<PAGE>
Oppenheimer Strategic Diversified Income Fund
Semi-Annual Report March 31, 1994
[Logo]
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FUND FACTS
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FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT
OPPENHEIMER STRATEGIC DIVERSIFIED INCOME FUND
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1 The Fund's objective is to seek a high level of current income,
principally by investing in debt securities.
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2 The Fund's managers seek to maximize yield and control investment risk
by spreading investments across three broad fixed income sectors: U.S.
government securities, higher-yielding, lower-rated corporate bonds, and
foreign fixed income securities.
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3 Portfolio allocation at March 31, 1994 was:(1)
MONEY MARKET INSTRUMENTS 48.3%
U.S. GOVERNMENT SECURITIES 27.6%
HIGHER-YIELDING, LOWER-RATED CORPORATE BONDS 13.1%2
FOREIGN FIXED INCOME SECURITIES 11.0%3
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4 "The Fund's diversified investment strategy is well-suited to the
current economic environment, as interest rates have risen in the United
States, but are expected to fall in Europe. Given the possibility of
further increases in U.S. rates, we are emphasizing shorter-term
investments in U.S. government securities. In Europe, we are emphasizing
longer-term, higher-yielding investments, which should increase in value
as rates fall. And we believe the higher-yielding corporate bond sector
will perform well as the U.S. economic recovery helps companies increase
earnings and strengthen credit quality."
PORTFOLIO MANAGERS DAVID NEGRI AND ART STEINMETZ, MARCH 31, 1994
IN THIS REPORT:
ANSWERS TO THREE QUESTIONS YOU SHOULD ASK YOUR FUND'S MANAGERS.
/ / HOW HAS THE FUND RESPONDED TO THE RECENT RISE IN U.S. INTEREST RATES?
/ / WHERE WILL THE FUND SEEK INVESTMENT OPPORTUNITIES GIVEN THE RECENT
VOLATILITY IN U.S. GOVERNMENT SECURITIES?
/ / ARE CORPORATE BONDS A GOOD INVESTMENT IN TODAY'S ECONOMIC ENVIRONMENT?
GET THE FACTS ABOUT BONDS AND BOND MUTUAL FUNDS. CALL 1-800-525-7048 TO RECEIVE
YOUR FREE COPY OF OPPENHEIMERFUNDS "FACTS ABOUT BOND FUNDS" BROCHURE.
1. The Fund's portfolio is subject to change.
2. Investors should be aware that the lower-rated bonds in which the Fund
invests may be subject to greater market fluctuation and risks of less income
and principal and have less liquidity than higher-rated fixed income
securities.
3. The risks of investing in foreign securities, such as currency exchange
fluctuation, political developments and difficulties in trading in foreign
markets, can increase the possibility of share price fluctuation.
2 Oppenheimer Strategic Diversified Income Fund
<PAGE>
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REPORT TO SHAREHOLDERS
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The objective of Oppenheimer Strategic Diversified Income Fund is to seek high
current income by strategically allocating assets among three investment
sectors: U.S. government securities; higher-yielding, lower-rated corporate
bonds; and foreign fixed income securities.
Historically, these sectors have tended to react differently to
economic events, with weak performance in one sector often offset by strong
performance in another. As a result, the Fund's managers have the ability to
seek high yields in different economic environments, while minimizing the impact
of adverse effects in any one sector.
The U.S. economy strengthened considerably in the last six months,
prompting the Federal Reserve to raise interest rates several times as a
pre-emptive strike against inflation. Because bond prices fall when interest
rates rise, prices of U.S. government securities have correspondingly declined.
Your Fund's managers positioned the Fund for a possible interest rate
increase and limited the Fund's exposure to long-term U.S. government bonds.
This helped to reduce the impact of rising rates on the securities in the Fund's
portfolio. We do not plan to add to these positions as long as there are more
compelling yield opportunities elsewhere.
"WE ARE BUILDING A SIZABLE POSITION IN CORPORATE BONDS."
For example, in the European markets, we believe continued economic
weakness and the German central bank's recent decision to cut interest rates
will cause bond prices to rise. Accordingly, we are adding to the Fund's
position in European securities. We are also maintaining our positions in
select Latin American markets, which offer attractive investment opportunities.
In addition, we are building a sizable position in corporate bonds,
which we believe will outperform U.S. government securities as the U.S. economic
recovery continues and corporate earnings increase.(3) In particular, we are
focusing on industries that do well in the later stages of a recovery, such as
transportation, forest products, metals and mining, and chemicals.
Thank you for your trust in Oppenheimer Strategic Diversified Income
Fund. We look forward to helping you seek your financial goals in the years
ahead.
/s/ James C. Swain /s/ Jon S. Fossel
James C. Swain Jon S. Fossel
Chairman President
Oppenheimer Strategic Funds Oppenheimer Strategic Funds
Trust for Oppenheimer Strategic Trust for Oppenheimer Strategic
Diversified Income Fund Diversified Income Fund
April 25, 1994
3. See footnote 2, page 2.
3 Oppenheimer Strategic Diversified Income Fund
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Statement of Investments March 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements - 47.1%
- - -------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets,
3.55%, dated 3/31/94, to be repurchased at $3,201,262
on 4/4/94, collateralized by U.S Treasury Nts., 4.125%-
9.50%, 5/15/94-10/31/96, with a value of $2,045,695
and U.S. Treasury Bills, 0%, 5/19/94,
with a value of $1,220,322 $ 3,200,000 $ 3,200,000
--------------------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc.,
3.53%, dated 3/31/94, to be repurchased at $3,201,255
on 4/4/94, collateralized by U.S Treasury Nts., 4.25%-
8.875%, 5/15/95-10/15/96, with a value of
$3,276,995 3,200,000 3,200,000
-------------
Total Repurchase Agreements (Cost $6,400,000) 6,400,000
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Government Obligations - 36.4%
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Short-Term - 1.7%
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United Mexican States Treasury Bills, 0%, 8/4/94 814,050 (1) 233,470
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Long-Term - 34.7%
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Argentina (Republic of):
Bonds, Bonos de Consolidacion de Deudas,
Series I, 4.25%, 4/1/01 (3)(5) 169,305 (1) 95,506
Past Due Interest Bonds, 4.1875%, 3/31/05 (3)(5) 150,000 105,563
--------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
CD, Banco Nacion de Desolvimiento,
9.25%, 5/14/95 (4) 100,000 100,750
Nts., Banco Estado Minas Gerais, 10%, 1/15/96 50,000 49,438
-----------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds:
12.50%, 1/1/98 150,000,000 (1) 102,578
12.50%, 3/19/98 50,000,000 (1) 34,379
-----------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation
Agreements, Tranche A, 4.50%, 1/1/09 (3)(4) 200,000 125,200
-----------------------------------------------------------------------------------------------
Spain (Kingdom of):
Bonds, 11%, 6/15/97 5,000,000 (1) 39,370
Bonds, 11.45%, 8/30/98 15,000,000 (1) 121,216
Gtd. Bonds, Bonos y Obligacion del Estado,
12.25%, 3/25/00 17,000,000 (1) 144,278
-----------------------------------------------------------------------------------------------
U.S. Treasury Nts., 8.875%, 11/15/19 (7) 3,230,000 3,537,857
-----------------------------------------------------------------------------------------------
Venezuela (Republic of):
Disc. Bonds, Series DL, 4.3125%, 12/18/07 (3) 250,000 123,125
Front-Loaded Interest Reduction
Bonds, Series A, 6%, 3/31/07 (3) 250,000 136,094
-------------------
4,715,354
-------------------
Total Government Obligations (Cost $5,134,139) 4,948,824
- - -------------------------------------------------------------------------------------------------------------------
Mortgage/Asset-Backed Obligations - 0.9%
- - -------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Interest-Only
Stripped Mtg. - Backed Security, Trust 240, Class 2,
7%, 9/25/23 (Cost $ 108,718) 328,705 120,747
4 Oppenheimer Strategic Diversified Income Fund
<PAGE>
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Statement of Investments (Unaudited) (Continued)
Face Market Value
Amount See Note 1
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<S> <C> <C>
Corporate Bonds and Notes - 13.3%
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Basic Materials - 3.2%
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Chemicals - 1.4% Rexene Corp., 9% Fst. Priority Nts., 11/15/99 (6) $ 200,000 $ 187,750
- - -------------------------------------------------------------------------------------------------------------------
Metals - 1.5% Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub.
Nts., 2/1/03 200,000 204,000
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Paper and Stone Container Corp., 9.875% Sr. Nts., 2/1/01 50,000 45,750
Forest Products
- 0.3%
- - -------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals - 4.1%
- - -------------------------------------------------------------------------------------------------------------------
Automotive - 1.9% New City Communications, Inc., 11.375% Sr. Sub.
Nts., 11/1/03 200,000 209,000
-----------------------------------------------------------------------------------------------
Penda Industries, Inc., 10.75% Sr. Nts., 3/1/04 (4) 50,000 49,500
------------
258,500
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Entertainment Casino Magic Finance Corp., 11.50% First Mtg.
- 0.4% Nts., 10/15/01 50,000 50,250
- - -------------------------------------------------------------------------------------------------------------------
Real Estate Saul (B.F.) Real Estate Investment Trust,
Development - 1.4% 11.625% Sr. Nts., 4/1/02 (4) 200,000 197,250
- - -------------------------------------------------------------------------------------------------------------------
Retail - 0.4% Cole National Group, Inc., 11.25% Sr. Nts.,
10/1/01 50,000 51,500
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Consumer Non-Cyclicals - 1.5%
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Food - 1.1% Family Restaurant, Inc., 10.875% Sr. Sub. Disc.
Nts., 2/1/04 150,000 101,250
-----------------------------------------------------------------------------------------------
Heileman Acquisition Corp., 9.625% Sr. Sub. Nts.,
1/31/04 50,000 46,750
---------------
148,000
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Healthcare - 0.4% Epic Healthcare Group, Inc., 10.875% Sr. Sub.
Nts., 6/1/03 50,000 58,000
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Financial - 0.4%
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Bayerische Vereinsbank International SA,
10.80% Sr. Debs., 6/16/03 70,000,000 (1) 47,652
- - -------------------------------------------------------------------------------------------------------------------
Industrial - 1.9%
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General Snyder General Corp., 14.25% Sr. Sub. Debs.,
Industrial - 1.9% 11/15/00 250,000 262,500
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Technology - 1.3%
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Communications Nextel Communications, Inc., 0%/9.75% Sr. Disc. Nts.,
- 0.7% 8/15/04 (2) 75,000 44,624
-----------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 9.50% Sr.
Nts., 2/1/04 50,000 46,750
---------------
91,374
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Technology - 0.6% Imax Corp., 7% Sr. Nts., 3/1/01 (3)(4) 80,000 74,000
5 Oppenheimer Strategic Diversified Income Fund
<PAGE>
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Statement of Investments (Unaudited) (Continued)
Face Market Value
Amount See Note 1
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<S> <C> <C>
Utilities - 0.9%
- - -------------------------------------------------------------------------------------------------------------------
California Energy Co., 0%/10.25% Sr. Disc. Nts.,
1/15/04 (2) $ 165,000 $ 117,562
------------------
Total Corporate Bonds and Notes (Cost $1,830,400) 1,794,088
- - -------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $13,473,257) 97.7% 13,263,659
- - -------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 2.3 316,599
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Net Assets 100.0% $13,580,258
-------- ---------------
-------- ---------------
<FN>
1. Face amount is reported in foreign currency.
2. Represents a zero coupon bond that converts to a fixed rate of interest
at a designated future date.
3. Represents the current interest rate for a variable rate security.
4. Restricted security--See Note 6 of Notes to Financial Statements.
5. Interest or dividend is paid in kind.
6. Represents the current interest rate for an increasing rate security.
7. Liquid assets have been segregated to cover outstanding put
options written, as follows:
Face Amount Expiration Exercise Premium Market Value
Subject to Put Date Price Received See Note 1
Japanese Government Bond,
Series 22, 5.30%, 3/20/13 $2,000,000 (1) 4/94 $102.225 $284 $39
</TABLE>
See accompanying Notes to Financial Statements.
6 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES March 31, 1994 (Unaudited)
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value (cost $13,473,257) - see accompanying statement $13,263,659
------------------------------------------------------------------------------------------------
Cash 829,072
------------------------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 891,636
Interest and dividends 192,333
------------------------------------------------------------------------------------------------
Deferred organization costs 6,375
------------------------------------------------------------------------------------------------
Other 23,021
-----------
Total assets 15,206,096
- - --------------------------------------------------------------------------------------------------------------------
LIABILITIES Options written, at value (premiums received $284) - see accompanying
statement - Note 4 39
------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 1,286,035
Shares of beneficial interest redeemed 240,417
Dividends 19,446
Other 79,901
-----------
Total liabilities 1,625,838
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NET ASSETS $13,580,258
-----------
-----------
- - --------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $13,808,454
NET ASSETS ------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (14,565)
------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment
and foreign currency transactions (1,260)
------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments, options written and
translation of assets and liabilities denominated in foreign
currencies (212,371)
-----------
Net assets $13,580,258
-----------
-----------
- - --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Net asset value, redemption price and offering
PER SHARE price per share (based on net assets of $13,580,258 and 2,779,903
shares of beneficial interest outstanding) $4.89
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Period from February 1, 1994 (Commencement of Operations)
to March 31, 1994 (Unaudited)
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Interest $ 55,590
- - --------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees - Note 5 8,019
------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 5 8,019
------------------------------------------------------------------------------------------------
Registration and filing fees 3,413
------------------------------------------------------------------------------------------------
Other 120
-----------
Total expenses 19,571
Less reimbursement from Oppenheimer Management Corporation - Note 5 (19,527)
-----------
Net expenses 44
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NET INVESTMENT INCOME 55,546
- - --------------------------------------------------------------------------------------------------------------------
REALIZED AND Net realized loss from:
UNREALIZED LOSS Investments (610)
ON INVESTMENTS, Foreign currency transactions (650)
OPTIONS WRITTEN AND -----------
FOREIGN CURRENCY Net realized loss (1,260)
TRANSACTIONS ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written (203,197)
Translation of assets and liabilities denominated in foreign currencies (9,174)
-----------
Net change (212,371)
-----------
Net realized and unrealized loss on investments, options written and foreign
currency transactions (213,631)
- - --------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(158,085)
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
March 31, 1994(1)
(Unaudited)
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS Net investment income $ 55,546
------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions (1,260)
------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments, options written and translation of assets
and liabilities denominated in foreign currencies (212,371)
----------
Net decrease in net assets resulting from operations (158,085)
- - --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income ($.0509 per share) (70,111)
DISTRIBUTIONS TO
SHAREHOLDERS
- - --------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net increase in net assets resulting from
TRANSACTIONS beneficial interest transactions - Note 2 13,808,454
- - --------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 13,580,258
------------------------------------------------------------------------------------------------
Beginning of period --
-----------
End of period $13,580,258
-----------
-----------
<FN>
1. For the period from February 1, 1994 (commencement of operations) to March 31, 1994.
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED
MARCH 31,
1994 (1)(Unaudited)
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 5.00
- - -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .05
Net realized and unrealized loss on
investments, options written and foreign currency
transactions (.11)
-------
Total loss from investment operations (.06)
- - -----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.05)
-------
Total dividends and distributions to shareholders (.05)
- - -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.89
-------
-------
- - -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) (1.19)%
- - -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $13,580
- - -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $6,597
- - -----------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at end of period
(in thousands) 2,780
- - -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.21%(3)
Expenses, before voluntary reimbursement by the Manager 1.84%(3)
Expenses, net of voluntary reimbursement by the Manager .01%(3)
- - -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 4.8%
<FN>
1. For the period from February 1, 1994 (commencement of operations) to March
31, 1994.
2. Assumes a hypothetical initial 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.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding short-
term securities) for the six months ended March 31, 1994 were $87,217,366 and
$302,521, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Strategic Diversified Income Fund
<PAGE>
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
- - --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Strategic Diversified Income Fund (the Fund)
ACCOUNTING POLICIES is a separate series of Oppenheimer Strategic Funds
Trust, a diversified, open-end management investment
company registered under the Investment Company Act of
1940, as amended. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The
Fund offers a single class of shares, designated as Class
C shares, which may be subject to a contingent deferred
sales charge. The following is a summary of significant
accounting policies consistently followed by the Fund.
---------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at
4:00 p.m. (New York time) on each trading day. Listed
and unlisted securities for which such information is
regularly reported are valued at the last sale price of
the day or, in the absence of sales, at values based on
the closing bid or asked price or the last sale price on
the prior trading day. Long-term debt securities are
valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which
cannot be valued by the approved portfolio pricing
service are valued by averaging the mean between the bid
and asked prices obtained from two active market makers
in such securities. Short-term debt securities having a
remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for
amortization to maturity of any premium or discount.
Securities for which market quotes are not readily
available are valued under procedures established by the
Board of Trustees to determine fair value in good faith.
An option is valued based upon the last sales price on
the principal exchange on which the option is traded or,
in the absence of any transactions that day, the value is
based upon the last sale on the prior trading date if it
is within the spread between the closing bid and asked
prices. If the last sale price is outside the spread,
the closing bid or asked price closest to the last
reported sale price is used. Forward foreign currency
exchange contracts are valued at the forward rate on a
daily basis.
---------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high yield
securities, which may be subject to a greater degree of
credit risk, greater market fluctuations and risk of loss
of income and principal, and may be more sensitive to
economic conditions than lower yielding, higher rated
fixed income securities. The Fund may acquire securities
in default, and is not obligated to dispose of securities
whose issuers subsequently default.
---------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of
the Fund are maintained in U.S. dollars. Prices of
securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of
securities and investment income are translated at the
rates of exchange prevailing on the respective dates of
such transactions.
The Fund generally enters into forward currency exchange
contracts as a hedge, upon the purchase or sale of a
security denominated in a foreign currency. In addition,
the Fund may enter into such contracts as a hedge against
changes in foreign currency exchange rates on portfolio
positions. A forward exchange contract is a commitment
to purchase or sell a foreign currency at a future date,
at a negotiated rate. Risks may arise from the potential
inability of the counterparty to meet the terms of the
contract and from unanticipated movements in the value of
a foreign currency relative to the U.S. dollar.
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 results of
operations.
11 Oppenheimer Strategic Diversified Income Fund
<PAGE>
---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- - --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian
to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated
within the custodian's vault, all securities held as
collateral for repurchase agreements. If the seller of
the agreement defaults and the value of the collateral
declines, or if the seller enters an insolvency
proceeding, realization of the value of the collateral by
the Fund may be delayed or limited.
---------------------------------------------------------
OPTIONS WRITTEN. The Fund may write covered call and put
options. 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. In writing an option, the Fund bears the
market risk of an unfavorable change in the price of the
security underlying the written option. Exercise of an
option written by the Fund could result in the Fund
selling or purchasing a security at a price different
from the current market value. All securities covering
call options written are held in escrow by the custodian
bank and the Fund maintains liquid assets sufficient to
cover written put options in the event of exercise by the
holder.
---------------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any net
realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income tax provision is required.
---------------------------------------------------------
ORGANIZATION COSTS. The Manager advanced $6,500 for
organization and start-up costs of the Fund. Such
expenses are being amortized over a five-year period from
the date operations commenced. In the event that all or
part of the Manager's initial investment in shares of the
Fund is withdrawn during the amortization period, the
redemption proceeds will be reduced to reimburse the Fund
for any unamortized expenses, in the same ratio as the
number of shares redeemed bears to the number of initial
shares outstanding at the time of such redemption.
---------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends from net investment income each day the
New York Stock Exchange is open for business and pay such
dividends monthly. Distributions from net realized gains
on investments, if any, will be declared at least once
each year.
---------------------------------------------------------
OTHER. Investment transactions are accounted for on the
date the investments are purchased or sold (trade date)
and dividend income is recorded on the ex-dividend date.
Discount on securities purchased is amortized over the
life of the respective securities, in accordance with
federal income tax requirements. Realized gains and
losses on investments and options written and unrealized
appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for
federal income tax purposes. Dividends in kind are
recognized as income on the ex-dividend date, at the
current market value of the underlying security. Interest
on payment-in-kind debt instruments is accrued as income
at the coupon rate and a market adjustment is made on the
ex-date.
12 Oppenheimer Strategic Diversified Income Fund
<PAGE>
---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- - --------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL INTEREST value shares of beneficial interest. Transactions in
shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, 1994(1)
----------------------------
SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C>
Sold 2,970,640 $14,747,156
Dividends
reinvested 4,519 22,277
Redeemed (195,256) (960,979)
---------- -----------
Net increase 2,779,903 $13,808,454
---------- -----------
---------- -----------
<FN>
1. For the period from February 1, 1994 (commencement of
operations) to March 31, 1994.
</TABLE>
- - --------------------------------------------------------------------------------
3. UNREALIZED GAINS At March 31, 1994, net unrealized depreciation of
AND LOSSES ON investments and options written of $209,353 was composed
INVESTMENTS AND of gross appreciation of $20,335, and gross depreciation
OPTIONS WRITTEN of $229,688.
- - --------------------------------------------------------------------------------
4. PUT OPTION Put option activity for the period from February 1, 1994
ACTIVITY (commencement of operations) to March 31, 1994 was as
follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
---------------------------------------------------------
<S> <C> <C>
Options written 200 $284
Options expired prior
to exercise -- --
Options exercised -- --
------ ------
Options outstanding at
March 31, 1994 200 $284
----- -----
----- -----
</TABLE>
- - --------------------------------------------------------------------------------
5. MANAGEMENT FEES Management fees paid to the Manager were in accordance
AND OTHER with the investment advisory agreement with the Fund
TRANSACTIONS WITH which provides for an annual fee of .75% on the first
AFFILIATES $200 million of net assets with a reduction of .03% on
each $200 million thereafter to $800 million, .60% on the
next $200 million and .50% on net assets in excess of $1
billion. The Manager has agreed to reimburse the Fund if
aggregate expenses (with specified exceptions) exceed the
most stringent applicable regulatory limit on Fund
expenses. In addition, the Manager has voluntarily
undertaken to reimburse Fund expenses to the level needed
to maintain a stable dividend.
During the six months ended March 31, 1994, OFDI received
contingent deferred sales charges of $381 upon redemption
of Fund shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
13 Oppenheimer Strategic Diversified Income Fund
<PAGE>
---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
- - --------------------------------------------------------------------------------
Oppenheimer Shareholder Services (OSS), a division of the
Manager, is the transfer and shareholder servicing agent
for the Fund, and for other registered investment
companies. OSS's total costs of providing such services
are allocated ratably to these companies.
Under an approved distribution and service plan, the Fund
may expend up to .25% of its net assets annually to
reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold
shares of the Fund, including amounts paid to brokers,
dealers, banks and other financial institutions. In
addition, the Fund's shares are subject to an asset-based
sales charge of .75% of net assets annually, to reimburse
OFDI for sales commissions paid from its own resources at
the time of sale and associated financing costs. In the
event of termination or discontinuance of the plan, the
Board of Trustees may allow the Fund to continue payment
of the asset-based sales charge to OFDI for distribution
expenses incurred on Fund shares sold prior to
termination or discontinuance of the plan.
- - --------------------------------------------------------------------------------
6. RESTRICTED The Fund owns securities purchased in private placement
SECURITIES transactions, without registration under the Securities
Act of 1933 (the Act). The securities are valued under
methods approved by the Board of Trustees as reflecting
fair value. The Fund intends to invest no more than 10%
of its net assets (determined at the time of purchase) in
restricted and illiquid securities, excluding securities
eligible for resale pursuant to Rule 144A of the Act that
are determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines.
Restricted and illiquid securities amount to $125,200, or
.92% of the Fund's net assets, at March 31, 1994.
<TABLE>
<CAPTION>
VALUATION PER
ACQUISITION COST UNIT AS OF
SECURITY DATE PER UNIT MARCH 31, 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brazil (Federal Republic of) Bonds,
Banco Nacional de Desenvolvimento
Economico e Social, 9.25%, 5/14/95(1) 3/8/94 $100.28 $100.75
-----------------------------------------------------------------------------------------------
Imax Corp., 7% Sr. Nts., 3/1/01(1) 2/22/94 $ 92.39 $ 92.50
-----------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation
Agreements, Tranche A, 4.50% 1/1/09 3/4/94 $ 72.53 $ 62.60
-----------------------------------------------------------------------------------------------
Penda Industries, Inc., 10.75% Sr.
Nts., 3/1/04(1) 3/11/94 $100.00 $ 99.00
-----------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment
Trust, 11.625% Sr. Nts., 4/1/02(1) 3/23/94-3/31/94 $ 99.25 $ 98.63
<FN>
1. Transferable under Rule 144A of the Act.
</TABLE>
14 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
OPPENHEIMER STRATEGIC DIVERSIFIED INCOME FUND
A Series of Oppenheimer Strategic Funds Trust
-------------------------------------------------------------------------------------------------
<S> <C>
OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
David P. Negri, Vice President
Arthur P. Steinmetz, Vice President
George C. Bowen, Vice President, Secretary, and Treasurer
Lynn M. Coluccy, Assistant Treasurer
Robert G. Zack, Assistant Secretary
-------------------------------------------------------------------------------------------------
INVESTMENT ADVISOR Oppenheimer Management Corporation
-------------------------------------------------------------------------------------------------
DISTRIBUTOR Oppenheimer Funds Distributor, Inc.
-------------------------------------------------------------------------------------------------
TRANSFER AND Oppenheimer Shareholder Services
SHAREHOLDER SERVICING
AGENT
-------------------------------------------------------------------------------------------------
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
-------------------------------------------------------------------------------------------------
INDEPENDENT AUDITORS Deloitte & Touche
-------------------------------------------------------------------------------------------------
LEGAL COUNSEL Myer, Swanson & Adams, P.C.
</TABLE>
The financial statements included herein have been taken
from the records of the Fund without examination by the
independent auditors.
This is a copy of a report to shareholders of Oppenheimer
Strategic Diversified Income Fund. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
Strategic Diversified Income Fund. For material
information concerning the Fund, see the Prospectus.
15 Oppenheimer Strategic Diversified Income Fund
