487,000 580,678
Romania (Republic of) Total Return Linked Nts., 7.50%, 3/6/07
(linked to Romanian Treasury Bills) [RON] 2,467,000 984,031
Romania (Republic of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON] 1,478,000 587,062
Romania (Republic of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON] 3,568,000 1,417,211
Romania (Republic of) Total Return Linked Nts., 7.90%, 2/12/08
(linked to Romanian Treasury Bills) [RON] 13,855,800 5,593,428
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley & Co. International Ltd./Red Arrow International Leasing plc:
Total Return Linked Nts., Series A, 8.375%, 6/30/12 5 [RUR] 186,617,822 7,210,028
Total Return Linked Nts., Series B, 11%, 6/30/12 5 [RUR] 148,100,000 5,671,076
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.:
Bank Center Credit Total Return Linked Nts., 7.52%, 6/6/08 [KZT] 2,043,000,000 16,206,830
Brazil (Federal Republic of) Sr. Linked Nts., 14.40%, 8/4/16 [BRR] 36,298,924 17,466,656
Philippines (Republic of the) Credit Linked Nts., 8.619%, 9/20/15 2 16,900,000 18,429,450
Philippines (Republic of the) Credit Linked Nts., 8.38%, 6/20/16 1,5 3,950,000 3,954,740
Venezuela (Republic of) 10 yr. Credit Linked Nts., 7.85%, 11/20/15 12,480,000 13,261,248
Venezuela (Republic of) Credit Linked Nts., 6.49%, 5/20/10 8,275,000 8,480,220
Venezuela (Republic of) Credit Linked Nts., 7.382%, 5/20/10 17,600,000 19,289,600
60 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Redwood Capital V Catastrophe Linked Nts., 9.657%, 1/9/07 1,2 $ 4,250,000 $ 4,224,075
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Reinsurance Ltd. Catastrophe Linked Nts.:
Series B, 13.85%, 6/6/08 1 4,300,000 3,905,045
Series B, 14.90%, 6/8/07 1,2 2,000,000 1,960,450
- ------------------------------------------------------------------------------------------------------------------------------------
Successor Cal Quake Parametric Ltd. Catastrophe Linked Nts., Cl. A-I,
10.64%, 6/6/08 1,2 4,560,000 4,516,452
- ------------------------------------------------------------------------------------------------------------------------------------
Successor Euro Wind Ltd. Catastrophe Linked Nts., Series A-I,
22.89%, 6/6/08 1,2 6,000,000 6,039,600
- ------------------------------------------------------------------------------------------------------------------------------------
Successor II Ltd. Catastrophe Linked Nts., Series A-I, 9.64%, 6/6/08 1,2 10,660,000 10,727,691
- ------------------------------------------------------------------------------------------------------------------------------------
UBS AG, Israel (State of) Credit Linked Nts., 7.50%, 4/5/14 [ILS] 37,034,500 9,595,193
- ------------------------------------------------------------------------------------------------------------------------------------
VASCO Re 2006 Ltd. Catastrophe Linked Nts., 13.898%, 6/5/09 1,5 6,710,000 6,818,702
----------------
Total Structured Notes (Cost $970,920,182) 1,006,537,370
EXPIRATION STRIKE
DATE PRICE CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONS PURCHASED--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Mexican Nuevo Peso (MXN) Call 15 10/12/06 $11.40 85,614,000 863
- ------------------------------------------------------------------------------------------------------------------------------------
Mexican Nuevo Peso (MXN) Put 15 10/12/06 11.40 85,614,000 282,405
- ------------------------------------------------------------------------------------------------------------------------------------
New Turkish Lira (TRY)/Japanese Yen (JPY) Put 15 1/30/07 77.00TRY 30,620,000 350,862
----------------
Total Options Purchased (Cost $936,771) 634,130
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--8.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 69.30% in joint repurchase agreement (Principal
Amount/Value $800,621,000, with a maturity value of $800,954,592) with Cantor
Fitzgerald & Co./Cantor Fitzgerald Securities, 5%, dated 9/29/06, to be
repurchased at $555,070,183 on 10/2/06, collateralized by U.S. Treasury Bonds,
5.25%-8.75%, 5/15/16-2/15/29, with a value of $802,318,218 and U.S. Treasury
Bills, 12/28/06, with a value of $14,820,750 (Cost $554,839,000) $ 554,839,000 554,839,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with Cash Collateral
from Securities Loaned) (Cost $7,141,215,069) 7,109,882,609
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--5.0% 18
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTE--0.0%
GSAA Home Equity Trust, Series 2005-15, Cl. 2A1, 5.42%, 10/25/06 1,461,119 1,461,119
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--4.6%
Undivided interest of 1.05% in joint repurchase agreement (Principal
Amount/Value $3,950,000,000, with a maturity value of $3,951,787,375) with
Nomura Securities, 5.43%, dated 9/29/06, to be repurchased at $41,535,784 on
10/2/06, collateralized by U.S. Agency Mortgages, 0.00%-22.12%, 3/15/14-6/25/43,
with a value of $4,029,000,000 41,516,998 41,516,998
61 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS Continued
Undivided interest of 10% in joint repurchase agreement (Principal
Amount/Value $2,500,000,000 with a maturity value of $2,501,131,250)
with ING Financial Markets LLC, 5.43%, dated 9/29/06, to be repurchased
at $250,113,125 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.00%-7%, 9/1/18-8/1/36, with a value of $2,550,003,623 $ 250,000,000 $ 250,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 10% in joint repurchase agreement (Principal
Amount/Value $250,000,000, with a maturity value of $250,112,500)
with Cantor Fitzgerald & Co., 5.40%, dated 9/29/06, to be repurchased
at $25,011,250 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.00%-6.50%, 8/1/12-9/1/36, with a value of $255,002,127 25,000,000 25,000,000
----------------
316,516,998
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--0.4%
American Express Credit Corp., 5.34%, 10/16/06 2,000,000 2,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns, 5.37%, 10/2/06 3,000,000 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 10/2/06 3,000,000 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Funding, Inc., 5.36%, 10/2/06 7,000,000 7,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Finance Corp., 5.32%, 10/6/06 3,000,000 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Links Finance LLC, 5.38%, 10/2/06 8,001,004 8,001,004
- ------------------------------------------------------------------------------------------------------------------------------------
Tango Finance Corp., 5.38%, 10/2/06 3,498,951 3,498,951
----------------
29,499,955
- ------------------------------------------------------------------------------------------------------------------------------------
YANKEE CERTIFICATE OF DEPOSIT FLOATING NOTE--0.0%
Natexis Banques Populaires NY, 5.37%, 10/2/06 2,000,000 2,000,000
----------------
Total Investments Purchased with Cash Collateral from Securities Loaned
(Cost $349,478,072) 349,478,072
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $7,490,693,141) 107.5% 7,459,360,681
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (7.5) (517,742,773)
------------------------------------
NET ASSETS 100.0% $ 6,941,617,908
====================================
62 | OPPENHEIMER STRATEGIC INCOME FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP Argentine Peso
AUD Australian Dollar
BRR Brazilian Real
CAD Canadian Dollar
COP Colombian Peso
DEM German Mark
DKK Danish Krone
DOP Dominican Republic Peso
EGP Egyptian Pounds
EUR Euro
GBP British Pound Sterling
IDR Indonesia Rupiah
ILS Israeli Shekel
JPY Japanese Yen
KZT Kazakhstan Tenge
MXN Mexican Nuevo Peso
MYR Malaysian Ringgit
NGN Nigeria Naira
PEN Peruvian New Sol
PLZ Polish Zloty
RON New Romanian Leu
RUR Russian Ruble
TRY New Turkish Lira
UAH Ukraine Hryvnia
UYU Uruguay Peso
ZMK Zambian Kwacha
1. Represents the current interest rate for a variable or increasing rate
security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $490,985,276 or 7.07% of the Fund's net
assets as of September 30, 2006.
3. When-issued security or forward commitment to be delivered and settled after
September 30, 2006. See Note 1 of accompanying Notes.
4. Issue is in default. See Note 1 of accompanying Notes.
5. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of September 30, 2006 was $527,224,851, which
represents 7.60% of the Fund's net assets, of which $8,274 is considered
restricted. In addition, the Fund has restricted currency of $2,490,558, which
represents 0.04% of the Fund's net assets. See Note 12 of accompanying Notes.
6. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $40,643,108 or 0.59% of the Fund's net assets
as of September 30, 2006.
7. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these 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. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $3,516,105 or 0.05% of the Fund's net assets as of
September 30, 2006.
8. Zero coupon bond reflects effective yield on the date of purchase.
9. Partial or fully-loaned security. See Note 14 of accompanying Notes.
10. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $30,985,814. See Note 6 of accompanying
Notes.
11. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of accompanying Notes.
63 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS Continued
12. A sufficient amount of securities has been designated to cover outstanding
written put options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO PUT DATE PRICE RECEIVED SEE NOTE 7
- ------------------------------------------------------------------------------------------------------------
New Turkish Lira (TRY)/Japanese Yen (JPY) 30,620,000 1/30/07 65TRY $519,227 $266,434
13. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
14. Interest or dividend is paid-in-kind, when applicable.
15. Non-income producing security.
16. Represents ownership of at least 5% of the voting securities of the issuer,
and is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended September 30, 2006. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
SEPTEMBER 30, 2005 ADDITIONS REDUCTIONS SEPTEMBER 30, 2006
- ------------------------------------------------------------------------------------------------------------
Prandium, Inc. 1,034,256 -- -- 1,034,256
VALUE DIVIDEND
SEE NOTE 1 INCOME
- ------------------------------------------------------------------------------------------------------------
Prandium, Inc. $8,274 $--
17. Denotes an inflation-indexed security: coupon and principal are indexed to
the consumer price index.
18. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 14 of
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES September 30, 2006
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $7,478,536,141) $7,459,352,407
Affiliated companies (cost $12,157,000) 8,274
---------------
7,459,360,681
- ----------------------------------------------------------------------------------------------------------
Cash 25,197,062
- ----------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $2,041,365) 2,036,566
- ----------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 22,509,047
- ----------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 17,853,697
- ----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 79,264,951
Investments sold (including $4,086,747 sold on a when-issued basis or
forward commitment) 29,562,551
Shares of beneficial interest sold 9,990,112
Closed foreign currency contracts 350,451
Other 138,355
---------------
Total assets 7,646,263,473
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $519,227)--see accompanying
statement of investments 266,434
- ----------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 349,478,072
- ----------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 11,829,544
- ----------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 5,922,166
- ----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $255,740,010 purchased on a
when-issued basis or forward commitment) 298,396,014
Closed foreign currency contracts 17,712,181
Shares of beneficial interest redeemed 10,583,520
Dividends 4,590,954
Distribution and service plan fees 4,131,245
Transfer and shareholder servicing agent fees 822,652
Shareholder communications 411,908
Futures margins 206,572
Trustees' compensation 129,039
Other 165,264
---------------
Total liabilities 704,645,565
- ----------------------------------------------------------------------------------------------------------
NET ASSETS $6,941,617,908
===============
65 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 1,659,194
- ----------------------------------------------------------------------------------------------------------
Additional paid-in capital 7,961,107,501
- ----------------------------------------------------------------------------------------------------------
Accumulated net investment income 28,620,443
- ----------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (1,051,588,378)
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 1,819,148
----------------
NET ASSETS $ 6,941,617,908
================
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$5,077,400,158 and 1,213,643,842 shares of beneficial interest outstanding) $ 4.18
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $ 4.39
- ----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $718,742,377
and 171,227,025 shares of beneficial interest outstanding) $ 4.20
- ----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $857,843,200
and 205,466,631 shares of beneficial interest outstanding) $ 4.18
- ----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $108,323,749
and 25,876,803 shares of beneficial interest outstanding) $ 4.19
- ----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $179,308,424 and 42,979,530 shares of beneficial interest outstanding) $ 4.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS For the Year Ended September 30, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 388,106,267
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $125,763) 8,400,957
- --------------------------------------------------------------------------------
Fee income 2,485,741
- --------------------------------------------------------------------------------
Portfolio lending fees 770,870
- --------------------------------------------------------------------------------
Other income 82,767
--------------
Total investment income 399,846,602
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 35,160,731
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 11,944,439
Class B 8,026,795
Class C 8,138,266
Class N 468,706
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 6,360,780
Class B 1,222,558
Class C 1,100,817
Class N 289,768
Class Y 64,650
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 810,517
Class B 171,987
Class C 129,801
- --------------------------------------------------------------------------------
Custodian fees and expenses 335,747
- --------------------------------------------------------------------------------
Trustees' compensation 99,300
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 293,391
--------------
Total expenses 74,619,753
Less reduction to custodian expenses (95,247)
--------------
Net expenses 74,524,506
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 325,322,096
67 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ 114,494,313
Closing and expiration of option contracts written 722,737
Closing and expiration of swaption contracts 371,561
Closing and expiration of futures contracts (5,337,609)
Foreign currency transactions (54,688,851)
Swap contracts 3,615,579
--------------
Net realized gain 59,177,730
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (96,370,255)
Translation of assets and liabilities denominated in foreign currencies (49,146,059)
Futures contracts 15,087,223
Option contracts 252,793
Swaption contracts 92,667
Swap contracts (4,178,552)
--------------
Net change in unrealized appreciation (134,262,183)
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 250,237,643
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2006 2005
- ---------------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------------
Net investment income $ 325,322,096 $ 289,867,824
- ---------------------------------------------------------------------------------------------------
Net realized gain 59,177,730 183,064,148
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (134,262,183) 97,582,611
-----------------------------------
Net increase in net assets resulting from operations 250,237,643 570,514,583
- ---------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (361,826,587) (294,738,505)
Class B (55,250,172) (62,870,416)
Class C (53,959,503) (44,696,942)
Class N (6,482,780) (4,206,758)
Class Y (8,310,116) (6,335,724)
- ---------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Class A 481,164,858 541,271,143
Class B (168,323,661) (271,334,101)
Class C 97,789,142 60,028,844
Class N 28,045,769 28,754,049
Class Y 118,978,171 (91,805,446)
- ---------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------
Total increase 322,062,764 424,580,727
- ---------------------------------------------------------------------------------------------------
Beginning of period 6,619,555,144 6,194,974,417
-----------------------------------
End of period (including accumulated net investment income of
$28,620,443 and $123,075,890, respectively) $ 6,941,617,908 $ 6,619,555,144
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.34 $ 4.23 $ 4.08 $ 3.64 $ 3.72
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 1 .21 1 .20 .26 .32
Net realized and unrealized gain (loss) (.05) .19 .15 .43 (.08)
--------------------------------------------------------------------------
Total from investment operations .16 .40 .35 .69 .24
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.32) (.29) (.20) (.25) (.30)
Tax return of capital distribution -- -- -- -- (.02)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.32) (.29) (.20) (.25) (.32)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.18 $ 4.34 $ 4.23 $ 4.08 $ 3.64
==========================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.77% 9.77% 8.73% 19.59% 6.63%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,077,400 $4,766,576 $4,117,666 $3,873,018 $3,202,825
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,888,392 $4,392,321 $4,025,554 $3,521,307 $3,263,490
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.03% 4.82% 4.69% 6.60% 7.91%
Total expenses 0.93% 0.94% 0.95% 0.95% 1.01%
Expenses after payments and waivers and
reduction to custodian expenses 0.92% 0.94% 0.95% 0.95% 1.01%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 4 103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS B YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.35 $ 4.24 $ 4.10 $ 3.66 $ 3.73
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1 .17 1 .16 .22 .28
Net realized and unrealized gain (loss) (.05) .20 .15 .44 (.05)
------------------------------------------------------------------------
Total from investment operations .13 .37 .31 .66 .23
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) (.26) (.17) (.22) (.28)
Tax return of capital distribution -- -- -- -- (.02)
------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.28) (.26) (.17) (.22) (.30)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.20 $ 4.35 $ 4.24 $ 4.10 $ 3.66
========================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.23% 8.94% 7.66% 18.62% 6.11%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $718,742 $ 918,651 $1,163,555 $1,686,295 $1,847,182
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $802,936 $1,021,022 $1,424,322 $1,757,152 $2,056,449
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.25% 4.05% 4.16% 5.92% 7.22%
Total expenses 1.71% 1.70% 1.69% 1.68% 1.75%
Expenses after payments and waivers and
reduction to custodian expenses 1.71% 1.69% 1.69% 1.68% 1.75%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 4 103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business 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. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.33 $ 4.22 $ 4.07 $ 3.64 $ 3.71
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1 .17 1 .17 .23 .29
Net realized and unrealized gain (loss) (.05) .20 .15 .42 (.06)
------------------------------------------------------------------------
Total from investment operations .13 .37 .32 .65 .23
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) (.26) (.17) (.22) (.28)
Tax return of capital distribution -- -- -- -- (.02)
------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.28) (.26) (.17) (.22) (.30)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.18 $ 4.33 $ 4.22 $ 4.07 $ 3.64
========================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.22% 8.96% 7.95% 18.45% 6.15%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $857,843 $788,217 $710,085 $698,196 $568,487
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $814,425 $748,199 $716,206 $623,598 $571,292
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.27% 4.07% 4.06% 5.85% 7.15%
Total expenses 1.68% 4 1.69% 4 1.69% 4,5 1.69% 4 1.75% 4
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 6 103% 6 90% 6 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS N YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.34 $ 4.23 $ 4.08 $ 3.65 $ 3.72
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .19 1 .19 1 .17 .25 .30
Net realized and unrealized gain (loss) (.04) .19 .16 .42 (.05)
--------------------------------------------------------------------------
Total from investment operations .15 .38 .33 .67 .25
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.27) (.18) (.24) (.30)
Tax return of capital distribution -- -- -- -- (.02)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.30) (.27) (.18) (.24) (.32)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.19 $ 4.34 $ 4.23 $ 4.08 $ 3.65
==========================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.60% 9.27% 8.28% 18.82% 6.70%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 108,324 $ 83,287 $ 52,969 $ 30,110 $ 15,508
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 94,281 $ 69,480 $ 40,043 $ 22,627 $ 8,954
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.62% 4.37% 4.19% 6.08% 7.07%
Total expenses 1.33% 4 1.40% 4 1.38% 4,5 1.34% 4 1.22% 4
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 6 103% 6 90% 6 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.32 $ 4.22 $ 4.07 $ 3.64 $ 3.71
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .22 1 .21 1 .21 .26 .32
Net realized and unrealized gain (loss) (.04) .19 .14 .42 (.06)
---------------------------------------------------------------------
Total from investment operations .18 .40 .35 .68 .26
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.33) (.30) (.20) (.25) (.31)
Tax return of capital distribution -- -- -- -- (.02)
---------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.33) (.30) (.20) (.25) (.33)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.17 $ 4.32 $ 4.22 $ 4.07 $ 3.64
=====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.35% 9.73% 8.80% 19.33% 7.06%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 179,309 $ 62,824 $ 150,699 $ 240,296 $ 152,767
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 118,239 $ 68,656 $ 213,632 $ 194,308 $ 127,992
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.38% 4.84% 4.80% 6.57% 7.86%
Total expenses 0.58% 1.16% 1.29% 1.41% 1.74%
Expenses after payments and waivers and
reduction to custodian expenses 0.58% 0.80% 0.90% 0.91% 0.90%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 4 103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Strategic Income Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek high current income by investing
mainly in debt securities. The Fund's investment advisor is OppenheimerFunds,
Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its
75 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
trading session ending at, or most recently prior to, the time when the Fund's
assets are valued. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value. Foreign and
domestic securities whose values have been materially affected by what the
Manager identifies as a significant event occurring before the Fund's assets are
valued but after the close of their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured note is sold or matures. As of September 30, 2006, the market
value of these securities comprised 14.5% of the Fund's net assets and resulted
in unrealized cumulative gains of $35,617,188.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade 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
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of September 30, 2006, the Fund had purchased
$255,740,010 of securities issued on a when-issued basis or forward commitment
and sold $4,086,747 of securities issued on a when-issued basis or forward
commitment.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same
76 | OPPENHEIMER STRATEGIC INCOME FUND
type, coupon and maturity) but not identical securities on a specified future
date. The Fund records the incremental difference between the forward purchase
and sale of each forward roll as realized gain (loss) on investments or as fee
income in the case of such transactions that have an associated fee in lieu of a
difference in the forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of September 30, 2006, securities with an
aggregate market value of $16,993,313, representing 0.24% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the
77 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures and other derivatives) that may
have off-balance sheet market risk. Off-balance sheet market risk exists when
the maximum potential loss on a particular financial instrument is greater than
the value of such financial instrument, as reflected in the Fund's Statement of
Assets and Liabilities.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4,5 TAX PURPOSES
---------------------------------------------------------------------------
$78,265,796 $-- $1,030,416,491 $43,110,745
1. As of September 30, 2006, the Fund had $963,979,042 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of September 30, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
------------------------------
2008 $ 308,649,467
2009 52,578,252
2010 185,647,798
2011 294,188,800
2012 122,914,725
-------------
Total $ 963,979,042
=============
78 | OPPENHEIMER STRATEGIC INCOME FUND
2. The Fund had $65,168,890 of post-October foreign currency losses which were
deferred.
3. The Fund had $1,268,559 of straddle losses which were deferred.
4. During the fiscal year ended September 30, 2006, the Fund utilized
$69,360,120 of capital loss carryforward to offset capital gains realized in
that fiscal year. a
a. Includes $11,836,618 of capital loss carryforwards acquired in the July
21, 2005 merger of Oppenheimer Multi-Sector Income Trust.
5. During the fiscal year ended September 30, 2005, the Fund utilized
$11,195,215 of capital loss carryforward to offset capital gains realized in
that fiscal year. b
b. Includes $2,302,465 of capital loss carryforwards acquired in the July
21, 2005 merger of Oppenheimer Multi-Sector Income Trust.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for September 30, 2006. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO INCREASE TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED LOSS
PAID-IN CAPITAL LOSS ON INVESTMENTS
------------------------------------------------------------------
$12,201,244 $66,051,615 $78,252,859
The tax character of distributions paid during the years ended September 30,
2006 and September 30, 2005 was as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
------------------------------------------------------------------
Distributions paid from:
Ordinary income $485,829,158 $412,848,345
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of September 30, 2006 are noted below. The
primary difference between book and tax appreciation or depreciation of
securities and other investments, if applicable, is attributable to the tax
deferral of losses or tax realization of financial statement unrealized gain or
loss.
Federal tax cost of securities $ 7,499,301,687
Federal tax cost of other investments 1,730,694,472
----------------
Total federal tax cost $ 9,229,996,159
================
Gross unrealized appreciation $ 209,037,043
Gross unrealized depreciation (252,147,788)
----------------
Net unrealized depreciation $ (43,110,745)
================
79 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's
80 | OPPENHEIMER STRATEGIC INCOME FUND
maximum exposure under these arrangements is unknown as this would be dependent
on future claims that may be made against the Fund. The risk of material loss
from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. 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.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
CLASS A
Sold 285,205,829 $ 1,197,018,631 253,721,621 $ 1,091,121,076
Dividends and/or
distributions reinvested 63,712,315 267,183,114 48,950,677 211,128,508
Acquisition-Note 14 -- -- 62,844,742 270,860,838
Redeemed (234,651,361) (983,036,887) (239,685,952) (1,031,839,279)
----------------------------------------------------------------------
Net increase 114,266,783 $ 481,164,858 125,831,088 $ 541,271,143
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS B
Sold 27,099,194 $ 114,141,319 27,868,668 $ 120,195,274
Dividends and/or
distributions reinvested 9,067,246 38,196,513 9,542,125 41,299,086
Redeemed (76,102,306) (320,661,493) (100,359,143) (432,828,461)
----------------------------------------------------------------------
Net decrease (39,935,866) $ (168,323,661) (62,948,350) $ (271,334,101)
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS C
Sold 52,485,697 $ 219,804,771 40,612,822 $ 174,277,627
Dividends and/or
distributions reinvested 9,627,908 40,332,270 7,606,352 32,743,949
Redeemed (38,820,281) (162,347,899) (34,262,628) (146,992,732)
----------------------------------------------------------------------
Net increase 23,293,324 $ 97,789,142 13,956,546 $ 60,028,844
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS N
Sold 11,223,391 $ 47,099,735 10,118,176 $ 43,521,928
Dividends and/or
distributions reinvested 1,377,036 5,780,559 896,137 3,865,917
Redeemed (5,922,489) (24,834,525) (4,331,470) (18,633,796)
----------------------------------------------------------------------
Net increase 6,677,938 $ 28,045,769 6,682,843 $ 28,754,049
======================================================================
81 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS Y
Sold 27,986,060 $ 117,026,957 16,530,646 $ 72,458,398
Dividends and/or
distributions reinvested 1,974,505 8,229,559 1,472,034 4,751,793
Redeemed (1,510,690) (6,278,345) (39,181,919) (169,015,637)
-----------------------------------------------------------------
Net increase (decrease) 28,449,875 $ 118,978,171 (21,179,239) $ (91,805,446)
=================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended September 30, 2006, were as
follows:
PURCHASES SALES
- -----------------------------------------------------------------------------------
Investment securities $4,939,332,169 $5,338,131,286
U.S. government and government agency obligations 320,320,066 346,184,902
To Be Announced (TBA) mortgage-related securities 4,097,005,267 4,231,030,059
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:
FEE SCHEDULE SEPT. 30, 2005 TO DEC. 31, 2005 FEE SCHEDULE EFFECTIVE JANUARY 1, 2006
- ---------------------------------------------- --------------------------------------------
Up to $200 million of net assets 0.75% Up to $200 million of net assets 0.75%
Next $200 million of net assets 0.72 Next $200 million of net assets 0.72
Next $200 million of net assets 0.69 Next $200 million of net assets 0.69
Next $200 million of net assets 0.66 Next $200 million of net assets 0.66
Next $200 million of net assets 0.60 Next $200 million of net assets 0.60
Over $1 billion of net assets 0.50 Next $4 billion of net assets 0.50
Over $5 billion of net assets 0.48
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended September 30, 2006, the Fund paid
$8,998,518 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
82 | OPPENHEIMER STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Class A shares of the Fund. The Distributor currently uses all of those fees
to pay dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at September 30, 2006 for Class B, Class C
and Class N shares were $98,945,222, $27,009,902 and $1,650,101, respectively.
Fees incurred by the Fund under the plans are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales
charges (CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------
September 30, 2006 $2,199,785 $43,415 $1,701,540 $113,735 $28,600
83 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of September 30, 2006, the Fund had outstanding foreign currency
contracts as follows:
CONTRACT VALUATION
EXPIRATION AMOUNT AS OF UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) SEPT. 30, 2006 APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Argentine Peso (ARP) 10/25/06 83,000ARP $ 26,652,455 $ -- $ 106,202
Australian Dollar (AUD) 10/13/06 2,290AUD 1,706,243 -- 15,768
Brazilian Real (BRR) 10/31/06-10/2/07 483,260BRR 211,758,523 3,778,704 196,117
British Pound
Sterling (GBP) 10/13/06-1/10/07 12,755GBP 23,899,318 6,659 90,728
Canadian Dollar (CAD) 10/13/06 7,725CAD 6,913,887 13,609 --
Chilean Peso (CLP) 11/21/06-12/28/06 15,171,000CLP 28,335,188 194,803 34,005
Dominican Republic
Peso (DOP) 10/10/06 244,558DOP 7,256,910 -- 153,934
Euro (EUR) 10/13/06-3/6/07 110,575EUR 140,930,923 13,411 898,289
Indian Rupee (INR) 10/3/06-10/11/06 1,212,608INR 26,392,075 70,285 --
Japanese Yen (JPY) 10/13/06-1/10/07 40,531,000JPY 347,900,985 -- 1,254,134
Malaysian
Ringgit (MYR) 11/16/06-11/17/06 56,590MYR 15,380,147 -- 661,466
Mexican Nuevo
Peso (MXN) 10/24/06-11/29/06 946,040MXN 85,828,716 -- 925,784
New Zealand
Dollar (NZD) 3/5/07 73,125NZD 47,288,028 74,205 156,017
84 | OPPENHEIMER STRATEGIC INCOME FUND
CONTRACT VALUATION
EXPIRATION AMOUNT AS OF UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) SEPT. 30, 2006 APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Norwegian
Krone (NOK) 1/10/07 109,100NOK $ 16,810,865 $ -- $ 77,680
South African
Rand (ZAR) 10/5/06-11/27/06 454,950ZAR 58,237,154 -- 5,161,425
South Korean
Won (KRW) 10/10/06-11/2/06 35,003,000KRW 37,013,091 423,611 --
Swiss Franc (CHF) 10/13/06-03/6/07 102,471CHF 82,953,330 32,382 791,518
Thailand Baht (THB) 10/17/06 855,000THB 22,700,742 126,484 --
Turkish Lira (TRY) 10/10/06-10/26/06 60,779TRY 39,793,365 11,508 781,510
-----------------------------
4,745,661 11,304,577
-----------------------------
CONTRACTS TO SELL
Australian Dollar (AUD) 1/10/07-3/5/07 96,965AUD 72,059,448 1,291,220 --
Brazilian Real (BRR) 12/10/09-1/5/10 90,846BRR 30,988,310 11,361,461 --
British Pound
Sterling (GBP) 2/7/07 11,000GBP 20,618,343 185,407 --
Canadian Dollar (CAD) 1/10/07-2/20/07 74,780CAD 67,127,163 37,353 --
Chinese
Renminbi (Yuan) (CNY) 10/23/06 210,000CNY 26,635,973 -- 112,449
Czech Koruna (CZK) 10/23/06 590,000CZK 26,482,595 -- 76,115
Euro (EUR) 11/20/06-2/7/07 61,450EUR 78,287,471 476,847 38,874
Iceland Krona (ISK) 10/23/06 829,900ISK 11,774,186 -- 297,529
Japanese Yen (JPY) 10/23/06-3/5/07 14,911,000JPY 127,849,011 3,637,666 --
Swedish Krone (SEK) 10/5/06-3/5/07 478,290SEK 65,660,051 762,417 --
Swiss Franc (CHF) 10/23/06 33,000CHF 26,452,498 11,015 --
-----------------------------
17,763,386 524,967
-----------------------------
Total unrealized appreciation and depreciation $ 22,509,047 $ 11,829,544
=============================
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
85 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations at the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of September 30, 2006, the Fund had outstanding futures contracts as
follows:
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF SEPTEMBER 30, APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS 2006 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
DAX Index 12/15/06 62 $ 11,881,348 $ 233,010
Euro-Bundesobligation, 5 yr. 12/7/06 466 64,970,898 214,118
Euro-Bundesobligation, 10 yr. 12/7/06 223 33,395,848 140,021
Euro-Schatz 12/7/06 744 98,126,374 51,720
FTSE 100 Index 12/15/06 20 2,241,757 22,233
IBEX 35 Index (The) 10/20/06 45 7,389,014 420,764
Japan (Government of) Bonds, 10 yr. 12/11/06 142 162,045,291 790,143
Japan (Government of) Bonds, 10 yr. 12/8/06 92 10,506,497 61,398
MSCI Taiwan Stock Index 10/30/06 258 7,402,020 (93,405)
NASDAQ 100 Index 12/15/06 745 24,901,625 1,024,636
Nikkei 225 Index 12/7/06 17 2,317,037 75,641
Standard & Poor's 500 E-Mini 12/15/06 163 10,965,010 273,979
Standard & Poor's ASX 200 Index 12/21/06 132 12,740,173 195,788
Standard & Poor's/MIB Index 12/15/06 29 7,075,050 94,243
United Kingdom Long Gilt 12/27/06 111 22,869,629 143,047
U.S. Long Bonds 12/19/06 4,130 464,237,813 8,785,089
U.S. Treasury Nts., 2 yr. 12/29/06 1,423 291,003,500 907,695
U.S. Treasury Nts., 10 yr. 12/19/06 3,066 331,319,625 3,293,662
---------------
16,633,782
---------------
CONTRACTS TO SELL
Australia (Commonwealth of) Bonds, 10 yr. 12/15/06 132 10,208,863 11,136
CAC-40 10 Index 10/20/06 190 12,678,954 (304,557)
Canadian Bonds, 10 yr. 12/18/06 304 31,315,196 (446,661)
DAX Index 12/15/06 72 13,797,695 (283,463)
FTSE 100 Index 12/15/06 255 28,582,402 (288,582)
Nikkei 225 Index 12/7/06 273 37,208,889 (183,929)
Standard & Poor's 500 E-Mini 12/15/06 1,947 130,974,690 (3,279,040)
Standard & Poor's/Toronto
Stock Exchange 60 Index 12/14/06 105 12,711,787 (234,510)
86 | OPPENHEIMER STRATEGIC INCOME FUND
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF SEPTEMBER 30, APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS 2006 (DEPRECIATION)
- ----------------------------------------------------------------------------------------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 12/29/06 172 $ 35,174,000 $ (913)
U.S. Treasury Nts., 5 yr. 12/29/06 1,009 106,465,266 (724,070)
U.S. Treasury Nts., 10 yr. 12/19/06 1,562 168,793,625 (609,473)
---------------
(6,344,062)
---------------
$ 10,289,720
===============
- --------------------------------------------------------------------------------
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 or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, expiration date, exercise price, premium received and market value are
detailed in a note to the Statement of Investments. Options written are reported
as a liability in the Statement of Assets and Liabilities. Realized 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 [or commodity]
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 [or commodity]
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.
87 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY Continued
Written option activity for the year ended September 30, 2006 was as follows:
PUT OPTIONS
------------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
- --------------------------------------------------------------------------------
Options outstanding as of
September 30, 2005 -- $ --
Options written 34,499,620,000 1,241,964
Options closed or expired (34,469,000,000) (722,737)
------------------------------
Options outstanding as of
September 30, 2006 30,620,000 $ 519,227
==============================
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS
A total return swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. One cash flow stream will typically be
based on a reference interest rate or index and the other on the total return of
a reference asset such as a security, a basket of securities, or an index. The
total return includes appreciation or depreciation on the reference asset, plus
any interest or dividend payments. Payments under the swap are based on an
agreed upon principal amount but since this principal amount is not exchanged,
it represents neither an asset nor a liability to either counter-party, and is
referred to as notional. Total return swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations. The primary risks associated with total return swaps are credit
risks (if the counterparty fails to meet its obligations) and market risk (if
there is no liquid market for the agreement or unfavorable changes occur in the
reference asset).
As of September 30, 2006, the Fund had entered into the following total return
swap agreements:
88 | OPPENHEIMER STRATEGIC INCOME FUND
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT/UNITS THE FUND THE FUND DATES (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Lehman Brothers
CMBS Index
If negative, Spread plus
the absolute value Total Return
of the Total Return Amount value
Amount for a for a given
$ 12,000,000 given Index Period. Index Period. 12/1/06 $ 8,844
Six-Month
12,650,000 BBA LIBOR 5.46% 5/13/15 1,709,604
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
Six-Month
7,180,000 BBA LIBOR 5.10 1/14/15 922,126
Six-Month
7,180,000 BBA LIBOR 5.08 1/20/15 959,073
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International:
One-Month
USD BBA
LIBOR -spread
plus total return, Total Return
if negative, of custom
of custom equity basket,
173,000 equity basket. if positive. 10/9/07 (101,652)
Price Depreciation Price Appreciation
of Sao Paulo of Sao Paulo
Stock Exchange Stock Exchange
4,984,181BRR Index Futures. Index Futures. 10/18/06 (64,527)
Price Depreciation Price Appreciation
of Sao Paulo of Sao Paulo
Stock Exchange Stock Exchange
10,400,077BRR Index Futures. Index Futures. 10/18/06 (141,959)
Price Depreciation Price Appreciation
of Standard & of Standard &
Poor's CNX Nifty Poor's CNX Nifty
329,442,300INR Index Futures. Index Futures. 10/26/06 (115,698)
Price Depreciation Price Appreciation
of Swiss Market of Swiss Market
8,958,033CHF Index Futures. Index Futures. 12/15/06 (178,083)
89 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS Continued
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT/UNITS THE FUND THE FUND DATES (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------
If positive,
If negative, receive the Spread
the absolute value on the Lehman
of the Lehman Brothers CMBS
Brothers CMBS AAA 8.5+
AAA 8.5+ Index Spread
Lehman Brothers Index Spread Return Amount,
Special Financing,
Inc. $ 12,600,000 Return Amount. and Carry Amount. 12/1/06 $ 9,115
- ---------------------------------------------------------------------------------------------------------------------------
Total Return Total Return
of custom of custom
Morgan Stanley & Co. equity basket, equity basket,
International Ltd. 1,382,000 if negative. if positive. 10/6/07 (41,064)
------------
$ 2,965,779
============
Notional amount is reported in U.S. Dollars, except for denoted in the following
currencies:
BRR Brazilian Real
CHF Swiss Franc
INR Indian Rupee
Abbreviations are as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
CMBS Commercial Mortgage Backed Securities
- --------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS
An interest rate swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. Interest rate swaps involve the exchange
of rights to receive or commitments to pay interest. One cash flow stream will
typically be a floating rate payment based upon a specified index while the
other is typically a fixed rate. Payments under the swap are based on an agreed
upon principal amount but since this principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Interest rate swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Swap agreements entail both interest rate risk and credit risk. There is a
risk, based on movements of interest rates in the future, the payments made by
the Fund under a swap agreement will be greater than the payments it received.
Credit risk arises from the
90 | OPPENHEIMER STRATEGIC INCOME FUND
possibility that the counterparty will default. If the counterparty defaults,
the Fund's loss will consist of the net amount of contractual interest payments
that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap transactions
on an ongoing basis.
As of September 30, 2006, the Fund had entered into the following interest rate
swap agreements:
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------
Barclays Bank plc 85,300,000MXN MXN TIIE 9.2700% 7/17/26 $ 63,301
- ------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings, Inc.:
Six-Month
11,250,000PLZ WIBO 5.5200 3/24/10 125,264
Six-Month
18,000,000PLZ WIBO 5.5500 3/25/10 204,163
313,800,000TWD 2.3200% TWD-Telerate 6/27/11 (132,245)
- ------------------------------------------------------------------------------------------------------------
Credit Suisse First 28-Day
Boston International 68,120,000MXN MXN TIIE 10.0000 7/9/15 495,333
- ------------------------------------------------------------------------------------------------------------
Credit Suisse First
Boston, Inc. Six-Month
(Nassau Branch) 29,965,000PLZ WIBO 4.4800 7/1/10 (268,905)
- ------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
1,531,000,000HUF 8.4400 Six-Month BUBOR 7/4/11 (533)
Six-Month
6,930,000 LIBOR 5.2500 6/23/15 692,665
- ------------------------------------------------------------------------------------------------------------
Deutsche Bank INR MIBOR-
AG, 5 yr. 314,300,000INR 7.1750 OIS-Compound 6/27/11 (54,038)
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Capital Markets LP:
12,475,040BRR BZDI 17.7200% 1/2/07 71,657
118,589,283BRR BZDI 17.1800 1/2/08 2,584,334
19,476,430BRR BZDI 18.1600 1/2/08 663,188
59,620,000MXN MXN TIIE 10.2900 6/14/15 532,292
67,560,000MXN MXN TIIE 10.2200 1/30/15 563,267
59,375,000MXN MXN TIIE 10.4300 5/29/15 567,379
59,375,000MXN MXN TIIE 10.3000 6/1/15 522,185
34,200,000MXN MXN TIIE 10.0000 6/24/15 243,765
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
9,638,700BRR BZDI 17.1700 1/2/08 185,831
11,780,630BRR BZDI 17.1700 1/2/08 227,127
23,464,063BRR BZDI 18.0000 1/2/07 202,200
89,360,000BRR BZDI 14.8900 1/4/10 684,840
17,960,000BRR BZDI 14.0500 1/2/12 (13,535)
90,610,000MXN MXN TIIE 9.1500 8/27/26 (7,237)
91 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS Continued
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
Continued
39,690,000MXN MXN TIIE 9.4100% 8/31/20 $ 120,121
70,140,000MXN MXN TIIE 10.7000 5/8/15 788,960
30,800,000MXN MXN TIIE 10.8500 3/5/15 364,732
119,100,000MXN MXN TIIE 9.5100 8/26/25 384,709
78,820,000MXN MXN TIIE 9.5000 8/28/25 246,733
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
Continued
68,200,000MXN MXN TIIE 9.2900 7/17/26 7,731
179,660,000MXN MXN TIIE 9.8400 12/31/09 880,313
- ------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
35,760,000BRR BZDI 13.9100 1/2/12 (101,346)
65,300,000MXN MXN TIIE 9.7600 8/17/15 372,855
169,320,000ZAR 8.2900% Three-Month JIBA 6/23/08 254,399
- ------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
52,480,000GBP 5.2500 Six-Month LIBOR 5/21/09 (249,509)
28-Day
67,450,000MXN MXN TIIE 9.9900 7/9/15 474,558
Six-Month
34,350,000PLZ WIBO 4.5300 7/5/10 (307,688)
- ------------------------------------------------------------------------------------------------------------
Merrill Lynch Three-Month
& Co., Inc. 251,235,000SEK STIBOR-SIDE 4.0325 6/19/12 163,548
- ------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
12,776,603BRR BZDI 16.8800 1/2/08 191,075
25,645,000BRR BZDI 17.5900 1/2/07 190,454
- ------------------------------------------------------------------------------------------------------------
Santander
Central Hispano 369,480,000BRR BZDI 14.0000 1/2/12 (23,048)
- ------------------------------------------------------------------------------------------------------------
UBS AG 369,480,000NOK 4.2200 Six-Month NIBOR 2/6/12 630,481
- ------------------------------------------------------------------------------------------------------------
WestPac
Banking Corp. 34,665,000NZD 6.7500 Six-Month BBR 6/29/16 (208,826)
------------
$12,332,550
============
Notional amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
BRR Brazilian Real
GBP British Pound Sterling
HUF Hungarian Forint
INR Indian Rupee
MXN Mexican Nuevo Peso
92 | OPPENHEIMER STRATEGIC INCOME FUND
NOK Norwegian Krone
NZD New Zealand Dollar
PLZ Polish Zloty
SEK Swedish Krona
TWD New Taiwan Dollar
ZAR South African Rand
Index abbreviations are as follows:
BBR Bank Bill Rate
BUBOR Budapest Interbank Offered Rate
BZDI Brazil Cetip Interbank Deposit Rate
FRAS French Franc/Austrian Schilling
IRS India Swap Composites
JIBA South Africa Johannesburg Interbank Agreed Rate
LIBOR London-Interbank Offered Rate
MIBOR-OIS Mid Market Interest Rate for FRAS and IRS-Overnight Indexed Swap
MXN TIIE Mexican Peso-Interbank Equilibrium Interest Rate
NIBOR Norwegian Interbank Offered Rate
STIBOR Stockholm Interbank Offered Rate
WIBO Poland Warsaw Interbank Offer Bid Rate
- --------------------------------------------------------------------------------
10. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a swap
contract, the Fund pays a periodic interest fee on the notional amount to the
counterparty. This interest fee is accrued daily as a component of unrealized
appreciation (depreciation) and is recorded as realized loss upon payment. Upon
occurrence of a specific credit event with respect to the underlying referenced
debt obligation, the Fund is obligated to deliver that security to the
counter-party in exchange for receipt of the notional amount from the
counterparty. The difference between the value of the security delivered and the
notional amount received is recorded as realized gain and is included on the
Statement of Operations. Credit default swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the
93 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. CREDIT DEFAULT SWAP CONTRACTS Continued
swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
Information regarding such credit default swaps as of September 30, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
REFERENCED RECEIVED BY THE RATE PAID UNREALIZED
DEBT FUND UPON BY THE EXPIRATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT FUND DATES (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings,
Inc.:
Hungary (Republic of) $13,190,000 0.4000% 12/20/15 $ 187,707
Mexico (Government of) 12,930,000 0.6475 1/20/11 (98,118)
- --------------------------------------------------------------------------------------------------------------
Deutsche Bank AG Ukraine (Republic of) 12,895,000 1.8800 3/20/11 (14,207)
- --------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank Russian Federation 8,390,000 2.4000 10/9/13 (929,516)
- --------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Philippines
Inc. (Republic of the) 23,950,000 1.7250 12/20/11 (23,029)
- --------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Colombia (Republic of) 5,880,000 3.7000 8/20/15 (632,082)
Indonesia (Republic of) 7,600,000 1.6800 6/20/11 (94,638)
Venezuela (Republic of) 8,275,000 2.2000 5/20/10 (319,928)
Venezuela (Republic of) 12,480,000 3.4800 11/20/15 (1,001,285)
------------
$(2,925,096)
============
The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a swap contract, the Fund receives a periodic
interest fee on the notional amount from the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized gain upon receipt. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund
receives that security from the counterparty in exchange for payment of the
notional amount to the counterparty. The difference between the value of the
security received and the notional amount paid is recorded as realized loss and
is included on the Statement of Operations. Credit default swaps are marked to
market daily using different sources, including quotations from counterparties,
pricing services, brokers or market makers. The unrealized appreciation
(depreciation) related to the change in the valuation of the notional amount of
the swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
94 | OPPENHEIMER STRATEGIC INCOME FUND
Information regarding such credit default swaps as of September 30, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
REFERENCED PAID BY THE RATE RECEIVED UNREALIZED
DEBT FUND UPON BY THE EXPIRATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT FUND DATES (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings,
Inc. Russian Federation $12,930,000 0.6475% 1/20/11 $ 79,040
- ----------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank Ukraine (Republic of) 1,409,000 1.9200 8/20/11 5,321
- ----------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Indonesia (Republic of) 7,600,000 1.6700 6/20/11 69,891
Istanbul Bond Co. SA
for Finansbank 23,940,000 1.3000 3/24/13 (799,470)
- ----------------------------------------------------------------------------------------------------------------
UBS AG Indonesia (Republic of) 6,125,000 2.3000 9/20/11 203,516
----------
$(441,702)
==========
- --------------------------------------------------------------------------------
11. SWAPTION TRANSACTIONS
The Fund may enter into a swaption transaction, whereby a contract that grants
the holder, in return for payment of the purchase price (the "premium") of the
option, the right, but not the obligation, to enter into an interest rate swap
at a preset rate within a specified period of time, with the writer of the
contract. The writer receives premiums and bears the risk of unfavorable changes
in the preset rate on the underlying interest rate swap. Swaption contracts
written by the Fund do not give rise to counterparty credit risk as they
obligate the Fund, not its counterparty, to perform. The Fund generally will
incur a greater risk when it writes a swaption than when it purchases a
swaption. When the Fund purchases a swaption it risks losing only the amount of
the premium they have paid should the Manager decide to let the option expire
unexercised. When the Fund writes a swaption it will become obligated, upon
exercise of the option, according to the terms of the underlying agreement.
Swaptions written are reported as a liability in the Statement of Assets and
Liabilities.
Written swaption activity for the year ended September 30, 2006 was as follows:
CALL SWAPTIONS
--------------------------------
NOTIONAL AMOUNT OF
AMOUNT PREMIUMS
- --------------------------------------------------------------------------------
Swaptions outstanding as of
September 30, 2005 $ 69,130,000 $ 283,433
Swaptions written 79,500,000 88,401
Swaptions closed or expired (148,630,000) (371,834)
--------------------------------
Swaptions outstanding as of
September 30, 2006 $ -- $ --
================================
95 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. ILLIQUID OR RESTRICTED SECURITIES AND CURRENCY
As of September 30, 2006, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 10% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities and currency is as follows:
VALUATION AS OF
ACQUISITION SEPT. 30, UNREALIZED
SECURITY DATES COST 2006 DEPRECIATION
- --------------------------------------------------------------------------------------
Prandium, Inc. 3/18/99-7/18/02 $12,157,000 $ 8,274 $12,148,726
=============================================
CURRENCY
Argentine Peso (ARP) 6/21/06-9/22/06 $ 2,495,208 $2,490,558 $ 4,650
=============================================
- --------------------------------------------------------------------------------
13. ACQUISITION OF OPPENHEIMER MULTI-SECTOR INCOME TRUST
On July 22, 2005, the Fund acquired all of the net assets of Oppenheimer
Multi-Sector Income Trust, pursuant to an Agreement and Plan of Reorganization
approved by the Oppenheimer Multi-Sector Income Trust shareholders on July 12,
2005. The Fund issued (at an exchange ratio of 2.150014 for Class A of the Fund
to one share of Oppenheimer Multi-Sector Income Trust) 62,844,742 shares of
beneficial interest for Class A, valued at $270,860,838 in exchange for the net
assets, resulting in combined Class A net assets of $4,466,747,248 on July 22,
2005. The net assets acquired included net unrealized appreciation of $6,581,052
and an unused capital loss carryforward of $32,689,355, potential utilization
subject to tax limitations. The exchange qualified as a tax-free reorganization
for federal income tax purposes.
- --------------------------------------------------------------------------------
14. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
coun-terparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral.
96 | OPPENHEIMER STRATEGIC INCOME FUND
If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
The Fund continues to receive the economic benefit of interest or dividends paid
on the securities loaned in the form of a substitute payment received from the
borrower. As of September 30, 2006, the Fund had on loan securities valued at
$431,697,370, which are included in the Statement of Assets and Liabilities as
"Investments, at value" and, when applicable, as "Receivable for Investments
sold." Collateral of $436,526,198 was received for the loans, of which
$349,478,072 was received in cash and subsequently invested in approved
investments or held as cash.
- --------------------------------------------------------------------------------
15. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
September 30, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. As of September
30, 2006, the Manager does not believe the adoption of SFAS No. 157 will
materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
- --------------------------------------------------------------------------------
16. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that
97 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
16. LITIGATION Continued
by permitting and/or participating in those actions, the Directors/Trustees and
the Officers of the funds breached their fiduciary duties to fund shareholders
under the Investment Company Act of 1940 and at common law. The plaintiffs
sought unspecified damages, an accounting of all fees paid, and an award of
attorneys' fees and litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
98 | OPPENHEIMER STRATEGIC INCOME FUND
A-7
Appendix A
RATINGS DEFINITIONS
Below are summaries of the rating definitions used by the
nationally-recognized rating agencies listed below. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate.
The summaries below are based upon publicly available information provided by
the rating organizations.
Moody's Investors Service, Inc. ("Moody's")
LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS
Aaa: Bonds and preferred stock rated "Aaa" are judged to be the best quality.
They carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, the
changes that can be expected are most unlikely to impair the fundamentally
strong position of such issues.
Aa: Bonds and preferred stock 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 risk appear
somewhat larger than that of "Aaa" securities.
A: Bonds and preferred stock 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 some
time in the future.
Baa: Bonds and preferred stock 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 and preferred stock 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
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock rated "B" generally lack characteristics of the
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 and preferred stock rated "Caa" are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds and preferred stock rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds and preferred stock rated "C" are the lowest class of rated bonds
and can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a
ranking in the lower end of that generic rating category. Advanced refunded
issues that are secured by certain assets are identified with a # symbol.
PRIME RATING SYSTEM (SHORT-TERM RATINGS - TAXABLE DEBT)
These ratings are opinions of the ability of issuers to honor senior
financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.
Prime-1: Issuer has a superior ability for repayment of senior short-term
debt obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions
may be more pronounced. Variability in earnings and profitability may result
in changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Ratings Services ("Standard & Poor's"), a division of The
McGraw-Hill Companies, Inc.
LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations:
o Likelihood of payment-capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance with the terms
of the obligation;
o Nature of and provisions of the obligation; and
o Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority
in bankruptcy, as noted above.
AAA: An obligation rated "AAA" have the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated "AA" differ from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A: An obligation rated "A" are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB: An obligation rated "BBB" exhibit adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
BB, B, CCC, CC, and C
An obligation rated `BB', `B', `CCC', `CC', and `C' are regarded as having
significant speculative characteristics. `BB' indicates the least degree of
speculation and `C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB: An obligation rated "BB" are less vulnerable to nonpayment than other
speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment on
the obligation.
B: An obligation rated "B" are more vulnerable to nonpayment than obligations
rated "BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.
CCC: An obligation rated "CCC" are currently vulnerable to nonpayment, and
are dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation. In the event
of adverse business, financial, or economic conditions, the obligor is not
likely to have the capacity to meet its financial commitment on the
obligation.
CC: An obligation rated "CC" are currently highly vulnerable to nonpayment.
C: Subordinated debt or preferred stock obligations rated "C" are currently
highly vulnerable to nonpayment. The "C" rating may be used to cover a
situation where a bankruptcy petition has been filed or similar action taken,
but payments on this obligation are being continued. A "C" also will be
assigned to a preferred stock issue in arrears on dividends or sinking fund
payments, but that is currently paying.
D: An obligation rated "D" are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The "D" rating also
will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
The ratings from "AA" to "CCC" may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within the major rating
categories.
c: The `c' subscript is used to provide additional information to investors
that the bank may terminate its obligation to purchase tendered bonds if the
long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.
p: The letter `p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
Continuance of the ratings is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
r: The `r' highlights derivative, hybrid, and certain other obligations that
Standard & Poor's believes may experience high volatility or high variability
in expected returns as a result of noncredit risks. Examples of such
obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an `r'
symbol should not be taken as an indication that an obligation will exhibit
no volatility or variability in total return.
N.R. Not rated.
Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
Bond Investment Quality Standards
Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories (`AAA', `AA', `A', `BBB',
commonly known as investment-grade ratings) generally are regarded as
eligible for bank investment. Also, the laws of various states governing
legal investments impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance
companies, and fiduciaries in general
SHORT-TERM ISSUE CREDIT RATINGS
Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. In the U.S., for example, that means
obligations with an original maturity of no more than 365 days-including
commercial paper.
A-1: A short-term obligation rated "A-1" is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity
to meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
B: A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet
its financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet
its financial commitment on the obligation.
C: A short-term obligation rated "C" is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.
NOTES:
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in
making that assessment:
o Amortization schedule-the larger the final maturity relative to other
maturities, the more likely it will
be treated as a note; and
o Source of payment-the more dependent the issue is on the market for its
refinancing, the more likely
it will be treated as a note.
SP-1: Strong capacity to pay principal and interest. An issue with a very
strong capacity to pay debt service is given a (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3: Speculative capacity to pay principal and interest.
Fitch, Inc.
International credit ratings assess the capacity to meet foreign currency or
local currency commitments. Both "foreign currency" and "local currency"
ratings are internationally comparable assessments. The local currency rating
measures the probability of payment within the relevant sovereign state's
currency and jurisdiction and therefore, unlike the foreign currency rating,
does not take account of the possibility of foreign exchange controls
limiting transfer into foreign currency.
INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings.
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. The ratings of obligations in this category are
based on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected recovery values
are highly speculative and cannot be estimated with any precision, the
following serve as general guidelines. "DDD" obligations have the highest
potential for recovery, around 90%-100% of outstanding amounts and accrued
interest. "DD" indicates potential recoveries in the range of 50%-90%, and
"D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy
a higher portion of their outstanding obligations, while entities rated "D"
have a poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories. Plus and minus signs are
not added to the "AAA" category or to categories below "CCC," nor to
short-term ratings other than "F1" (see below).
INTERNATIONAL SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings. A short-term rating has a time horizon of less than 12 months for
most obligations, or up to three years for U.S. public finance securities,
and thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.
F1: Highest credit quality. Strongest capacity for timely payment of
financial commitments. May have an added "+" to denote any exceptionally
strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of higher ratings.
F3: Fair credit quality. Capacity for timely payment of financial commitments
is adequate. However, near-term adverse changes could result in a reduction
to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.
D: Default. Denotes actual or imminent payment default.
B-1
Appendix B
Industry Classifications
Aerospace & Defense Household Products
Air Freight & Couriers Industrial Conglomerates
Airlines Insurance
Auto Components Internet & Catalog Retail
Automobiles Internet Software & Services
Beverages IT Services
Biotechnology Leisure Equipment & Products
Building Products Machinery
Chemicals Marine
Consumer Finance Media
Commercial Banks Metals & Mining
Commercial Services & Supplies Multiline Retail
Communications Equipment Multi-Utilities
Computers & Peripherals Office Electronics
Construction & Engineering Oil & Gas
Construction Materials Paper & Forest Products
Containers & Packaging Personal Products
Distributors Pharmaceuticals
Diversified Financial Services Real Estate
Diversified Telecommunication Services Road & Rail
Electric Utilities Semiconductors and Semiconductor
Equipment
Electrical Equipment Software
Electronic Equipment & Instruments Specialty Retail
Energy Equipment & Services Textiles, Apparel & Luxury Goods
Food & Staples Retailing Thrifts & Mortgage Finance
Food Products Tobacco
Gas Utilities Trading Companies & Distributors
Health Care Equipment & Supplies Transportation Infrastructure
Health Care Providers & Services Water Utilities
Hotels Restaurants & Leisure Wireless Telecommunication Services
Household Durables
C-13
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class
A shares(2) of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived.(3) That
is because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds,
the term "Retirement Plan" refers to the following types of plans:
1) plans qualified under Sections 401(a) or 401(k) of the Internal
Revenue Code,
2) non-qualified deferred compensation plans,
3) employee benefit plans(4)
4) Group Retirement Plans(5)
5) 403(b)(7) custodial plan accounts
6) Individual Retirement Accounts ("IRAs"), including traditional
IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the
"Transfer Agent") of the particular Oppenheimer fund. These waivers and
special arrangements may be amended or terminated at any time by a particular
fund, the Distributor, and/or OppenheimerFunds, Inc. (referred to in this
document as the "Manager").
Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
I.
Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
- ------------------------------------------------------------------------------
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to
Initial Sales Charge but May Be Subject to the Class A Contingent Deferred
Sales Charge (unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases
may be subject to the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer Rochester National
Municipals and Rochester Fund Municipals) of the beginning of the calendar
month of their purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the redemption).
Additionally, on shares purchased under these waivers that are subject to the
Class A contingent deferred sales charge, the Distributor will pay the
applicable concession described in the Prospectus under "Class A Contingent
Deferred Sales Charge."(6) This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases of Class A shares by a Retirement Plan that was permitted to
purchase such shares at net asset value but subject to a contingent
deferred sales charge prior to March 1, 2001. That included plans
(other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
costing $500,000 or more, 2) had at the time of purchase 100 or more
eligible employees or total plan assets of $500,000 or more, or 3)
certified to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
1) through a broker, dealer, bank or registered investment adviser
that has made special arrangements with the Distributor for those
purchases, or
2) by a direct rollover of a distribution from a qualified
Retirement Plan if the administrator of that Plan has made
special arrangements with the Distributor for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
1) The record keeping is performed by Merrill Lynch Pierce Fenner &
Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Merrill Lynch
Investment Management, L.P. ("MLIM"), that are made available
under a Service Agreement between Merrill Lynch and the mutual
fund's principal underwriter or distributor, and (b) funds
advised or managed by MLIM (the funds described in (a) and (b)
are referred to as "Applicable Investments").
2) The record keeping for the Retirement Plan is performed on a
daily valuation basis by a record keeper whose services are
provided under a contract or arrangement between the Retirement
Plan and Merrill Lynch. On the date the plan sponsor signs the
record keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets (excluding assets
invested in money market funds) invested in Applicable
Investments.
3) The record keeping for a Retirement Plan is handled under a
service agreement with Merrill Lynch and on the date the plan
sponsor signs that agreement, the Plan has 500 or more eligible
employees (as determined by the Merrill Lynch plan conversion
manager).
II.
Waivers of Class A Sales Charges of Oppenheimer Funds
- ------------------------------------------------------------------------------
A. Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers.
Class A shares purchased by the following investors are not subject to any
Class A sales charges (and no concessions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
relatives by virtue of a remarriage (step-children, step-parents,
etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans
for their employees.
|_| Employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and
which are identified as such to the Distributor) or with the
Distributor. The purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular
investment products made available to their clients. Those clients
may be charged a transaction fee by their dealer, broker, bank or
advisor for the purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares
for their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary
that has made special arrangements with the Distributor for those
purchases.
|_| Clients of investment advisors or financial planners (that have entered
into an agreement for this purpose with the Distributor) who buy
shares for their own accounts may also purchase shares without sales
charge but only if their accounts are linked to a master account of
their investment advisor or financial planner on the books and
records of the broker, agent or financial intermediary with which
the Distributor has made such special arrangements. Each of these
investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially owns shares for
those persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this
arrangement) and persons who are directors or trustees of the
company or trust which is the beneficial owner of such accounts.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
|_| Retirement Plans and deferred compensation plans and trusts used to
fund those plans (including, for example, plans qualified or created
under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
Code), in each case if those purchases are made through a broker,
agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for
Value Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
|_| A qualified Retirement Plan that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for
Value Funds at net asset value, with such shares to be held through
DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
arrangement was consummated and share purchases commenced by
December 31, 1996.
|_| Effective October 1, 2005, taxable accounts established with the
proceeds of Required Minimum Distributions from Retirement Plans.
B. Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions.
1. Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds or
unit investment trusts for which reinvestment arrangements have been
made with the Distributor.
|_| Shares purchased by certain Retirement Plans that are part of a
retirement plan or platform offered by banks, broker-dealers,
financial advisors or insurance companies, or serviced by
recordkeepers.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an
affiliate acts as sponsor.
|_| Shares purchased in amounts of less than $5.
2. Class A shares issued and purchased in the following transactions are not
subject to sales charges (a dealer concession at the annual rate of 0.25% is
paid by the Distributor on purchases made within the first 6 months of plan
establishment):
|_| Retirement Plans that have $5 million or more in plan assets.
|_| Retirement Plans with a single plan sponsor that have $5 million or
more in aggregate assets invested in Oppenheimer funds.
C. Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.
The Class A contingent deferred sales charge is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
|_| For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established.
2) To return excess contributions.
3) To return contributions made due to a mistake of fact.
4) Hardship withdrawals, as defined in the plan.(7)
5) Under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code, or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
6) To meet the minimum distribution requirements of the Internal
Revenue Code.
7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
8) For loans to participants or beneficiaries.
9) Separation from service.(8)
10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) if the plan has made special
arrangements with the Distributor.
11) Plan termination or "in-service distributions," if the
redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
|_| For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing
this waiver.
|_| For distributions from retirement plans that have $10 million or more
in plan assets and that have entered into a special agreement with
the Distributor.
|_| For distributions from retirement plans which are part of a retirement
plan product or platform offered by certain banks, broker-dealers,
financial advisors, insurance companies or record keepers which have
entered into a special agreement with the Distributor.
III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
Funds
- ---------------------------------------------------------------------------------
The Class B, Class C and Class N contingent deferred sales charges will not
be applied to shares purchased in certain types of transactions or redeemed
in certain circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_| Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder. The death or
disability must have occurred after the account was established, and
for disability you must provide evidence of a determination of
disability by the Social Security Administration.
|_| The contingent deferred sales charges are generally not waived
following the death or disability of a grantor or trustee for a
trust account. The contingent deferred sales charges will only be
waived in the limited case of the death of the trustee of a grantor
trust or revocable living trust for which the trustee is also the
sole beneficiary. The death or disability must have occurred after
the account was established, and for disability you must provide
evidence of a determination of disability (as defined in the
Internal Revenue Code).
|_| Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into
a special arrangement with the Distributor for this purpose.
|_| Redemptions of Class C shares of an Oppenheimer fund in amounts of $1
million or more requested in writing by a Retirement Plan sponsor
and submitted more than 12 months after the Retirement Plan's first
purchase of Class C shares, if the redemption proceeds are invested
to purchase Class N shares of one or more Oppenheimer funds.
|_| Distributions(9) from Retirement Plans or other employee benefit plans
for any of the following purposes:
1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established in an Oppenheimer fund.
2) To return excess contributions made to a participant's account.
3) To return contributions made due to a mistake of fact.
4) To make hardship withdrawals, as defined in the plan.(10)
5) To make distributions required under a Qualified Domestic
Relations Order or, in the case of an IRA, a divorce or
separation agreement described in Section 71(b) of the Internal
Revenue Code.
6) To meet the minimum distribution requirements of the Internal
Revenue Code.
7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
8) For loans to participants or beneficiaries.(11)
9) On account of the participant's separation from service.(12)
10) Participant-directed redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) offered as an investment option in a
Retirement Plan if the plan has made special arrangements with
the Distributor.
11) Distributions made on account of a plan termination or
"in-service" distributions, if the redemption proceeds are rolled
over directly to an OppenheimerFunds-sponsored IRA.
12) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age 59 1/2,
as long as the aggregate value of the distributions does not
exceed 10% of the account's value, adjusted annually.
13) Redemptions of Class B shares under an Automatic Withdrawal
Plan for an account other than a Retirement Plan, if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value, adjusted annually.
14) For distributions from 401(k) plans sponsored by
broker-dealers that have entered into a special arrangement with
the Distributor allowing this waiver.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager
or the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in
Section I.A.) of the Fund, the Manager and its affiliates and
retirement plans established by them for their employees.
IV.
Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former Quest for Value Funds
- -------------------------------------------------------------------------------
The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described
below for certain persons who were shareholders of the former Quest for Value
Funds. To be eligible, those persons must have been shareholders on November
24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those
former Quest for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer Small- & Mid- Cap
Value Fund
Oppenheimer Quest Balanced Fund Oppenheimer Quest
International Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
These arrangements also apply to shareholders of the following funds
when they merged (were reorganized) into various Oppenheimer funds on
November 24, 1995:
Quest for Value U.S. Government Income Fund Quest for Value New York
Tax-Exempt Fund
Quest for Value Investment Quality Income Fund Quest for Value
National Tax-Exempt Fund
Quest for Value Global Income Fund Quest for Value California
Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent
deferred sales charges described in this Appendix apply to shares of an
Oppenheimer fund that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds,
or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any of
the Former Quest for Value Funds into that other Oppenheimer fund on
November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the
initial sales charge rates for Class A shares purchased by members of
"Associations" formed for any purpose other than the purchase of securities.
The rates in the table apply if that Association purchased shares of any of
the Former Quest for Value Funds or received a proposal to purchase such
shares from OCC Distributors prior to November 24, 1995.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales Charge Concession as
Number of Eligible Charge as a % of as a % of Net Amount % of Offering
Employees or Members Offering Price Invested Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either
the sales charge rate in the table based on the number of members of an
Association, or the sales charge rate that applies under the Right of
Accumulation described in the applicable fund's Prospectus and Statement of
Additional Information. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase
shares for their individual or custodial accounts at these reduced sales
charge rates, upon request to the Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o Shareholders who were shareholders of the AMA Family of Funds on
February 28, 1991 and who acquired shares of any of the Former
Quest for Value Funds by merger of a portfolio of the AMA Family
of Funds.
o Shareholders who acquired shares of any Former Quest for Value Fund by
merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
o withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not
exceed 10% of the initial value of the account value, adjusted
annually, and
o liquidation of a shareholder's account if the aggregate net asset value
of shares held in the account is less than the required minimum
value of such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent
deferred sales charge will be waived for redemptions of Class A, Class B or
Class C shares of an Oppenheimer fund. The shares must have been acquired by
the merger of a Former Quest for Value Fund into the fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on
or after March 6, 1995, but prior to November 24, 1995:
o redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S.
Social Security Administration);
o withdrawals under an automatic withdrawal plan (but only for Class B or
Class C shares) where the annual withdrawals do not exceed 10% of
the initial value of the account value; adjusted annually, and
o liquidation of a shareholder's account if the aggregate net asset value
of shares held in the account is less than the required minimum
account value.
A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class
B or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
Investment Accounts, Inc.
- ---------------------------------------------------------------------------
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix)
of the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
Oppenheimer U. S. Government Trust,
Oppenheimer Core Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Connecticut Mutual Government Securities Account CMIA LifeSpan Capital
Appreciation Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|X| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue
to make additional purchases of Class A shares at net asset value without a
Class A initial sales charge, but subject to the Class A contingent deferred
sales charge that was in effect prior to March 18, 1996 (the "prior Class A
CDSC"). Under the prior Class A CDSC, if any of those shares are redeemed
within one year of purchase, they will be assessed a 1% contingent deferred
sales charge on an amount equal to the current market value or the original
purchase price of the shares sold, whichever is smaller (in such redemptions,
any shares not subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
1) persons whose purchases of Class A shares of a Fund and other
Former Connecticut Mutual Funds were $500,000 prior to March 18,
1996, as a result of direct purchases or purchases pursuant to
the Fund's policies on Combined Purchases or Rights of
Accumulation, who still hold those shares in that Fund or other
Former Connecticut Mutual Funds, and
2) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase
shares valued at $500,000 or more over a 13-month period entitled
those persons to purchase shares at net asset value without being
subject to the Class A initial sales charge
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this
arrangement they will be subject to the prior Class A CDSC.
|X|
Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of
the categories below and acquired Class A shares prior to March 18, 1996, and
still holds Class A shares:
1) any purchaser, provided the total initial amount invested in the
Fund or any one or more of the Former Connecticut Mutual Funds
totaled $500,000 or more, including investments made pursuant to
the Combined Purchases, Statement of Intention and Rights of
Accumulation features available at the time of the initial
purchase and such investment is still held in one or more of the
Former Connecticut Mutual Funds or a Fund into which such Fund
merged;
2) any participant in a qualified plan, provided that the total
initial amount invested by the plan in the Fund or any one or
more of the Former Connecticut Mutual Funds totaled $500,000 or
more;
3) Directors of the Fund or any one or more of the Former
Connecticut Mutual Funds and members of their immediate families;
4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
5) one or more members of a group of at least 1,000 persons (and
persons who are retirees from such group) engaged in a common
business, profession, civic or charitable endeavor or other
activity, and the spouses and minor dependent children of such
persons, pursuant to a marketing program between CMFS and such
group; and
6) an institution acting as a fiduciary on behalf of an individual
or individuals, if such institution was directly compensated by
the individual(s) for recommending the purchase of the shares of
the Fund or any one or more of the Former Connecticut Mutual
Funds, provided the institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State
by Connecticut Mutual Life Insurance Company through the Panorama Separate
Account which is beyond the applicable surrender charge period and which was
used to fund a qualified plan, if that holder exchanges the variable annuity
contract proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B
shares of a Fund into Class A or Class B shares of a Former Connecticut
Mutual Fund provided that the Class A or Class B shares of the Fund to be
redeemed or exchanged were (i) acquired prior to March 18, 1996 or (ii) were
acquired by exchange from an Oppenheimer fund that was a Former Connecticut
Mutual Fund. Additionally, the shares of such Former Connecticut Mutual Fund
must have been purchased prior to March 18, 1996:
1) by the estate of a deceased shareholder;
2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or concession in connection with the purchase of
shares of any registered investment management company;
6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of Advance
America Funds, Inc.
- ------------------------------------------------------------------------------
Shareholders of Oppenheimer AMT-Free Municipals, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund
who acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance America
Funds, Inc. on March 30, 1990, may purchase Class A shares of those four
Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
Convertible Securities Fund
- ------------------------------------------------------------------------------
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to
purchase those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of
Additional Information) of the Fund, the Manager and its affiliates,
and retirement plans established by them or the prior investment
advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans
for their employees,
|_| employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial
institutions that have entered into sales arrangements with those
dealers or brokers (and whose identity is made known to the
Distributor) or with the Distributor, but only if the purchaser
certifies to the Distributor at the time of purchase that the
purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of
the Fund specifically providing for the use of Class M shares of the
Fund in specific investment products made available to their
clients, and
|_| dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
.
Oppenheimer Strategic Income Fund
Internet Website:
www.oppenheimerfunds.com
Investment Advisor
OppenheimerFunds, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008
Distributor
OppenheimerFunds Distributor, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL OPP (225.5677)
Custodian Bank
JPMorgan Chase Bank
4 Chase Metro Tech Center
Brooklyn, New York, 11245
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Counsel to the Funds
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
Counsel to the Independent Trustees
Bell, Boyd & Lloyd LLC
70 West Madison Street, Suite 3100
Chicago, Illinois 60602
1234
PX230.001.0106
(1) In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not
have any direct or indirect financial interest in the operation of the
distribution plan or any agreement under the plan.
(2) Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
(3) In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent deferred sales
charges mean the Fund's Early Withdrawal Charges and references to
"redemptions" mean "repurchases" of shares.
(4) An "employee benefit plan" means any plan or arrangement, whether or not
it is "qualified" under the Internal Revenue Code, under which Class N shares
of an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
(5) The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment
dealer, broker or other financial institution designated by the group. Such
plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans
other than plans for public school employees. The term "Group Retirement
Plan" also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase shares of an Oppenheimer fund or
funds through a single investment dealer, broker or other financial
institution that has made special arrangements with the Distributor.
(6) However, that concession will not be paid on purchases of shares in
amounts of $1 million or more (including any right of accumulation) by a
Retirement Plan that pays for the purchase with the redemption proceeds of
Class C shares of one or more Oppenheimer funds held by the Plan for more
than one year.
(7) This provision does not apply to IRAs.
(8) This provision only applies to qualified retirement plans and 403(b)(7)
custodial plans after your separation from service in or after the year you
reached age 55.
(9) The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
(10) This provision does not apply to IRAs.
(11) This provision does not apply to loans from 403(b)(7) custodial plans
and loans from the OppenheimerFunds-sponsored Single K retirement plan.
(12) This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATE BONDS & NOTES--TOP TEN INDUSTRIES
- --------------------------------------------------------------------------------
Media 3.8%
- --------------------------------------------------------------------------------
Oil & Gas 3.5
- --------------------------------------------------------------------------------
Hotels, Restaurants & Leisure 2.0
- --------------------------------------------------------------------------------
Commercial Banks 1.9
- --------------------------------------------------------------------------------
Diversified Telecommunication Services 1.2
- --------------------------------------------------------------------------------
Automobiles 1.1
- --------------------------------------------------------------------------------
Containers & Packaging 1.1
- --------------------------------------------------------------------------------
Wireless Telecommunication Services 1.1
- --------------------------------------------------------------------------------
Health Care Providers & Services 1.0
- --------------------------------------------------------------------------------
Metals & Mining 0.9
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2006, and are based on net assets.
- --------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Corporate Bonds 26.8%
Foreign Government Bonds 21.9
Other Bonds 15.9
Government Agency Bonds 13.7
Cash Equivalents 11.1
U.S. Government Bonds 8.7
Stocks 1.9
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2006, and are based on the total market value of investments. The
Fund may invest without limit in below investment-grade securities, which carry
a greater risk that the issue may default on principal or interest payments, and
in foreign securities, which entail higher expenses and risks, such as currency
fluctuation.
- --------------------------------------------------------------------------------
9 | OPPENHEIMER STRATEGIC INCOME FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED SEPTEMBER 30, 2006, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Over the 12-month period ended
September 30, 2006, Oppenheimer Strategic Income Fund's Class A shares (without
sales charge) produced higher returns than its benchmark, the Lehman Brothers
Aggregate Bond Index. The Fund benefited early in the reporting period from its
emphasis on bonds and currencies from the emerging markets, which continued to
gain value in a robust global economic environment. The Fund's investments in
Brazil, Mexico, Turkey and Russia produced particularly attractive returns as
these nations made progress toward reforming their financial systems and taming
inflation. Global market conditions changed in the spring of 2006, when surging
commodity prices and weakening housing markets sparked concerns that a U.S.
economic slowdown might precede a downturn in international economic conditions.
Global bond market volatility intensified as investors grew more risk-averse,
and the Fund's overweighted position in emerging market bonds detracted modestly
from its relative performance. The Fund's returns also were undermined to a mild
degree by unfortunate timing in the trading of yen and euros in the currency
markets. However, these setbacks were not severe enough to erase the reporting
period's previous gains from emerging markets bonds and currencies.
The Fund also received generally positive contributions to performance
from its holdings of high-yield corporate bonds. However, bonds in the lower
high-yield rating categories tended to fare better than those with higher credit
ratings. Because we reduced the Fund's exposure to lower-rated securities in
anticipation of slower economic growth and more moderate business conditions,
the Fund did not participate fully in the high-yield sector's relative strength
during the second half of the reporting period.
Finally, our security selection and duration management strategies helped
support returns from the U.S. government securities. We captured higher yields
than those provided by U.S. Treasuries by focusing on mortgage- and asset-backed
securities from U.S. government agencies. In the spring of 2006, we began to
increase the Fund's average duration--a measure of sensitivity to changing
interest rates--toward a range that is closer to industry averages. This change
helped the Fund participate more fully in rallies as the market rebounded from
heightened market volatility during the spring and summer of 2006.
10 | OPPENHEIMER STRATEGIC INCOME FUND
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until September 30, 2006. In the case of Class A, Class B and Class C
shares, performance is measured over a ten fiscal year period; Class Y shares
since inception of the Class on January 26, 1998. In the case of Class N shares,
performance is measured from inception of the Class on March 1, 2001. The Fund's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions.
The Fund's performance is compared to the performance of the Lehman
Brothers Aggregate Bond Index and the Citigroup World Government Bond Index,
formerly Salomon Brothers World Government Bond Index. The former 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 latter 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 worldwide basis. Index
performance reflects the reinvestment of dividends but does not consider the
effect of capital gains or transaction costs, and none of the data in the graphs
that follow shows the effect of taxes. The Fund's performance reflects the
effects 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 the indices.
11 | OPPENHEIMER STRATEGIC INCOME FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Strategic Income Fund (Class A)
Lehman Brothers Aggregate Bond Index
Citigroup World Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Strategic Lehman Brothers Citigroup World
Income Fund Aggregate Government
(Class A) Bond Index Bond Index
09/30/1996 9,525 10,000 10,000
12/31/1996 9,878 10,300 10,238
03/31/1997 9,855 10,242 9,814
06/30/1997 10,254 10,619 10,112
09/30/1997 10,600 10,971 10,241
12/31/1997 10,704 11,294 10,262
03/31/1998 10,990 11,470 10,342
06/30/1998 11,062 11,738 10,548
09/30/1998 10,684 12,234 11,426
12/31/1998 10,882 12,275 11,832
03/31/1999 10,941 12,215 11,376
06/30/1999 10,977 12,107 10,984
09/30/1999 10,996 12,189 11,481
12/31/1999 11,322 12,175 11,328
03/31/2000 11,501 12,443 11,347
06/30/2000 11,564 12,660 11,331
09/30/2000 11,675 13,041 11,033
12/31/2000 11,572 13,590 11,508
03/31/2001 11,778 14,002 11,157
06/30/2001 11,680 14,081 10,983
09/30/2001 11,466 14,731 11,768
12/31/2001 11,979 14,738 11,394
03/31/2002 12,180 14,751 11,210
06/30/2002 12,175 15,296 12,516
09/30/2002 12,226 15,997 13,000
12/31/2002 12,799 16,249 13,615
03/31/2003 13,289 16,475 14,038
06/30/2003 14,158 16,887 14,583
09/30/2003 14,621 16,863 14,870
12/31/2003 15,308 16,916 15,645
03/31/2004 15,665 17,365 15,936
06/30/2004 15,377 16,941 15,406
09/30/2004 15,898 17,483 15,911
12/31/2004 16,780 17,650 17,264
03/31/2005 16,588 17,565 16,819
06/30/2005 17,155 18,093 16,578
09/30/2005 17,450 17,971 16,392
12/31/2005 17,477 18,078 16,077
03/31/2006 17,742 17,961 16,012
06/30/2006 17,455 17,948 16,519
09/30/2006 18,109 18,631 16,758
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year -1.16% 5-Year 8.51% 10-Year 6.12%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
12 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Strategic Income Fund (Class B)
Lehman Brothers Aggregate Bond Index
Citigroup World Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Strategic Lehman Brothers Citigroup World
Income Fund Aggregate Government
(Class B) Bond Index Bond Index
09/30/1996 10,000 10,000 10,000
12/31/1996 10,350 10,300 10,238
03/31/1997 10,307 10,242 9,814
06/30/1997 10,703 10,619 10,112
09/30/1997 11,043 10,971 10,241
12/31/1997 11,130 11,294 10,262
03/31/1998 11,405 11,470 10,342
06/30/1998 11,459 11,738 10,548
09/30/1998 11,071 12,234 11,426
12/31/1998 11,230 12,275 11,832
03/31/1999 11,269 12,215 11,376
06/30/1999 11,311 12,107 10,984
09/30/1999 11,284 12,189 11,481
12/31/1999 11,596 12,175 11,328
03/31/2000 11,757 12,443 11,347
06/30/2000 11,799 12,660 11,331
09/30/2000 11,889 13,041 11,033
12/31/2000 11,792 13,590 11,508
03/31/2001 11,979 14,002 11,157
06/30/2001 11,828 14,081 10,983
09/30/2001 11,589 14,731 11,768
12/31/2001 12,115 14,738 11,394
03/31/2002 12,263 14,751 11,210
06/30/2002 12,235 15,296 12,516
09/30/2002 12,269 15,997 13,000
12/31/2002 12,845 16,249 13,615
03/31/2003 13,336 16,475 14,038
06/30/2003 14,208 16,887 14,583
09/30/2003 14,673 16,863 14,870
12/31/2003 15,362 16,916 15,645
03/31/2004 15,720 17,365 15,936
06/30/2004 15,432 16,941 15,406
09/30/2004 15,954 17,483 15,911
12/31/2004 16,839 17,650 17,264
03/31/2005 16,646 17,565 16,819
06/30/2005 17,215 18,093 16,578
09/30/2005 17,512 17,971 16,392
12/31/2005 17,539 18,078 16,077
03/31/2006 17,805 17,961 16,012
06/30/2006 17,517 17,948 16,519
09/30/2006 18,173 18,631 16,758
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year -1.60% 5-Year 8.50% 10-Year 6.16%
13 | OPPENHEIMER STRATEGIC INCOME FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Strategic Income Fund (Class C)
Lehman Brothers Aggregate Bond Index
Citigroup World Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Strategic Lehman Brothers Citigroup World
Income Fund Aggregate Government
(Class C) Bond Index Bond Index
09/30/1996 10,000 10,000 10,000
12/31/1996 10,371 10,300 10,238
03/31/1997 10,328 10,242 9,814
06/30/1997 10,704 10,619 10,112
09/30/1997 11,067 10,971 10,241
12/31/1997 11,132 11,294 10,262
03/31/1998 11,409 11,470 10,342
06/30/1998 11,462 11,738 10,548
09/30/1998 11,073 12,234 11,426
12/31/1998 11,233 12,275 11,832
03/31/1999 11,297 12,215 11,376
06/30/1999 11,313 12,107 10,984
09/30/1999 11,286 12,189 11,481
12/31/1999 11,626 12,175 11,328
03/31/2000 11,761 12,443 11,347
06/30/2000 11,832 12,660 11,331
09/30/2000 11,894 13,041 11,033
12/31/2000 11,796 13,590 11,508
03/31/2001 11,984 14,002 11,157
06/30/2001 11,863 14,081 10,983
09/30/2001 11,592 14,731 11,768
12/31/2001 12,122 14,738 11,394
03/31/2002 12,270 14,751 11,210
06/30/2002 12,242 15,296 12,516
09/30/2002 12,305 15,997 13,000
12/31/2002 12,825 16,249 13,615
03/31/2003 13,327 16,475 14,038
06/30/2003 14,174 16,887 14,583
09/30/2003 14,575 16,863 14,870
12/31/2003 15,234 16,916 15,645
03/31/2004 15,561 17,365 15,936
06/30/2004 15,247 16,941 15,406
09/30/2004 15,734 17,483 15,911
12/31/2004 16,578 17,650 17,264
03/31/2005 16,357 17,565 16,819
06/30/2005 16,886 18,093 16,578
09/30/2005 17,144 17,971 16,392
12/31/2005 17,137 18,078 16,077
03/31/2006 17,364 17,961 16,012
06/30/2006 17,090 17,948 16,519
09/30/2006 17,697 18,631 16,758
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year 2.26% 5-Year 8.83% 10-Year 5.87%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
14 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Strategic Income Fund (Class N)
Lehman Brothers Aggregate Bond Index
Citigroup World Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Strategic Lehman Brothers Citigroup World
Income Fund Aggregate Government
(Class N) Bond Index Bond Index
03/01/2001 10,000 10,000 10,000
03/31/2001 9,799 10,050 9,712
06/30/2001 9,717 10,107 9,560
09/30/2001 9,539 10,573 10,244
12/31/2001 9,988 10,578 9,917
03/31/2002 10,122 10,588 9,757
06/30/2002 10,112 10,979 10,894
09/30/2002 10,177 11,482 11,316
12/31/2002 10,617 11,663 11,851
03/31/2003 11,044 11,825 12,219
06/30/2003 11,753 12,121 12,693
09/30/2003 12,092 12,103 12,944
12/31/2003 12,648 12,141 13,618
03/31/2004 12,929 12,464 13,872
06/30/2004 12,678 12,159 13,410
09/30/2004 13,094 12,548 13,850
12/31/2004 13,806 12,668 15,027
03/31/2005 13,632 12,607 14,640
06/30/2005 14,080 12,986 14,430
09/30/2005 14,307 12,899 14,268
12/31/2005 14,315 12,976 13,994
03/31/2006 14,552 12,892 13,937
06/30/2006 14,302 12,882 14,379
09/30/2006 14,822 13,372 14,587
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
9/30/06
1-Year 2.63% 5-Year 9.22% Since Inception (3/1/01) 7.31%
15 | OPPENHEIMER STRATEGIC INCOME FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Strategic Income Fund (Class Y)
Lehman Brothers Aggregate Bond Index
Citigroup World Government Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Strategic Lehman Brothers Citigroup World
Income Fund Aggregate Government
(Class Y) Bond Index Bond Index
01/26/1998 10,000 10,000 10,000
03/31/1998 10,181 10,027 9,981
06/30/1998 10,257 10,261 10,180
09/30/1998 9,936 10,695 11,028
12/31/1998 10,108 10,731 11,420
03/31/1999 10,194 10,678 10,979
06/30/1999 10,237 10,584 10,600
09/30/1999 10,241 10,656 11,081
12/31/1999 10,579 10,643 10,932
03/31/2000 10,732 10,878 10,951
06/30/2000 10,826 11,067 10,935
09/30/2000 10,912 11,401 10,648
12/31/2000 10,850 11,880 11,106
03/31/2001 11,049 12,241 10,768
06/30/2001 10,965 12,310 10,599
09/30/2001 10,740 12,877 11,358
12/31/2001 11,256 12,883 10,996
03/31/2002 11,419 12,895 10,819
06/30/2002 11,416 13,372 12,079
09/30/2002 11,498 13,984 12,546
12/31/2002 12,021 14,204 13,140
03/31/2003 12,496 14,402 13,548
06/30/2003 13,317 14,762 14,074
09/30/2003 13,721 14,741 14,351
12/31/2003 14,369 14,787 15,099
03/31/2004 14,706 15,181 15,380
06/30/2004 14,437 14,810 14,869
09/30/2004 14,927 15,283 15,356
12/31/2004 15,760 15,429 16,662
03/31/2005 15,590 15,355 16,232
06/30/2005 16,131 15,817 16,000
09/30/2005 16,379 15,710 15,820
12/31/2005 16,454 15,804 15,717
03/31/2006 16,718 15,701 15,453
06/30/2006 16,460 15,689 15,943
09/30/2006 17,093 16,287 16,173
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 9/30/06
1-Year 4.35% 5-Year 9.74% Since Inception (1/26/98) 6.37%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE 10-YEAR RETURN FOR CLASS B SHARES
USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 17 FOR
FURTHER INFORMATION.
16 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 10/16/89. Unless
otherwise noted, Class A returns include the current maximum initial sales
charge of 4.75%. The Fund's maximum sales charge for Class A shares was lower
prior to 2/1/93, so actual performance may have been higher.
CLASS B shares of the Fund were first publicly offered on 11/30/92. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B uses
Class A performance for the period after conversion. Class B shares are subject
to an annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 5/26/95. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
17 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES
- --------------------------------------------------------------------------------
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 1/26/98. Class Y
shares are offered only to certain institutional investors under special
agreement with the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
18 | OPPENHEIMER STRATEGIC INCOME FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended September 30, 2006.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
19 | OPPENHEIMER STRATEGIC INCOME FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(4/1/06) (9/30/06) SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,020.70 $4.67
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,020.46 4.67
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,016.70 8.68
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,016.50 8.68
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,019.20 8.54
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.65 8.53
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,018.60 6.70
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,018.45 6.70
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,022.40 2.84
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,022.26 2.84
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 183/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended September 30, 2006 are as follows:
CLASS EXPENSE RATIOS
- ---------------------------------
Class A 0.92%
- ---------------------------------
Class B 1.71
- ---------------------------------
Class C 1.68
- ---------------------------------
Class N 1.32
- ---------------------------------
Class Y 0.56
- --------------------------------------------------------------------------------
20 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS September 30, 2006
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Ace Securities Corp., Home Equity Loan Pass-Through Certificates,
Series 2005-HE7, Cl. A2B, 5.51%, 11/25/35 1 $ 2,450,000 $ 2,452,626
- ------------------------------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 5.39%, 4/20/08 1 1,450,000 1,451,109
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.81%, 5/25/34 1 9,060,000 9,100,706
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2006-M3, Asset-Backed Pass-Through Certificates,
Series 2006-M3, Cl. A2B, 5.43%, 9/25/36 1 2,090,000 2,090,000
- ------------------------------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2006-W5, Asset-Backed Pass-Through Certificates,
Series 2006-W5, Cl. A2B, 5.43%, 5/26/36 1 3,665,000 3,667,294
- ------------------------------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust 2005-A, Automobile Asset-Backed Securities,
Series 2005-A, Cl. A2, 3.66%, 12/26/07 675,171 674,954
- ------------------------------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust 2006-A, Automobile Asset-Backed Securities,
Series 2006-A, Cl. A2, 5.30%, 5/26/09 4,070,000 4,070,000
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust 2004-2, Automobile
Asset-Backed Securities, Series 2004-2, Cl. A3, 3.58%, 1/15/09 4,920,000 4,850,863
- ------------------------------------------------------------------------------------------------------------------------------------
Capital One Prime Auto Receivables Trust, Automobile Loan
Asset-Backed Securities, Series 2005-1, Cl. A2, 4.24%, 11/15/07 1,463,649 1,463,742
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-C, Asset-Backed Certificates,
Series 2005-C, Cl. AF1, 4.196%, 6/25/35 419,897 418,623
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2005-D, Asset-Backed Certificates:
Series 2005-D, Cl. AF1, 5.04%, 10/25/35 2,155,677 2,146,737
Series 2005-D, Cl. AV2, 5.60%, 10/25/35 1 250,000 250,274
- ------------------------------------------------------------------------------------------------------------------------------------
Centex Home Equity Loan Trust 2006-A, Asset-Backed Certificates,
Series 2006-A, Cl. AV2, 5.43%, 5/16/36 1 4,590,000 4,592,873
- ------------------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A2, 3.72%, 12/15/07 1,059,858 1,058,970
- ------------------------------------------------------------------------------------------------------------------------------------
CitiFinancial Mortgage Securities, Inc., Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 2004-1, Cl. AF2, 2.645%, 4/25/34 5,076,405 4,928,018
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc., Asset-Backed Pass-Through
Certificates, Series 2005-WF2, Cl. AF2, 4.922%, 8/25/35 1 5,742,413 5,691,594
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Credit Reference Index Securities Program, Credit Card
Asset-Backed Certificates, Series 2002-B, Cl. FX, 10.421%, 3/22/07 2 15,441,000 15,675,358
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-7, Asset-Backed Certificates,
Series 2005-7, Cl. AF1B, 4.317%, 11/25/35 1 358,234 357,189
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-10, Asset-Backed Certificates,
Series 2005-10, Cl. AF1, 5.484%, 2/25/36 1 3,558,808 3,561,698
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 1 1,720,000 1,717,335
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset Backed Certificates,
Series 2005-17, Cl. 1AF1, 5.53%, 5/25/36 1 2,562,754 2,565,859
- ------------------------------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates,
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 1 1,150,000 1,147,907
21 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates:
Series 2005-B, Cl. A2, 3.75%, 12/8/07 $ 741,690 $ 741,917
Series 2006-C, Cl. A2, 5.33%, 5/8/09 3 7,100,000 7,099,645
- ------------------------------------------------------------------------------------------------------------------------------------
DLJ Ltd., Collateralized Bond Obligations,
Series1A, Cl. C2, 11.96%, 4/15/11 4,5,15 15,000,000 1,500
- ------------------------------------------------------------------------------------------------------------------------------------
DVI Receivables Corp., Equipment Asset-Backed Certificates,
Series 2001-2, Cl. C, 4.405%, 11/11/09 5 3,083,887 510,769
- ------------------------------------------------------------------------------------------------------------------------------------
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts.,
Series 2000-A, Cl. B, 8/15/25 4,5,15 2,275,079 22,751
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2005-FF10, Mtg. Pass-Through
Certificates, Series 2005-FF10, Cl. A3, 5.54%, 11/25/35 1 7,200,000 7,207,662
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF5, Mtg. Pass-Through
Certificates, Series 2006-FF5, Cl. 2A1, 5.38%, 5/15/36 1 2,374,859 2,376,511
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF9, Mtg. Pass-Through
Certificates, Series 2006-FF9, Cl. 2A2, 5.434%, 7/7/36 1 1,850,000 1,851,158
- ------------------------------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust 2006-FF10, Mtg. Pass-Through
Certificates, Series 2006-FF10, Cl. A3, 5.414%, 7/25/36 1 3,620,000 3,622,264
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2005-A, Cl. A3, 3.48%, 11/17/08 2,702,984 2,683,117
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Asset Management CBO Ltd., Sub. Collateralized Bond
Obligations, Series 1A, Cl. D, 0.125%, 6/13/11 1,5 6,523,018 97,845
- ------------------------------------------------------------------------------------------------------------------------------------
Green Tree Financial Corp., Manufactured Housing Contract Sr. Sub.
Pass-Through Certificates, Series 1997-5, Cl. M1, 6.95%, 5/15/29 4,814,000 4,289,866
- ------------------------------------------------------------------------------------------------------------------------------------
Greenpoint Credit Manufactured Housing Contract Trust, Pass-Through
Certificates, Series 2000-3, Cl. IM1, 9.01%, 6/20/31 5,214,000 1,156,802
- ------------------------------------------------------------------------------------------------------------------------------------
GS Auto Loan Trust, Automobile Loan Asset-Backed Securities,
Series 2005-1, Cl. A2, 4.32%, 5/15/08 5,160,193 5,152,967
- ------------------------------------------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Receivable Obligations,
Series 2005-3, Cl. A2, 3.73%, 10/18/07 5 1,305,431 1,304,173
- ------------------------------------------------------------------------------------------------------------------------------------
Household Home Equity Loan Trust, Home Equity Loan Pass-Through
Certificates, Series 2005-3, Cl. A1, 5.59%, 1/20/35 1 2,565,543 2,569,540
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates:
Series 2005-2, Cl. 2A1B, 5.18%, 8/25/35 1 3,245,583 3,236,647
Series 2005-4, Cl. 2A1B, 5.17%, 10/25/35 2,557,223 2,545,710
- ------------------------------------------------------------------------------------------------------------------------------------
Madison Avenue CDO Ltd., Commercial Debt Obligations,
Series 2A, Cl. C1, 0.307%, 3/24/14 1,5 3,433,919 137,357
- ------------------------------------------------------------------------------------------------------------------------------------
Mastr Asset Backed Securities Trust 2006-WMC3, Mtg. Pass-Through
Certificates, Series 2006-WMC3, Cl. A3, 5.43%, 9/29/36 1 5,330,000 5,330,000
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley ABS Capital I, Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B, 5.59%, 7/25/35 1 2,230,000 2,235,127
- ------------------------------------------------------------------------------------------------------------------------------------
NC Finance Trust, CMO Pass-Through Certificates,
Series 1999-I, Cl. ECFD, 1.762%, 1/25/29 5 4,420,411 928,286
22 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.,
Series 2005-C, Cl. A2, 3.99%, 1/15/08 $ 4,583,384 $ 4,573,876
- ------------------------------------------------------------------------------------------------------------------------------------
Onyx Acceptance Owner Trust, Automobile Receivable Obligations,
Series 2005-B, Cl. A2, 4.03%, 4/15/08 359,922 359,967
- ------------------------------------------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Asset-Backed Certificates,
Series 2006-2, Cl. 2A2, 5.43%, 7/1/36 1 6,040,000 6,043,780
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2004-5, Mtg. Pass-Through
Certificates, Series 2004-5, Cl. AF2, 3.735%, 11/10/34 1 852,059 848,023
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-1, Mtg. Pass-Through
Certificates, Series 2005-1, Cl. AF2, 3.914%, 5/25/35 1 898,899 893,063
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-2, Mtg. Pass-Through
Certificates, Series 2005-2, Cl. AF2, 4.415%, 4/25/35 1 1,670,000 1,654,767
- ------------------------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust 2005-6, Mtg. Pass-Through
Certificates, Series 2005-6, Cl. A3, 5.68%, 1/25/36 1 1,810,000 1,808,909
- ------------------------------------------------------------------------------------------------------------------------------------
RAMP Series 2004-RS7 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2004-RS7, Cl. AI32 4.45%, 7/25/28 3,393,424 3,364,886
- ------------------------------------------------------------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-RS4, Cl. A1, 5.41%, 7/25/36 1 2,248,858 2,250,269
- ------------------------------------------------------------------------------------------------------------------------------------
RASC Series 2006-KS7 Trust, Home Equity Mtg. Asset-Backed Pass-Through
Certificates, Series 2006-KS7, Cl. A2, 5.428%, 9/25/36 1 4,510,000 4,509,161
- ------------------------------------------------------------------------------------------------------------------------------------
Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 5.39%, 4/25/36 1 2,483,764 2,485,475
- ------------------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Mtg. Pass-Through Certificates:
Series 2003-25XS, Cl. A4, 4.51%, 8/25/33 136,436 135,787
Series 2005-4XS, Cl. 3A1, 5.18%, 3/26/35 3,793,349 3,781,362
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust, Home
Equity Asset-Backed Certificates, Series 2006-2, Cl. A2, 5.424%, 7/25/36 1 3,600,000 3,602,251
----------------
Total Asset-Backed Securities (Cost $199,814,969) 165,346,919
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--14.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates,
Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30 4,599,837 4,627,190
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Commercial Mortgage, Inc., Commercial Mtg. Pass-Through
Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43 5,070,000 4,960,808
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 3,549,024 3,609,285
- ------------------------------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 3,313,443 3,341,402
Series 2005-E, Cl. 2A2, 4.975%, 6/25/35 1 445,411 444,875
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 8.20%, 6/22/24 6 6,736,843 257,036
- ------------------------------------------------------------------------------------------------------------------------------------
ChaseFlex Trust 2006-2, Multi-Class Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1B, 5.43%, 8/25/08 1 3,768,385 3,772,165
23 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust 2006-WF1, Asset-Backed Pass-Through
Certificates, Series 2006-WF1, Cl. A2B, 5.536%, 3/1/36 $ 1,311,000 $ 1,309,532
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Alternative Loan Trust, CMO:
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 7,915,636 7,999,740
Series 2005-J3, Cl. 3A1, 6.50%, 9/25/34 1,732,811 1,769,553
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, CMO,
Series 2006-AB2, Cl. A7, 5.961%, 6/25/36 7,315,671 7,309,386
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Alt-B Securities, Inc. Mortgage Loan Trust, CMO:
Series 2006-AB3, Cl. A7, 6.36%, 4/25/08 2,365,198 2,373,103
Series 2006-AB4, Cl. A1A, 6.005%, 6/25/08 7,520,000 7,525,875
- ------------------------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 1997-CF2, Cl. B30C, 5.543%, 10/15/30 1,5 36,400,000 10,920,000
- ------------------------------------------------------------------------------------------------------------------------------------
Fannie Mae Whole Loan, CMO Pass-Through Certificates,
Trust 2004-W9, Cl. 2A2, 7%, 2/25/44 2,453,592 2,533,242
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 5/1/19 6,107,550 5,899,495
5%, 10/1/36 17,996,000 17,309,903
6%, 4/1/17-9/1/24 26,308,932 26,682,938
6.50%, 4/1/18-8/1/32 14,311,669 14,640,092
7%, 8/1/21-10/1/31 6,796,664 7,005,349
7.50%, 2/1/32-4/1/36 10,589,431 11,007,495
8.50%, 8/1/31 717,091 769,579
10%, 4/1/20-5/1/20 198,147 219,456
10.50%, 5/1/20 295,302 330,723
11.50%, 10/1/16 222,587 241,408
12%, 5/1/10-6/1/17 706,487 770,305
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Multiclass Mtg.
Participation Certificates:
Series 2368, Cl. TG, 6%, 10/15/16 1,811,760 1,840,326
Series 3057, Cl. LG, 5%, 10/15/35 5,000,000 4,672,932
Series 3105, Cl. BD, 5.50%, 1/15/26 8,122,000 8,129,895
Series 3138, Cl. PA, 5.50%, 2/15/27 19,202,109 19,254,942
Series 3153, Cl. FJ, 5.71%, 5/15/36 1 2,338,201 2,344,981
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 1360, Cl. PZ, 7.50%, 9/15/22 9,528,668 9,709,957
Series 2002-66, Cl. FG, 6.33%, 9/25/32 1 8,892,727 9,047,178
Series 2055, Cl. ZM, 6.50%, 5/15/28 1,989,442 2,030,694
Series 2080, Cl. Z, 6.50%, 8/15/28 1,288,332 1,316,837
Series 2173, Cl. Z, 6.50%, 7/15/29 4,994,385 5,148,959
Series 2326, Cl. ZP, 6.50%, 6/15/31 1,434,006 1,471,726
Series 2387, Cl. PD, 6%, 4/15/30 968,030 969,194
Series 2500, Cl. FD, 5.83%, 3/15/32 1 840,263 849,026
Series 2526, Cl. FE, 5.73%, 6/15/29 1 1,074,995 1,079,569
Series 2551, Cl. FD, 5.73%, 1/15/33 1 842,687 851,893
24 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates: Continued
Series 2583, Cl. KA, 5.50%, 3/15/22 $ 1,459,863 $ 1,458,415
Series 2939, Cl. PE, 5%, 2/15/35 11,489,000 10,773,811
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 177, Cl. IO, 12.667%, 7/1/26 6 3,356,432 747,036
Series 183, Cl. IO, 8.234%, 4/1/27 6 1,349,217 293,166
Series 192, Cl. IO, 13.941%, 2/1/28 6 590,751 125,938
Series 200, Cl. IO, 13.272%, 1/1/29 6 713,211 156,137
Series 203, Cl. IO, 3.706%, 6/1/29 6 2,528,921 548,865
Series 204, Cl. IO, (6.142)%, 5/1/29 6 207,878 45,763
Series 205, Cl. IO, 10.148%, 9/1/29 6 3,216,207 715,616
Series 206, Cl. IO, (13.726)%, 12/1/29 6 1,110,456 258,545
Series 207, Cl. IO, (16.958)%, 4/1/30 6 1,256,119 281,834
Series 2074, Cl. S, 0.394%, 7/17/28 6 776,505 73,961
Series 2079, Cl. S, (0.624)%, 7/17/28 6 1,222,768 121,739
Series 208, Cl. IO, (2.557)%, 6/1/30 6 2,217,363 480,353
Series 212, Cl. IO, 5.047%, 5/1/31 6 5,061,704 1,108,318
Series 214, Cl. IO, (8.788)%, 6/1/31 6 1,207,038 268,231
Series 2003-13, Cl. I O, 9.767%, 3/25/33 6 6,057,153 1,334,273
Series 2003-26, Cl. I O, 10.614%, 4/25/33 6 4,826,175 1,061,575
Series 2003-118, Cl. S, 10.01%, 12/25/33 6 9,919,651 1,091,133
Series 2005-87, Cl. SG, 10.772%, 10/25/35 6 17,490,125 1,012,771
Series 2526, Cl. SE, 2.072%, 6/15/29 6 1,920,308 100,569
Series 2819, Cl. S, 0.785%, 6/15/34 6 17,324,305 1,242,080
Series 2920, Cl. S, (0.487)%, 1/15/35 6 10,196,523 491,200
Series 3000, Cl. SE, (4.389)%, 7/15/25 6 12,554,617 480,052
Series 3004, Cl. SB, 8.215%, 7/15/35 6 19,212,358 562,661
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/1/19 2,872,913 2,776,667
4.50%, 10/1/21 3 26,741,000 25,805,065
5%, 2/1/18-11/1/33 71,692,437 69,822,672
5%, 10/1/21-10/1/36 3 52,416,439 50,901,508
5.50%, 1/1/33-11/1/34 84,309,976 83,325,551
5.50%, 10/1/21-10/1/36 3 77,891,000 76,986,168
6%, 7/1/24-5/1/33 22,972,133 23,179,685
6%, 10/1/21-10/1/36 3 29,043,000 29,453,486
6.50%, 6/1/17-9/1/32 42,801,200 43,811,048
6.50%, 10/1/36 3 20,373,000 20,748,637
7%, 11/1/17-9/1/34 29,854,743 30,813,714
7.50%, 6/1/10-1/1/33 16,574,874 17,211,627
8.50%, 7/1/32 114,538 123,336
9.50%, 4/1/20-3/15/21 191,897 209,398
11%, 10/15/15-2/1/26 462,240 511,909
25 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.: Continued
13%, 6/1/15 $ 102,012 $ 114,242
15%, 4/15/13 401,873 458,351
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust:
CMO Interest-Only Stripped Mtg.-Backed Security,
Trust 2001-T10, Cl. IO, (1.986)%, 12/25/41 6 182,967,069 2,695,507
CMO Interest-Only Stripped Mtg.-Backed Security,
Trust 2001-T3, Cl. IO, 12.136%, 11/25/40 6 21,000,954 397,743
CMO Interest-Only Stripped Mtg.-Backed Security,
Trust 2001-T4, Cl. IO, 8.085%, 7/25/41 6 35,048,276 651,386
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1996-35, Cl. Z, 7%, 7/25/26 230,489 236,117
Trust 1997-45, Cl. CD, 8%, 7/18/27 2,627,896 2,783,616
Trust 1998-58, Cl. PC, 6.50%, 10/25/28 2,965,865 3,062,205
Trust 2001-50, Cl. NE, 6%, 8/25/30 484,352 485,455
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 214,810 219,252
Trust 2001-70, Cl. LR, 6%, 9/25/30 739,308 740,685
Trust 2001-72, Cl. NH, 6%, 4/25/30 306,162 306,024
Trust 2001-74, Cl. PD, 6%, 5/25/30 128,033 127,766
Trust 2002-9, Cl. PC, 6%, 3/25/17 5,174,162 5,252,948
Trust 2002-19, Cl. PE, 6%, 4/25/17 2,646,745 2,685,176
Trust 2002-21, Cl. PE, 6.50%, 4/25/32 6,057,949 6,236,461
Trust 2002-77, Cl. WF, 5.73%, 12/18/32 1 1,216,230 1,226,463
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 4,963,000 4,897,198
Trust 2003-23, Cl. EQ, 5.50%, 4/25/23 12,066,000 11,879,574
Trust 2003-28, Cl. KG, 5.50%, 4/25/23 5,467,000 5,421,052
Trust 2003-84, Cl. PW, 3%, 6/25/22 4,650,000 4,551,334
Trust 2003-116, Cl. FA, 5.73%, 11/25/33 1 1,082,074 1,087,949
Trust 2004-101, Cl. BG, 5%, 1/25/20 4,201,000 4,107,038
Trust 2005-31, Cl. PB, 5.50%, 4/25/35 2,865,000 2,801,873
Trust 2005-71, Cl. DB, 4.50%, 8/25/25 3,510,000 3,256,821
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25 2,910,000 2,815,628
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 9,270,000 9,301,734
Trust 2006-50, Cl. KS, 4.657%, 6/25/36 1 4,352,129 4,243,130
Trust 2006-50, Cl. SA, 4.657%, 6/25/36 1 5,043,548 4,880,712
Trust 2006-50, Cl. SK, 5.657%, 6/25/36 1 915,041 896,965
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 12,594,804 12,619,981
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Interest-Only
Stripped Mtg.-Backed Security:
Trust 2002-28, Cl. SA, 0.899%, 4/25/32 6 1,008,490 72,327
Trust 2002-38, Cl. SO, (3.515)%, 4/25/32 6 897,537 53,146
Trust 2002-39, Cl. SD, (1.665)%, 3/18/32 6 1,470,717 110,605
Trust 2002-48, Cl. S, 1.226%, 7/25/32 6 1,617,186 124,943
Trust 2002-52, Cl. SL, 1.23%, 9/25/32 6 959,728 76,547
Trust 2002-53, Cl. SK, (1.213)%, 4/25/32 6 917,065 78,398
26 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Interest-Only
Stripped Mtg.-Backed Security: Continued
Trust 2002-56, Cl. SN, 2.237%, 7/25/32 6 $ 2,217,399 $ 175,501
Trust 2002-77, Cl. IS, 1.501%, 12/18/32 6 1,529,137 122,020
Trust 2006-34, Cl. SK, 13.241%, 5/25/36 6 16,897,259 1,276,444
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Trust 221, Cl. 2, 12.052%, 5/1/23 6 1,238,495 284,508
Trust 240, Cl. 2, 20.817%, 9/1/23 6 2,004,394 446,103
Trust 247, Cl. 2, 13.627%, 10/1/23 6 251,048 59,994
Trust 301, Cl. 2, 6.416%, 4/1/29 6 1,968,421 421,809
Trust 303, Cl. IO, 11.777%, 11/1/29 6 1,189,618 278,272
Trust 313, Cl. 2, (6.97)%, 6/1/31 6 7,130,917 1,615,404
Trust 319, Cl. 2, 12.061%, 2/1/32 6 53,279 12,263
Trust 321, Cl. 2, 9.57%, 4/1/32 6 9,524,512 2,195,201
Trust 324, Cl. 2, 5.939%, 7/1/32 6 6,954,821 1,580,873
Trust 329, Cl. 2, 9.451%, 1/1/33 6 14,965,828 3,593,266
Trust 334, Cl. 12, 5.349%, 2/1/33 6 9,853,872 2,100,310
Trust 340, Cl. 2, 8.005%, 9/1/33 6 4,852,457 1,188,985
Trust 344, Cl. 2, 7.65%, 12/1/33 6 3,909,569 905,245
Trust 2001-61, Cl. SH, 8.995%, 11/18/31 6 5,943,121 559,775
Trust 2001-63, Cl. SD, 2.209%, 12/18/31 6 77,847 7,445
Trust 2001-68, Cl. SC, 2.546%, 11/25/31 6 54,929 4,809
Trust 2001-81, Cl. S, 2.648%, 1/25/32 6 1,449,081 109,190
Trust 2002-9, Cl. MS, 1.19%, 3/25/32 6 1,881,042 150,756
Trust 2002-65, Cl. SC, (3.835)%, 6/25/26 6 2,886,056 186,990
Trust 2002-77, Cl. SH, 2.876%, 12/18/32 6 1,704,584 162,673
Trust 2003-4, Cl. S, 9.966%, 2/25/33 6 3,143,628 357,303
Trust 2003-33, Cl. SP, 13.034%, 5/25/33 6 6,025,517 705,289
Trust 2005-40, Cl. SA, (2.733)%, 5/25/35 6 15,586,621 787,282
Trust 2005-40, Cl. SB, 0.265%, 5/25/35 6 6,982,455 301,101
Trust 2005-71, Cl. SA, 3.309%, 8/25/25 6 7,986,842 456,463
Trust 2006-33, Cl. SP, 13.681%, 5/25/36 6 8,478,579 661,211
Trust 2006-75, Cl. SA, 8.486%, 8/25/36 6 5,292,362 244,235
Trust 2682, Cl. TQ, 14.208%, 10/15/33 6 6,733,138 416,234
Trust 2981, Cl. BS, 14.201%, 5/15/35 6 12,913,052 596,964
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed
Security, Trust 340, Cl. 1, 5.181%, 9/1/33 7 4,852,457 3,516,105
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates,
Series 2005-C, Cl. A2, 4.24%, 3/15/08 2,491,609 2,486,640
- ------------------------------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 2,940,000 2,912,854
27 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc.,
Commercial Mtg. Pass-Through Certificates:
Series 1997-C1, Cl. A3, 6.869%, 7/15/29 $ 1,103,370 $ 1,111,664
Series 1998-C1, Cl. F, 7.185%, 5/15/30 1 2,000,000 2,115,158
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
4.75%, 7/20/27 1 11,879 11,981
7%, 1/15/28-1/20/30 2,806,146 2,897,033
8%, 1/15/28-9/15/28 1,226,126 1,300,394
11%, 10/20/19 29,778 32,847
12%, 11/20/13-9/20/15 44,616 49,934
12.50%, 12/15/13-11/15/15 1,741,367 1,936,383
13%, 10/15/15 2,658,467 2,974,165
13.50%, 6/15/15 3,571,550 4,023,524
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates:
Series 1999-32, Cl. ZB, 8%, 9/16/29 9,575,873 10,278,147
Series 2000-7, Cl. Z, 8%, 1/16/30 5,951,450 6,353,483
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Series 1998-6, Cl. SA, (1.078)%, 3/16/28 6 1,522,286 134,227
Series 1998-19, Cl. SB, (0.434)%, 7/16/28 6 2,470,926 242,921
Series 2006-47, Cl. SA, 16.226%, 8/16/36 6 5,468,503 327,374
- ------------------------------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates:
Series 2005-GG3, Cl. A2, 4.305%, 8/10/42 3,260,000 3,186,904
Series 2005-GG5, Cl. A2, 5.117%, 4/10/37 3,310,000 3,306,528
- ------------------------------------------------------------------------------------------------------------------------------------
JP Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32 10,200,699 10,810,782
- ------------------------------------------------------------------------------------------------------------------------------------
JP Morgan Mortgage Trust, CMO Pass-Through Certificates,
Series 2005-S2, Cl. 3A1, 6.731%, 2/25/32 1 7,399,705 7,496,952
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 1,220,000 1,196,804
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 4,310,000 4,251,593
- ------------------------------------------------------------------------------------------------------------------------------------
LB Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates, Series 1999-C2, Cl. C, 7.47%, 10/15/32 8,115,000 8,642,480
- ------------------------------------------------------------------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust, Commercial Mtg.
Pass-Through Certificates:
Series 2000-C3, Cl. A2, 7.95%, 5/15/25 9,627,000 10,405,758
Series 2005-C5, Cl. A2, 4.885%, 9/15/30 3,520,000 3,495,636
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Structured Securities Corp., CMO,
Series 2002-GE1, Cl. A, 2.514%, 7/26/24 5 519,449 379,198
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates,
Series 2005-10, Cl. 2A3B, 5.55%, 1/25/36 2,738,935 2,720,036
28 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 $ 5,045,368 $ 5,019,503
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 3,055,589 3,036,475
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I Trust, Commercial Mtg. Pass-Through
Certificates, Series 1997-XL1, Cl. G, 7.695%, 10/3/30 13,823,000 11,996,588
- ------------------------------------------------------------------------------------------------------------------------------------
PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 2001-C1, Cl. A2, 6.36%, 3/12/34 9,627,000 10,052,786
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Agricultural Credit, Inc., Farmer Mac Agricultural Real Estate
Trust Sr. Sub. Mtg. Pass-Through Certificates:
Series 1992-2, Cl. B2, 1/15/03 4,5,15 624,465 --
Series 1992-2, Cl. B3, 10.324%, 4/15/09 1,5 135,251 42
- ------------------------------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through Certificates,
Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 380,000 408,271
- ------------------------------------------------------------------------------------------------------------------------------------
RALI Series 2006-QS13 Trust, Mtg. Asset-Backed Pass Through Certificates,
Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 8,890,000 8,894,167
- ------------------------------------------------------------------------------------------------------------------------------------
RALI Series 2006-QS5 Trust, Mtg. Asset-BackedPass-Through Certificates,
Series 2006-QS5, Cl. 2A2, 6%, 4/25/08 8,743,213 8,737,324
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust 2006-A9CB, CMO Pass-Through Certificates,
Series 2006-A9CB, Cl. A5, 6%, 9/25/36 8,007,405 7,999,272
- ------------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Mortgage Securities VII, Inc., CMO:
Series 2000-UP1, Cl. A2, 8%, 9/25/30 598,566 601,848
Series 2001-UP2, Cl. AF2, 7.25%, 10/25/31 455,022 464,780
- ------------------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney RV Trust, Recreational Vehicles Mtg. Obligations,
Series 2001-1, Cl. B, 6.64%, 4/15/18 2,407,000 2,418,026
- ------------------------------------------------------------------------------------------------------------------------------------
Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security:
Series 1992-2, Cl. IO, 4.286%, 9/15/22 6 18,392,200 449,268
Series 1995-2B, Cl. 2IO, 8.288%, 6/15/25 6 1,326,631 31,006
Series 1995-3, Cl. 1IO, (6.974)%, 9/15/25 6 42,214,929 374,940
- ------------------------------------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust, Commercial Mtg.
Obligations, Series 2005-C17, Cl. A2, 4.782%, 3/15/42 5,800,000 5,736,569
- ------------------------------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR5 Trust,
Series 2005-AR5, Cl. A1, 4.673%, 5/25/35 1 2,194,521 2,188,420
- ------------------------------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR8 Trust,
Series 2005-AR8, Cl. 2AB1, 5.58%, 7/25/45 1 2,883,587 2,892,126
- ------------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2004-DD Trust, CMO Mtg.
Pass-Through Certificates, Series 2004-DD, Cl. 2A1, 4.509%, 1/25/35 1 255,388 254,588
----------------
Total Mortgage-Backed Obligations (Cost $1,030,340,562) 1,009,936,331
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--9.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Fannie Mae Unsec. Nts., 3.69%, 10/5/07 8,9 61,690,000 58,586,253
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds, 3.50%, 11/15/07 9 150,000 147,444
29 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
4.125%, 7/12/10 9 $ 3,100,000 $ 3,019,115
5.25%, 7/18/11 80,930,000 82,152,286
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4%, 2/28/07 335,000 333,260
4.25%, 7/15/07 9 505,000 501,355
4.75%, 12/15/10 9 15,620,000 15,544,290
6%, 5/15/11 9 22,400,000 23,423,814
6%, 5/15/08 9,10 15,044,000 15,281,274
6.625%, 9/15/09 10 32,926,000 34,481,227
- ------------------------------------------------------------------------------------------------------------------------------------
Resolution Funding Corp. Bonds, Residual Funding STRIPS,
6.132%, 1/15/21 8,9 51,220,000 25,224,621
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 5.02%, 11/9/06 9,11,12 293,925,000 292,367,369
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
4.50%, 2/15/36 9 415,000 397,784
5.25%, 2/15/29 9 40,170,000 42,489,215
5.50%, 8/15/28 9,10 152,000 165,680
7.25%, 5/15/16 9,10 2,734,000 3,277,598
STRIPS, 4.941%, 2/15/16 8,10 23,586,000 15,248,302
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.625%, 8/31/11 9 29,711,000 29,752,803
5.125%, 6/30/11 9 13,327,000 13,625,298
----------------
Total U.S. Government Obligations (Cost $652,810,286) 656,018,988
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--23.0%
- ------------------------------------------------------------------------------------------------------------------------------------
ARGENTINA--1.5%
Argentina (Republic of) Bonds:
2%, 9/30/14 5 [ARP] 13,011,900 4,267,253
5.589%, 8/3/12 1 48,514,501 44,802,964
Series V, 7%, 3/28/11 52,430,000 49,587,122
- ------------------------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas,
Series PBA1, 4/1/07 4,5 [ARP] 208,251 90,145
- ------------------------------------------------------------------------------------------------------------------------------------
Central Bank of Argentina Bonds, 2%, 2/4/18 5 [ARP] 17,611,439 8,500,019
----------------
107,247,503
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--0.8%
New South Wales Treasury Corp. Gtd. Bonds, 8%, 3/1/08 [AUD] 70,980,000 54,276,524
- ------------------------------------------------------------------------------------------------------------------------------------
BELGIUM--0.6%
Belgium (Kingdom of) Bonds, Series 44, 5%, 3/28/35 [EUR] 9,450,000 14,120,896
- ------------------------------------------------------------------------------------------------------------------------------------
Belgium (Kingdom of) Treasury Bills, 3.192%, 12/14/06 8 [EUR] 22,950,000 28,918,176
----------------
43,039,072
30 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
BRAZIL--2.0%
Brazil (Federal Republic of) Bonds:
8%, 1/15/18 $ 26,600,000 $ 29,286,600
8.75%, 2/4/25 32,645,000 38,961,808
8.875%, 10/14/19 25,985,000 30,883,173
10.50%, 7/14/14 24,810,000 31,235,790
- ------------------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts., 7.875%, 3/7/15 7,950,000 8,733,075
----------------
139,100,446
- ------------------------------------------------------------------------------------------------------------------------------------
BULGARIA--0.2%
Bulgaria (Republic of) Bonds:
8.25%, 1/15/15 7,080,000 8,363,250
8.25%, 1/15/15 2 6,790,000 8,020,688
----------------
16,383,938
- ------------------------------------------------------------------------------------------------------------------------------------
CANADA--0.8%
Canada (Government of) Nts., 4%, 9/1/10 [CAD] 65,285,000 58,651,659
- ------------------------------------------------------------------------------------------------------------------------------------
COLOMBIA--1.4%
Colombia (Republic of) Bonds:
7.375%, 9/18/37 27,157,000 27,564,355
10.75%, 1/15/13 8,000,000 9,808,000
12%, 10/22/15 [COP] 49,296,000,000 23,498,351
- ------------------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Nts., 11.75%, 3/1/10 [COP] 23,854,260,000 10,633,740
- ------------------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Unsec. Bonds, 8.125%, 5/21/24 22,580,000 24,950,900
----------------
96,455,346
- ------------------------------------------------------------------------------------------------------------------------------------
DENMARK--0.2%
Denmark (Kingdom of) Bonds:
4%, 11/15/10 [DKK] 21,445,000 3,700,451
4%, 11/15/15 [DKK] 15,950,000 2,775,045
7%, 11/10/24 [DKK] 5,820,000 1,385,552
- ------------------------------------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Nts., 4%, 8/15/08 [DKK] 23,020,000 3,940,710
----------------
11,801,758
- ------------------------------------------------------------------------------------------------------------------------------------
DOMINICAN REPUBLIC--0.0%
Dominican Republic Unsec. Unsub. Nts., Series REGS, 9.50%, 9/27/11 1,876,658 2,026,791
- ------------------------------------------------------------------------------------------------------------------------------------
EL SALVADOR--0.2%
El Salvador (Republic of) Bonds:
7.625%, 9/21/34 2 4,802,000 5,270,195
7.65%, 6/15/35 2 4,735,000 5,101,963
----------------
10,372,158
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE--1.9%
France (Government of) Bonds, 3.25%, 4/25/16 [EUR] 59,985,000 73,217,511
31 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE Continued
France (Government of) Obligations Assimilables du Tresor Bonds,
4%, 4/25/55 [EUR] 25,690,000 $ 33,269,855
- ------------------------------------------------------------------------------------------------------------------------------------
France (Government of) Treasury Bills, 3.195%, 12/14/06 8 [EUR] 18,630,000 23,472,652
----------------
129,960,018
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY--1.8%
Germany (Federal Republic of) Bonds, Series 05, 4%, 1/4/37 [EUR] 36,260,000 47,119,930
- ------------------------------------------------------------------------------------------------------------------------------------
Germany (Federal Republic of) Treasury Bills,
Series 0906, 3.359%, 3/14/07 8 [EUR] 62,930,000 78,613,623
----------------
125,733,553
- ------------------------------------------------------------------------------------------------------------------------------------
GREECE--0.4%
Greece (Republic of) Bonds, 4.60%, 5/20/13 [EUR] 21,830,000 28,889,504
- ------------------------------------------------------------------------------------------------------------------------------------
GUATEMALA--0.1%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11 2 2,972,000 3,514,390
10.25%, 11/8/11 1,205,000 1,424,913
----------------
4,939,303
- ------------------------------------------------------------------------------------------------------------------------------------
INDONESIA--0.2%
Indonesia (Republic of) Nts.:
6.75%, 3/10/14 2 2,670,000 2,730,075
7.25%, 4/20/15 2 4,450,000 4,689,188
- ------------------------------------------------------------------------------------------------------------------------------------
Indonesia (Republic of) Unsec. Nts., 8.50%, 10/12/35 2 6,210,000 7,288,988
----------------
14,708,251
- ------------------------------------------------------------------------------------------------------------------------------------
ISRAEL--0.4%
Israel (State of) Bonds, Series 2682, 7.50%, 3/31/14 [ILS] 101,230,000 25,226,569
- ------------------------------------------------------------------------------------------------------------------------------------
ITALY--1.5%
Italy (Republic of) Nts., Certificati di Credito del Tesoro, 3.40%, 7/1/09 1 [EUR] 40,215,000 51,219,165
- ------------------------------------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali,
4.25%, 2/1/19 [EUR] 42,280,000 54,835,703
----------------
106,054,868
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN--1.0%
Japan (Government of) Bonds:
10 yr., Series 268, 1.50%, 3/20/15 [JPY] 2,523,000,000 21,296,256
Series 7, 0.80%, 3/10/16 [JPY] 5,368,056,000 44,469,090
----------------
65,765,346
32 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MALAYSIA--0.4%
Johor Corp. Malaysia (Government of) Bonds, Series P3, 1%, 7/31/12 5 [MYR] 57,058,000 $ 17,173,097
- ------------------------------------------------------------------------------------------------------------------------------------
Malaysia (Government of) Bonds, Series 2/05, 4.72%, 9/30/15 [MYR] 26,605,000 7,246,400
----------------
24,419,497
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO--0.9%
Mexican Williams Sr. Nts., 6.03%, 11/15/08 1,5 1,500,000 1,545,938
- ------------------------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds:
7.50%, 4/8/33 35,543,000 41,087,708
8.30%, 8/15/31 2,000,000 2,499,000
11.375%, 9/15/16 45,000 64,688
- ------------------------------------------------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%, 1/14/12 18,630,000 20,493,000
----------------
65,690,334
- ------------------------------------------------------------------------------------------------------------------------------------
NIGERIA--0.1%
Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20 5 3,585,000 3,578,278
- ------------------------------------------------------------------------------------------------------------------------------------
Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 2,312,295 2,182,603
----------------
5,760,881
- ------------------------------------------------------------------------------------------------------------------------------------
PANAMA--0.7%
Panama (Republic of) Bonds:
6.70%, 1/26/36 39,951,000 39,751,245
9.375%, 4/1/29 5,500,000 7,122,500
----------------
46,873,745
- ------------------------------------------------------------------------------------------------------------------------------------
PERU--1.6%
Peru (Republic of) Bonds:
7.35%, 7/21/25 7,075,000 7,577,325
7.84%, 8/12/20 [PEN] 102,295,000 33,409,443
8.20%, 8/12/26 5 [PEN] 10,835,000 3,609,333
8.375%, 5/3/16 3,210,000 3,715,575
9.91%, 5/5/15 [PEN] 63,042,000 23,268,520
Series 7, 8.60%, 8/12/17 [PEN] 24,020,000 8,284,554
Series 8-1, 12.25%, 8/10/11 [PEN] 10,583,000 4,060,056
- ------------------------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Past Due Interest Bonds, Series 20 yr., 5%, 3/7/17 1 1,064,000 1,053,360
- ------------------------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts., 4.533%, 2/28/16 8 24,145,946 13,542,254
- ------------------------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Unsec. Unsub. Bonds, 8.75%, 11/21/33 11,120,000 13,677,600
----------------
112,198,020
33 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES--1.3%
Philippines (Republic of the) Bonds:
8%, 1/15/16 $ 38,400,000 $ 42,336,000
8.375%, 2/15/11 5,050,000 5,454,000
9.50%, 2/2/30 9,510,000 11,744,850
- ------------------------------------------------------------------------------------------------------------------------------------
Philippines (Republic of the) Unsec. Bonds, 7.75%, 1/14/31 27,181,000 28,506,074
----------------
88,040,924
- ------------------------------------------------------------------------------------------------------------------------------------
POLAND--0.7%
Poland (Republic of) Bonds:
Series 0K0807, 4.191%, 8/12/07 8 [PLZ] 36,350,000 11,172,606
Series DS1013, 5%, 10/24/13 [PLZ] 37,200,000 11,744,493
Series WS0922, 5.75%, 9/23/22 [PLZ] 8,540,000 2,744,177
Series 0511, 4.25%, 5/24/11 [PLZ] 77,135,000 23,499,001
----------------
49,160,277
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSIA--0.0%
Russian Ministry of Finance Debs., Series VII, 3%, 5/14/11 3,560,000 3,198,019
- ------------------------------------------------------------------------------------------------------------------------------------
TURKEY--0.4%
Turkey (Republic of) Bonds, 7%, 9/26/16 7,900,000 7,781,500
- ------------------------------------------------------------------------------------------------------------------------------------
Turkey (Republic of) Nts.:
7.25%, 3/15/15 9,675,000 9,771,750
9.50%, 1/15/14 6,050,000 6,912,125
11%, 1/14/13 2,590,000 3,128,979
----------------
27,594,354
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--1.3%
United Kingdom Treasury Bonds:
5%, 3/7/08 [GBP] 13,585,000 25,461,224
6%, 12/7/28 [GBP] 17,815,000 41,618,033
- ------------------------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 4%, 3/7/09 [GBP] 13,870,000 25,488,712
----------------
92,567,969
- ------------------------------------------------------------------------------------------------------------------------------------
URUGUAY--0.6%
Uruguay (Oriental Republic of) Bonds, 7.625%, 3/21/36 4,835,000 4,847,088
- ------------------------------------------------------------------------------------------------------------------------------------
Uruguay (Oriental Republic of) Unsec. Bonds:
5%, 9/14/18 [UYU] 222,660,000 9,560,630
8%, 11/18/22 23,935,000 25,371,100
----------------
39,778,818
----------------
Total Foreign Government Obligations (Cost $1,557,044,880) 1,595,915,445
34 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--28.0%
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--8.9%
- ------------------------------------------------------------------------------------------------------------------------------------
AUTO COMPONENTS--0.6%
Collins & Aikman Floorcoverings, Inc., 9.75% Sr. Sub. Nts.,
Series B, 2/15/10 $ 2,729,000 $ 2,729,000
- ------------------------------------------------------------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The):
7.857% Nts., 8/15/11 6,631,000 6,481,803
9% Sr. Unsec. Nts., 7/1/15 6,000,000 6,120,000
- ------------------------------------------------------------------------------------------------------------------------------------
Keystone Automotive Operations, Inc., 9.75% Sr. Unsec. Sub. Nts., 11/1/13 5 1,000,000 945,000
- ------------------------------------------------------------------------------------------------------------------------------------
Stoneridge, Inc., 11.50% Sr. Nts., 5/1/12 3,777,000 3,673,133
- ------------------------------------------------------------------------------------------------------------------------------------
Tenneco Automotive, Inc.:
8.625% Sr. Unsec. Sub. Nts., 11/15/14 4,051,000 4,020,618
10.25% Sr. Sec. Nts., Series B, 7/15/13 3,084,000 3,361,560
- ------------------------------------------------------------------------------------------------------------------------------------
United Components, Inc., 9.375% Sr. Sub. Nts., 6/15/13 1,700,000 1,691,500
- ------------------------------------------------------------------------------------------------------------------------------------
Visteon Corp.:
7% Sr. Unsec. Nts., 3/10/14 3,975,000 3,577,500
8.25% Sr. Unsec. Nts., 8/1/10 6,600,000 6,468,000
----------------
39,068,114
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES--1.1%
Ford Motor Co., 7.45% Bonds, 7/16/31 2,700,000 2,099,250
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co.:
5.625% Nts., 10/1/08 5,400,000 5,182,753
5.80% Sr. Unsec. Nts., 1/12/09 800,000 762,008
7.375% Nts., 10/28/09 18,550,000 18,039,059
7.375% Unsec. Nts., 2/1/11 1,950,000 1,873,359
9.957% Nts., 4/15/12 1 9,615,000 10,074,059
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
6.875% Nts., 9/15/11 15,360,000 15,294,413
7.25% Nts., 3/2/11 3,500,000 3,523,289
8% Bonds, 11/1/31 10,590,000 11,103,318
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Corp.:
7.20% Nts., 1/15/11 4,000,000 3,705,000
8.375% Sr. Unsec. Debs., 7/15/33 1,400,000 1,218,000
- ------------------------------------------------------------------------------------------------------------------------------------
Hertz Corp.:
8.875% Sr. Nts., 1/1/14 2 940,000 989,350
10.50% Sr. Sub. Nts., 1/1/16 2 4,255,000 4,701,775
----------------
78,565,633
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTORS--0.0%
SGS International, Inc., 12% Sr. Unsec. Sub. Nts., 12/15/13 2,825,000 2,867,375
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Education Management LLC/Education Management Corp.,
10.25% Sr. Sub. Nts., 6/1/16 2 3,345,000 3,436,988
35 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--2.0%
American Casino & Entertainment Properties LLC,
7.85% Sr. Sec. Nts., 2/1/12 $ 1,900,000 $ 1,938,000
- ------------------------------------------------------------------------------------------------------------------------------------
Aztar Corp., 9% Sr. Unsec. Sub. Nts., 8/15/11 4,101,000 4,300,924
- ------------------------------------------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12 4,566,000 4,817,130
- ------------------------------------------------------------------------------------------------------------------------------------
CCM Merger, Inc., 8% Unsec. Nts., 8/1/13 2 4,895,000 4,723,675
- ------------------------------------------------------------------------------------------------------------------------------------
Domino's, Inc., 8.25% Sr. Unsec. Sub. Nts., 7/1/11 2,391,000 2,522,505
- ------------------------------------------------------------------------------------------------------------------------------------
French Lick Resorts & Casino LLC, 10.75% First Mtg. Nts., 4/15/14 2 4,600,000 4,197,500
- ------------------------------------------------------------------------------------------------------------------------------------
Gaylord Entertainment Co.:
6.75% Sr. Unsec. Unsub. Nts., 11/15/14 700,000 672,875
8% Sr. Nts., 11/15/13 1,900,000 1,942,750
- ------------------------------------------------------------------------------------------------------------------------------------
Greektown Holdings, Inc., 10.75% Sr. Nts., 12/1/13 2 4,915,000 5,209,900
- ------------------------------------------------------------------------------------------------------------------------------------
Intrawest Corp., 7.50% Sr. Unsec. Nts., 10/15/13 3,382,000 3,648,333
- ------------------------------------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc.:
7% Sr. Unsec. Sub. Nts., 3/1/14 2,022,000 1,931,010
9% Sr. Sub. Nts., 3/15/12 7,132,000 7,479,685
- ------------------------------------------------------------------------------------------------------------------------------------
Mandalay Resort Group:
9.375% Sr. Sub. Nts., 2/15/10 3,370,000 3,618,538
10.25% Sr. Unsec. Sub. Nts., Series B, 8/1/07 5,121,000 5,313,038
- ------------------------------------------------------------------------------------------------------------------------------------
MGM Mirage, Inc.:
6.75% Sr. Unsec. Nts., 4/1/13 3,200,000 3,160,000
8.375% Sr. Unsec. Sub. Nts., 2/1/11 6,110,000 6,400,531
9.75% Sr. Unsec. Sub. Nts., 6/1/07 1,200,000 1,234,500
- ------------------------------------------------------------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority:
6.125% Sr. Unsec. Sub. Nts., 2/15/13 1,670,000 1,640,775
6.375% Sr. Sub. Nts., 7/15/09 3,327,000 3,318,683
6.875% Sr. Unsec. Sub. Nts., 2/15/15 2,330,000 2,283,400
7.125% Sr. Unsec. Sub. Nts., 8/15/14 900,000 900,000
8% Sr. Sub. Nts., 4/1/12 2,950,000 3,068,000
- ------------------------------------------------------------------------------------------------------------------------------------
NCL Corp., 10.625% Sr. Unsub. Nts., 7/15/14 1,000,000 972,500
- ------------------------------------------------------------------------------------------------------------------------------------
Park Place Entertainment Corp., 7.875% Sr. Sub. Nts., 3/15/10 8,839,000 9,236,755
- ------------------------------------------------------------------------------------------------------------------------------------
Penn National Gaming, Inc., 6.75% Sr. Unsec. Sub. Nts., 3/1/15 1,665,000 1,629,619
- ------------------------------------------------------------------------------------------------------------------------------------
Pinnacle Entertainment, Inc., 8.25% Sr. Unsec. Sub. Nts., 3/15/12 6,950,000 7,071,625
- ------------------------------------------------------------------------------------------------------------------------------------
Pokagon Gaming Authority, 10.375% Sr. Nts., 6/15/14 2 2,265,000 2,426,381
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Cruise Ltd., 11% Sr. Nts., 3/15/08 4,5,15 10,800,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Six Flags, Inc.:
8.875% Sr. Unsec. Nts., 2/1/10 3,226,000 3,105,025
9.625% Sr. Nts., 6/1/14 1,368,000 1,224,360
9.75% Sr. Nts., 4/15/13 1,050,000 950,250
- ------------------------------------------------------------------------------------------------------------------------------------
Station Casinos, Inc.:
6.50% Sr. Unsec. Sub. Nts., 2/1/14 10,325,000 9,718,406
6.875% Sr. Unsec. Sub. Nts., 3/1/16 1,580,000 1,489,150
- ------------------------------------------------------------------------------------------------------------------------------------
Trump Entertainment Resorts, Inc., 8.50% Sec. Nts., 6/1/15 8,600,000 8,266,750
- ------------------------------------------------------------------------------------------------------------------------------------
Universal City Development Partners Ltd., 11.75% Sr. Nts., 4/1/10 3,858,000 4,176,285
36 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE Continued
Vail Resorts, Inc., 6.75% Sr. Sub. Nts., 2/15/14 $ 1,500,000 $ 1,473,750
- ------------------------------------------------------------------------------------------------------------------------------------
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 6.625% Nts., 12/1/14 10,403,000 10,142,925
----------------
136,205,533
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.4%
Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12 6,554,000 6,554,000
- ------------------------------------------------------------------------------------------------------------------------------------
D.R. Horton, Inc., 9.75% Sr. Sub. Nts., 9/15/10 2,738,000 3,010,792
- ------------------------------------------------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12 2,803,000 2,760,955
- ------------------------------------------------------------------------------------------------------------------------------------
KB Home:
8.625% Sr. Sub. Nts., 12/15/08 2,474,000 2,547,898
9.50% Sr. Unsec. Sub. Nts., 2/15/11 1,200,000 1,231,500
- ------------------------------------------------------------------------------------------------------------------------------------
Sealy Mattress Co., 8.25% Sr. Sub. Nts., 6/15/14 1,971,000 2,020,275
- ------------------------------------------------------------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12 2,025,000 1,964,250
- ------------------------------------------------------------------------------------------------------------------------------------
Toll Corp., 8.25% Sr. Sub. Nts., 12/1/11 1,925,000 1,977,938
- ------------------------------------------------------------------------------------------------------------------------------------
WCI Communities, Inc., 9.125% Sr. Sub. Nts., 5/1/12 3,570,000 3,213,000
- ------------------------------------------------------------------------------------------------------------------------------------
William Lyon Homes, Inc., 10.75% Sr. Nts., 4/1/13 3,521,000 3,256,925
----------------
28,537,533
- ------------------------------------------------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Leslie's Poolmart, Inc., 7.75% Sr. Unsec. Nts., 2/1/13 3,450,000 3,415,500
- ------------------------------------------------------------------------------------------------------------------------------------
Steinway Musical Instruments, Inc., 7% Sr. Nts., 3/1/14 2 1,955,000 1,925,675
----------------
5,341,175
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA--3.8%
Adelphia Communications Corp.:
7.875% Sr. Unsec. Nts., 5/1/09 4,15 1,400,000 857,500
8.125% Sr. Nts., Series B, 7/15/03 4,15 2,325,000 1,447,313
8.375% Sr. Nts., Series B, 2/1/08 4,15 4,236,000 2,636,910
9.25% Sr. Unsec. Nts., Series B, 10/1/02 4,15 6,065,000 3,760,300
9.875% Sr. Nts., Series B, 3/1/07 4,15 1,800,000 1,120,500
10.25% Sr. Unsec. Sub. Nts., 6/15/11 4,15 800,000 522,000
10.875% Sr. Unsec. Nts., 10/1/10 4,15 200,000 124,500
- ------------------------------------------------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/12 4,246,000 4,299,075
- ------------------------------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc.:
8% Sr. Unsec. Sub. Nts., 3/1/14 1,550,000 1,464,750
9.50% Sr. Unsec. Sub. Nts., 2/1/11 3,409,000 3,421,784
- ------------------------------------------------------------------------------------------------------------------------------------
American Media Operations, Inc.:
8.875% Sr. Unsec. Sub. Nts., 1/15/11 975,000 860,438
10.25% Sr. Unsec. Sub. Nts., Series B, 5/1/09 3,750,000 3,506,250
- ------------------------------------------------------------------------------------------------------------------------------------
Block Communications, Inc., 8.25% Sr. Nts., 12/15/15 2 2,290,000 2,244,200
37 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA Continued
Charter Communications Holdings II LLC/Charter Communications
Holdings II Capital Corp.:
10.25% Sr. Unsec. Nts., 9/15/10 $ 1,300,000 $ 1,332,500
10.25% Sr. Unsec. Nts., Series B, 9/15/10 3,830,000 3,906,600
- ------------------------------------------------------------------------------------------------------------------------------------
Charter Communications Operating LLC/Charter Communications
Operating Capital Corp., 8.375% Sr. Nts., Second Lien, 4/30/14 2 20,029,000 20,454,616
- ------------------------------------------------------------------------------------------------------------------------------------
Cinemark USA, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/13 2,229,000 2,323,733
- ------------------------------------------------------------------------------------------------------------------------------------
Cinemark, Inc., 0%/9.75% Sr. Unsec. Disc. Nts., 3/15/14 13 7,129,000 5,721,023
- ------------------------------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc.:
7.25% Sr. Nts., 4/15/12 2 2,950,000 2,953,688
7.625% Sr. Unsec. Debs., 7/15/18 900,000 925,875
7.625% Sr. Unsec. Unsub. Nts., Series B, 4/1/11 6,419,000 6,619,594
- ------------------------------------------------------------------------------------------------------------------------------------
Dex Media East LLC/Dex Media East Finance Co.,
9.875% Sr. Unsec. Nts., 11/15/09 4,240,000 4,489,100
- ------------------------------------------------------------------------------------------------------------------------------------
Dex Media West LLC/Dex Media West Finance Co.:
8.50% Sr. Nts., 8/15/10 2,509,000 2,603,088
9.875% Sr. Sub. Nts., 8/15/13 4,431,000 4,807,635
- ------------------------------------------------------------------------------------------------------------------------------------
Dex Media, Inc.:
0%/9% Unsec. Disc. Nts., 11/15/13 13 3,600,000 3,051,000
8% Unsec. Nts., 11/15/13 14,633,000 14,596,418
- ------------------------------------------------------------------------------------------------------------------------------------
DirecTV Holdings LLC/DirecTV Financing Co., Inc.,
6.375% Sr. Unsec. Nts., 6/15/15 2,700,000 2,551,500
- ------------------------------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp.:
6.625% Sr. Unsec. Nts., 10/1/14 6,188,000 5,901,805
7% Sr. Nts., 10/1/13 2,3 2,150,000 2,112,375
7.125% Sr. Nts., 2/1/16 2 2,200,000 2,136,750
- ------------------------------------------------------------------------------------------------------------------------------------
Emmis Operating Co., 6.875% Sr. Unsec. Sub. Nts., 5/15/12 3,296,000 3,308,360
- ------------------------------------------------------------------------------------------------------------------------------------
Entercom Radio LLC/Entercom Capital, Inc.,
7.625% Sr. Unsec. Sub. Nts., 3/1/14 1,925,000 1,888,906
- ------------------------------------------------------------------------------------------------------------------------------------
Granite Broadcasting Corp., 9.75% Sr. Sec. Nts., 12/1/10 648,000 602,640
- ------------------------------------------------------------------------------------------------------------------------------------
Lamar Media Corp.:
6.625% Sr. Unsec. Sub. Nts., 8/15/15 4,023,000 3,877,166
7.25% Sr. Unsec. Sub. Nts., 1/1/13 1,800,000 1,820,250
- ------------------------------------------------------------------------------------------------------------------------------------
Lin Television Corp., 6.50% Sr. Sub. Nts., 5/15/13 3,233,000 3,030,938
- ------------------------------------------------------------------------------------------------------------------------------------
Marquee Holdings, Inc., 0%/12% Sr. Disc. Nts., 8/15/14 13 7,400,000 5,698,000
- ------------------------------------------------------------------------------------------------------------------------------------
Mediacom Broadband LLC, 8.50% Sr. Nts., 10/15/15 2,3 4,910,000 4,903,863
- ------------------------------------------------------------------------------------------------------------------------------------
Mediacom Broadband LLC/Mediacom Broadband Corp.,
8.50% Sr. Nts., 10/15/15 1,895,000 1,892,631
- ------------------------------------------------------------------------------------------------------------------------------------
Mediacom LLC/Mediacom Capital Corp., 9.50% Sr. Unsec. Nts., 1/15/13 4,855,000 4,988,513
- ------------------------------------------------------------------------------------------------------------------------------------
MediaNews Group, Inc.:
6.375% Sr. Sub. Nts., 4/1/14 1,900,000 1,686,250
6.875% Sr. Unsec. Sub. Nts., 10/1/13 4,775,000 4,440,750
- ------------------------------------------------------------------------------------------------------------------------------------
Nielsen Finance LLC/Nielsen Finance Co.:
0%/12.50% Sr. Sub. Disc. Nts., 8/1/16 2,13 5,360,000 3,169,100
10% Sr. Nts., 8/1/14 2 7,265,000 7,546,519
38 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA Continued
NTL Cable plc, 9.125% Sr. Nts., 8/15/16 $ 1,475,000 $ 1,530,313
- ------------------------------------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 11.757% Sr. Sec. Nts., 1/15/13 1,5 4,225,000 4,277,813
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMEDIA, Inc.:
8% Sr. Nts., 5/15/13 5,317,000 4,851,763
8.875% Sr. Unsec. Nts., 5/15/11 1,718,000 1,687,935
- ------------------------------------------------------------------------------------------------------------------------------------
Quebecor World Capital Corp., 8.75% Sr. Nts., 3/15/16 2 1,600,000 1,548,000
- ------------------------------------------------------------------------------------------------------------------------------------
R.H. Donnelley Corp.:
6.875% Sr. Disc. Nts., Series A-1, 1/15/13 10,815,000 9,922,763
6.875% Sr. Disc. Nts., Series A-2, 1/15/13 10,155,000 9,317,213
6.875% Sr. Nts., 1/15/13 6,800,000 6,239,000
8.875% Sr. Unsec. Nts., Series A-3, 1/15/16 11,110,000 11,193,325
- ------------------------------------------------------------------------------------------------------------------------------------
R.H. Donnelley Financial Corp. I, 10.875% Sr. Sub. Nts., 12/15/12 2 4,340,000 4,795,700
- ------------------------------------------------------------------------------------------------------------------------------------
Radio One, Inc., 8.875% Sr. Unsec. Sub. Nts., Series B, 7/1/11 2,992,000 3,070,540
- ------------------------------------------------------------------------------------------------------------------------------------
Rainbow National Services LLC, 8.75% Sr. Nts., 9/1/12 2 1,999,000 2,148,925
- ------------------------------------------------------------------------------------------------------------------------------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27 [CAD] 14,037,000 13,429,808
- ------------------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.:
8% Sr. Unsec. Sub. Nts., 3/15/12 11,275,000 11,486,406
8.75% Sr. Sub. Nts., 12/15/11 1,100,000 1,152,250
- ------------------------------------------------------------------------------------------------------------------------------------
Sirius Satellite Radio, Inc., 9.625% Sr. Unsec. Nts., 8/1/13 800,000 786,000
- ------------------------------------------------------------------------------------------------------------------------------------
Vertis, Inc.:
9.75% Sr. Sec. Nts., 4/1/09 3,666,000 3,716,408
10.875% Sr. Unsec. Nts., Series B, 6/15/09 3,100,000 3,131,000
- ------------------------------------------------------------------------------------------------------------------------------------
Warner Music Group, 7.375% Sr. Sub. Bonds, 4/15/14 2,300,000 2,254,000
- ------------------------------------------------------------------------------------------------------------------------------------
WMG Holdings Corp., 0%/9.50% Sr. Disc. Nts., 12/15/14 13 9,185,000 6,888,750
- ------------------------------------------------------------------------------------------------------------------------------------
XM Satellite Radio, Inc., 9.75% Sr. Nts., 5/1/14 2 800,000 772,000
----------------
265,806,618
- ------------------------------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL--0.2%
Bon-Ton Stores, Inc. (The), 10.25% Sr. Unsec. Unsub. Nts., 3/15/14 7,700,000 7,526,750
- ------------------------------------------------------------------------------------------------------------------------------------
Neiman Marcus Group, Inc. (The):
9% Sr. Unsec. Nts., 10/15/15 6,770,000 7,226,975
10.375% Sr. Unsec. Sub. Nts., 10/15/15 2,060,000 2,235,100
----------------
16,988,825
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--0.3%
Asbury Automotive Group, Inc., 9% Sr. Sub. Nts., 6/15/12 5,880,000 6,049,050
- ------------------------------------------------------------------------------------------------------------------------------------
Atlantic Broadband Finance LLC, 9.375% Sr. Unsec. Sub. Nts., 1/15/14 1,000,000 982,500
- ------------------------------------------------------------------------------------------------------------------------------------
Boise Cascade LLC, 7.125% Sr. Unsec. Sub. Nts., 10/15/14 3,327,000 3,119,063
- ------------------------------------------------------------------------------------------------------------------------------------
Just For Feet, Inc., 11% Sr. Sub. Nts., 5/1/09 4,5,15 4,300,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Linens 'N Things, Inc., 11.132% Sr. Sec. Nts., 1/15/14 1,2 4,635,000 4,495,950
39 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL Continued
Petco Animal Supplies, Inc., 10.75% Sr. Sub. Nts., 11/1/11 5 $ 3,851,000 $ 4,082,060
- ------------------------------------------------------------------------------------------------------------------------------------
Rent-A-Center, Inc., 7.50% Sr. Unsec. Sub. Nts., Series B, 5/1/10 1,650,000 1,666,500
----------------
20,395,123
- ------------------------------------------------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.3%
Invista, Inc., 9.25% Sr. Nts., 5/1/12 2 5,830,000 6,194,375
- ------------------------------------------------------------------------------------------------------------------------------------
Levi Strauss & Co.:
9.75% Sr. Unsec. Unsub. Nts., 1/15/15 3,888,000 4,053,240
10.258% Sr. Unsec. Unsub. Nts., 4/1/12 1 4,570,000 4,729,950
- ------------------------------------------------------------------------------------------------------------------------------------
Oxford Industries, Inc., 8.875% Sr. Nts., 6/1/11 5 1,650,000 1,691,250
- ------------------------------------------------------------------------------------------------------------------------------------
Quiksilver, Inc., 6.875% Sr. Unsec. Nts., 4/15/15 2,865,000 2,728,913
----------------
19,397,728
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--1.0%
- ------------------------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.1%
Constellation Brands, Inc.:
7.25% Sr. Nts., 9/1/16 1,635,000 1,661,569
8.125% Sr. Sub. Nts., 1/15/12 2,025,000 2,103,469
----------------
3,765,038
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.2%
Jean Coutu Group (PJC), Inc. (The), 8.50% Sr. Sub. Nts., 8/1/14 6,697,000 6,479,348
- ------------------------------------------------------------------------------------------------------------------------------------
Real Time Data Co., 11% Disc. Nts., 5/31/09 4,5,15 8,836,185 --
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Corp.:
8.125% Sr. Sec. Nts., 5/1/10 3,801,000 3,829,508
9.50% Sr. Sec. Nts., 2/15/11 3,225,000 3,349,969
----------------
13,658,825
- ------------------------------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
Del Monte Corp.:
6.75% Sr. Unsec. Sub. Nts., 2/15/15 1,325,000 1,285,250
8.625% Sr. Sub. Nts., 12/15/12 3,955,000 4,167,581
- ------------------------------------------------------------------------------------------------------------------------------------
Dole Food Co., Inc.:
8.625% Sr. Nts., 5/1/09 1,838,000 1,805,835
8.875% Sr. Unsec. Nts., 3/15/11 623,000 599,638
- ------------------------------------------------------------------------------------------------------------------------------------
Hines Nurseries, Inc., 10.25% Sr. Unsec. Sub. Nts., 10/1/11 3,500,000 3,176,250
- ------------------------------------------------------------------------------------------------------------------------------------
Smithfield Foods, Inc.:
7.625% Sr. Unsec. Sub. Nts., 2/15/08 3,336,000 3,402,720
8% Sr. Nts., Series B, 10/15/09 1,300,000 1,365,000
- ------------------------------------------------------------------------------------------------------------------------------------
United Biscuits Finance plc, 10.75% Sr. Sub. Nts., 4/15/11 [GBP] 4,351,000 8,594,832
----------------
24,397,106
40 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.1%
Church & Dwight Co., Inc., 6% Sr. Unsec. Sub. Nts., 12/15/12 $ 2,000,000 $ 1,925,000
- ------------------------------------------------------------------------------------------------------------------------------------
Nutro Products, Inc., 10.75% Sr. Sub. Nts., 4/15/14 2 1,460,000 1,569,500
- ------------------------------------------------------------------------------------------------------------------------------------
Spectrum Brands, Inc., 7.375% Sr. Unsec. Sub. Nts., 2/1/15 2,550,000 2,052,750
----------------
5,547,250
- ------------------------------------------------------------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.2%
Elizabeth Arden, Inc., 7.75% Sr. Unsec. Sub. Nts., 1/15/14 3,800,000 3,743,000
- ------------------------------------------------------------------------------------------------------------------------------------
Playtex Products, Inc.:
8% Sr. Sec. Nts., 3/1/11 3,092,000 3,223,410
9.375% Sr. Unsec. Sub. Nts., 6/1/11 3,588,000 3,767,400
----------------
10,733,810
- ------------------------------------------------------------------------------------------------------------------------------------
TOBACCO--0.1%
Reynolds American, Inc., 7.25% Sr. Sec. Nts., 6/1/13 2 8,170,000 8,448,009
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY--3.7%
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.2%
Basic Energy Services, Inc., 7.125% Sr. Nts., 4/15/16 2 1,600,000 1,552,000
- ------------------------------------------------------------------------------------------------------------------------------------
Dresser, Inc., 9.875% Sr. Unsec. Sub. Nts., 4/15/11 1 1,829,000 1,922,736
- ------------------------------------------------------------------------------------------------------------------------------------
Hanover Compressor Co., 8.625% Sr. Unsec. Sub. Nts., 12/15/10 1,100,000 1,149,500
- ------------------------------------------------------------------------------------------------------------------------------------
Hanover Equipment Trust, 8.50% Sr. Sec. Nts., Series A, 9/1/08 807,000 821,123
- ------------------------------------------------------------------------------------------------------------------------------------
PHI, Inc., 7.125% Sr. Nts., 4/15/13 2 1,920,000 1,828,800
- ------------------------------------------------------------------------------------------------------------------------------------
RathGibson, Inc., 11.25% Sr. Nts., 2/15/14 2 1,590,000 1,645,650
- ------------------------------------------------------------------------------------------------------------------------------------
Universal Compression, Inc., 7.25% Sr. Unsec. Sub. Nts., 5/15/10 3,281,000 3,322,013
----------------
12,241,822
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS--3.5%
Arch Western Finance LLC, 6.75% Sr. Nts., 7/1/13 3,281,000 3,166,165
- ------------------------------------------------------------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125% Sr. Unsec. Nts., 12/15/15 1,635,000 1,671,788
- ------------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp.:
6.375% Sr. Unsec. Nts., 6/15/15 2,000,000 1,920,000
6.875% Sr. Unsec. Nts., 1/15/16 6,473,000 6,359,723
- ------------------------------------------------------------------------------------------------------------------------------------
Clayton Williams Energy, Inc., 7.75% Sr. Unsec. Nts., 8/1/13 640,000 579,200
- ------------------------------------------------------------------------------------------------------------------------------------
Compton Petroleum Finance Corp., 7.625% Sr. Nts., 12/1/13 6,345,000 6,154,650
- ------------------------------------------------------------------------------------------------------------------------------------
Copano Energy LLC, 8.125% Sr. Unsec. Nts., 3/1/16 950,000 966,625
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Corp., 7.875% Sr. Unsec. Nts., 6/15/12 6,140,000 6,400,950
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Energy Corp., 7.625% Nts., 7/15/11 4,453,000 4,586,590
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Production Holding Co., 7.75% Sr. Unsec. Nts., 6/1/13 9,966,000 10,240,065
- ------------------------------------------------------------------------------------------------------------------------------------
Forest Oil Corp., 7.75% Sr. Nts., 5/1/14 3,570,000 3,623,550
- ------------------------------------------------------------------------------------------------------------------------------------
Foundation PA Coal Co., 7.25% Sr. Unsec. Nts., 8/1/14 900,000 909,000
- ------------------------------------------------------------------------------------------------------------------------------------
Frontier Oil Corp., 6.625% Sr. Unsec. Nts., 10/1/11 2,775,000 2,788,875
41 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS Continued
Gaz Capital SA, 8.625% Sr. Unsec. Nts., 4/28/34 2 $ 23,680,000 $ 29,540,800
- ------------------------------------------------------------------------------------------------------------------------------------
Inergy LP/Inergy Finance Corp., 8.25% Sr. Unsec. Nts., 3/1/16 1,535,000 1,596,400
- ------------------------------------------------------------------------------------------------------------------------------------
Massey Energy Co., 6.875% Sr. Unsec. Nts., 12/15/13 1,620,000 1,474,200
- ------------------------------------------------------------------------------------------------------------------------------------
National Gas Co., 6.05% Nts., 1/15/36 2 8,195,000 7,893,162
- ------------------------------------------------------------------------------------------------------------------------------------
Newfield Exploration Co., 6.625% Sr. Unsec. Sub. Nts., 9/1/14 3,600,000 3,541,500
- ------------------------------------------------------------------------------------------------------------------------------------
Pacific Energy Partners LP/Pacific Energy Finance Corp.,
6.25% Sr. Unsec. Nts., 9/15/15 640,000 633,600
- ------------------------------------------------------------------------------------------------------------------------------------
Peabody Energy Corp., 6.875% Sr. Unsec. Nts., Series B, 3/15/13 3,377,000 3,343,230
- ------------------------------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust:
7.375% Unsec. Unsub. Nts., 12/15/14 8,661,000 9,384,194
8.50% Unsub. Nts., 2/15/08 3,586,000 3,717,786
9.125% Unsec. Unsub. Nts., 10/13/10 7,746,000 8,691,012
- ------------------------------------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV, 5.265% Sr. Nts., Cl. A3, 6/15/11 2 27,864,373 27,468,671
- ------------------------------------------------------------------------------------------------------------------------------------
Pogo Producing Co., 7.875% Sr. Sub. Nts., 5/1/13 2 1,610,000 1,648,238
- ------------------------------------------------------------------------------------------------------------------------------------
Premcor Refining Group, Inc., 9.50% Sr. Nts., 2/1/13 5,314,000 5,792,249
- ------------------------------------------------------------------------------------------------------------------------------------
Quicksilver Resources, Inc., 7.125% Sr. Sub. Nts., 4/1/16 4,200,000 4,000,500
- ------------------------------------------------------------------------------------------------------------------------------------
Range Resources Corp.:
6.375% Sr. Sub. Nts., 3/15/15 2,465,000 2,354,075
7.50% Sr. Sub. Nts., 5/15/16 6,525,000 6,590,250
- ------------------------------------------------------------------------------------------------------------------------------------
Southern Natural Gas Co.:
7.35% Nts., 2/15/31 5,502,000 5,728,814
8% Sr. Unsub. Nts., 3/1/32 4,332,000 4,811,245
8.875% Sr. Nts., 3/15/10 2,599,000 2,738,475
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Energy Corp.:
6.75% Sr. Unsec. Sub. Nts., 12/15/14 3,150,000 3,165,750
8.25% Sr. Unsec. Sub. Nts., 12/15/11 1,000,000 1,017,500
- ------------------------------------------------------------------------------------------------------------------------------------
Targa Resources, Inc., 8.50% Sr. Nts., 11/1/13 2 3,265,000 3,273,163
- ------------------------------------------------------------------------------------------------------------------------------------
Teekay Shipping Corp., 8.875% Sr. Nts., 7/15/11 1,925,000 2,040,500
- ------------------------------------------------------------------------------------------------------------------------------------
Tengizchevroil LLP, 6.124% Nts., 11/15/14 2 17,587,000 17,499,065
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds, 4/1/17 12,126,000 12,831,685
- ------------------------------------------------------------------------------------------------------------------------------------
Tesoro Corp.:
6.25% Sr. Nts., 11/1/12 2 2,450,000 2,373,438
6.625% Sr. Nts., 11/1/15 2 3,750,000 3,628,125
- ------------------------------------------------------------------------------------------------------------------------------------
Transcontinental Gas Pipe Line Corp., 6.40% Sr. Nts., 4/15/16 2 2,240,000 2,226,000
- ------------------------------------------------------------------------------------------------------------------------------------
Whiting Petroleum Corp.:
7.25% Sr. Sub. Nts., 5/1/12 2,000,000 1,970,000
7.25% Sr. Unsec. Sub. Nts., 5/1/13 600,000 591,000
- ------------------------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The):
7.125% Nts., 9/1/11 9,762,000 10,054,860
7.625% Nts., 7/15/19 600,000 627,000
8.75% Unsec. Nts., 3/15/32 3,825,000 4,207,500
42 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS Continued
Williams Holdings of Delaware, Inc., 6.50% Nts., 12/1/08 5 $ 1,100,000 $ 1,094,500
----------------
246,915,668
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIALS--3.4%
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--0.2%
Berry Plastics Holding Corp.:
8.875% Sr. Sec. Nts., 9/15/14 2 2,450,000 2,474,500
9.265% Sr. Sec. Nts., 9/15/14 1,2 2,450,000 2,474,500
- ------------------------------------------------------------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc., 12% Sr. Unsec. Sub. Nts.,
Series B, 9/30/08 5 800,000 604,000
- ------------------------------------------------------------------------------------------------------------------------------------
E*TRADE Financial Corp.:
7.375% Sr. Unsec. Nts., 9/15/13 1,956,000 2,009,790
8% Sr. Nts., 6/15/11 2,710,000 2,818,400
----------------
10,381,190
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--1.9%
Banco BMG SA, 9.15% Nts., 1/15/16 2 16,590,000 16,672,950
- ------------------------------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07 5 4,012,000 4,312,900
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Bank plc:
9.751% Sr. Unsec. Nts., 7/8/09 8 16,420,000 9,852,000
11.601% Sr. Unsec. Nts., 1/12/10 8 21,550,000 10,947,400
12.278% Sr. Unsec. Nts., 3/9/09 8 16,420,000 9,342,980
- ------------------------------------------------------------------------------------------------------------------------------------
Inter-American Development Bank:
6.26% Nts., 12/8/09 1 [BRR] 7,210,000 3,140,527
7.889% Nts., 1/25/12 1 [COP] 7,054,142,895 3,140,448
- ------------------------------------------------------------------------------------------------------------------------------------
Kuznetski Capital SA/Bank of Moscow, 7.375% Nts., 11/26/10 5 12,565,000 12,879,125
- ------------------------------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/10 4,5,15 4,970,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
RSHB Capital SA/OJSC Russian Agricultural Bank, 7.175% Nts., 5/16/13 2 14,210,000 14,813,925
- ------------------------------------------------------------------------------------------------------------------------------------
Salisbury International Investments Ltd., 9.657% Sec. Nts.,
Series 2006-003, Tranche E, 7/20/11 1,5 4,800,000 4,800,000
- ------------------------------------------------------------------------------------------------------------------------------------
UBS Luxembourg SA, 6.23% Sub. Nts., 2/11/15 1 18,020,000 18,185,063
- ------------------------------------------------------------------------------------------------------------------------------------
VTB Capital SA, 6.25% Sr. Nts., 6/30/35 2 20,590,000 20,744,425
----------------
128,831,743
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE--0.0%
Ace Cash Express, Inc., 10.25% Sr. Nts., 10/1/14 2,3 615,000 625,763
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--0.9%
Affinia Group, Inc., 9% Sr. Unsec. Sub. Nts., 11/30/14 503,000 471,563
- ------------------------------------------------------------------------------------------------------------------------------------
Autopistas del Nordeste Cayman Ltd., 9.39% Nts., 1/15/26 5 10,758,721 10,489,753
- ------------------------------------------------------------------------------------------------------------------------------------
BCP Crystal US Holdings Corp., 9.625% Sr. Sub. Nts., 6/15/14 4,153,000 4,526,770
- ------------------------------------------------------------------------------------------------------------------------------------
Cloverie plc, 9.64% Sec. Nts., Series 2005-93, 12/20/10 1,5 6,400,000 6,408,960
43 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
Credit Suisse First Boston International, Export-Import Bank of Ukraine
Loan Participation Nts., 8.40%, 2/9/16 $ 12,520,000 $ 12,213,260
- ------------------------------------------------------------------------------------------------------------------------------------
Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp.,
0%/10.50% Sr. Unsec. Disc. Nts., Series B, 10/1/14 13 3,290,000 2,685,463
- ------------------------------------------------------------------------------------------------------------------------------------
Halyk Savings Bank Kazakhstan Europe BV, 7.75% Nts., 5/13/13 2 3,035,000 3,103,288
- ------------------------------------------------------------------------------------------------------------------------------------
Itabo Finance SA, 10.875% Nts., 10/5/13 2,3 2,602,000 2,649,096
- ------------------------------------------------------------------------------------------------------------------------------------
JSG Funding plc, 7.75% Sr. Unsec. Sub. Nts., 4/1/15 3,075,000 2,921,250
- ------------------------------------------------------------------------------------------------------------------------------------
Nell AF Sarl, 8.375% Sr. Nts., 8/15/15 2 4,815,000 4,802,963
- ------------------------------------------------------------------------------------------------------------------------------------
Reachcom Public Ltd., Renaissance Consumer Finance Bank of Russia
Loan Participation Nts., 10.50%, 7/27/07 5 [RUR] 83,000,000 3,102,159
- ------------------------------------------------------------------------------------------------------------------------------------
Tiers-BSP, 0%/8.60% Collateralized Trust, Cl. A, 6/15/97 5,13 14,015,000 4,905,250
- ------------------------------------------------------------------------------------------------------------------------------------
Universal City Florida:
8.375% Sr. Unsec. Nts., 5/1/10 1,000,000 1,008,750
10.239% Sr. Unsec. Nts., 5/1/10 1 1,000,000 1,032,500
----------------
60,321,025
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE--0.1%
Felcor Lodging LP, 8.50% Sr. Nts., 6/1/11 1 4,011,000 4,266,701
- ------------------------------------------------------------------------------------------------------------------------------------
Host Marriott LP, 6.375% Sr. Nts., Series O, 3/15/15 3,825,000 3,729,375
- ------------------------------------------------------------------------------------------------------------------------------------
Ventas Realty LP/Ventas Capital Corp., 6.75% Sr. Nts., 4/1/17 1,835,000 1,855,644
----------------
9,851,720
- ------------------------------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.3%
Banco Hipotecario SA, 9.75% Sr. Unsec. Nts., 4/27/16 5 7,210,000 7,372,225
- ------------------------------------------------------------------------------------------------------------------------------------
Bankunited Capital Trust, 10.25% Capital Securities, 12/31/26 5 9,675,000 10,207,125
- ------------------------------------------------------------------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875% Capital Nts., 8/1/27 5 5,054,000 5,344,605
----------------
22,923,955
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--1.1%
- ------------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY--0.0%
Angiotech Pharmaceuticals, Inc., 7.75% Sr. Sub. Nts., 4/1/14 2 1,605,000 1,532,775
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.1%
Inverness Medical Innovations, Inc., 8.75% Sr. Sub. Nts., 2/15/12 2,000,000 1,980,000
- ------------------------------------------------------------------------------------------------------------------------------------
Universal Hospital Services, Inc., 10.125% Sr. Unsec. Nts., 11/1/11 2,359,000 2,488,745
----------------
4,468,745
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--1.0%
AmeriPath, Inc., 10.50% Sr. Unsec. Sub. Nts., 4/1/13 2,796,000 2,977,740
- ------------------------------------------------------------------------------------------------------------------------------------
Community Health Systems, Inc., 6.50% Sr. Unsec. Sub. Nts., 12/15/12 3,231,000 3,105,799
- ------------------------------------------------------------------------------------------------------------------------------------
DaVita, Inc.:
6.625% Sr. Unsec. Nts., 3/15/13 3,330,000 3,267,563
7.25% Sr. Unsec. Sub. Nts., 3/15/15 5,260,000 5,194,250
44 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Extendicare Health Services, Inc.:
6.875% Sr. Sub. Nts., 5/1/14 $ 1,350,000 $ 1,451,250
9.50% Sr. Unsec. Sub. Nts., 7/1/10 1,929,000 2,032,684
- ------------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08 4,067,000 4,148,340
- ------------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust III, 7.375% Nts., 2/1/08 5 [DEM] 1,700,000 1,140,764
- ------------------------------------------------------------------------------------------------------------------------------------
Fresenius Medical Care Capital Trust IV, 7.875% Trust Preferred
Securities, 6/15/11 5 2,888,000 2,978,250
- ------------------------------------------------------------------------------------------------------------------------------------
Genesis HealthCare Corp., 8% Sr. Sub. Nts., 10/15/13 5 1,450,000 1,511,625
- ------------------------------------------------------------------------------------------------------------------------------------
HCA, Inc.:
6.30% Sr. Unsec. Nts., 10/1/12 4,007,000 3,400,941
6.375% Nts., 1/15/15 6,048,000 4,898,880
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTHSOUTH Corp., 10.75% Sr. Nts., 6/15/16 2 2,545,000 2,611,806
- ------------------------------------------------------------------------------------------------------------------------------------
Omnicare, Inc.:
6.75% Sr. Sub. Nts., 12/15/13 1,295,000 1,265,863
6.875% Sr. Sub. Nts., 12/15/15 1,620,000 1,581,525
- ------------------------------------------------------------------------------------------------------------------------------------
Psychiatric Solutions, Inc., 7.75% Sr. Unsec. Sub. Nts., 7/15/15 1,605,000 1,572,900
- ------------------------------------------------------------------------------------------------------------------------------------
Select Medical Corp., 7.625% Sr. Unsec. Sub. Nts., 2/1/15 8,285,000 7,021,538
- ------------------------------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
6.375% Sr. Nts., 12/1/11 3,170,000 2,801,488
7.375% Nts., 2/1/13 118,000 106,938
9.875% Sr. Nts., 7/1/14 10,584,000 10,597,230
- ------------------------------------------------------------------------------------------------------------------------------------
Triad Hospitals, Inc., 7% Sr. Sub. Nts., 11/15/13 1,585,000 1,547,356
- ------------------------------------------------------------------------------------------------------------------------------------
US Oncology, Inc.:
9% Sr. Unsec. Nts., 8/15/12 100,000 104,000
10.75% Sr. Unsec. Sub. Nts., 8/15/14 100,000 110,000
- ------------------------------------------------------------------------------------------------------------------------------------
Vanguard Health Holding Co. I LLC, 0%/11.25% Sr. Disc. Nts., 10/1/15 13 5,600,000 4,060,000
----------------
69,488,730
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--1.8%
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.3%
Alliant Techsystems, Inc., 6.75% Sr. Sub. Nts., 4/1/16 3,200,000 3,160,000
- ------------------------------------------------------------------------------------------------------------------------------------
BE Aerospace, Inc., 8.875% Sr. Unsec. Sub. Nts., 5/1/11 2,047,000 2,139,115
- ------------------------------------------------------------------------------------------------------------------------------------
DRS Technologies, Inc.:
6.625% Sr. Nts., 2/1/16 3,735,000 3,688,313
7.625% Sr. Sub. Nts., 2/1/18 1,110,000 1,132,200
- ------------------------------------------------------------------------------------------------------------------------------------
L-3 Communications Corp.:
5.875% Sr. Sub. Nts., 1/15/15 4,059,000 3,876,345
6.125% Sr. Unsec. Sub. Nts., 1/15/14 1,800,000 1,755,000
6.375% Sr. Unsec. Sub. Nts., Series B, 10/15/15 2,215,000 2,165,163
7.625% Sr. Sub. Nts., 6/15/12 600,000 621,000
45 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
TRW Automotive, Inc.:
9.375% Sr. Nts., 2/15/13 $ 2,024,000 $ 2,165,680
11% Sr. Sub. Nts., 2/15/13 1,720,000 1,883,400
----------------
22,586,216
- ------------------------------------------------------------------------------------------------------------------------------------
AIRLINES--0.0%
ATA Holdings Corp., 13% Sr. Unsec. Nts., 2/1/09 4,5,15 11,115,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING PRODUCTS--0.2%
Associated Materials, Inc., 9.75% Sr. Sub. Nts., 4/15/12 2,411,000 2,417,028
- ------------------------------------------------------------------------------------------------------------------------------------
Goodman Global Holding Co., Inc., 7.875% Sr. Unsec. Sub. Nts., 12/15/12 2,060,000 1,972,450
- ------------------------------------------------------------------------------------------------------------------------------------
Jacuzzi Brands, Inc., 9.625% Sr. Sec. Nts., 7/1/10 3,253,000 3,464,445
- ------------------------------------------------------------------------------------------------------------------------------------
Nortek, Inc., 8.50% Sr. Unsec. Unsub. Nts., 9/1/14 2,850,000 2,707,500
----------------
10,561,423
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.3%
Allied Waste North America, Inc.:
7.25% Sr. Nts., 3/15/15 815,000 812,963
7.375% Sr. Sec. Nts., Series B, 4/15/14 8,000,000 7,920,000
9.25% Sr. Sec. Debs., Series B, 9/1/12 267,000 286,024
- ------------------------------------------------------------------------------------------------------------------------------------
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05 4,5,15 3,462,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Cenveo Corp., 7.875% Sr. Sub. Nts., 12/1/13 3,200,000 3,048,000
- ------------------------------------------------------------------------------------------------------------------------------------
Corrections Corp. of America:
6.25% Sr. Unsec. Sub. Nts., 3/15/13 3,335,000 3,284,975
7.50% Sr. Nts., 5/1/11 1,500,000 1,541,250
- ------------------------------------------------------------------------------------------------------------------------------------
FTI Consulting, Inc., 7.75% Sr. Unsec. Nts., 10/1/16 2,3 2,150,000 2,182,250
- ------------------------------------------------------------------------------------------------------------------------------------
Mobile Services Group, Inc., 9.75% Sr. Nts., 8/1/14 2 490,000 504,700
----------------
19,580,162
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
IIRSA Norte Finance Ltd., 8.75% Sr. Nts., 5/30/24 5 9,750,000 10,115,625
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.2%
Belden & Blake Corp., 8.75% Sec. Nts., 7/15/12 550,000 567,875
- ------------------------------------------------------------------------------------------------------------------------------------
Dayton Superior Corp., 13% Sr. Unsec. Sub. Nts., 6/15/09 2,407,000 2,274,615
- ------------------------------------------------------------------------------------------------------------------------------------
Eletropaulo Metropolitana SA, 19.125% Nts., 6/28/10 5 [BRR] 8,285,000 4,239,094
- ------------------------------------------------------------------------------------------------------------------------------------
General Cable Corp., 9.50% Sr. Nts., 11/15/10 1,000,000 1,075,000
- ------------------------------------------------------------------------------------------------------------------------------------
UCAR Finance, Inc., 10.25% Sr. Nts., 2/15/12 2,411,000 2,543,605
----------------
10,700,189
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.0%
Covalence Specialty Materials Corp., 10.25% Sr. Sub. Nts., 3/1/16 2 1,950,000 1,901,250
- ------------------------------------------------------------------------------------------------------------------------------------
Great Lakes Dredge & Dock Co., 7.75% Sr. Unsec. Sub. Nts., 12/15/13 360,000 336,600
----------------
2,237,850
46 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MACHINERY--0.2%
Case New Holland, Inc., 7.125% Sr. Unsec. Nts., 3/1/14 $ 2,550,000 $ 2,572,313
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas Dynamics LLC, 7.75% Sr. Nts., 1/15/12 2 2,714,000 2,578,300
- ------------------------------------------------------------------------------------------------------------------------------------
Greenbrier Cos., Inc., 8.375% Sr. Unsec. Nts., 5/15/15 2,990,000 3,049,800
- ------------------------------------------------------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The), 7.125% Sr. Nts., 11/1/13 5 650,000 643,500
- ------------------------------------------------------------------------------------------------------------------------------------
Milacron Escrow Corp., 11.50% Sr. Sec. Nts., 5/15/11 5 4,055,000 3,872,525
- ------------------------------------------------------------------------------------------------------------------------------------
Trinity Industries, Inc., 6.50% Sr. Nts., 3/15/14 2,050,000 2,014,125
- ------------------------------------------------------------------------------------------------------------------------------------
Wolverine Tube, Inc.:
7.375% Sr. Nts., 8/1/08 2 600,000 513,000
10.50% Sr. Nts., 4/1/09 5 2,351,000 2,080,635
----------------
17,324,198
- ------------------------------------------------------------------------------------------------------------------------------------
ROAD & RAIL--0.2%
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.:
7.75% Sr. Nts., 5/15/16 2 1,595,000 1,547,150
7.905% Sr. Nts., 5/15/14 1,2 640,000 630,400
- ------------------------------------------------------------------------------------------------------------------------------------
Kansas City Southern Railway Co. (The), 7.50% Sr. Nts., 6/15/09 2,125,000 2,135,625
- ------------------------------------------------------------------------------------------------------------------------------------
Stena AB:
7% Sr. Unsec. Nts., 12/1/16 972,000 920,970
7.50% Sr. Unsec. Nts., 11/1/13 232,000 229,100
9.625% Sr. Nts., 12/1/12 5 3,820,000 4,125,600
- ------------------------------------------------------------------------------------------------------------------------------------
TDS Investor Corp., 11.875% Sr. Sub. Nts., 9/1/16 2 3,800,000 3,667,000
----------------
13,255,845
- ------------------------------------------------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.3%
Ashtead Capital, Inc., 9% Nts., 8/15/16 2 1,650,000 1,724,250
- ------------------------------------------------------------------------------------------------------------------------------------
H&E Equipment Services, Inc., 8.375% Sr. Nts., 7/15/16 2 1,815,000 1,869,450
- ------------------------------------------------------------------------------------------------------------------------------------
Interline Brands, Inc., 8.125% Sr. Sub. Nts., 6/15/14 1,645,000 1,673,788
- ------------------------------------------------------------------------------------------------------------------------------------
United Rentals, Inc., 7% Sr. Sub. Nts., 2/15/14 15,909,000 15,034,005
----------------
20,301,493
- ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.3%
Loral Skynet Corp., 14% Sr. Sec. Nts., 11/21/15 5,14 2,188,000 2,559,960
- ------------------------------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 6.45% Unsec. Debs., 3/15/29 13,199,000 11,813,105
- ------------------------------------------------------------------------------------------------------------------------------------
Nortel Networks Ltd.:
9.731% Sr. Nts., 7/15/11 1,2 1,630,000 1,691,125
10.75% Sr. Nts., 7/15/16 2 1,300,000 1,397,500
- ------------------------------------------------------------------------------------------------------------------------------------
Orion Network Systems, Inc., 12.50% Sr. Unsub. Disc. Nts., 1/15/07 4,15 12,679,000 127
----------------
17,461,817
47 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.1%
Seagate Technology HDD Holdings:
6.375% Sr. Nts., 10/1/11 $ 3,060,000 $ 3,060,000
6.80% Sr. Nts., 10/1/16 920,000 920,000
8% Sr. Nts., 5/15/09 2,518,000 2,618,745
----------------
6,598,745
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.3%
Flextronics International Ltd., 6.25% Sr. Sub. Nts., 11/15/14 7,006,000 6,830,850
- ------------------------------------------------------------------------------------------------------------------------------------
RBS Global & Rexnord Corp.:
9.50% Sr. Nts., 8/1/14 5 3,280,000 3,345,600
11.75% Sr. Sub. Nts., 8/1/16 5 4,915,000 5,087,025
- ------------------------------------------------------------------------------------------------------------------------------------
Sanmina-SCI Corp.:
6.75% Unsec. Sub. Nts., 3/1/13 1,700,000 1,610,750
8.125% Sr. Sub. Nts., 3/1/16 3,970,000 3,910,450
- ------------------------------------------------------------------------------------------------------------------------------------
Solectron Global Finance Ltd., 8% Sr. Unsec. Sub. Nts., 3/15/16 2,225,000 2,213,875
----------------
22,998,550
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.0%
Exodus Communications, Inc., 10.75% Sr. Nts., 12/15/09 4,5,15 [EUR] 2,116,376 --
- ------------------------------------------------------------------------------------------------------------------------------------
NorthPoint Communications Group, Inc., 12.875% Nts., 2/15/10 4,5,15 2,081,799 --
- ------------------------------------------------------------------------------------------------------------------------------------
PSINet, Inc., 10.50% Sr. Unsec. Nts., 12/1/06 4,5,15 [EUR] 6,650,000 --
----------------
--
- ------------------------------------------------------------------------------------------------------------------------------------
IT SERVICES--0.3%
DI Finance/DynCorp International LLC, 9.50% Sr. Unsec. Sub. Nts.,
Series B, 2/15/13 4,340,000 4,513,600
- ------------------------------------------------------------------------------------------------------------------------------------
iPayment Holdings, Inc., 9.75% Sr. Sub. Nts., 5/15/14 5 1,900,000 1,947,500
- ------------------------------------------------------------------------------------------------------------------------------------
Iron Mountain, Inc., 7.75% Sr. Sub. Nts., 1/15/15 4,182,000 4,202,910
- ------------------------------------------------------------------------------------------------------------------------------------
SunGard Data Systems, Inc.:
9.125% Sr. Unsec. Nts., 8/15/13 4,370,000 4,544,800
10.25% Sr. Unsec. Sub. Nts., 8/15/15 8,150,000 8,435,250
----------------
23,644,060
- ------------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--0.2%
Advanced Micro Devices, Inc., 7.75% Sr. Unsec. Nts., 11/1/12 6,701,000 6,818,268
- ------------------------------------------------------------------------------------------------------------------------------------
Amkor Technology, Inc., 7.75% Sr. Nts., 5/15/13 6,800,000 6,264,500
----------------
13,082,768
48 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
MATERIALS--3.0%
- ------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.6%
Equistar Chemicals LP/Equistar Funding Corp.:
8.75% Sr. Unsec. Nts., 2/15/09 $ 4,644,000 $ 4,829,760
10.125% Sr. Unsec. Nts., 9/1/08 118,000 125,523
10.625% Sr. Unsec. Nts., 5/1/11 1,351,000 1,455,703
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia Gulf Corp., 10.75% Sr. Sub. Nts., 10/15/16 4,910,000 4,836,350
- ------------------------------------------------------------------------------------------------------------------------------------
Huntsman International LLC:
8.375% Sr. Sub. Nts., 1/1/15 1,2 1,811,000 1,838,165
10.125% Sr. Unsec. Sub. Nts., 7/1/09 4,243,000 4,327,860
- ------------------------------------------------------------------------------------------------------------------------------------
Huntsman LLC:
11.50% Sr. Unsec. Nts., 7/15/12 1 706,000 806,605
11.625% Sr. Unsec. Nts., 10/15/10 76,000 84,360
- ------------------------------------------------------------------------------------------------------------------------------------
IMC Global, Inc., 10.875% Sr. Unsec. Nts., 8/1/13 5 118,000 132,160
- ------------------------------------------------------------------------------------------------------------------------------------
Ineos Group Holdings plc, 8.50% Nts., 2/15/16 2 3,650,000 3,494,875
- ------------------------------------------------------------------------------------------------------------------------------------
Innophos, Inc., 8.875% Sr. Unsec. Sub. Nts., 8/15/14 1,090,000 1,087,275
- ------------------------------------------------------------------------------------------------------------------------------------
KI Holdings, Inc., 0%/9.875% Sr. Unsec. Sub. Disc. Nts., 11/15/14 13 2,650,000 1,961,000
- ------------------------------------------------------------------------------------------------------------------------------------
Lyondell Chemical Co.:
8% Sr. Unsec. Nts., 9/15/14 4,590,000 4,670,325
8.25% Sr. Unsec. Nts., 9/15/16 2,450,000 2,499,000
9.50% Sec. Nts., 12/15/08 70,000 72,363
10.50% Sr. Sec. Nts., 6/1/13 3,875,000 4,281,875
- ------------------------------------------------------------------------------------------------------------------------------------
Rockwood Specialties Group, Inc.:
7.50% Sr. Sub. Nts., 11/15/14 1,350,000 1,336,500
10.625% Sr. Unsec. Sub. Nts., 5/15/11 875,000 940,625
- ------------------------------------------------------------------------------------------------------------------------------------
Tronox Worldwide LLC/Tronox Finance Corp., 9.50% Sr. Unsec. Nts., 12/1/12 2 2,810,000 2,897,813
----------------
41,678,137
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.1%
NTK Holdings, Inc., 0%/10.75% Sr. Disc. Nts., 3/1/14 13 5,990,000 4,163,050
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING--1.1%
Ball Corp., 6.625% Sr. Nts., 3/15/18 4,500,000 4,432,500
- ------------------------------------------------------------------------------------------------------------------------------------
Crown Americas, Inc., 7.75% Sr. Nts., 11/15/15 3,810,000 3,876,675
- ------------------------------------------------------------------------------------------------------------------------------------
Graham Packaging Co., Inc.:
8.50% Sr. Unsec. Nts., 10/15/12 1,300,000 1,293,500
9.875% Sr. Unsec. Sub. Nts., 10/15/14 5,614,000 5,543,825
- ------------------------------------------------------------------------------------------------------------------------------------
Graphic Packaging International Corp.:
8.50% Sr. Nts., 8/15/11 5,738,000 5,895,795
9.50% Sr. Sub. Nts., 8/15/13 2,555,000 2,625,263
- ------------------------------------------------------------------------------------------------------------------------------------
Jefferson Smurfit Corp., 8.25% Sr. Unsec. Nts., 10/1/12 3,950,000 3,801,875
- ------------------------------------------------------------------------------------------------------------------------------------
MDP Acquisitions plc, 9.625% Sr. Nts., 10/1/12 3,281,000 3,477,860
49 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING Continued
Owens-Brockway Glass Container, Inc.:
7.75% Sr. Sec. Nts., 5/15/11 $ 2,792,000 $ 2,882,740
8.25% Sr. Unsec. Nts., 5/15/13 1,618,000 1,666,540
8.75% Sr. Sec. Nts., 11/15/12 7,702,000 8,164,120
8.875% Sr. Sec. Nts., 2/15/09 5,700,000 5,885,250
- ------------------------------------------------------------------------------------------------------------------------------------
Pliant Corp., 11.85% Sr. Sec. Nts., 6/15/09 4 2,143,765 2,401,017
- ------------------------------------------------------------------------------------------------------------------------------------
Solo Cup Co., 8.50% Sr. Sub. Nts., 2/15/14 6,158,000 5,349,763
- ------------------------------------------------------------------------------------------------------------------------------------
Stone Container Corp.:
8.375% Sr. Nts., 7/1/12 3,145,000 3,034,925
9.75% Sr. Unsec. Nts., 2/1/11 6,879,000 7,119,765
- ------------------------------------------------------------------------------------------------------------------------------------
Tekni-Plex, Inc., 10.875% Sr. Sec. Nts., 8/15/12 2 960,000 1,080,000
- ------------------------------------------------------------------------------------------------------------------------------------
TriMas Corp., 9.875% Sr. Unsec. Sub. Nts., 6/15/12 6,543,000 6,084,990
----------------
74,616,403
- ------------------------------------------------------------------------------------------------------------------------------------
METALS & MINING--0.9%
AK Steel Corp.:
7.75% Sr. Unsec. Nts., 6/15/12 3,768,000 3,687,930
7.875% Sr. Unsec. Nts., 2/15/09 1,379,000 1,380,724
- ------------------------------------------------------------------------------------------------------------------------------------
Alrosa Finance SA:
8.875% Nts., 11/17/14 17,015,000 19,397,100
8.875% Nts., 11/17/14 2 8,645,000 9,855,300
- ------------------------------------------------------------------------------------------------------------------------------------
Century Aluminum Co., 7.50% Sr. Unsec. Nts., 8/15/14 2,055,000 2,065,275
- ------------------------------------------------------------------------------------------------------------------------------------
Gibraltar Industries, Inc., 8% Sr. Unsec. Sub. Nts., Series B, 12/1/15 5 1,970,000 1,960,150
- ------------------------------------------------------------------------------------------------------------------------------------
International Utility Structures, Inc., 13% Unsec. Sub. Nts., 2/1/08 4,5,15 1,586,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
IPSCO, Inc., 8.75% Sr. Nts., 6/1/13 1,000,000 1,070,000
- ------------------------------------------------------------------------------------------------------------------------------------
Ispat Inland ULC, 9.75% Sr. Sec. Nts., 4/1/14 2,974,000 3,354,003
- ------------------------------------------------------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 9.75% Sr. Sec. Nts., 6/1/12 5,406,000 5,791,178
- ------------------------------------------------------------------------------------------------------------------------------------
Koppers Industry, Inc., 9.875% Sr. Sec. Nts., 10/15/13 2,172,000 2,362,050
- ------------------------------------------------------------------------------------------------------------------------------------
Northwest Pipeline Corp., 8.125% Sr. Nts., 3/1/10 1,100,000 1,149,500
- ------------------------------------------------------------------------------------------------------------------------------------
Novelis, Inc., 8.25% Sr. Nts., 2/15/15 1,2 7,180,000 6,856,900
- ------------------------------------------------------------------------------------------------------------------------------------
Steel Dynamics, Inc., 9.50% Sr. Nts., 3/15/09 2,125,000 2,202,031
- ------------------------------------------------------------------------------------------------------------------------------------
United States Steel Corp.:
9.75% Sr. Nts., 5/15/10 1,949,000 2,090,303
10.75% Sr. Nts., 8/1/08 3,197,000 3,472,741
----------------
66,695,185
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.3%
Abitibi-Consolidated Co. of Canada, 8.375% Sr. Unsec. Sub. Nts., 4/1/15 3,900,000 3,568,500
- ------------------------------------------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc.:
8.55% Nts., 8/1/10 1,925,000 1,920,188
8.85% Unsec. Bonds, 8/1/30 1,200,000 1,014,000
- ------------------------------------------------------------------------------------------------------------------------------------
Buckeye Technologies, Inc., 8.50% Sr. Nts., 10/1/13 1,500,000 1,511,250
50 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS Continued
Catalyst Paper Corp., 8.625% Sr. Unsec. Nts., Series D, 6/15/11 $ 1,100,000 $ 1,086,250
- ------------------------------------------------------------------------------------------------------------------------------------
Domtar, Inc., 7.125% Nts., 8/15/15 1,400,000 1,309,000
- ------------------------------------------------------------------------------------------------------------------------------------
Inland Fiber Group LLC, 9.625% Sr. Unsec. Nts., 11/15/07 4,5,15 6,414,000 4,008,750
- ------------------------------------------------------------------------------------------------------------------------------------
JSG Holding plc, 11.50% Sr. Nts., 10/1/15 2,14 [EUR] 1,157,197 1,500,404
- ------------------------------------------------------------------------------------------------------------------------------------
Mercer International, Inc., 9.25% Sr. Nts., 2/15/13 1,665,000 1,525,556
- ------------------------------------------------------------------------------------------------------------------------------------
Norske Skog Canada Ltd., 7.375% Sr. Unsec. Nts., 3/1/14 2,600,000 2,405,000
- ------------------------------------------------------------------------------------------------------------------------------------
Verso Paper Holdings LLC/Verson Paper, Inc.:
9.235%, Sr. Sec. Nts., 8/1/14 1,2 1,975,000 2,004,625
11.375% Sr. Sub. Nts., 8/1/16 2 1,975,000 1,970,063
----------------
23,823,586
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.3%
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.2%
Citizens Communications Co., 6.25% Sr. Nts., 1/15/13 2 12,700,000 12,414,250
- ------------------------------------------------------------------------------------------------------------------------------------
Exodus Communications, Inc., 10.75% Sr. Unsec. Sub. Nts., 12/15/09 4,5,15 6,401,538 --
- ------------------------------------------------------------------------------------------------------------------------------------
Intelsat Bermuda Ltd., 11.25% Sr. Nts., 6/15/16 2 3,355,000 3,581,463
- ------------------------------------------------------------------------------------------------------------------------------------
Intelsat Subsidiary Holding Co. Ltd.:
8.25% Sr. Nts., 1/15/13 1 4,000,000 4,070,000
8.625% Sr. Nts., 1/15/15 1 3,595,000 3,693,863
- ------------------------------------------------------------------------------------------------------------------------------------
Level 3 Financing, Inc., 10.75% Sr. Unsec. Unsub. Nts., 10/15/11 800,000 841,000
- ------------------------------------------------------------------------------------------------------------------------------------
Nordic Telephone Co. Holdings ApS, 8.875% Sr. Nts., 5/1/16 2 1,590,000 1,679,438
- ------------------------------------------------------------------------------------------------------------------------------------
PanAmSat Corp.:
9% Sr. Nts., 6/15/16 2 3,280,000 3,394,800
9% Sr. Unsec. Nts., 8/15/14 5,470,000 5,675,125
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest Capital Funding, Inc.:
7.25% Unsec. Unsub. Nts., 2/15/11 2,200,000 2,211,000
7.90% Unsec. Nts., 8/15/10 5,197,000 5,365,903
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest Communications International, Inc., 7.25% Sr. Unsec. Sub. Nts., 2/15/11 1 1,500,000 1,507,500
- ------------------------------------------------------------------------------------------------------------------------------------
Qwest Corp.:
7.50% Sr. Nts., 10/1/14 2 3,275,000 3,397,813
8.875% Unsec. Unsub. Nts., 3/15/12 1 13,690,000 15,007,663
- ------------------------------------------------------------------------------------------------------------------------------------
Telefonica del Peru SA, 8% Sr. Unsec. Bonds, 4/11/16 5 [PEN] 20,898,900 6,806,657
- ------------------------------------------------------------------------------------------------------------------------------------
Teligent, Inc., 11.50% Sr. Nts., 12/1/07 4,5,15 5,035,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Time Warner Telecom Holdings, Inc., 9.25% Sr. Unsec. Unsub. Nts., 2/15/14 7,670,000 8,111,025
- ------------------------------------------------------------------------------------------------------------------------------------
Valor Telecommunications Enterprises LLC, 7.75% Sr. Unsec. Sub. Nts., 2/15/15 1,665,000 1,781,550
- ------------------------------------------------------------------------------------------------------------------------------------
Windstream Corp.:
8.125% Sr. Nts., 8/1/13 2 2,445,000 2,606,981
8.625% Sr. Nts., 8/1/16 2 2,445,000 2,628,375
----------------
84,774,406
51 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.1%
Alamosa Delaware, Inc.:
8.50% Sr. Nts., 1/31/12 $ 200,000 $ 214,000
11% Sr. Unsec. Nts., 7/31/10 118,000 129,505
- ------------------------------------------------------------------------------------------------------------------------------------
American Cellular Corp., 10% Sr. Nts., Series B, 8/1/11 6,820,000 7,178,050
- ------------------------------------------------------------------------------------------------------------------------------------
American Tower Corp.:
7.125% Sr. Unsec. Nts., 10/15/12 750,000 772,500
7.50% Sr. Nts., 5/1/12 5 3,247,000 3,352,528
- ------------------------------------------------------------------------------------------------------------------------------------
CellNet Data Systems, Inc., Sr. Unsec. Disc. Nts., 10/1/07 4,5,15 21,702,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Centennial Cellular Operating Co. LLC/Centennial Communications Corp.,
10.125% Sr. Nts., 6/15/13 6,810,000 7,269,675
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Cellular Systems, Inc., 8.375% Sr. Sec. Nts., 11/1/11 1,010,000 1,054,188
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp.:
8.875% Sr. Nts., 10/1/13 3,294,000 3,281,648
9.757% Sr. Unsec. Nts., 10/15/12 1 955,000 978,875
- ------------------------------------------------------------------------------------------------------------------------------------
IWO Holdings, Inc., 9.257% Sr. Sec. Nts., 1/15/12 1 850,000 877,625
- ------------------------------------------------------------------------------------------------------------------------------------
Nextel Communications, Inc., 7.375% Sr. Nts., Series D, 8/1/15 10 18,460,000 19,065,100
- ------------------------------------------------------------------------------------------------------------------------------------
Nextel Partners, Inc., 8.125% Sr. Nts., 7/1/11 200,000 211,000
- ------------------------------------------------------------------------------------------------------------------------------------
Rogers Wireless, Inc.:
7.50% Sec. Nts., 3/15/15 4,931,000 5,288,498
8% Sr. Sub. Nts., 12/15/12 3,844,000 4,103,470
- ------------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp.:
9.75% Sr. Sub. Nts., 1/15/10 10,663,000 10,782,959
9.875% Sr. Nts., 2/1/10 5,468,000 5,727,730
- ------------------------------------------------------------------------------------------------------------------------------------
UbiquiTel Operating Co., 9.875% Sr. Nts., 3/1/11 2,503,000 2,728,270
----------------
73,015,621
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.6%
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.7%
Edison Mission Energy:
7.50% Sr. Nts., 6/15/13 2 1,610,000 1,634,150
7.75% Sr. Nts., 6/15/16 2 2,255,000 2,294,463
- ------------------------------------------------------------------------------------------------------------------------------------
ESI Tractebel Acquisition Corp., 7.99% Sec. Bonds, Series B, 12/30/11 403,000 417,681
- ------------------------------------------------------------------------------------------------------------------------------------
Midwest Generation LLC, 8.75% Sr. Sec. Nts., 5/1/34 10,991,000 11,787,848
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Americas Generation LLC, Escrow Shares, 5/1/07 5 2,214,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
MSW Energy Holdings LLC/MSW Energy Finance Co., Inc.,
8.50% Sr. Sec. Nts., 9/1/10 1,650,000 1,707,750
- ------------------------------------------------------------------------------------------------------------------------------------
National Power Corp., 9.625% Unsec. Bonds, 5/15/28 11,790,000 13,640,865
- ------------------------------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc., 6.75% Sr. Sec. Nts., 12/15/14 900,000 860,625
- ------------------------------------------------------------------------------------------------------------------------------------
Reliant Resources, Inc.:
9.25% Sr. Sec. Nts., 7/15/10 1,970,000 2,053,725
9.50% Sr. Sec. Nts., 7/15/13 4,460,000 4,649,550
- ------------------------------------------------------------------------------------------------------------------------------------
Sierra Pacific Resources, 6.75% Sr. Unsec. Nts., 8/15/17 6,894,000 6,931,379
----------------
45,978,036
52 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY TRADERS--0.8%
AES Corp. (The), 8.75% Sr. Sec. Nts., 5/15/13 2 $ 8,898,000 $ 9,587,595
- ------------------------------------------------------------------------------------------------------------------------------------
Aes Dominicana Energia Finance SA, 11% Sr. Nts., 12/13/15 5 3,330,000 3,446,550
- ------------------------------------------------------------------------------------------------------------------------------------
AES Red Oak LLC, 8.54% Sr. Sec. Bonds, Series A, 11/30/19 2,647,706 2,833,045
- ------------------------------------------------------------------------------------------------------------------------------------
Dynegy Holdings, Inc.:
6.875% Sr. Unsec. Unsub. Nts., 4/1/11 3,130,000 3,063,488
8.375% Sr. Unsec. Nts., 5/1/16 3,195,000 3,266,888
8.75% Sr. Nts., 2/15/12 1,335,000 1,390,069
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Americas Generation LLC:
8.30% Sr. Unsec. Nts., 5/1/11 13,900,000 13,986,875
8.50% Sr. Unsec. Nts., 10/1/21 1,300,000 1,267,500
9.125% Sr. Unsec. Nts., 5/1/31 2,700,000 2,760,750
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Mid-Atlantic LLC, 8.625% Sec. Pass-Through Certificates,
Series A, 6/30/12 3,384,693 3,589,890
- ------------------------------------------------------------------------------------------------------------------------------------
NRG Energy, Inc., 7.375% Sr. Nts., 2/1/16 14,525,000 14,470,531
----------------
59,663,181
- ------------------------------------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.0%
SEMCO Energy, Inc., 7.125% Sr. Nts., 5/15/08 1,300,000 1,298,951
- ------------------------------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.1%
CMS Energy Corp.:
7.50% Sr. Nts., 1/15/09 1,318,000 1,364,130
7.75% Sr. Nts., 8/1/10 1,650,000 1,740,750
8.50% Sr. Nts., 4/15/11 2,407,000 2,611,595
- ------------------------------------------------------------------------------------------------------------------------------------
NorthWestern Corp., 5.875% Sr. Sec. Nts., 11/1/14 670,000 662,432
----------------
6,378,907
----------------
Total Corporate Bonds and Notes (Cost $1,989,423,006) 1,943,278,223
SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
AmeriKing, Inc., 13% Cum. Sr. Exchangeable, Non-Vtg. 5,14,15 338,141 --
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp., 6% Cv., Series F (converts into Dobson
Communications Corp., Cl. A common stock), Non-Vtg. 2 8,195 1,372,663
- ------------------------------------------------------------------------------------------------------------------------------------
Eagle-Picher Holdings, Inc., 11.75% Cum. Exchangeable,
Series B, Non-Vtg. 5,15 43,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
ICG Holdings, Inc., 14.25% Exchangeable, Non-Vtg. 5,14,15 5,773 --
- ------------------------------------------------------------------------------------------------------------------------------------
ION Media Networks, Inc.:
14.25% Cum., Non-Vtg. 5,14 1,873 15,642,725
9.75% Cv., Series AI 5,14,15 -- 3,173
- ------------------------------------------------------------------------------------------------------------------------------------
Loral Skynet Corp., 12% Cum., Series A, Non-Vtg. 5,14 19,310 3,871,655
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Real Estate Investment Trust, 11% 51,500 2,842,800
- ------------------------------------------------------------------------------------------------------------------------------------
PTV, Inc., 10% Cum., Series A, Non-Vtg. 300 885
53 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Rural Cellular Corp., 11.375% Cum., Series B, Non-Vtg. 5,14 2,511 $ 3,057,143
- ------------------------------------------------------------------------------------------------------------------------------------
Sovereign Real Estate Investment Trust, 12% Non-Cum., Series A 5 61,550 8,693,938
----------------
Total Preferred Stocks (Cost $45,340,232) 35,484,982
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
3i Group plc 75,701 1,325,962
- ------------------------------------------------------------------------------------------------------------------------------------
American Tower Corp. 15 90,209 3,292,629
- ------------------------------------------------------------------------------------------------------------------------------------
Anglo American plc 30,900 1,300,919
- ------------------------------------------------------------------------------------------------------------------------------------
ATA Holdings Corp. 5,15 30,231 453,465
- ------------------------------------------------------------------------------------------------------------------------------------
BASF AG 16,527 1,327,005
- ------------------------------------------------------------------------------------------------------------------------------------
Bayer AG 27,682 1,407,601
- ------------------------------------------------------------------------------------------------------------------------------------
Beverly Hills Bancorp, Inc. 539,100 4,399,056
- ------------------------------------------------------------------------------------------------------------------------------------
BNP Paribas SA 12,860 1,383,664
- ------------------------------------------------------------------------------------------------------------------------------------
British Airways plc 15 175,350 1,401,907
- ------------------------------------------------------------------------------------------------------------------------------------
British Land Co. plc 52,770 1,347,681
- ------------------------------------------------------------------------------------------------------------------------------------
Brixton plc 136,800 1,354,963
- ------------------------------------------------------------------------------------------------------------------------------------
Cebridge Connections Holding LLC 5,15 56,470 --
- ------------------------------------------------------------------------------------------------------------------------------------
Charles River Laboratories International, Inc. 15 43,520 1,889,203
- ------------------------------------------------------------------------------------------------------------------------------------
Charter plc 15 93,910 1,499,845
- ------------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp. 431,648 12,509,159
- ------------------------------------------------------------------------------------------------------------------------------------
Chiquita Brands International, Inc. 88,293 1,181,360
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup, Inc. 1,106 54,935
- ------------------------------------------------------------------------------------------------------------------------------------
Commerzbank AG 39,240 1,329,545
- ------------------------------------------------------------------------------------------------------------------------------------
Corus Group plc 183,620 1,333,943
- ------------------------------------------------------------------------------------------------------------------------------------
Covad Communications Group, Inc. 15 174,581 260,126
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Agricole SA 33,760 1,482,921
- ------------------------------------------------------------------------------------------------------------------------------------
Daiwa Securities Group, Inc. 116,000 1,359,847
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Boerse AG 9,001 1,352,530
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Lufthansa AG 69,285 1,467,214
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Telekom AG 93,817 1,490,632
- ------------------------------------------------------------------------------------------------------------------------------------
Dobson Communications Corp., Cl. A 15 442,193 3,104,195
- ------------------------------------------------------------------------------------------------------------------------------------
Eagle Materials, Inc. 6,792 228,755
- ------------------------------------------------------------------------------------------------------------------------------------
El Paso Corp. 146,000 1,991,440
- ------------------------------------------------------------------------------------------------------------------------------------
Etablissements Economiques du Casino Guichard-Perrachon SA 15,990 1,288,551
- ------------------------------------------------------------------------------------------------------------------------------------
Euronext NV 15,250 1,482,244
- ------------------------------------------------------------------------------------------------------------------------------------
France Telecom SA 64,600 1,482,685
- ------------------------------------------------------------------------------------------------------------------------------------
Fujikura Ltd. 9 116,000 1,274,948
- ------------------------------------------------------------------------------------------------------------------------------------
Furukawa Electric Co., Ltd. (The) 199,762 1,325,710
54 | OPPENHEIMER STRATEGIC INCOME FUND
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Globix Corp. 15 107,797 $ 501,256
- ------------------------------------------------------------------------------------------------------------------------------------
Great Portland Estates plc 15 127,480 1,444,053
- ------------------------------------------------------------------------------------------------------------------------------------
Hammerson plc 56,620 1,390,879
- ------------------------------------------------------------------------------------------------------------------------------------
ICO Global Communication Holdings Ltd. 15 300,766 1,759,481
- ------------------------------------------------------------------------------------------------------------------------------------
Investec plc 107,120 1,051,966
- ------------------------------------------------------------------------------------------------------------------------------------
iPCS, Inc. 15 81,469 4,362,665
- ------------------------------------------------------------------------------------------------------------------------------------
Ishikawajima-Harima Heavy Industries Co. Ltd. 474,000 1,456,082
- ------------------------------------------------------------------------------------------------------------------------------------
JFE Holdings, Inc. 9 33,800 1,324,817
- ------------------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp. 15 28,135 1,247,506
- ------------------------------------------------------------------------------------------------------------------------------------
Ladish Co., Inc. 15 30,000 866,400
- ------------------------------------------------------------------------------------------------------------------------------------
Leap Wireless International, Inc. 15 28,354 1,374,885
- ------------------------------------------------------------------------------------------------------------------------------------
Legal & General Group plc 5,320 14,194
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Global, Inc., Series A 15 117,510 3,024,707
- ------------------------------------------------------------------------------------------------------------------------------------
Liberty Global, Inc., Series C 15 119,172 2,986,450
- ------------------------------------------------------------------------------------------------------------------------------------
London Stock Exchange Group plc 62,470 1,445,691
- ------------------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. 15 136,709 3,598,181
- ------------------------------------------------------------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 16,184 724,881
- ------------------------------------------------------------------------------------------------------------------------------------
Mirant Corp. 15 12,550 342,741
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchells & Butlers plc 1,260 13,907
- ------------------------------------------------------------------------------------------------------------------------------------
Mitsubishi Heavy Industries Ltd. 328,815 1,365,539
- ------------------------------------------------------------------------------------------------------------------------------------
Mitsubishi Materials Corp. 9 317,000 1,312,427
- ------------------------------------------------------------------------------------------------------------------------------------
Mittal Steel Co. NV 56,749 1,981,800
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley 20,600 1,501,946
- ------------------------------------------------------------------------------------------------------------------------------------
Muenchener Rueckversicherungs-Gesellschaft AG 9,050 1,431,617
- ------------------------------------------------------------------------------------------------------------------------------------
Nippon Kayaku Co. Ltd. 159,000 1,347,378
- ------------------------------------------------------------------------------------------------------------------------------------
Nippon Mining Holdings, Inc. 9 187,000 1,326,901
- ------------------------------------------------------------------------------------------------------------------------------------
Nomura Securities Co. Ltd. 71,300 1,255,484
- ------------------------------------------------------------------------------------------------------------------------------------
NTL, Inc. 602,120 15,311,912
- ------------------------------------------------------------------------------------------------------------------------------------
Odakyu Electric Railway Co. Ltd. 216,000 1,373,257
- ------------------------------------------------------------------------------------------------------------------------------------
Orbital Sciences Corp. 15 59,993 1,126,069
- ------------------------------------------------------------------------------------------------------------------------------------
PagesJaunes Groupe SA 47,810 1,358,015
- ------------------------------------------------------------------------------------------------------------------------------------
Pioneer Corp. 72,071 1,273,007
- ------------------------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., Cl. A 15 16,137 415,528
- ------------------------------------------------------------------------------------------------------------------------------------
Prandium, Inc. 5,15,16 1,034,256 8,274
- ------------------------------------------------------------------------------------------------------------------------------------
Premier Holdings Ltd. 5,15 799,833 --
- ------------------------------------------------------------------------------------------------------------------------------------
ProSieben Sat.1 Media AG 50,901 1,413,540
- ------------------------------------------------------------------------------------------------------------------------------------
Resolution plc 121,050 1,399,546
55 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Royal & Sun Alliance Insurance Group plc 520,050 $ 1,450,831
- ------------------------------------------------------------------------------------------------------------------------------------
Salzgitter AG 15,303 1,439,853
- ------------------------------------------------------------------------------------------------------------------------------------
Shinko Securities Co. Ltd. 342,000 1,359,165
- ------------------------------------------------------------------------------------------------------------------------------------
Showa Shell Sekiyu K.K. 122,000 1,359,170
- ------------------------------------------------------------------------------------------------------------------------------------
Societe Generale, Cl. A 8,500 1,352,697
- ------------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners LP 15 220 548
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. 5,15 10,861 142,279
- ------------------------------------------------------------------------------------------------------------------------------------
Sumitomo Metal Industries 9 334,960 1,289,041
- ------------------------------------------------------------------------------------------------------------------------------------
TVMAX Holdings, Inc. 5,15 59,250 59,250
- ------------------------------------------------------------------------------------------------------------------------------------
Vallourec SA 6,120 1,422,681
- ------------------------------------------------------------------------------------------------------------------------------------
Verizon Communications, Inc. 32,985 1,224,733
- ------------------------------------------------------------------------------------------------------------------------------------
Viatel Holding (Bermuda) Ltd. 5,15 43,569 1,743
- ------------------------------------------------------------------------------------------------------------------------------------
Vivendi SA 39,660 1,429,774
- ------------------------------------------------------------------------------------------------------------------------------------
Volkswagen AG, Preference 24,268 1,431,816
- ------------------------------------------------------------------------------------------------------------------------------------
Walter Industries, Inc. 57,800 2,466,904
- ------------------------------------------------------------------------------------------------------------------------------------
Western Forest Products, Inc. 9,15 680,382 998,279
- ------------------------------------------------------------------------------------------------------------------------------------
WRC Media Corp. 5,15 16,235 162
- ------------------------------------------------------------------------------------------------------------------------------------
XO Holdings, Inc. 15 40,006 195,229
- ------------------------------------------------------------------------------------------------------------------------------------
Xstrata plc 30,550 1,262,406
----------------
Total Common Stocks (Cost $138,859,194) 141,404,183
UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
ASAT Finance LLC Wts., Exp. 11/1/06 5,15 2,200 --
- ------------------------------------------------------------------------------------------------------------------------------------
ATA Holdings Corp. Wts., Exp. 2/28/11 15 2,497 18,543
- ------------------------------------------------------------------------------------------------------------------------------------
COLO.com, Inc. Wts., Exp. 3/15/10 5,15 6,650 --
- ------------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/15/07 5,15 5,250 --
- ------------------------------------------------------------------------------------------------------------------------------------
DeCrane Aircraft Holdings, Inc. Wts., Exp. 9/30/08 5,15 800 --
- ------------------------------------------------------------------------------------------------------------------------------------
HF Holdings, Inc. Wts., Exp. 9/27/09 5,15 34,425 --
- ------------------------------------------------------------------------------------------------------------------------------------
iPCS, Inc. Wts., Exp. 6/15/10 5,15 6,600 --
- ------------------------------------------------------------------------------------------------------------------------------------
Long Distance International, Inc. Wts., Exp. 4/13/08 5,15 4,560 --
- ------------------------------------------------------------------------------------------------------------------------------------
Ntelos, Inc. Wts., Exp. 8/15/10 5,15 8,500 --
- ------------------------------------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc. Wts., Exp. 9/19/10 15 6,738 2,224
- ------------------------------------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. Wts., Exp. 12/19/08 15 17,634 13
- ------------------------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Oil Linked Payment Obligation Wts.,
Exp. 4/15/20 5,15 9,035 329,778
- ------------------------------------------------------------------------------------------------------------------------------------
Verado Holdings, Inc., Cl. B Wts., Exp. 4/15/08 15 7,500 5,197
56 | OPPENHEIMER STRATEGIC INCOME FUND
VALUE
UNITS SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
XO Communications, Inc.:
Series A Wts., Exp. 1/16/10 15 80,025 $ 72,023
Series B Wts., Exp. 1/16/10 15 60,020 36,012
Series C Wts., Exp. 1/16/10 15 60,020 22,808
- ------------------------------------------------------------------------------------------------------------------------------------
Ziff Davis Holdings, Inc. Wts., Exp. 8/12/12 5,15 44,000 440
----------------
Total Rights, Warrants and Certificates (Cost $885,987) 487,038
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--14.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Aiolos Ltd. Catastrophe Linked Nts., 7.812%, 4/8/09 1,2 [EUR] 4,850,000 6,071,494
- ------------------------------------------------------------------------------------------------------------------------------------
Atlantic & Western Re Ltd. Catastrophe Linked Nts., Series B,
15.44%, 11/15/10 1 6,500,000 6,120,238
- ------------------------------------------------------------------------------------------------------------------------------------
Calabash Re Ltd. Catastrophe Linked Nts., Cl. A-1, 13.90%, 5/26/09 1,5 6,250,000 6,304,375
- ------------------------------------------------------------------------------------------------------------------------------------
Cascadia Ltd. Catastrophe Nts.:
8.515%, 6/13/08 1,2 2,750,000 2,715,103
9.40%, 8/31/09 1 3,950,000 3,942,298
- ------------------------------------------------------------------------------------------------------------------------------------
Cat-Mex Ltd. Catastrophe Linked Nts., Cl. A, 7.754%, 5/18/09 1,5 5,000,000 5,007,750
- ------------------------------------------------------------------------------------------------------------------------------------
Champlain Ltd. Catastrophe Linked Nts., Series A, 18.239%, 1/7/09 1 5,250,000 5,206,950
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc.:
Argentina (Republic of) Credit Linked Nts., 4%, 5/22/08 17 [ARP] 10,355,000 8,873,522
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR] 21,585,000 9,159,652
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR] 33,875,000 14,374,947
Brazil (Federal Republic of) Unsec. Credit Linked Nts.,
14.809%, 1/5/10 8 [BRR] 18,237,724 5,454,374
Brazil (Federal Republic of) Unsec. Credit Linked Nts.,
15.427%, 1/2/09 8 [BRR] 17,433,522 5,977,494
Brazil (Federal Republic of) Unsec. Credit Linked Nts.,
15.728%, 1/3/08 8 [BRR] 15,201,753 5,961,565
Colombia (Republic of) Credit Linked Bonds, 11%, 7/24/20 [COP] 7,230,000,000 3,335,636
Colombia (Republic of) Credit Linked Nts., Series II, 15%, 4/27/12 [COP] 4,311,848,685 2,198,245
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 10,085,000,000 5,141,484
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 8,162,000,000 4,161,110
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 6,891,000,000 3,513,135
Dominican Republic Unsec. Credit Linked Nts., 11.648%, 9/24/07
(linked to Dominican Republic Treasury Bills) 3,8 [DOP] 272,500,000 7,148,314
Dominican Republic Credit Linked Nts., 11.242%, 1/2/7
(linked to Dominican Republic Treasury Bills) 8 [DOP] 58,700,000 1,690,560
Dominican Republic Credit Linked Nts., 14.608%, 5/14/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 142,700,000 3,926,664
Dominican Republic Credit Linked Nts., 16.50%, 3/12/07
(linked to Dominican Republic Treasury Bills) [DOP] 132,800,000 3,736,882
Dominican Republic Credit Linked Nts., 17%, 3/12/07 [DOP] 145,400,000 4,396,257
Dominican Republic Credit Linked Nts., Series II, 15.603%, 4/23/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 56,010,000 1,553,189
57 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc.: Continued
Dominican Republic Unsec. Credit Linked Nts., 15.638%, 4/30/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 50,870,000 $ 1,407,046
Dominican Republic Unsec. Credit Linked Nts., Series II, 15.736%, 4/30/07
(linked to Dominican Republic Treasury Bills) 8 [DOP] 111,530,000 3,084,880
Egypt (The Arab Republic of) Credit Linked Nts., 8.70%, 7/12/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 32,570,000 5,283,982
Egypt (The Arab Republic of) Credit Linked Nts., 9.079%, 3/22/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 3,900,000 651,102
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.50%, 2/16/08
(linked to Egyptian Treasury Bills) [EGP] 23,760,000 4,095,538
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.775%, 2/22/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 31,030,000 5,215,899
Nigeria (Federal Republic of) Credit Linked Nts., 12.474%, 7/22/07 8 [NGN] 907,570,000 6,540,727
Nigeria (Federal Republic of) Credit Linked Nts., 14.50%, 3/1/11 [NGN] 1,761,000,000 14,159,620
Nigeria (Federal Republic of) Credit Linked Nts., Series II,
14.50%, 4/4/11 [NGN] 1,281,000,000 10,309,181
Ukraine Hryvnia Unsec. Credit Linked Nts., 11.94%, 1/4/10 [UAH] 6,470,000 1,402,177
Zambia (Republic of) Credit Linked Nts., 11%, 2/21/07
(linked to Zambian Treasury Bills) [ZMK] 16,410,000,000 3,737,549
Zambia (Republic of) Credit Linked Nts., Series II, 11%, 2/21/07
(linked to Zambian Treasury Bills) [ZMK] 6,700,000,000 1,525,995
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston International:
Indonesia (Republic of) Total Return Linked Nts., 12%, 9/16/11 [IDR] 68,000,000,000 7,750,157
Lukoil Credit Linked Nts., Series Fbi 105, 7.25%, 11/17/09 [RUR] 232,499,000 8,817,760
Moscow (City of) Credit Linked Nts., Series Fbi 101, 10%, 12/31/10 5 [RUR] 211,690,000 8,958,638
Moscow (City of) Credit Linked Nts., Series Fbi 98, 11%, 4/23/09 [RUR] 221,305,000 9,280,370
OAO Gazprom Credit Linked Nts., 8.11%, 1/21/07 [RUR] 230,095,000 8,798,134
Russian Unified Energy Systems Credit Linked Nts., Series Fbi 108,
8.80%, 12/20/07 [RUR] 553,980,000 21,808,478
South African Rand Interest Bearing Linked Nts., Series FBi 43, 5.175%, 5/23/22 1 14,280,000 14,387,100
Ukraine (Republic of) Credit Linked Nts., Series EMG 13, 11.94%, 12/30/09 [UAH] 15,823,000 3,511,699
- ------------------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. (Nassau Branch):
Turkey (Republic of) Credit Linked Nts., Series 2, 20.853%, 7/16/08 3,8 [TRY] 25,240,000 11,663,963
Turkey (Republic of) Credit Linked Nts., Series EM 880, 20%, 10/18/07 9,712,912 9,355,802
Ukraine (Republic of) Credit Linked Nts., Series EMG 11, 11.94%, 12/30/09 [UAH] 4,771,000 1,058,858
Ukraine (Republic of) Credit Linked Nts., Series NPC 12, 11.94%, 12/30/09 [UAH] 30,720,000 6,817,886
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Argentina (Republic of) Credit Linked Nts., 4%, 12/21/11 [ARP] 19,110,000 15,331,099
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA
de CV Credit Linked Nts., 9.09%, 1/5/11 5 [MXN] 75,701,012 6,885,666
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA
de CV Credit Linked Nts., 9.65%, 1/5/11 5 [MXN] 49,570,093 4,525,740
Brazil Real Credit Linked Nts., 13.882%, 3/3/10 8 [BRR] 33,618,120 11,741,526
58 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG: Continued
Brazil Real Credit Linked Nts., 6%, 8/18/10 [BRR] 10,875,000 $ 7,175,646
Campania Total Return Linked Nts., 3.804%, 7/30/10 1,5 [EUR] 36,800,000 46,417,063
Campania Total Return Linked Nts., 3.846%, 7/30/10 1,5 [EUR] 31,000,000 39,156,364
Colombia (Republic of) Credit Linked Nts., 13.50%, 9/15/14 [COP] 8,506,000,000 4,281,863
Egypt (The Arab Republic of) Total Return Linked Nts., 8.328%, 12/12/06
(linked to Egyptian Treasury Bills) 8 [EGP] 46,890,000 8,007,732
Egypt (The Arab Republic of) Total Return Linked Nts., 9.170%, 1/30/07
(linked to Egyptian Treasury Bills) 5,8 [EGP] 18,000,000 3,060,814
European Investment Bank, Russian Federation Credit Linked Nts.,
5.502%, 1/19/10 8 5,580,000 4,752,207
Grupo TMM SA Credit Linked Nts., 6%, 9/7/12 5 10,485,000 10,499,522
Halyk Bank of Kazakhstan Total Return Linked Nts., Series I,
7.25%, 3/24/09 [KZT] 1,345,160,000 10,861,648
Indonesia (Republic of) Credit Linked Nts., 9.50%, 6/22/15 6,080,000 5,818,560
Indonesia (Republic of) Credit Linked Nts., Series III, 14.25%, 6/15/13 6,200,533 7,492,104
Nigeria (Federal Republic of) Credit Linked Nts., 12.50%, 2/24/09 [NGN] 352,600,000 2,785,361
Nigeria (Federal Republic of) Credit Linked Nts., 15%, 1/27/09 [NGN] 474,000,000 3,975,543
OAO Gazprom I Credit Nts., 8.36%, 10/20/07 7,455,000 8,039,276
OAO Gazprom II Credit Nts., 8.11%, 4/20/07 7,455,000 7,894,570
Peru (Republic of) Credit Linked Nts., 6.73%, 2/20/11 1 7,790,000 7,807,273
Romania (Republic of) Credit Linked Nts., 11.49%, 12/7/06 [RON] 6,161,250 2,434,508
Russian Federation Credit Linked Nts., 0.00%, 12/2/09 8 [RUR] 155,437,000 6,206,166
Russian Federation Total Return Linked Nts., Series II, 9%, 4/22/11 [RUR] 191,850,000 7,907,824
Ukraine (Republic of) 5 yr. Credit Linked Nts., 4.05%, 8/25/10 5,430,000 5,453,512
Ukraine (Republic of) 5.5 yr. Credit Linked Nts., 4.05%, 2/25/11 5,480,000 5,487,014
Ukraine (Republic of) 6 yr. Credit Linked Nts., 4.05%, 8/25/11 5,480,000 5,477,205
Ukraine (Republic of) 6.5 yr. Credit Linked Nts., 4.05%, 2/27/12 5,480,000 5,458,080
Ukraine (Republic of) 7 yr. Credit Linked Nts., 4.05%, 8/28/12 5,480,000 5,439,503
Ukraine (Republic of) Credit Linked Nts., 10.208%, 7/1/09 [UAH] 20,075,400 4,101,753
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH] 2,139,000 463,723
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH] 7,579,000 1,643,083
Ukraine (Republic of) Credit Linked Nts., 5.592%, 5/16/07 [UAH] 15,868,000 3,137,071
Ukraine (Republic of) Credit Linked Nts., Series A, 5.592%, 5/16/07 [UAH] 15,871,000 3,137,664
United Mexican States BORHIS Total Return Linked Nts.,
6.10%, 9/27/35 [MXN] 17,060,000 5,928,637
United Mexican States Credit Linked Nts., 9.52%, 1/5/11 5 [MXN] 49,642,956 4,521,103
Videocon International Ltd. Credit Linked Nts., 7.75%, 12/29/09 5 15,470,000 15,468,453
Volga Investments Ltd. Credit Linked Nts., Series III, 6.01%, 4/2/08 10,000,000 10,206,600
- ------------------------------------------------------------------------------------------------------------------------------------
Dow Jones CDX High Yield Index:
8.25% Pass-Through Certificates, Series 4-T1, 6/29/10 5 55,671,360 56,715,198
8.375% Pass-Through Certificates, Series 7-T1, 12/29/11 3,5 780,000 780,468
- ------------------------------------------------------------------------------------------------------------------------------------
Drewcat Capital Ltd. Catastrophe Linked Nts., Cl. A, 25.864%, 12/28/06 1,2 6,730,000 6,778,288
- ------------------------------------------------------------------------------------------------------------------------------------
Eurus Ltd. Catastrophe Linked Nts., 11.74%, 4/8/09 1,5 5,770,000 5,741,150
- ------------------------------------------------------------------------------------------------------------------------------------
Fhu-Jin Ltd. Catastrophe Linked Nts., Cl. B, 9.385%, 8/3/11 1,5 6,700,000 6,745,225
- ------------------------------------------------------------------------------------------------------------------------------------
Foundation RE Ltd. Catastrophe Linked Nts., 9.526%, 11/24/08 1,2 5,000,000 4,747,400
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International, Russian Federation Total Return
Linked Nts., 8%, 5/13/09 [RUR] 358,300,000 14,629,932
59 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
ING Bank NV, Ukraine (Republic of) Credit Linked Nts., Series 725,
11.89%, 12/30/09 5 [UAH] 36,698,000 $ 7,986,675
- ------------------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Argentina (Republic of) Credit Linked Nts., 4%, 12/19/11 5 [ARP] 18,250,000 14,804,035
Brazil (Federal Republic of) Credit Linked Nts., 12.683%, 6/1/13 8 [BRR] 42,180,340 7,997,736
Brazil (Federal Republic of) Credit Linked Nts., 15.326%, 1/2/15 8 [BRR] 81,357,010 12,620,832
Brazil (Federal Republic of) Credit Linked Nts., 2.731%, 11/30/12 8 [ARP] 27,660,000 6,707,021
Brazil (Federal Republic of) Credit Linked Nts., 6%, 5/16/45 5 [BRR] 30,560,000 17,639,851
Brazil (Federal Republic of) Credit Linked Nts., Series II, 13.553%, 1/2/15 8 [BRR] 56,242,917 8,724,908
Brazil (Federal Republic of) Credit Linked Nts., 12.080%, 1/2/15 8 [BRR] 26,663,580 4,136,295
Colombia (Republic of) Credit Linked Bonds, 10.190%, 1/5/16 8 [COP] 115,400,000,000 17,645,944
Colombia (Republic of) Credit Linked Bonds, 11.198%, 8/3/20 8 [COP] 82,000,000,000 8,465,768
Peru (Republic of) Credit Linked Nts., 8.115%, 9/2/15 8 [PEN] 24,240,000 3,639,169
Swaziland (Kingdom of) Credit Linked Nts., 7.25%, 6/20/10 8,765,000 9,084,923
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers International:
Romania (Republic of) Total Return Linked Nts., 7.90%, 2/9/10
(linked to Romanian Treasury Bills) [RON] 6,092,000 2,474,751
Turkey (Republic of) Total Return Linked Nts., 20%, 10/17/07
(linked to Turkish Treasury Bills) 3,349,124 3,558,444
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
Romania (Republic of) Total Return Linked Nts., 6.50%, 3/10/10
(linked to Romanian Treasury Bills) [RON] 16,085,800 6,138,499
Romania (Republic of) Total Return Linked Nts., 6.75%, 3/11/08
(linked to Romanian Treasury Bills) [RON] 18,680,000 7,280,137
Romania (Republic of) Total Return Linked Nts., 7.25%, 4/18/10
(linked to Romanian Treasury Bills) [RON] 1,487,000 580,678
Romania (Republic of) Total Return Linked Nts., 7.50%, 3/6/07
(linked to Romanian Treasury Bills) [RON] 2,467,000 984,031
Romania (Republic of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON] 1,478,000 587,062
Romania (Republic of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON] 3,568,000 1,417,211
Romania (Republic of) Total Return Linked Nts., 7.90%, 2/12/08
(linked to Romanian Treasury Bills) [RON] 13,855,800 5,593,428
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley & Co. International Ltd./Red Arrow International Leasing plc:
Total Return Linked Nts., Series A, 8.375%, 6/30/12 5 [RUR] 186,617,822 7,210,028
Total Return Linked Nts., Series B, 11%, 6/30/12 5 [RUR] 148,100,000 5,671,076
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.:
Bank Center Credit Total Return Linked Nts., 7.52%, 6/6/08 [KZT] 2,043,000,000 16,206,830
Brazil (Federal Republic of) Sr. Linked Nts., 14.40%, 8/4/16 [BRR] 36,298,924 17,466,656
Philippines (Republic of the) Credit Linked Nts., 8.619%, 9/20/15 2 16,900,000 18,429,450
Philippines (Republic of the) Credit Linked Nts., 8.38%, 6/20/16 1,5 3,950,000 3,954,740
Venezuela (Republic of) 10 yr. Credit Linked Nts., 7.85%, 11/20/15 12,480,000 13,261,248
Venezuela (Republic of) Credit Linked Nts., 6.49%, 5/20/10 8,275,000 8,480,220
Venezuela (Republic of) Credit Linked Nts., 7.382%, 5/20/10 17,600,000 19,289,600
60 | OPPENHEIMER STRATEGIC INCOME FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
- ------------------------------------------------------------------------------------------------------------------------------------
Redwood Capital V Catastrophe Linked Nts., 9.657%, 1/9/07 1,2 $ 4,250,000 $ 4,224,075
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Reinsurance Ltd. Catastrophe Linked Nts.:
Series B, 13.85%, 6/6/08 1 4,300,000 3,905,045
Series B, 14.90%, 6/8/07 1,2 2,000,000 1,960,450
- ------------------------------------------------------------------------------------------------------------------------------------
Successor Cal Quake Parametric Ltd. Catastrophe Linked Nts., Cl. A-I,
10.64%, 6/6/08 1,2 4,560,000 4,516,452
- ------------------------------------------------------------------------------------------------------------------------------------
Successor Euro Wind Ltd. Catastrophe Linked Nts., Series A-I,
22.89%, 6/6/08 1,2 6,000,000 6,039,600
- ------------------------------------------------------------------------------------------------------------------------------------
Successor II Ltd. Catastrophe Linked Nts., Series A-I, 9.64%, 6/6/08 1,2 10,660,000 10,727,691
- ------------------------------------------------------------------------------------------------------------------------------------
UBS AG, Israel (State of) Credit Linked Nts., 7.50%, 4/5/14 [ILS] 37,034,500 9,595,193
- ------------------------------------------------------------------------------------------------------------------------------------
VASCO Re 2006 Ltd. Catastrophe Linked Nts., 13.898%, 6/5/09 1,5 6,710,000 6,818,702
----------------
Total Structured Notes (Cost $970,920,182) 1,006,537,370
EXPIRATION STRIKE
DATE PRICE CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONS PURCHASED--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Mexican Nuevo Peso (MXN) Call 15 10/12/06 $11.40 85,614,000 863
- ------------------------------------------------------------------------------------------------------------------------------------
Mexican Nuevo Peso (MXN) Put 15 10/12/06 11.40 85,614,000 282,405
- ------------------------------------------------------------------------------------------------------------------------------------
New Turkish Lira (TRY)/Japanese Yen (JPY) Put 15 1/30/07 77.00TRY 30,620,000 350,862
----------------
Total Options Purchased (Cost $936,771) 634,130
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--8.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 69.30% in joint repurchase agreement (Principal
Amount/Value $800,621,000, with a maturity value of $800,954,592) with Cantor
Fitzgerald & Co./Cantor Fitzgerald Securities, 5%, dated 9/29/06, to be
repurchased at $555,070,183 on 10/2/06, collateralized by U.S. Treasury Bonds,
5.25%-8.75%, 5/15/16-2/15/29, with a value of $802,318,218 and U.S. Treasury
Bills, 12/28/06, with a value of $14,820,750 (Cost $554,839,000) $ 554,839,000 554,839,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with Cash Collateral
from Securities Loaned) (Cost $7,141,215,069) 7,109,882,609
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--5.0% 18
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTE--0.0%
GSAA Home Equity Trust, Series 2005-15, Cl. 2A1, 5.42%, 10/25/06 1,461,119 1,461,119
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--4.6%
Undivided interest of 1.05% in joint repurchase agreement (Principal
Amount/Value $3,950,000,000, with a maturity value of $3,951,787,375) with
Nomura Securities, 5.43%, dated 9/29/06, to be repurchased at $41,535,784 on
10/2/06, collateralized by U.S. Agency Mortgages, 0.00%-22.12%, 3/15/14-6/25/43,
with a value of $4,029,000,000 41,516,998 41,516,998
61 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS Continued
Undivided interest of 10% in joint repurchase agreement (Principal
Amount/Value $2,500,000,000 with a maturity value of $2,501,131,250)
with ING Financial Markets LLC, 5.43%, dated 9/29/06, to be repurchased
at $250,113,125 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.00%-7%, 9/1/18-8/1/36, with a value of $2,550,003,623 $ 250,000,000 $ 250,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Undivided interest of 10% in joint repurchase agreement (Principal
Amount/Value $250,000,000, with a maturity value of $250,112,500)
with Cantor Fitzgerald & Co., 5.40%, dated 9/29/06, to be repurchased
at $25,011,250 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.00%-6.50%, 8/1/12-9/1/36, with a value of $255,002,127 25,000,000 25,000,000
----------------
316,516,998
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--0.4%
American Express Credit Corp., 5.34%, 10/16/06 2,000,000 2,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Bear Stearns, 5.37%, 10/2/06 3,000,000 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 10/2/06 3,000,000 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Citigroup Funding, Inc., 5.36%, 10/2/06 7,000,000 7,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Finance Corp., 5.32%, 10/6/06 3,000,000 3,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Links Finance LLC, 5.38%, 10/2/06 8,001,004 8,001,004
- ------------------------------------------------------------------------------------------------------------------------------------
Tango Finance Corp., 5.38%, 10/2/06 3,498,951 3,498,951
----------------
29,499,955
- ------------------------------------------------------------------------------------------------------------------------------------
YANKEE CERTIFICATE OF DEPOSIT FLOATING NOTE--0.0%
Natexis Banques Populaires NY, 5.37%, 10/2/06 2,000,000 2,000,000
----------------
Total Investments Purchased with Cash Collateral from Securities Loaned
(Cost $349,478,072) 349,478,072
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $7,490,693,141) 107.5% 7,459,360,681
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (7.5) (517,742,773)
------------------------------------
NET ASSETS 100.0% $ 6,941,617,908
====================================
62 | OPPENHEIMER STRATEGIC INCOME FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP Argentine Peso
AUD Australian Dollar
BRR Brazilian Real
CAD Canadian Dollar
COP Colombian Peso
DEM German Mark
DKK Danish Krone
DOP Dominican Republic Peso
EGP Egyptian Pounds
EUR Euro
GBP British Pound Sterling
IDR Indonesia Rupiah
ILS Israeli Shekel
JPY Japanese Yen
KZT Kazakhstan Tenge
MXN Mexican Nuevo Peso
MYR Malaysian Ringgit
NGN Nigeria Naira
PEN Peruvian New Sol
PLZ Polish Zloty
RON New Romanian Leu
RUR Russian Ruble
TRY New Turkish Lira
UAH Ukraine Hryvnia
UYU Uruguay Peso
ZMK Zambian Kwacha
1. Represents the current interest rate for a variable or increasing rate
security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $490,985,276 or 7.07% of the Fund's net
assets as of September 30, 2006.
3. When-issued security or forward commitment to be delivered and settled after
September 30, 2006. See Note 1 of accompanying Notes.
4. Issue is in default. See Note 1 of accompanying Notes.
5. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of September 30, 2006 was $527,224,851, which
represents 7.60% of the Fund's net assets, of which $8,274 is considered
restricted. In addition, the Fund has restricted currency of $2,490,558, which
represents 0.04% of the Fund's net assets. See Note 12 of accompanying Notes.
6. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $40,643,108 or 0.59% of the Fund's net assets
as of September 30, 2006.
7. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these 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. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $3,516,105 or 0.05% of the Fund's net assets as of
September 30, 2006.
8. Zero coupon bond reflects effective yield on the date of purchase.
9. Partial or fully-loaned security. See Note 14 of accompanying Notes.
10. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $30,985,814. See Note 6 of accompanying
Notes.
11. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of accompanying Notes.
63 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS Continued
12. A sufficient amount of securities has been designated to cover outstanding
written put options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO PUT DATE PRICE RECEIVED SEE NOTE 7
- ------------------------------------------------------------------------------------------------------------
New Turkish Lira (TRY)/Japanese Yen (JPY) 30,620,000 1/30/07 65TRY $519,227 $266,434
13. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
14. Interest or dividend is paid-in-kind, when applicable.
15. Non-income producing security.
16. Represents ownership of at least 5% of the voting securities of the issuer,
and is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended September 30, 2006. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
SEPTEMBER 30, 2005 ADDITIONS REDUCTIONS SEPTEMBER 30, 2006
- ------------------------------------------------------------------------------------------------------------
Prandium, Inc. 1,034,256 -- -- 1,034,256
VALUE DIVIDEND
SEE NOTE 1 INCOME
- ------------------------------------------------------------------------------------------------------------
Prandium, Inc. $8,274 $--
17. Denotes an inflation-indexed security: coupon and principal are indexed to
the consumer price index.
18. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 14 of
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES September 30, 2006
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $7,478,536,141) $7,459,352,407
Affiliated companies (cost $12,157,000) 8,274
---------------
7,459,360,681
- ----------------------------------------------------------------------------------------------------------
Cash 25,197,062
- ----------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $2,041,365) 2,036,566
- ----------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 22,509,047
- ----------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 17,853,697
- ----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns 79,264,951
Investments sold (including $4,086,747 sold on a when-issued basis or
forward commitment) 29,562,551
Shares of beneficial interest sold 9,990,112
Closed foreign currency contracts 350,451
Other 138,355
---------------
Total assets 7,646,263,473
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $519,227)--see accompanying
statement of investments 266,434
- ----------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 349,478,072
- ----------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 11,829,544
- ----------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 5,922,166
- ----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $255,740,010 purchased on a
when-issued basis or forward commitment) 298,396,014
Closed foreign currency contracts 17,712,181
Shares of beneficial interest redeemed 10,583,520
Dividends 4,590,954
Distribution and service plan fees 4,131,245
Transfer and shareholder servicing agent fees 822,652
Shareholder communications 411,908
Futures margins 206,572
Trustees' compensation 129,039
Other 165,264
---------------
Total liabilities 704,645,565
- ----------------------------------------------------------------------------------------------------------
NET ASSETS $6,941,617,908
===============
65 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 1,659,194
- ----------------------------------------------------------------------------------------------------------
Additional paid-in capital 7,961,107,501
- ----------------------------------------------------------------------------------------------------------
Accumulated net investment income 28,620,443
- ----------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (1,051,588,378)
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 1,819,148
----------------
NET ASSETS $ 6,941,617,908
================
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$5,077,400,158 and 1,213,643,842 shares of beneficial interest outstanding) $ 4.18
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $ 4.39
- ----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $718,742,377
and 171,227,025 shares of beneficial interest outstanding) $ 4.20
- ----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $857,843,200
and 205,466,631 shares of beneficial interest outstanding) $ 4.18
- ----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $108,323,749
and 25,876,803 shares of beneficial interest outstanding) $ 4.19
- ----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $179,308,424 and 42,979,530 shares of beneficial interest outstanding) $ 4.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS For the Year Ended September 30, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 388,106,267
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $125,763) 8,400,957
- --------------------------------------------------------------------------------
Fee income 2,485,741
- --------------------------------------------------------------------------------
Portfolio lending fees 770,870
- --------------------------------------------------------------------------------
Other income 82,767
--------------
Total investment income 399,846,602
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 35,160,731
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 11,944,439
Class B 8,026,795
Class C 8,138,266
Class N 468,706
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 6,360,780
Class B 1,222,558
Class C 1,100,817
Class N 289,768
Class Y 64,650
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 810,517
Class B 171,987
Class C 129,801
- --------------------------------------------------------------------------------
Custodian fees and expenses 335,747
- --------------------------------------------------------------------------------
Trustees' compensation 99,300
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 293,391
--------------
Total expenses 74,619,753
Less reduction to custodian expenses (95,247)
--------------
Net expenses 74,524,506
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 325,322,096
67 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ 114,494,313
Closing and expiration of option contracts written 722,737
Closing and expiration of swaption contracts 371,561
Closing and expiration of futures contracts (5,337,609)
Foreign currency transactions (54,688,851)
Swap contracts 3,615,579
--------------
Net realized gain 59,177,730
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (96,370,255)
Translation of assets and liabilities denominated in foreign currencies (49,146,059)
Futures contracts 15,087,223
Option contracts 252,793
Swaption contracts 92,667
Swap contracts (4,178,552)
--------------
Net change in unrealized appreciation (134,262,183)
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 250,237,643
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68 | OPPENHEIMER STRATEGIC INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2006 2005
- ---------------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------------
Net investment income $ 325,322,096 $ 289,867,824
- ---------------------------------------------------------------------------------------------------
Net realized gain 59,177,730 183,064,148
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (134,262,183) 97,582,611
-----------------------------------
Net increase in net assets resulting from operations 250,237,643 570,514,583
- ---------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (361,826,587) (294,738,505)
Class B (55,250,172) (62,870,416)
Class C (53,959,503) (44,696,942)
Class N (6,482,780) (4,206,758)
Class Y (8,310,116) (6,335,724)
- ---------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Class A 481,164,858 541,271,143
Class B (168,323,661) (271,334,101)
Class C 97,789,142 60,028,844
Class N 28,045,769 28,754,049
Class Y 118,978,171 (91,805,446)
- ---------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------
Total increase 322,062,764 424,580,727
- ---------------------------------------------------------------------------------------------------
Beginning of period 6,619,555,144 6,194,974,417
-----------------------------------
End of period (including accumulated net investment income of
$28,620,443 and $123,075,890, respectively) $ 6,941,617,908 $ 6,619,555,144
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.34 $ 4.23 $ 4.08 $ 3.64 $ 3.72
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 1 .21 1 .20 .26 .32
Net realized and unrealized gain (loss) (.05) .19 .15 .43 (.08)
--------------------------------------------------------------------------
Total from investment operations .16 .40 .35 .69 .24
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.32) (.29) (.20) (.25) (.30)
Tax return of capital distribution -- -- -- -- (.02)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.32) (.29) (.20) (.25) (.32)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.18 $ 4.34 $ 4.23 $ 4.08 $ 3.64
==========================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.77% 9.77% 8.73% 19.59% 6.63%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,077,400 $4,766,576 $4,117,666 $3,873,018 $3,202,825
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,888,392 $4,392,321 $4,025,554 $3,521,307 $3,263,490
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.03% 4.82% 4.69% 6.60% 7.91%
Total expenses 0.93% 0.94% 0.95% 0.95% 1.01%
Expenses after payments and waivers and
reduction to custodian expenses 0.92% 0.94% 0.95% 0.95% 1.01%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 4 103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS B YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.35 $ 4.24 $ 4.10 $ 3.66 $ 3.73
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1 .17 1 .16 .22 .28
Net realized and unrealized gain (loss) (.05) .20 .15 .44 (.05)
------------------------------------------------------------------------
Total from investment operations .13 .37 .31 .66 .23
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) (.26) (.17) (.22) (.28)
Tax return of capital distribution -- -- -- -- (.02)
------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.28) (.26) (.17) (.22) (.30)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.20 $ 4.35 $ 4.24 $ 4.10 $ 3.66
========================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.23% 8.94% 7.66% 18.62% 6.11%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $718,742 $ 918,651 $1,163,555 $1,686,295 $1,847,182
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $802,936 $1,021,022 $1,424,322 $1,757,152 $2,056,449
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.25% 4.05% 4.16% 5.92% 7.22%
Total expenses 1.71% 1.70% 1.69% 1.68% 1.75%
Expenses after payments and waivers and
reduction to custodian expenses 1.71% 1.69% 1.69% 1.68% 1.75%
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 4 103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business 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. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.33 $ 4.22 $ 4.07 $ 3.64 $ 3.71
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .18 1 .17 1 .17 .23 .29
Net realized and unrealized gain (loss) (.05) .20 .15 .42 (.06)
------------------------------------------------------------------------
Total from investment operations .13 .37 .32 .65 .23
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) (.26) (.17) (.22) (.28)
Tax return of capital distribution -- -- -- -- (.02)
------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.28) (.26) (.17) (.22) (.30)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.18 $ 4.33 $ 4.22 $ 4.07 $ 3.64
========================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.22% 8.96% 7.95% 18.45% 6.15%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $857,843 $788,217 $710,085 $698,196 $568,487
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $814,425 $748,199 $716,206 $623,598 $571,292
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.27% 4.07% 4.06% 5.85% 7.15%
Total expenses 1.68% 4 1.69% 4 1.69% 4,5 1.69% 4 1.75% 4
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 6 103% 6 90% 6 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72 | OPPENHEIMER STRATEGIC INCOME FUND
CLASS N YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.34 $ 4.23 $ 4.08 $ 3.65 $ 3.72
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .19 1 .19 1 .17 .25 .30
Net realized and unrealized gain (loss) (.04) .19 .16 .42 (.05)
--------------------------------------------------------------------------
Total from investment operations .15 .38 .33 .67 .25
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.30) (.27) (.18) (.24) (.30)
Tax return of capital distribution -- -- -- -- (.02)
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.30) (.27) (.18) (.24) (.32)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.19 $ 4.34 $ 4.23 $ 4.08 $ 3.65
==========================================================================
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.60% 9.27% 8.28% 18.82% 6.70%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 108,324 $ 83,287 $ 52,969 $ 30,110 $ 15,508
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 94,281 $ 69,480 $ 40,043 $ 22,627 $ 8,954
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.62% 4.37% 4.19% 6.08% 7.07%
Total expenses 1.33% 4 1.40% 4 1.38% 4,5 1.34% 4 1.22% 4
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 6 103% 6 90% 6 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73 | OPPENHEIMER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED SEPTEMBER 30, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 4.32 $ 4.22 $ 4.07 $ 3.64 $ 3.71
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .22 1 .21 1 .21 .26 .32
Net realized and unrealized gain (loss) (.04) .19 .14 .42 (.06)
---------------------------------------------------------------------
Total from investment operations .18 .40 .35 .68 .26
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.33) (.30) (.20) (.25) (.31)
Tax return of capital distribution -- -- -- -- (.02)
---------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.33) (.30) (.20) (.25) (.33)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.17 $ 4.32 $ 4.22 $ 4.07 $ 3.64
=====================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.35% 9.73% 8.80% 19.33% 7.06%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 179,309 $ 62,824 $ 150,699 $ 240,296 $ 152,767
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 118,239 $ 68,656 $ 213,632 $ 194,308 $ 127,992
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 5.38% 4.84% 4.80% 6.57% 7.86%
Total expenses 0.58% 1.16% 1.29% 1.41% 1.74%
Expenses after payments and waivers and
reduction to custodian expenses 0.58% 0.80% 0.90% 0.91% 0.90%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 96% 4 103% 4 90% 4 104% 117%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
4. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- --------------------------------------------------------------------------------
Year Ended September 30, 2006 $4,097,005,267 $4,231,030,059
Year Ended September 30, 2005 $4,436,804,790 $4,469,108,355
Year Ended September 30, 2004 $5,593,936,243 $5,563,251,032
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Strategic Income Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek high current income by investing
mainly in debt securities. The Fund's investment advisor is OppenheimerFunds,
Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its
75 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
trading session ending at, or most recently prior to, the time when the Fund's
assets are valued. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value. Foreign and
domestic securities whose values have been materially affected by what the
Manager identifies as a significant event occurring before the Fund's assets are
valued but after the close of their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Trustees. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured note is sold or matures. As of September 30, 2006, the market
value of these securities comprised 14.5% of the Fund's net assets and resulted
in unrealized cumulative gains of $35,617,188.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade 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
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of September 30, 2006, the Fund had purchased
$255,740,010 of securities issued on a when-issued basis or forward commitment
and sold $4,086,747 of securities issued on a when-issued basis or forward
commitment.
In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities. Forward roll transactions require the
sale of securities for delivery in the current month, and a simultaneous
agreement with the same counterparty to repurchase similar (same
76 | OPPENHEIMER STRATEGIC INCOME FUND
type, coupon and maturity) but not identical securities on a specified future
date. The Fund records the incremental difference between the forward purchase
and sale of each forward roll as realized gain (loss) on investments or as fee
income in the case of such transactions that have an associated fee in lieu of a
difference in the forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of September 30, 2006, securities with an
aggregate market value of $16,993,313, representing 0.24% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the
77 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures and other derivatives) that may
have off-balance sheet market risk. Off-balance sheet market risk exists when
the maximum potential loss on a particular financial instrument is greater than
the value of such financial instrument, as reflected in the Fund's Statement of
Assets and Liabilities.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4,5 TAX PURPOSES
---------------------------------------------------------------------------
$78,265,796 $-- $1,030,416,491 $43,110,745
1. As of September 30, 2006, the Fund had $963,979,042 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of September 30, 2006,
details of the capital loss carryforwards were as follows:
EXPIRING
------------------------------
2008 $ 308,649,467
2009 52,578,252
2010 185,647,798
2011 294,188,800
2012 122,914,725
-------------
Total $ 963,979,042
=============
78 | OPPENHEIMER STRATEGIC INCOME FUND
2. The Fund had $65,168,890 of post-October foreign currency losses which were
deferred.
3. The Fund had $1,268,559 of straddle losses which were deferred.
4. During the fiscal year ended September 30, 2006, the Fund utilized
$69,360,120 of capital loss carryforward to offset capital gains realized in
that fiscal year. a
a. Includes $11,836,618 of capital loss carryforwards acquired in the July
21, 2005 merger of Oppenheimer Multi-Sector Income Trust.
5. During the fiscal year ended September 30, 2005, the Fund utilized
$11,195,215 of capital loss carryforward to offset capital gains realized in
that fiscal year. b
b. Includes $2,302,465 of capital loss carryforwards acquired in the July
21, 2005 merger of Oppenheimer Multi-Sector Income Trust.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for September 30, 2006. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO INCREASE TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED LOSS
PAID-IN CAPITAL LOSS ON INVESTMENTS
------------------------------------------------------------------
$12,201,244 $66,051,615 $78,252,859
The tax character of distributions paid during the years ended September 30,
2006 and September 30, 2005 was as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
------------------------------------------------------------------
Distributions paid from:
Ordinary income $485,829,158 $412,848,345
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of September 30, 2006 are noted below. The
primary difference between book and tax appreciation or depreciation of
securities and other investments, if applicable, is attributable to the tax
deferral of losses or tax realization of financial statement unrealized gain or
loss.
Federal tax cost of securities $ 7,499,301,687
Federal tax cost of other investments 1,730,694,472
----------------
Total federal tax cost $ 9,229,996,159
================
Gross unrealized appreciation $ 209,037,043
Gross unrealized depreciation (252,147,788)
----------------
Net unrealized depreciation $ (43,110,745)
================
79 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's
80 | OPPENHEIMER STRATEGIC INCOME FUND
maximum exposure under these arrangements is unknown as this would be dependent
on future claims that may be made against the Fund. The risk of material loss
from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. 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.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
CLASS A
Sold 285,205,829 $ 1,197,018,631 253,721,621 $ 1,091,121,076
Dividends and/or
distributions reinvested 63,712,315 267,183,114 48,950,677 211,128,508
Acquisition-Note 14 -- -- 62,844,742 270,860,838
Redeemed (234,651,361) (983,036,887) (239,685,952) (1,031,839,279)
----------------------------------------------------------------------
Net increase 114,266,783 $ 481,164,858 125,831,088 $ 541,271,143
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS B
Sold 27,099,194 $ 114,141,319 27,868,668 $ 120,195,274
Dividends and/or
distributions reinvested 9,067,246 38,196,513 9,542,125 41,299,086
Redeemed (76,102,306) (320,661,493) (100,359,143) (432,828,461)
----------------------------------------------------------------------
Net decrease (39,935,866) $ (168,323,661) (62,948,350) $ (271,334,101)
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS C
Sold 52,485,697 $ 219,804,771 40,612,822 $ 174,277,627
Dividends and/or
distributions reinvested 9,627,908 40,332,270 7,606,352 32,743,949
Redeemed (38,820,281) (162,347,899) (34,262,628) (146,992,732)
----------------------------------------------------------------------
Net increase 23,293,324 $ 97,789,142 13,956,546 $ 60,028,844
======================================================================
- ----------------------------------------------------------------------------------------------------
CLASS N
Sold 11,223,391 $ 47,099,735 10,118,176 $ 43,521,928
Dividends and/or
distributions reinvested 1,377,036 5,780,559 896,137 3,865,917
Redeemed (5,922,489) (24,834,525) (4,331,470) (18,633,796)
----------------------------------------------------------------------
Net increase 6,677,938 $ 28,045,769 6,682,843 $ 28,754,049
======================================================================
81 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED SEPTEMBER 30, 2006 YEAR ENDED SEPTEMBER 30, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS Y
Sold 27,986,060 $ 117,026,957 16,530,646 $ 72,458,398
Dividends and/or
distributions reinvested 1,974,505 8,229,559 1,472,034 4,751,793
Redeemed (1,510,690) (6,278,345) (39,181,919) (169,015,637)
-----------------------------------------------------------------
Net increase (decrease) 28,449,875 $ 118,978,171 (21,179,239) $ (91,805,446)
=================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended September 30, 2006, were as
follows:
PURCHASES SALES
- -----------------------------------------------------------------------------------
Investment securities $4,939,332,169 $5,338,131,286
U.S. government and government agency obligations 320,320,066 346,184,902
To Be Announced (TBA) mortgage-related securities 4,097,005,267 4,231,030,059
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:
FEE SCHEDULE SEPT. 30, 2005 TO DEC. 31, 2005 FEE SCHEDULE EFFECTIVE JANUARY 1, 2006
- ---------------------------------------------- --------------------------------------------
Up to $200 million of net assets 0.75% Up to $200 million of net assets 0.75%
Next $200 million of net assets 0.72 Next $200 million of net assets 0.72
Next $200 million of net assets 0.69 Next $200 million of net assets 0.69
Next $200 million of net assets 0.66 Next $200 million of net assets 0.66
Next $200 million of net assets 0.60 Next $200 million of net assets 0.60
Over $1 billion of net assets 0.50 Next $4 billion of net assets 0.50
Over $5 billion of net assets 0.48
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended September 30, 2006, the Fund paid
$8,998,518 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
82 | OPPENHEIMER STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Class A shares of the Fund. The Distributor currently uses all of those fees
to pay dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Trustees and its independent trustees must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at September 30, 2006 for Class B, Class C
and Class N shares were $98,945,222, $27,009,902 and $1,650,101, respectively.
Fees incurred by the Fund under the plans are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales
charges (CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------------
September 30, 2006 $2,199,785 $43,415 $1,701,540 $113,735 $28,600
83 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of September 30, 2006, the Fund had outstanding foreign currency
contracts as follows:
CONTRACT VALUATION
EXPIRATION AMOUNT AS OF UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) SEPT. 30, 2006 APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Argentine Peso (ARP) 10/25/06 83,000ARP $ 26,652,455 $ -- $ 106,202
Australian Dollar (AUD) 10/13/06 2,290AUD 1,706,243 -- 15,768
Brazilian Real (BRR) 10/31/06-10/2/07 483,260BRR 211,758,523 3,778,704 196,117
British Pound
Sterling (GBP) 10/13/06-1/10/07 12,755GBP 23,899,318 6,659 90,728
Canadian Dollar (CAD) 10/13/06 7,725CAD 6,913,887 13,609 --
Chilean Peso (CLP) 11/21/06-12/28/06 15,171,000CLP 28,335,188 194,803 34,005
Dominican Republic
Peso (DOP) 10/10/06 244,558DOP 7,256,910 -- 153,934
Euro (EUR) 10/13/06-3/6/07 110,575EUR 140,930,923 13,411 898,289
Indian Rupee (INR) 10/3/06-10/11/06 1,212,608INR 26,392,075 70,285 --
Japanese Yen (JPY) 10/13/06-1/10/07 40,531,000JPY 347,900,985 -- 1,254,134
Malaysian
Ringgit (MYR) 11/16/06-11/17/06 56,590MYR 15,380,147 -- 661,466
Mexican Nuevo
Peso (MXN) 10/24/06-11/29/06 946,040MXN 85,828,716 -- 925,784
New Zealand
Dollar (NZD) 3/5/07 73,125NZD 47,288,028 74,205 156,017
84 | OPPENHEIMER STRATEGIC INCOME FUND
CONTRACT VALUATION
EXPIRATION AMOUNT AS OF UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) SEPT. 30, 2006 APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Norwegian
Krone (NOK) 1/10/07 109,100NOK $ 16,810,865 $ -- $ 77,680
South African
Rand (ZAR) 10/5/06-11/27/06 454,950ZAR 58,237,154 -- 5,161,425
South Korean
Won (KRW) 10/10/06-11/2/06 35,003,000KRW 37,013,091 423,611 --
Swiss Franc (CHF) 10/13/06-03/6/07 102,471CHF 82,953,330 32,382 791,518
Thailand Baht (THB) 10/17/06 855,000THB 22,700,742 126,484 --
Turkish Lira (TRY) 10/10/06-10/26/06 60,779TRY 39,793,365 11,508 781,510
-----------------------------
4,745,661 11,304,577
-----------------------------
CONTRACTS TO SELL
Australian Dollar (AUD) 1/10/07-3/5/07 96,965AUD 72,059,448 1,291,220 --
Brazilian Real (BRR) 12/10/09-1/5/10 90,846BRR 30,988,310 11,361,461 --
British Pound
Sterling (GBP) 2/7/07 11,000GBP 20,618,343 185,407 --
Canadian Dollar (CAD) 1/10/07-2/20/07 74,780CAD 67,127,163 37,353 --
Chinese
Renminbi (Yuan) (CNY) 10/23/06 210,000CNY 26,635,973 -- 112,449
Czech Koruna (CZK) 10/23/06 590,000CZK 26,482,595 -- 76,115
Euro (EUR) 11/20/06-2/7/07 61,450EUR 78,287,471 476,847 38,874
Iceland Krona (ISK) 10/23/06 829,900ISK 11,774,186 -- 297,529
Japanese Yen (JPY) 10/23/06-3/5/07 14,911,000JPY 127,849,011 3,637,666 --
Swedish Krone (SEK) 10/5/06-3/5/07 478,290SEK 65,660,051 762,417 --
Swiss Franc (CHF) 10/23/06 33,000CHF 26,452,498 11,015 --
-----------------------------
17,763,386 524,967
-----------------------------
Total unrealized appreciation and depreciation $ 22,509,047 $ 11,829,544
=============================
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
85 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations at the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of September 30, 2006, the Fund had outstanding futures contracts as
follows:
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF SEPTEMBER 30, APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS 2006 (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
DAX Index 12/15/06 62 $ 11,881,348 $ 233,010
Euro-Bundesobligation, 5 yr. 12/7/06 466 64,970,898 214,118
Euro-Bundesobligation, 10 yr. 12/7/06 223 33,395,848 140,021
Euro-Schatz 12/7/06 744 98,126,374 51,720
FTSE 100 Index 12/15/06 20 2,241,757 22,233
IBEX 35 Index (The) 10/20/06 45 7,389,014 420,764
Japan (Government of) Bonds, 10 yr. 12/11/06 142 162,045,291 790,143
Japan (Government of) Bonds, 10 yr. 12/8/06 92 10,506,497 61,398
MSCI Taiwan Stock Index 10/30/06 258 7,402,020 (93,405)
NASDAQ 100 Index 12/15/06 745 24,901,625 1,024,636
Nikkei 225 Index 12/7/06 17 2,317,037 75,641
Standard & Poor's 500 E-Mini 12/15/06 163 10,965,010 273,979
Standard & Poor's ASX 200 Index 12/21/06 132 12,740,173 195,788
Standard & Poor's/MIB Index 12/15/06 29 7,075,050 94,243
United Kingdom Long Gilt 12/27/06 111 22,869,629 143,047
U.S. Long Bonds 12/19/06 4,130 464,237,813 8,785,089
U.S. Treasury Nts., 2 yr. 12/29/06 1,423 291,003,500 907,695
U.S. Treasury Nts., 10 yr. 12/19/06 3,066 331,319,625 3,293,662
---------------
16,633,782
---------------
CONTRACTS TO SELL
Australia (Commonwealth of) Bonds, 10 yr. 12/15/06 132 10,208,863 11,136
CAC-40 10 Index 10/20/06 190 12,678,954 (304,557)
Canadian Bonds, 10 yr. 12/18/06 304 31,315,196 (446,661)
DAX Index 12/15/06 72 13,797,695 (283,463)
FTSE 100 Index 12/15/06 255 28,582,402 (288,582)
Nikkei 225 Index 12/7/06 273 37,208,889 (183,929)
Standard & Poor's 500 E-Mini 12/15/06 1,947 130,974,690 (3,279,040)
Standard & Poor's/Toronto
Stock Exchange 60 Index 12/14/06 105 12,711,787 (234,510)
86 | OPPENHEIMER STRATEGIC INCOME FUND
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF SEPTEMBER 30, APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS 2006 (DEPRECIATION)
- ----------------------------------------------------------------------------------------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 12/29/06 172 $ 35,174,000 $ (913)
U.S. Treasury Nts., 5 yr. 12/29/06 1,009 106,465,266 (724,070)
U.S. Treasury Nts., 10 yr. 12/19/06 1,562 168,793,625 (609,473)
---------------
(6,344,062)
---------------
$ 10,289,720
===============
- --------------------------------------------------------------------------------
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 or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, expiration date, exercise price, premium received and market value are
detailed in a note to the Statement of Investments. Options written are reported
as a liability in the Statement of Assets and Liabilities. Realized 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 [or commodity]
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 [or commodity]
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.
87 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY Continued
Written option activity for the year ended September 30, 2006 was as follows:
PUT OPTIONS
------------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
- --------------------------------------------------------------------------------
Options outstanding as of
September 30, 2005 -- $ --
Options written 34,499,620,000 1,241,964
Options closed or expired (34,469,000,000) (722,737)
------------------------------
Options outstanding as of
September 30, 2006 30,620,000 $ 519,227
==============================
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS
A total return swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. One cash flow stream will typically be
based on a reference interest rate or index and the other on the total return of
a reference asset such as a security, a basket of securities, or an index. The
total return includes appreciation or depreciation on the reference asset, plus
any interest or dividend payments. Payments under the swap are based on an
agreed upon principal amount but since this principal amount is not exchanged,
it represents neither an asset nor a liability to either counter-party, and is
referred to as notional. Total return swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations. The primary risks associated with total return swaps are credit
risks (if the counterparty fails to meet its obligations) and market risk (if
there is no liquid market for the agreement or unfavorable changes occur in the
reference asset).
As of September 30, 2006, the Fund had entered into the following total return
swap agreements:
88 | OPPENHEIMER STRATEGIC INCOME FUND
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT/UNITS THE FUND THE FUND DATES (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Lehman Brothers
CMBS Index
If negative, Spread plus
the absolute value Total Return
of the Total Return Amount value
Amount for a for a given
$ 12,000,000 given Index Period. Index Period. 12/1/06 $ 8,844
Six-Month
12,650,000 BBA LIBOR 5.46% 5/13/15 1,709,604
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
Six-Month
7,180,000 BBA LIBOR 5.10 1/14/15 922,126
Six-Month
7,180,000 BBA LIBOR 5.08 1/20/15 959,073
- ---------------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International:
One-Month
USD BBA
LIBOR -spread
plus total return, Total Return
if negative, of custom
of custom equity basket,
173,000 equity basket. if positive. 10/9/07 (101,652)
Price Depreciation Price Appreciation
of Sao Paulo of Sao Paulo
Stock Exchange Stock Exchange
4,984,181BRR Index Futures. Index Futures. 10/18/06 (64,527)
Price Depreciation Price Appreciation
of Sao Paulo of Sao Paulo
Stock Exchange Stock Exchange
10,400,077BRR Index Futures. Index Futures. 10/18/06 (141,959)
Price Depreciation Price Appreciation
of Standard & of Standard &
Poor's CNX Nifty Poor's CNX Nifty
329,442,300INR Index Futures. Index Futures. 10/26/06 (115,698)
Price Depreciation Price Appreciation
of Swiss Market of Swiss Market
8,958,033CHF Index Futures. Index Futures. 12/15/06 (178,083)
89 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS Continued
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT/UNITS THE FUND THE FUND DATES (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------
If positive,
If negative, receive the Spread
the absolute value on the Lehman
of the Lehman Brothers CMBS
Brothers CMBS AAA 8.5+
AAA 8.5+ Index Spread
Lehman Brothers Index Spread Return Amount,
Special Financing,
Inc. $ 12,600,000 Return Amount. and Carry Amount. 12/1/06 $ 9,115
- ---------------------------------------------------------------------------------------------------------------------------
Total Return Total Return
of custom of custom
Morgan Stanley & Co. equity basket, equity basket,
International Ltd. 1,382,000 if negative. if positive. 10/6/07 (41,064)
------------
$ 2,965,779
============
Notional amount is reported in U.S. Dollars, except for denoted in the following
currencies:
BRR Brazilian Real
CHF Swiss Franc
INR Indian Rupee
Abbreviations are as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
CMBS Commercial Mortgage Backed Securities
- --------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS
An interest rate swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. Interest rate swaps involve the exchange
of rights to receive or commitments to pay interest. One cash flow stream will
typically be a floating rate payment based upon a specified index while the
other is typically a fixed rate. Payments under the swap are based on an agreed
upon principal amount but since this principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Interest rate swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Swap agreements entail both interest rate risk and credit risk. There is a
risk, based on movements of interest rates in the future, the payments made by
the Fund under a swap agreement will be greater than the payments it received.
Credit risk arises from the
90 | OPPENHEIMER STRATEGIC INCOME FUND
possibility that the counterparty will default. If the counterparty defaults,
the Fund's loss will consist of the net amount of contractual interest payments
that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap transactions
on an ongoing basis.
As of September 30, 2006, the Fund had entered into the following interest rate
swap agreements:
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------
Barclays Bank plc 85,300,000MXN MXN TIIE 9.2700% 7/17/26 $ 63,301
- ------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings, Inc.:
Six-Month
11,250,000PLZ WIBO 5.5200 3/24/10 125,264
Six-Month
18,000,000PLZ WIBO 5.5500 3/25/10 204,163
313,800,000TWD 2.3200% TWD-Telerate 6/27/11 (132,245)
- ------------------------------------------------------------------------------------------------------------
Credit Suisse First 28-Day
Boston International 68,120,000MXN MXN TIIE 10.0000 7/9/15 495,333
- ------------------------------------------------------------------------------------------------------------
Credit Suisse First
Boston, Inc. Six-Month
(Nassau Branch) 29,965,000PLZ WIBO 4.4800 7/1/10 (268,905)
- ------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
1,531,000,000HUF 8.4400 Six-Month BUBOR 7/4/11 (533)
Six-Month
6,930,000 LIBOR 5.2500 6/23/15 692,665
- ------------------------------------------------------------------------------------------------------------
Deutsche Bank INR MIBOR-
AG, 5 yr. 314,300,000INR 7.1750 OIS-Compound 6/27/11 (54,038)
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Capital Markets LP:
12,475,040BRR BZDI 17.7200% 1/2/07 71,657
118,589,283BRR BZDI 17.1800 1/2/08 2,584,334
19,476,430BRR BZDI 18.1600 1/2/08 663,188
59,620,000MXN MXN TIIE 10.2900 6/14/15 532,292
67,560,000MXN MXN TIIE 10.2200 1/30/15 563,267
59,375,000MXN MXN TIIE 10.4300 5/29/15 567,379
59,375,000MXN MXN TIIE 10.3000 6/1/15 522,185
34,200,000MXN MXN TIIE 10.0000 6/24/15 243,765
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
9,638,700BRR BZDI 17.1700 1/2/08 185,831
11,780,630BRR BZDI 17.1700 1/2/08 227,127
23,464,063BRR BZDI 18.0000 1/2/07 202,200
89,360,000BRR BZDI 14.8900 1/4/10 684,840
17,960,000BRR BZDI 14.0500 1/2/12 (13,535)
90,610,000MXN MXN TIIE 9.1500 8/27/26 (7,237)
91 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS Continued
UNREALIZED
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION APPRECIATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
Continued
39,690,000MXN MXN TIIE 9.4100% 8/31/20 $ 120,121
70,140,000MXN MXN TIIE 10.7000 5/8/15 788,960
30,800,000MXN MXN TIIE 10.8500 3/5/15 364,732
119,100,000MXN MXN TIIE 9.5100 8/26/25 384,709
78,820,000MXN MXN TIIE 9.5000 8/28/25 246,733
- ------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
Continued
68,200,000MXN MXN TIIE 9.2900 7/17/26 7,731
179,660,000MXN MXN TIIE 9.8400 12/31/09 880,313
- ------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
35,760,000BRR BZDI 13.9100 1/2/12 (101,346)
65,300,000MXN MXN TIIE 9.7600 8/17/15 372,855
169,320,000ZAR 8.2900% Three-Month JIBA 6/23/08 254,399
- ------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
52,480,000GBP 5.2500 Six-Month LIBOR 5/21/09 (249,509)
28-Day
67,450,000MXN MXN TIIE 9.9900 7/9/15 474,558
Six-Month
34,350,000PLZ WIBO 4.5300 7/5/10 (307,688)
- ------------------------------------------------------------------------------------------------------------
Merrill Lynch Three-Month
& Co., Inc. 251,235,000SEK STIBOR-SIDE 4.0325 6/19/12 163,548
- ------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
12,776,603BRR BZDI 16.8800 1/2/08 191,075
25,645,000BRR BZDI 17.5900 1/2/07 190,454
- ------------------------------------------------------------------------------------------------------------
Santander
Central Hispano 369,480,000BRR BZDI 14.0000 1/2/12 (23,048)
- ------------------------------------------------------------------------------------------------------------
UBS AG 369,480,000NOK 4.2200 Six-Month NIBOR 2/6/12 630,481
- ------------------------------------------------------------------------------------------------------------
WestPac
Banking Corp. 34,665,000NZD 6.7500 Six-Month BBR 6/29/16 (208,826)
------------
$12,332,550
============
Notional amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
BRR Brazilian Real
GBP British Pound Sterling
HUF Hungarian Forint
INR Indian Rupee
MXN Mexican Nuevo Peso
92 | OPPENHEIMER STRATEGIC INCOME FUND
NOK Norwegian Krone
NZD New Zealand Dollar
PLZ Polish Zloty
SEK Swedish Krona
TWD New Taiwan Dollar
ZAR South African Rand
Index abbreviations are as follows:
BBR Bank Bill Rate
BUBOR Budapest Interbank Offered Rate
BZDI Brazil Cetip Interbank Deposit Rate
FRAS French Franc/Austrian Schilling
IRS India Swap Composites
JIBA South Africa Johannesburg Interbank Agreed Rate
LIBOR London-Interbank Offered Rate
MIBOR-OIS Mid Market Interest Rate for FRAS and IRS-Overnight Indexed Swap
MXN TIIE Mexican Peso-Interbank Equilibrium Interest Rate
NIBOR Norwegian Interbank Offered Rate
STIBOR Stockholm Interbank Offered Rate
WIBO Poland Warsaw Interbank Offer Bid Rate
- --------------------------------------------------------------------------------
10. CREDIT DEFAULT SWAP CONTRACTS
Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. The Fund may enter into credit default
swaps, both directly ("unfunded swaps") and indirectly in the form of a swap
embedded within a structured note ("funded swaps"), to protect against the risk
that a security will default. Unfunded and funded credit default swaps may be on
a single security, or a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default
swap, counterparty risk, and the need to fund the delivery obligation (either
cash or defaulted bonds depending on whether the Fund is long or short the swap,
respectively).
The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers. As a purchaser of credit protection under a swap
contract, the Fund pays a periodic interest fee on the notional amount to the
counterparty. This interest fee is accrued daily as a component of unrealized
appreciation (depreciation) and is recorded as realized loss upon payment. Upon
occurrence of a specific credit event with respect to the underlying referenced
debt obligation, the Fund is obligated to deliver that security to the
counter-party in exchange for receipt of the notional amount from the
counterparty. The difference between the value of the security delivered and the
notional amount received is recorded as realized gain and is included on the
Statement of Operations. Credit default swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the
93 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. CREDIT DEFAULT SWAP CONTRACTS Continued
swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
Information regarding such credit default swaps as of September 30, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
REFERENCED RECEIVED BY THE RATE PAID UNREALIZED
DEBT FUND UPON BY THE EXPIRATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT FUND DATES (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings,
Inc.:
Hungary (Republic of) $13,190,000 0.4000% 12/20/15 $ 187,707
Mexico (Government of) 12,930,000 0.6475 1/20/11 (98,118)
- --------------------------------------------------------------------------------------------------------------
Deutsche Bank AG Ukraine (Republic of) 12,895,000 1.8800 3/20/11 (14,207)
- --------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank Russian Federation 8,390,000 2.4000 10/9/13 (929,516)
- --------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Philippines
Inc. (Republic of the) 23,950,000 1.7250 12/20/11 (23,029)
- --------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Colombia (Republic of) 5,880,000 3.7000 8/20/15 (632,082)
Indonesia (Republic of) 7,600,000 1.6800 6/20/11 (94,638)
Venezuela (Republic of) 8,275,000 2.2000 5/20/10 (319,928)
Venezuela (Republic of) 12,480,000 3.4800 11/20/15 (1,001,285)
------------
$(2,925,096)
============
The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a swap contract, the Fund receives a periodic
interest fee on the notional amount from the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized gain upon receipt. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund
receives that security from the counterparty in exchange for payment of the
notional amount to the counterparty. The difference between the value of the
security received and the notional amount paid is recorded as realized loss and
is included on the Statement of Operations. Credit default swaps are marked to
market daily using different sources, including quotations from counterparties,
pricing services, brokers or market makers. The unrealized appreciation
(depreciation) related to the change in the valuation of the notional amount of
the swap is combined with the amount due to (owed by) the Fund at termination or
settlement and disclosed separately on the Statement of Assets and Liabilities.
The net change in this amount is included on the Statement of Operations.
94 | OPPENHEIMER STRATEGIC INCOME FUND
Information regarding such credit default swaps as of September 30, 2006 is as
follows:
NOTIONAL ANNUAL
AMOUNT INTEREST
REFERENCED PAID BY THE RATE RECEIVED UNREALIZED
DEBT FUND UPON BY THE EXPIRATION APPRECIATION
COUNTERPARTY OBLIGATION CREDIT EVENT FUND DATES (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings,
Inc. Russian Federation $12,930,000 0.6475% 1/20/11 $ 79,040
- ----------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank Ukraine (Republic of) 1,409,000 1.9200 8/20/11 5,321
- ----------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
Indonesia (Republic of) 7,600,000 1.6700 6/20/11 69,891
Istanbul Bond Co. SA
for Finansbank 23,940,000 1.3000 3/24/13 (799,470)
- ----------------------------------------------------------------------------------------------------------------
UBS AG Indonesia (Republic of) 6,125,000 2.3000 9/20/11 203,516
----------
$(441,702)
==========
- --------------------------------------------------------------------------------
11. SWAPTION TRANSACTIONS
The Fund may enter into a swaption transaction, whereby a contract that grants
the holder, in return for payment of the purchase price (the "premium") of the
option, the right, but not the obligation, to enter into an interest rate swap
at a preset rate within a specified period of time, with the writer of the
contract. The writer receives premiums and bears the risk of unfavorable changes
in the preset rate on the underlying interest rate swap. Swaption contracts
written by the Fund do not give rise to counterparty credit risk as they
obligate the Fund, not its counterparty, to perform. The Fund generally will
incur a greater risk when it writes a swaption than when it purchases a
swaption. When the Fund purchases a swaption it risks losing only the amount of
the premium they have paid should the Manager decide to let the option expire
unexercised. When the Fund writes a swaption it will become obligated, upon
exercise of the option, according to the terms of the underlying agreement.
Swaptions written are reported as a liability in the Statement of Assets and
Liabilities.
Written swaption activity for the year ended September 30, 2006 was as follows:
CALL SWAPTIONS
--------------------------------
NOTIONAL AMOUNT OF
AMOUNT PREMIUMS
- --------------------------------------------------------------------------------
Swaptions outstanding as of
September 30, 2005 $ 69,130,000 $ 283,433
Swaptions written 79,500,000 88,401
Swaptions closed or expired (148,630,000) (371,834)
--------------------------------
Swaptions outstanding as of
September 30, 2006 $ -- $ --
================================
95 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. ILLIQUID OR RESTRICTED SECURITIES AND CURRENCY
As of September 30, 2006, investments in securities included issues that are
illiquid or restricted. Restricted securities are purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. The Fund will not invest more than 10% of
its net assets (determined at the time of purchase and reviewed periodically) in
illiquid or restricted securities. Certain restricted securities, eligible for
resale to qualified institutional investors, are not subject to that limitation.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning restricted
securities and currency is as follows:
VALUATION AS OF
ACQUISITION SEPT. 30, UNREALIZED
SECURITY DATES COST 2006 DEPRECIATION
- --------------------------------------------------------------------------------------
Prandium, Inc. 3/18/99-7/18/02 $12,157,000 $ 8,274 $12,148,726
=============================================
CURRENCY
Argentine Peso (ARP) 6/21/06-9/22/06 $ 2,495,208 $2,490,558 $ 4,650
=============================================
- --------------------------------------------------------------------------------
13. ACQUISITION OF OPPENHEIMER MULTI-SECTOR INCOME TRUST
On July 22, 2005, the Fund acquired all of the net assets of Oppenheimer
Multi-Sector Income Trust, pursuant to an Agreement and Plan of Reorganization
approved by the Oppenheimer Multi-Sector Income Trust shareholders on July 12,
2005. The Fund issued (at an exchange ratio of 2.150014 for Class A of the Fund
to one share of Oppenheimer Multi-Sector Income Trust) 62,844,742 shares of
beneficial interest for Class A, valued at $270,860,838 in exchange for the net
assets, resulting in combined Class A net assets of $4,466,747,248 on July 22,
2005. The net assets acquired included net unrealized appreciation of $6,581,052
and an unused capital loss carryforward of $32,689,355, potential utilization
subject to tax limitations. The exchange qualified as a tax-free reorganization
for federal income tax purposes.
- --------------------------------------------------------------------------------
14. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
coun-terparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral.
96 | OPPENHEIMER STRATEGIC INCOME FUND
If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
The Fund continues to receive the economic benefit of interest or dividends paid
on the securities loaned in the form of a substitute payment received from the
borrower. As of September 30, 2006, the Fund had on loan securities valued at
$431,697,370, which are included in the Statement of Assets and Liabilities as
"Investments, at value" and, when applicable, as "Receivable for Investments
sold." Collateral of $436,526,198 was received for the loans, of which
$349,478,072 was received in cash and subsequently invested in approved
investments or held as cash.
- --------------------------------------------------------------------------------
15. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
September 30, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.
In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. As of September
30, 2006, the Manager does not believe the adoption of SFAS No. 157 will
materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
- --------------------------------------------------------------------------------
16. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that
97 | OPPENHEIMER STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
16. LITIGATION Continued
by permitting and/or participating in those actions, the Directors/Trustees and
the Officers of the funds breached their fiduciary duties to fund shareholders
under the Investment Company Act of 1940 and at common law. The plaintiffs
sought unspecified damages, an accounting of all fees paid, and an award of
attorneys' fees and litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
98 | OPPENHEIMER STRATEGIC INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER STRATEGIC INCOME FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Strategic Income Fund, including the statement of investments, as of
September 30, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 the standards of the Public
Company Accounting Oversight Board (United States). 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2006, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Strategic Income Fund as of September 30, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
November 15, 2006
99 | OPPENHEIMER STRATEGIC INCOME FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended September
30, 2006 which are not designated as capital gain distributions should be
multiplied by 1.48% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended September 30, 2006 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $6,699,836 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2007, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended September 30, 2006, $176,623,671 or 36.36% of the ordinary
distributions paid by the Fund qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
100 | OPPENHEIMER STRATEGIC INCOME FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
101 | OPPENHEIMER STRATEGIC INCOME FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, CO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since 2006); Chairman of the following
Chairman of the Board private mortgage banking companies: Cherry Creek Mortgage Company (since 1991),
of Trustees (since 2003) Centennial State Mortgage Company (since 1994), and The El Paso Mortgage Company
and Trustee (since 1999) (since 1993); Chairman of the following private companies: Ambassador Media
Age: 69 Corporation (since 1984) and Broadway Ventures (since 1984); Director of the
following: Helmerich & Payne, Inc. (oil and gas drilling/production company) (since
1992), Campus Crusade for Christ (since 1991) and The Lynde and Harry Bradley
Foundation, Inc. (non-profit organization) (since 2002); former Chairman of the
following: Transland Financial Services, Inc. (private mortgage banking company)
(1997-2003), Great Frontier Insurance (insurance agency) (1995-2000), Frontier Real
Estate, Inc. (residential real estate brokerage) (1994-2000) and Frontier Title
(title insurance agency) (1995-2000); former Director of the following:
UNUMProvident (insurance company) (1991-2004), Storage Technology Corporation
(computer equipment company) (1991-2003) and International Family Entertainment
(television channel) (1992-1997); U.S. Senator (January 1979-January 1991). Oversees
37 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital, Inc. (General Partner of private
Trustee (since 1993) equity funds) (until February 2001); Chairman, President and Chief Executive Officer
Age: 75 of A.G. Edwards Capital, Inc. (until March 2000); Director of A.G. Edwards & Sons,
Inc. (brokerage company) (until 2000) and A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and Director of A.G. Edwards, Inc. (until March
1999); Vice Chairman of A.G. Edwards & Sons, Inc. (until March 1999); Chairman of
A.G. Edwards Trust Company (until March 1999) and A.G.E. Asset Management
(investment adviser) (until March 1999). Oversees 37 portfolios in the
OppenheimerFunds complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial Asset Management Corporation
Trustee (since 2000) (December 1991-April 1999); President, Treasurer and Director of Centennial Capital
Age: 70 Corporation (June 1989-April 1999); Chief Executive Officer and Director of
MultiSource Services, Inc. (March 1996-April 1999); Mr. Bowen held several positions
with the Manager and with subsidiary or affiliated companies of the Manager
(September 1987-April 1999). Oversees 37 portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon (George Washington historical site) (since
Trustee (since 2000) June 2000); Director of Genetic ID, Inc. (biotech company) (March 2001-May 2002);
Age: 68 Partner at PricewaterhouseCoopers LLP (accounting firm) (July 1974-June 1999);
Chairman of Price Waterhouse LLP Global Investment Management Industry Services
Group (accounting firm) (July 1994-June 1998). Oversees 37 portfolios in the
OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company) (since June 2002); Director of
Trustee (since 1990) Northwestern Energy Corp. (public utility corporation) (since November 2004);
Age: 64 Director of P.R. Pharmaceuticals (October 1999-October 2003); Director of Rocky
Mountain Elk Foundation (non-profit organization) (February 1998-February 2003 and
since February 2005); Chairman and Director (until October 1996) and President and
Chief Executive Officer (until October 1995) of the Manager;
102 | OPPENHEIMER STRATEGIC INCOME FUND
JON S. FOSSEL, President, Chief Executive Officer and Director of the following: Oppenheimer
Continued Acquisition Corp. ("OAC") (parent holding company of the Manager), Shareholders
Services, Inc. and Shareholder Financial Services, Inc. (until October 1995).
Oversees 37 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado UpLIFT (charitable organization) (since September 1984). Mr.
Trustee (since 1996) Freedman held several positions with the Manager and with subsidiary or affiliated
Age: 66 companies of the Manager (until October 1994). Oversees 37 portfolios in the
OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International Studies (educational organization)
Trustee (since 2002) (since February 2000); Board Member of Middlebury College (educational organization)
Age: 60 (since December 2005); Director of The California Endowment (philanthropic
organization) (since April 2002); Director (February 2002-2005) and Chairman of
Trustees (since 2006) of the Community Hospital of Monterey Peninsula; Director
(October 1991-2005) and Vice Chairman (since 2006) of American Funds' Emerging
Markets Growth Fund, Inc. (mutual fund); President of ARCO Investment Management
Company (February 1991-April 2000); Member of the investment committees of The
Rockefeller Foundation (since 2001) and The University of Michigan (since 2000);
Advisor at Credit Suisse First Boston's Sprout venture capital unit (venture capital
fund) (1994-January 2005); Trustee of MassMutual Institutional Funds (investment
company) (1996-June 2004); Trustee of MML Series Investment Fund (investment
company) (April 1989-June 2004); Member of the investment committee of Hartford
Hospital (2000-2003); and Advisor to Unilever (Holland) pension fund (2000-2003).
Oversees 37 portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University (educational organization) (since August
Trustee (since 2002) 2005); Chairman, Chief Executive Officer and Director of Steele Street State Bank
Age: 62 (commercial banking) (since August 2003); Director of Colorado UpLIFT (charitable
organization) (since 1986); Trustee of the Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman of U.S. Bank-Colorado (subsidiary of
U.S. Bancorp and formerly Colorado National Bank) (July 1996-April 1999); Director
of Commercial Assets, Inc. (real estate investment trust) (1993-2000); Director of
Jones Knowledge, Inc. (2001-July 2004); and Director of U.S. Exploration, Inc. (oil
and gas exploration) (1997-February 2004). Oversees 37 portfolios in the
OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly MassMutual Institutional Funds)
Trustee (since 2000) (investment company) (since 1996) and MML Series Investment Fund (investment
Age: 64 company) (since 1996); Trustee (since 1987) and Chairman (1994-2005) of the
Investment Committee of the Worcester Polytech Institute (private university);
President and Treasurer of the SIS Funds (private charitable fund) (since January
1999); Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (commercial bank)
(January 1999-July 1999); and Executive Vice President of Peoples Heritage Financial
Group, Inc. (commercial bank) (January 1999-July 1999). Oversees 39 portfolios in
the OppenheimerFunds complex.
103 | OPPENHEIMER STRATEGIC INCOME FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR
REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
Trustee, President and (since September 2000) of the Manager; President and director or trustee of other
Principle Executive Officer Oppenheimer funds; President and Director of OAC and of Oppenheimer Partnership
(since 2001) Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001);
Age: 57 Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
November 2001); Chairman and Director of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager)
(since July 2001); President and Director of OppenheimerFunds Legacy Program
(charitable trust program established by the Manager) (since July 2001); Director of
the following investment advisory subsidiaries of the Manager: OFI Institutional
Asset Management, Inc., Centennial Asset Management Corporation, Trinity Investment
Management Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent company) (since February 1997); Director
of DLB Acquisition Corporation (holding company parent of Babson Capital Management
LLC) (since June 1995); Member of the Investment Company Institute's Board of
Governors (since October 3, 2003); Chief Operating Officer of the Manager (September
2000-June 2001); President and Trustee of MML Series Investment Fund and MassMutual
Select Funds (open-end investment companies) (November 1999-November 2001); Director
of C.M. Life Insurance Company (September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State Life Insurance Company (September
1999-August 2000); Director of Emerald Isle Bancorp and Hibernia Savings Bank
(wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 92
portfolios in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS.
OF THE FUND STEINMETZ, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225
LIBERTY STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED,
PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-
3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
ARTHUR P. STEINMETZ, Senior Vice President of the Manager (since March 1993) and of HarbourView Asset
Vice President and Portfolio Management Corporation (since March 2000). An officer of 3 portfolios in the
Manager (since 1993) OppenheimerFunds complex.
Age: 47
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March
Vice President and 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Chief Compliance Officer Management Corporation and Shareholder Services, Inc. (since June 1983); Vice
(since 2004) President and Director of Internal Audit of the Manager (1997-February 2004). An
Age: 56 officer of 92 portfolios in the OppenheimerFunds complex.
104 | OPPENHEIMER STRATEGIC INCOME FUND
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of
Treasurer and the following: HarbourView Asset Management Corporation, Shareholder Financial
Principal Financial and Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Accounting Officer Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
(since 1999) Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd.
Age: 47 and OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc.
(since November 2000), and OppenheimerFunds Legacy Program (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary
of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief
Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 92 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial
Assistant Treasurer Product Accounting of the Manager (November 1998-July 2002). An officer of 92
(since 2004) portfolios in the OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004); Manager
(since 2005) of Compliance of Berger Financial Group LLC (May 2001-March 2003); Director of
Age: 36 Mutual Fund Operations at American Data Services, Inc. (September 2000-May 2001). An
officer of 92 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002)
Vice President and Secretary of the Manager; General Counsel and Director of the Distributor (since December
(since 2001) 2001); General Counsel of Centennial Asset Management Corporation (since December
Age: 58 2001); Senior Vice President and General Counsel of HarbourView Asset Management
Corporation (since December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of Shareholder Financial
Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice
President, General Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI
Institutional Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice President (May
1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant
Secretary of the following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September 1997-November 2001). An officer of 92
portfolios in the OppenheimerFunds complex.
105 | OPPENHEIMER STRATEGIC INCOME FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April
(since 2004) 2004), Corporate Vice President (May 1999-April 2001) and Assistant General Counsel
Age: 38 (May 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber
Incorporated). An officer of 92 portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
(since 2001) (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
Age: 41 Management Corporation (since October 2003); Vice President and Assistant Secretary
of Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds
Legacy Program and Shareholder Financial Services, Inc. (since December 2001);
Assistant Counsel of the Manager (August 1994-October 2003). An officer of 92
portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September
Assistant Secretary 2004); First Vice President (2000-September 2004), Director (2000-September 2004)
(since 2004) and Vice President (1998-2000) of Merrill Lynch Investment Management. An officer of
Age: 42 92 portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.525.7048.
106 | OPPENHEIMER STRATEGIC INCOME FUND
OPPENHEIMER STRATEGIC INCOME FUND
FORM N-14
PART C
OTHER INFORMATION
Item 15. - Indemnification
Reference is made to the provisions of Article Seven of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 16(1) to
this Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "1933 Act") may be permitted to trustees,
officers and controlling persons of Registrant pursuant to the
foregoing provisions or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or
controlling person of Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
Item 16. - Exhibits
(1) Amended and Restated Declaration of Trust dated September 25,
2002: Filed with Registrant's Post-Effective Amendment No. 23
(11/22/02), and incorporated herein by reference.
(2) Amended By-Laws dated October 24, 2000: Filed with Registrant's
Post-Effective Amendment No. 21 (1/25/01), and incorporated herein by
reference.
(3) Not Applicable.
(4) Not Applicable.
(5) (i) Specimen Class A Share Certificate: Previously filed with
Registrant's Post-Effective Amendment No. 22 (1/28/02), and
incorporated herein by reference.
(6) Amended and Restated Investment Advisory Agreement dated
January 1, 2005: Previously filed with Registrant's Post-Effective
Amendment No. 27, 01/25/06, and incorporated herein by reference.
(7) (i) General Distributor's Agreement dated 10/13/92: Filed with
Registrant's Post-Effective Amendment No. 5, 12/3/92 and refiled with
Registrant's Post-Effective Amendment No. 9, 1/31/95, pursuant to Item
102 of Regulation S-T, and incorporated herein by reference.
(ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Post-Effective Amendment No. 45 to the
Registration Statement of Oppenheimer High Yield Fund (Reg. No.
2-62076), 10/26/01, and incorporated herein by reference.
(iii) Form of Broker Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Post-Effective Amendment No. 45 to the
Registration Statement of Oppenheimer High Yield Fund (Reg. No.
2-62076), 10/26/01, and incorporated herein by reference.
(iv) Form of Agency Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Post-Effective Amendment No. 45 to the
Registration Statement of Oppenheimer High Yield Fund (Reg. No.
2-62076), 10/26/01, and incorporated herein by reference.
(v) Form of Trust Company Fund/SERV Purchase Agreement of
OppenheimerFunds Distributor, Inc.: Previously filed with
Post-Effective Amendment No. 45 to the Registration Statement of
Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and
incorporated herein by reference.
(vi) Form of Trust Company Agency Agreement of OppenheimerFunds
Distributor, Inc.: Previously filed with Post-Effective Amendment No.
45 to the Registration Statement of Oppenheimer High Yield Fund (Reg.
No. 2-62076), 10/26/01, and incorporated herein by reference.
(8) (i) Amended and Restated Retirement Plan for Non-Interested
Trustees or Directors dated 8/9/01: Previously filed with
Post-Effective Amendment No. 34 to the Registration Statement of
Oppenheimer Gold & Special Minerals Fund (Reg. No. 2-82590), 10/25/01,
and incorporated herein by reference.
(ii) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Previously filed with Post-Effective Amendment No.
26 to the Registration Statement of Oppenheimer Gold & Special Minerals
Fund (Reg. No. 2-82590), 10/28/98, and incorporated by reference.
(9) (i) Global Custody Agreement dated August 16, 2002: Previously
filed with Post-Effective Amendment No. 41 to the Registration
Statement of Oppenheimer Variable Account Funds (Reg. No. 2-93177),
4/28/03, and incorporated herein by reference.
(ii) Amendment dated October 2, 2003 to the Global Custody
Agreement dated August 16, 2002: Previously filed with Pre-Effective
Amendment No. 1 to the Registration Statement of Oppenheimer Principal
Protected Trust II (Reg. 333-108093), 11/6/03, and incorporated herein
by reference.
(10) (i) Amended and Restated Service Plan and Agreement for Class A
shares dated 4/26/04: Previously filed with Registrant's Post-Effective
Amendment No. 25, 11/24/04, and incorporated herein by reference.
(ii) Oppenheimer Funds Multiple Class Plan under Rule 18f-3
updated through 8/11/05: Previously filed with Post-Effective Amendment
No. 5 to the Registration Statement of Oppenheimer Main Street
Opportunity Fund (Reg. No. 33-40186), 9/27/05, and incorporated herein
by reference.
(11) Opinion and Consent of Counsel: To be filed by Amendment.
(12) Tax Opinion: To be filed by Amendment.
(13) Not Applicable.
(14) (i) Consent of Deloitte & Touche LLP for Atlas Strategic Income
Fund: Filed herewith.
(ii) Consent of Deloitte & Touche LLP for Oppenheimer Strategic
Income Fund: Filed herewith.
(15) Not Applicable.
(16) Powers of Attorney dated December 13, 2004 for all
Trustees/Directors and Officers: Previously filed with Post-Effective
Amendment No. 44 to the Registration Statement of Oppenheimer Variable
Account Funds, 2/25/05, and incorporated herein by reference.
(17) Not Applicable.
Item 17. - Undertakings
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus
which is a part of this registration statement by any person or party
who is deemed to be an underwriter within the meaning of Rule 145(c) of
the Securities Act [17 CFR 230.145c], the reoffering prospectus will
contain the information called for by the applicable registration form
for the reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment
to the registration statement and will not be used until the amendment
is effective, and that, in determining any liability under the 1933
Act, each post-effective amendment shall be deemed to be a new
registration statement or the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, as amended, this
registration statement has been signed on behalf of the registrant, in
the City of New York and State of New York, on the 27th day of
December, 2006.
Oppenheimer Strategic Income Fund
By: /s/ John V. Murphy*
---------------------------------------------
John V. Murphy, President,
Principal Executive Officer &
Trustee
As required by of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the
capacities on the dates indicated:
Signatures Title Date
/s/ William L. Armstrong* Chairman of the December 27,
2006
- ------------------------------- Board of
Trustees
William L. Armstrong
/s/ John V. Murphy* President, Principal December 27,
2006
- ------------------------ Executive Officer & Trustee
John V. Murphy
/s/ Brian W. Wixted* Treasurer, Principal December 27,
2006
- ------------------------- Financial &
Brian W. Wixted Accounting Officer
/s/ Robert G. Avis* Trustee December 27,
2006
- ----------------------
Robert G. Avis
/s/ George Bowen* Trustee December 27,
2006
- ----------------------
George Bowen
/s/ Edward Cameron* Trustee December 27,
2006
- ------------------------
Edward Cameron
/s/ Jon S. Fossel* Trustee December 27,
2006
- --------------------
Jon S. Fossel
/s/ Sam Freedman* Trustee December 27,
2006
- ----------------------
Sam Freedman
/s/ Beverly L. Hamilton*
- ------------------------------ Trustee
December 27, 2006
Beverly L. Hamilton
/s/ Robert J. Malone*
- -------------------------- Trustee December 27,
2006
Robert J. Malone
/s/ F. William Marshall, Jr.* Trustee
December 27, 2006
- --------------------------------
F. William Marshall, Jr.
*By: /s/ Kathleen T. Ives
-----------------------------------------
Kathleen T. Ives, Attorney-in-Fact
OPPENHEIMER STRATEGIC INCOME FUND
Registration No. 33-28598
EXHIBIT INDEX
Exhibit No. Description
(14)(i) Consent of Deloitte & Touche LLP for Atlas Strategic
Income Fund
(14)(ii) Consent of Deloitte & Touche LLP for Oppenheimer
Strategic Income Fund
