OPPENHEIMER STRATEGIC DIVERSIFIED INCOME FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 26, 1995
To the Shareholders of Oppenheimer Strategic Diversified Income Fund:
Notice is hereby given that a Special Meeting of the Shareholders of
Oppenheimer Strategic Diversified Income Fund ("Strategic Diversified
Income Fund"), a registered management investment company, will be held
at 3410 South Galena Street, Denver, Colorado 80231, at 10:00 A.M., Denver
time, on July 26, 1995, or any adjournments thereof (the "Meeting"), for
the following purposes:
1. To approve an Agreement and Plan of Reorganization between
Oppenheimer Strategic Diversified Income Fund and Oppenheimer Strategic
Income Fund ("Strategic Income Fund"), and the transactions contemplated
thereby, including the transfer of substantially all the assets of
Strategic Diversified Income Fund, which is a series of Oppenheimer
Strategic Funds Trust (the "Trust"), having one class of shares,
designated as Class C, in exchange for Class C shares of Strategic Income
Fund, which is also a series of the Trust and the distribution of Class
C shares to the shareholders of Strategic Diversified Income Fund in
complete liquidation of Strategic Diversified Income Fund, the
cancellation of the outstanding shares of Strategic Diversified Income
Fund and its termination as a series of the Trust.
2. To act upon such other matters as may properly come before the
Meeting.
Shareholders of record at the close of business on May 12, 1995 are
entitled to notice of, and to vote at, the Meeting. The Proposal is more
fully discussed in the Proxy Statement and Prospectus. Please read it
carefully before telling us, through your proxy or in person, how you wish
your shares to be voted. Strategic Diversified Income Fund's Board of
Trustees recommends a vote in favor of the Proposal. WE URGE YOU TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
George C. Bowen, Secretary
June 2, 1995
_______________________________________________________________________
Shareholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed proxy and to date, sign and
return it in the accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly mailing your proxy
no matter how large or small your holdings may be.
387
<PAGE>
OPPENHEIMER STRATEGIC INCOME FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
Oppenheimer Strategic Funds Trust (the "Trust") has filed with the
Securities and Exchange Commission (the "SEC") a Registration Statement
on Form N-14 relating to the registration of Class C shares of its series
named Oppenheimer Strategic Income Fund ("Strategic Income Fund") to be
offered to the shareholders of the second series of the Trust named
Oppenheimer Strategic Diversified Income Fund (the "Fund"), located at
3410 South Galena Street, Denver, Colorado 80231 (telephone 1-800-525-
7048), pursuant to an Agreement and Plan of Reorganization (the
"Reorganization Agreement") between Strategic Income Fund and Strategic
Diversified Income Fund. This Proxy Statement of Strategic Diversified
Income Fund relating to the Reorganization Agreement and the transactions
contemplated thereby (the "Reorganization") also constitutes a Prospectus
of Strategic Income Fund filed as part of such Registration Statement.
Strategic Income Fund is a mutual fund with the investment objective of
seeking a high level of current income by investing mainly in debt
securities and by writing covered call options on them.
This Proxy Statement and Prospectus sets forth concisely information about
Strategic Income Fund that shareholders of Strategic Diversified Income
Fund should know before voting on the Reorganization. A copy of the
Prospectus for Strategic Income Fund, dated May 26, 1995, supplemented May
26, 1995, is enclosed, and is incorporated herein by reference. The
following documents have been filed with the SEC and are available without
charge upon written request to Oppenheimer Shareholder Services ("OSS"),
the transfer and shareholder servicing agent for Strategic Income Fund and
Strategic Diversified Income Fund, at P.O. Box 5270, Denver, Colorado
80217, or by calling the toll-free number shown above: (i) a Prospectus
for Strategic Diversified Income Fund, dated February 1, 1995,
supplemented May 26, 1995; (ii) a Statement of Additional Information
about Strategic Diversified Income Fund, dated May 26, 1995; and (iii) a
Statement of Additional Information about Strategic Income Fund, dated May
26, 1995 (the "Strategic Income Fund Additional Statement"). The
Strategic Income Fund Additional Statement, which is incorporated herein
by reference, contains more detailed information about Strategic Income
Fund and its management. A Statement of Additional Information relating
to the Reorganization, dated June 2, 1995, has been filed with the SEC as
part of the Strategic Income Fund Registration Statement on Form N-14 and
is incorporated by reference herein, and is available by written request
to OSS at the same address immediately above or by calling the toll-free
number shown above.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated June 2, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Introduction
General
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
Comparative Fee Table
Synopsis
Parties to the Reorganization
Shares to be Issued
The Reorganization
Reasons for the Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution and Service Plan Fees
Purchases, Exchanges and Redemptions
Principal Risk Factors
Approval of the Reorganization (The Proposal)
Reasons for the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
Comparison Between Strategic Diversified Income Fund and Strategic Income
Fund
Investment Objectives and Policies
Special Investment Methods
Investment Restrictions
Portfolio Turnover
Description of Brokerage Practices
Expense Ratios and Performance
Shareholder Services
Rights of Shareholders
Management and Distribution Arrangements
Purchase of Additional Shares
Method of Carrying Out the Reorganization
Miscellaneous
Additional Information
Financial Information
Public Information
Other Business
Annex A - Agreement and Plan of Reorganization, dated
February 28, 1995, by and between Oppenheimer Strategic
Diversified Income Fund and Oppenheimer Strategic
Income Fund A-1
<PAGE>
OPPENHEIMER STRATEGIC DIVERSIFIED INCOME FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
Special Meeting of Shareholders
to be held July 26, 1995
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the shareholders
of Oppenheimer Strategic Diversified Income Fund ("Strategic Diversified
Income Fund"), a registered management investment company, in connection
with the solicitation by the Board of Trustees (the "Board") of
Oppenheimer Strategic Funds Trust (the "Trust") proxies to be used at the
Special Meeting of Shareholders of Strategic Diversified Income Fund to
be held at 3410 South Galena Street, Denver, Colorado 80231, at 10:00
A.M., Denver time, on July 26, 1995, or any adjournments thereof (the
"Meeting"). It is expected that the mailing of this Proxy Statement and
Prospectus will commence on or about June 12, 1995.
At the Meeting, shareholders of Strategic Diversified Income Fund will be
asked to approve an Agreement and Plan of Reorganization (the
"Reorganization Agreement") between Strategic Diversified Income Fund and
Oppenheimer Strategic Income Fund ("Strategic Income Fund"), and the
transactions contemplated thereby (the "Reorganization"), including the
transfer of substantially all the assets of Strategic Diversified Income
Fund, which is a series of Oppenheimer Strategic Funds Trust (the
"Trust"), having one class of shares, designated as Class C, in exchange
for Class C shares of Strategic Income Fund, the distribution of Class C
shares to the shareholders of Strategic Diversified Income Fund in
complete liquidation of Strategic Diversified Income Fund, and the
cancellation of the outstanding shares of Strategic Diversified Income
Fund and its termination as a series of the Trust. The Class C shares to
be issued by Strategic Income Fund pursuant to the Reorganization will be
issued at net asset value without a sales charge and without the
imposition of the contingent deferred sales load. Additional information
with respect to these changes to Strategic Income Fund is set forth
herein, in the Prospectus of Strategic Income Fund accompanying this Proxy
Statement and Prospectus, and in the Strategic Income Fund Additional
Statement which is incorporated herein by reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on May 12, 1995 as the record
date (the "Record Date") for the determination of shareholders entitled
to notice of, and to vote at, the Meeting. An affirmative vote of the
holders of a "majority of the outstanding shares" of Strategic Diversified
Income Fund is required to approve the Reorganization. That vote is
defined in the Investment Company Act of 1940 as the vote of the holders
of the lesser of: (i) 67% or more of the voting securities present or
represented by proxy at the shareholders meeting, if the holders of more
than 50% of the outstanding voting securities are present or represented
by proxy, or (ii) more than 50% of the outstanding voting securities.
Each shareholder will be entitled to one vote for each share and a
fractional vote for each fractional share held of record at the close of
business on the Record Date. Only shareholders of Strategic Diversified
Income Fund will vote on the Reorganization. The vote of shareholders of
Strategic Income Fund is not being solicited.
At the close of business on the Record Date, there were approximately
11,296,673.993 shares of Strategic Diversified Income Fund issued and
outstanding and 855,259,204.347 shares of Strategic Income Fund issued and
outstanding consisting of 588,698,599.025 Class A shares and
266,560,605.322 Class B shares. The presence in person or by proxy of the
holders of a majority of such shares constitutes a quorum for the
transaction of business at the Meeting. To the knowledge of Strategic
Diversified Income Fund, as of the Record Date, no person owned of record
or beneficially 5% or more of its outstanding shares. As of the Record
Date, to the knowledge of Strategic Income Fund, no person owned of record
or beneficially 5% or more of the outstanding shares of either class. In
addition, as of the record date, the Trustees and officers of the Trust
owned less than 1% of the outstanding shares of either Strategic
Diversified Income Fund or Strategic Income Fund.
Proxies
The enclosed form of proxy, if properly executed and returned, will be
voted (or counted as an abstention or withheld from voting) in accordance
with the choices specified thereon, and will be included in determining
whether there is a quorum to conduct the Meeting. The proxy will be voted
in favor of the Proposal unless a choice is indicated to vote against or
to abstain from voting on the Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-dealer
based on instructions received from its customers. If no instructions are
received, the broker-dealer may (if permitted under applicable stock
exchange rules), as record holder, vote such shares on the Proposal in the
same proportion as that broker-dealer votes street account shares for
which voting instructions were received in time to be voted. If a
shareholder executes and returns a proxy but fails to indicate how the
votes should be cast, the proxy will be voted in favor of the Proposal.
The proxy may be revoked at any time prior to the voting thereof by: (i)
writing to the Secretary of Strategic Diversified Income Fund at 3410
South Galena Street, Denver, Colorado 80231; (ii) attending the Meeting
and voting in person; or (iii) signing and returning a new proxy (if
returned and received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and
mailing this Proxy Statement and Prospectus, will be borne by Strategic
Diversified Income Fund. Any documents such as existing prospectuses or
annual reports that are included in that mailing will be a cost of the
fund issuing the document. In addition to the solicitation of proxies by
mail, proxies may be solicited by officers of Strategic Diversified Income
Fund or officers and employees of OSS, personally or by telephone or
telegraph; any expenses so incurred will be borne by OSS. Proxies may be
solicited by a proxy solicitation firm hired at Strategic Diversified
Income Fund's expense for such purpose. Brokerage houses, banks and other
fiduciaries may be requested to forward soliciting material to the
beneficial owners of shares of Strategic Diversified Income Fund and to
obtain authorization for the execution of proxies. For those services,
if any, they will be reimbursed by Strategic Diversified Income Fund for
their reasonable out-of-pocket expenses.
With respect to the Reorganization, Strategic Diversified Income Fund and
Strategic Income Fund will bear the cost of their respective tax opinions.
Any other out-of-pocket expenses of Strategic Diversified Income Fund and
Strategic Income Fund associated with the Reorganization, including legal,
accounting and transfer agent expenses, will be borne by Strategic
Diversified Income Fund and Strategic Income Fund, respectively, in the
amounts so incurred by each.
COMPARATIVE FEE TABLE
Strategic Diversified Income Fund and Strategic Income Fund each pay a
variety of expenses directly for management of their assets,
administration, distribution of their shares and other services, and those
expenses are reflected in each fund's net asset value per share.
Shareholders pay other expenses directly, such as sales charges. The
following table is provided to help you compare the direct expenses of
investing in Strategic Diversified Income Fund with the direct expenses
of investing in Strategic Income Fund.
<TABLE>
<CAPTION>
Oppenheimer
Strategic Oppenheimer
Diversified Strategic
Income Fund Income Fund
Class C Class A Class B Class C
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge on
Purchases (as a % of
offering price) None 4.75% None None
Sales Charge on Reinvested
Dividends None None None None
Deferred Sales Charge (as
a % of the lower of the
original purchase price
or redemption proceeds) 1%(1) None 5% in the 1%(1)
first year
declining to
1% in the
sixth year
and eliminated
thereafter
Pro Forma Surviving Strategic Income Fund
Class A Class B Class C
Maximum Sales Charge on
Purchases (as a % of
offering price) 4.75% None None
Sales Charge on Reinvested
Dividends None None None
Deferred Sales Charge (as
a % of the lower of the
original purchase price
or redemption proceeds) None 5% in the 1%(1)
first year
declining to
1% in the sixth
year and
eliminated
thereafter
<FN>
_______________________
(1) If you redeem shares within 12 months of buying them, you may have to pay a 1% contingent deferred sales charge
("CDSC"). The CDSC will not be imposed on Fund shares exchanged in this Reorganization but will continue to apply to
Strategic Income Fund shares received, based on the date your Fund shares were purchased.
</TABLE>
The following numbers are projections of Strategic Diversified Income
Fund's business expenses based on a six month period (annualized) ended
March 31, 1995 (unaudited). Since Class C shares of Strategic Income Fund
were not publicly offered during the six months ended March 31, 1995, the
annual operating expenses are annualized estimates, based on Class B
shares of Strategic Income Fund for the same period (unaudited). The pro
forma information with respect to Class C shares is based on estimates of
the business expenses for Strategic Income Class B shares after giving
effect to the Reorganization. These amounts are shown as a percentage of
average net assets. The 12b-1 Distribution and Service Plan fees are the
12b-1 service plan fees (0.25% of average annual net assets) and the
annual asset-based sales charges of 0.75%.
<TABLE>
<CAPTION>
Strategic Pro Forma
Diversified Strategic Strategic
Income Fund Income Fund Income Fund
Class C Class C Class C
<S> <C> <C> <C>
Management Fees .75% .54% .54%
12b-1 Distribution and
Service Plan Fees 1.00% 1.00% 1.00%
Other Expenses .44% .15% .15%
Total Fund Operating
Expenses 2.19% 1.69% 1.69%
</TABLE>
Class A and Class B shares will not be issued to shareholders of Strategic
Diversified Income Fund as part of the Reorganization. However, for
informational purposes, the business expenses of Class A and Class B
shares, for the six months ended March 31, 1995 (annualized) were with
respect to Class A shares, .54% of management fees, .24% of 12b-1 service
plan fees, and .16% of other expenses for total operating expenses of
.94%. With respect to Class B shares, .54% of management fees, 1.00% of
12b-1 Distribution and Service Plan Fees and .15% of other expenses, for
total operating expenses of 1.69%. The pro forma estimates with respect
to Class A and Class B shares after giving effect to the Reorganization
would be the same.
Example. To try and show the effect of the expenses in an investment over
time, the hypotheticals shown below have been created. Assume that you
make a $1,000 investment in either the Class C shares of Strategic
Diversified Income Fund, the Class C shares of Strategic Income Fund or
the pro forma surviving Strategic Income Fund and that the annual return
is 5% and that the operating expenses for each fund are the ones shown in
the chart above. If you were to redeem your shares at the end of each
period shown below, your investment would incur the following expenses by
the end of each period shown.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
Oppenheimer Strategic
Diversified Income Fund
Class C Shares $32 $69 $117 $252
Oppenheimer Strategic
Income Fund
Class C Shares $27 $53 $92 $200
Pro Forma Surviving Strategic
Income Fund
Class C Shares $27 $53 $92 $200
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years*
Oppenheimer Strategic
Diversified Income Fund
Class C Shares $22 $69 $117 $252
Oppenheimer Strategic
Income Fund
Class C Shares $17 $53 $92 $200
Pro Forma Surviving Strategic
Income Fund
Class C Shares $17 $53 $92 $200
<FN>
__________________________
* Because of the asset-based sales charge imposed and the contingent deferred sales charge on Class C shares, long-term Class
C shareholders could pay the economic equivalent of an amount greater than the maximum front-end sales charge allowed under
applicable regulation requirements.
</TABLE>
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus and
presents key considerations for shareholders of Strategic Diversified
Income Fund to assist them in determining whether to approve the
Reorganization. This synopsis is only a summary and is qualified in its
entirety by the more detailed information contained in or incorporated by
reference in this Proxy Statement and Prospectus and by the Reorganization
Agreement, a copy of which is attached as an Annex hereto. Shareholders
should carefully review this Proxy Statement and Prospectus and the
Reorganization Agreement in their entirety and, in particular, the current
Prospectus of Strategic Income Fund which accompanies this Proxy Statement
and Prospectus and is incorporated by reference herein.
Parties to the Reorganization
Strategic Diversified Income Fund is one of two investment portfolios or
"series" of Oppenheimer Strategic Funds Trust (the "Trust"). The Trust
was organized in 1989 as a Massachusetts business trust with one series,
but in December 1993, the Trust was reorganized to become a multi-series
business trust and Strategic Diversified Income Fund became a series of
it. The Trust is an open-end, diversified management investment company,
with an unlimited number of authorized shares of beneficial interest.
Each of the two series of the Trust is a fund that issues its own shares,
has its own investment portfolio, and its own assets and liabilities.
Strategic Diversified Income Fund and Strategic Income Fund are each
located at 3410 South Galena Street, Denver, Colorado 80231. There is
one Board of Trustees of the Trust. Oppenheimer Management Corporation
(the "Manager") acts as investment adviser to Strategic Diversified Income
Fund and Strategic Income Fund (collectively referred to herein as the
"funds"). Additional information about the parties is set forth below.
Shares to be Issued. Shareholders of Strategic Diversified Income Fund
will receive Class C shares of Strategic Income Fund in exchange for their
shares of Strategic Diversified Income Fund. The Board of Trustees of the
Trust have established three classes of shares of Strategic Income which
are Classes A, B and C. All classes of shares vote together in the
aggregate as to certain matters; however, shares of a particular class
vote together on matters that affect that class alone. With respect to
Strategic Diversified Income Fund, there is only one class of shares, and
Fund shareholders vote exclusively on all matters submitted to a vote of
shareholders. In most other respects, the shares of Strategic Diversified
Income Fund, and Class C shares of Strategic Income to be issued in the
reorganization are substantially similar.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of Strategic Diversified Income Fund to Strategic Income
Fund in exchange for Class C shares of Strategic Income Fund. Presently
Strategic Diversified Income Fund has only one class of shares (Class C
shares). The net asset value of Strategic Income Fund Class C shares
issued in the exchange will equal the value of the assets of Strategic
Diversified Income Fund received by Strategic Income Fund. Following the
Closing of the Reorganization presently scheduled for August 4, 1995,
Strategic Diversified Income Fund will distribute the Class C shares of
Strategic Income Fund received by Strategic Diversified Income Fund on the
Closing Date to holders of Strategic Diversified Income Fund shares issued
and outstanding as of the Valuation Date (as hereinafter defined). As a
result of the Reorganization, each Strategic Diversified Income Fund
shareholder will receive that number of full and fractional Strategic
Income Fund Class C shares equal in value to such shareholder's pro rata
interest in the assets transferred to Strategic Income Fund as of the
Valuation Date. The Board has determined that the interests of existing
Fund shareholders will not be diluted as a result of the Reorganization.
For the reasons set forth below under "The Reorganization - Reasons for
the Reorganization," the Board, including the trustees who are not
"interested persons" of the Trust (the "Independent Trustees'), as that
term is defined in the Investment Company Act, has concluded that the
Reorganization is in the best interests of Strategic Diversified Income
Fund and its shareholders and recommends approval of the Reorganization
by Fund shareholders. If the Reorganization is not approved, Strategic
Diversified Income Fund will continue in existence as a series of the
Trust and the Board will determine whether to pursue alternative actions.
Reasons for the Reorganization
At a meeting of the Board of Trustees (the "Board") held February 28,
1995, the Trustees reviewed and discussed materials relevant to the
Reorganization. The Board, including the Independent Trustees,
unanimously approved and recommended to shareholders of Strategic
Diversified Income Fund that they approve the Reorganization. Strategic
Diversified Income Fund and Strategic Income Fund are each series of the
same Trust. Strategic Diversified Income Fund presently offers one class
of shares designated as Class C. Strategic Income Fund has three
designated classes of shares; Class A, Class B and Class C. Each series
has its own investment portfolio and its own assets and liabilities. The
Board, in its review of the proposed reorganization, noted that both
Strategic Diversified Income Fund and Strategic Income Fund share the
identical investment objective of seeking a high level of current income
by investing primarily in debt securities and by writing covered call
options on them. The investment policies and restrictions of each fund
are substantially the same. While sharing identical investment objectives
and policies, Strategic Diversified Income Fund is a new fund which
commenced the sales of its shares on February 1, 1994. Strategic
Diversified Income Fund has not grown and it is significantly smaller in
size compared to Strategic Income Fund. The Board considered that
Strategic Income Fund would provide a greater diversification of
investments to Strategic Diversified Income Fund shareholders, and at the
same time Strategic Diversified Income Fund shareholders would have the
benefit of a reduction in management fee rates and business expenses based
on the large asset size and the large number of shareholders of Strategic
Income Fund. As of March 31, 1995, Strategic Diversified Income Fund has
$49,094,881 net assets and Strategic Income Fund had approximately net
assets of $4,643,263,905. The Board concluded that as a result of such
Reorganization, shareholders of Strategic Diversified Income Fund would
become shareholders of a larger fund and should benefit from the economics
of scale.
The Board, in reviewing financial information, considered that Strategic
Diversified Income Fund shareholders would expect a reduction in overall
expenses as a result of becoming shareholders in the larger Strategic
Income Fund. Although the Manager had been voluntarily reimbursing
Strategic Diversified Income Fund to the level needed in order to maintain
the dividend, the voluntary reimbursement is no longer necessary, and it
was terminated in September of 1994. The ratio of expenses to average net
assets for Strategic Diversified Income Fund for the fiscal year ended
September 30, 1994 was 1.71% (after reimbursement). Before voluntary
reimbursement by the Manager these expenses for the period ended September
30, 1994 were 2.13%. For the six months ended March 31, 1995, the ratio
of expenses to average net assets was 2.19%.
For the fiscal year ended September 30, 1994, and the six month period
ended March 31, 1995 (unaudited) on a pro forma basis giving effect to the
Reorganization, the expense ratio of Strategic Income Fund, as a
percentage of average annual net assets would have been 1.71% and 1.69%,
respectively, for Class C shares.
In addition to the above, the Board also considered information with
respect to the investment performance of Strategic Diversified Income
Fund. The Board considered information concerning Class B shares of
Strategic Income Fund, which has comparable business expenses to the
expected expenses of the Class C shares of Strategic Diversified Income
Fund, and determined that both standardized yield and average annual
return were better for Class B shares of Strategic Income Fund than Class
C shares of Strategic Diversified Income Fund. Although past performance
is not predictive of future results, shareholders of Strategic Diversified
Income Fund would have an opportunity to become shareholders of Strategic
Diversified Income Fund which has better past performance.
The Board also considered that the Reorganization would be a tax-free
reorganization, and there would be no sales charge imposed in effecting
the Reorganization. The Board concluded that the combining of Strategic
Diversified Income Fund with Class C shares of Strategic Income Fund would
not result in dilution to the shareholders of Strategic Diversified Income
Fund and it would not result in dilution to shareholders of Strategic
Income Fund.
Tax Consequences of the Reorganization
In the opinion of Deloitte & Touche LLP, tax adviser to Strategic
Diversified Income Fund, the Reorganization will qualify as a tax-free
reorganization for Federal income tax purposes. As a result, no gain or
loss will be recognized by the Trust, Strategic Income Fund, or the
shareholders of Strategic Diversified Income Fund for Federal income tax
purposes as a result of the Reorganization. For further information about
the tax consequences of the Reorganization, see "Approval of the
Reorganization - Tax Aspects" below.
Investment Objectives and Policies
Strategic Diversified Income Fund and Strategic Income Fund have virtually
identical investment objectives and policies. Each fund seeks a high
level of current income mainly from interest on debt securities and also
seeks to enhance its income by writing covered call options on debt
securities. The funds do not invest with the objective of seeking capital
appreciation.
Each fund seeks its investment objective by investing principally in three
market sectors: (1) debt securities of foreign governments and companies,
(2) U.S. Government securities, and (3) lower-rated, high-yield debt
securities of U.S. companies. Under normal market conditions the funds
will invest in each of these three sectors, but from time to time the
Manager will adjust the amounts the funds invest in each sector.
Investment Advisory and Distribution and Service Plan Fees
The terms and conditions of the investment advisory agreements are
substantially the same. The funds obtain investment management services
from the Manager. The management fee is payable monthly and computed on
the net asset value of each fund as of the close of business each day.
Both Strategic Diversified Income Fund and Strategic Income Fund pay the
same management fee at the rate of 0.75% of the first $200 million of net
assets, 0.72% of the next $200 million, 0.69% of the next $200 million,
0.66% of the next $200 million, 0.60% of the next $200 million and 0.50%
of the net assets in excess of $1 billion.
Each fund has a Distribution and Service Plan (the "Plan" for its Class
C shares pursuant to which payments are made to Oppenheimer Funds
Distributor, Inc. (the "Distributor") in connection with distributing each
fund's Class C shares and servicing accounts. Under each Plan, the fund
pays the Distributor an annual "asset-based sales charge" of 0.75 per
year. The Distributor also receives a service fee of 0.25% per year.
Both fees are computed on the average annual net assets of the fund,
determined as of the close of each regular business day. The Plan for
Strategic Diversified Income Fund makes payments to reimburse the
Distributor for its distribution expenses. The Plan for Strategic Income
is a compensation plan under which Strategic Income pays the Distributor
for certain distribution services but Strategic Income payments are not
tied to reimbursing the Distributor for its expenses.
Purchases, Exchanges and Redemptions
Strategic Diversified Income Fund and Strategic Income Fund are each a
series of Oppenheimer Strategic Funds Trust. The funds are part of the
OppenheimerFunds complex of mutual funds. The procedures for purchases,
exchanges and redemptions of shares of the funds are substantially the
same. Shares of either fund may be exchanged only for Class C shares of
Oppenheimer Funds and the number of Oppenheimer Funds offering Class C
shares is limited.
There is no initial sales charge on purchases of either Strategic
Diversified shares or Strategic Income Fund Class C shares, however, if
shares of either Strategic Diversified Income Fund or Strategic Income
Fund, Class C shares are sold within 12 months, there will be a contingent
deferred sales charge of 1%. Class C shares of Strategic Income Fund
received in the Reorganization will be issued at net asset value, without
a sales charge and no CDSC will be imposed as a result of the
Reorganization. Services available to shareholders of both funds include
purchase and redemption of shares through OppenheimerFunds AccountLink and
PhoneLink (an automated telephone system), telephone redemptions, and
exchanges by telephone to other OppenheimerFunds which offer Class C
shares, and reinvestment privileges. Please see "Shareholder Services,"
and refer to Strategic Diversified Income Fund's prospectus and Strategic
Income Fund's prospectus included with this document for further
information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in
Strategic Income Fund, shareholders should carefully consider the
following risk factors, the information set forth in this Proxy Statement
and Prospectus and the more complete description of risk factors set forth
in the documents incorporated by reference herein, including the
Prospectuses of the funds and their respective Statements of Additional
Information. As stated in their respective Prospectuses, as a general
matter, both Strategic Diversified Income Fund and Strategic Income Fund
are designed for investors willing to assume additional risk in return for
seeking high current income. The funds do not invest with the objective
of seeking capital appreciation.
Both Strategic Diversified Income Fund and Strategic Income Fund seek high
current income mainly from interest on debt securities. They also seek
to enhance income by writing covered call options on debt securities. In
seeking their investment objectives, both funds invest in higher-yielding,
lower-rated debt securities, commonly known as "junk bonds." The types
of securities each fund invests in are substantially similar, including
foreign securities and certain derivative investments. These securities
and risks of investing in them are described below under "Investment
Objectives and Policies" on page 15. The Board of Trustees has concluded
that shareholders of Strategic Diversified Income Fund should not be
subject to any material increase in investment risks as shareholders of
Strategic Income.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting of the Board of Trustees (the "Board") held February 28,
1995, the Trustees reviewed and discussed materials relevant to the
proposed Reorganization. The Board, including the Independent Trustees,
unanimously approved and recommended to shareholders of Strategic
Diversified Income Fund that they approve the Reorganization. Strategic
Diversified Income Fund and Strategic Income Fund are each series of the
same Trust. Strategic Diversified Income Fund presently offers one class
of shares designated as Class C. Strategic Income Fund has three
designated classes of shares; Class A, Class B and Class C. Each series
has its own investment portfolio and its own assets and liabilities. The
Board, in its review of the proposed reorganization, noted that both
Strategic Diversified Income Fund and Strategic Income Fund share the
identical investment objective of seeking a high level of current income
by investing primarily in debt securities and by writing covered call
options on them. The investment policies and restrictions of each fund
are substantially the same. While sharing identical investment
objectives, Strategic Diversified Income Fund is a new fund which
commenced the sales of its shares on February 1, 1994. Strategic
Diversified Income Fund has not grown and it is significantly smaller in
size than Strategic Income Fund. The Board considered that Strategic
Income Fund would provide a greater diversification of investments to Fund
shareholders, and at the same time Fund shareholders would have the
benefit of a reduction in management fee rates and business expenses based
on the large asset size and the large number of shareholders of Strategic
Income Fund. As of March 31, 1995, Strategic Diversified Income Fund had
net assets of $49,094,881 and Strategic Income Fund had approximately net
assets of $4,643,263,905. The Board concluded that as a result of such
Reorganization, shareholders of Strategic Diversified Income Fund would
become shareholders of a larger fund and should benefit from the economics
of scale.
The Board, in reviewing financial information, considered that Strategic
Diversified Income Fund shareholders would expect a reduction in overall
expenses as a result of becoming shareholders in the larger Strategic
Income Fund. Although the Manager had been voluntarily reimbursing
Strategic Diversified Income Fund to the level needed to maintain the
dividend, the voluntary reimbursement was terminated in September, 1994
because it was no longer necessary in order to maintain the dividend. The
ratio of expenses to average net assets for Strategic Diversified Income
Fund for the fiscal year ended September 30, 1994 was 1.71% (after
reimbursement). Before voluntary reimbursement by the Manager these
expenses for the period ended September 30, 1994 were 2.13%. For the six
months ended March 31, 1995, the ratio of expenses to average net assets
was 2.19%.
In addition to the above, the Board also considered information with
respect to the performance of Strategic Diversified Income Fund. All
shares of all classes of Strategic Income Fund represent interests in the
same portfolio of investment securities, and the investment performance
of Strategic Income Fund's investments affects each share equally. The
investment return on the shares of the different classes is affected by
the expenses borne by each class. The Board reviewed information
concerning Class B shares of Strategic Income Fund, and considered that
the business expenses which will be incurred by Class C shares of
Strategic Income Fund are similar to the business expenses of Strategic
Income Fund's Class B shares. Through the economies of scale mentioned
above, it is anticipated that the expenses to be borne by Strategic Income
Fund's Class C shares should be less than the expenses borne by Strategic
Diversified Income Fund's shareholders. Based on this analysis, the Board
anticipates that the investment performance of Strategic Income Fund's
Class C shares should be better than the investment performance of shares
of Strategic Diversified Income Fund if there were no Reorganization.
Based on a similar analysis, the Board also considered that both
standardized yield and average annual return were better for Class B
shares of Strategic Income Fund than Class C shares of Strategic
Diversified Income Fund. Although past performance is not predictive of
future results, shareholders of Strategic Diversified Income Fund would
have an opportunity to become shareholders of a fund with lower expenses.
The Board also considered that the Reorganization would be a tax-free
reorganization, and there would be no sales charge imposed in effecting
the Reorganization. The Board concluded that the Reorganization would not
result in dilution to the shareholders of Strategic Diversified Income
Fund and it would not result in dilution to shareholders of Strategic
Income Fund.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as
Annex A to this Proxy Statement and Prospectus) contemplates a
reorganization under which (i) all of the assets of Strategic Diversified
Income Fund (other than the cash reserve described below (the "Cash
Reserve")) as a series of Oppenheimer Strategic Funds Trust will be
transferred to Strategic Income Fund in exchange for Class C shares of
Strategic Income Fund, (ii) these shares will be distributed among the
shareholders of Strategic Diversified Income Fund in complete liquidation
of Strategic Diversified Income Fund, (iii) Strategic Diversified Income
Fund will be terminated as a series of the Trust and (iv) the outstanding
shares of Strategic Diversified Income Fund will be cancelled. Strategic
Income Fund will not assume any of Strategic Diversified Income Fund's
liabilities except for portfolio securities purchased which have not
settled and outstanding shareholder redemption and dividend checks.
The result of effectuating the Reorganization would be that: (i) Strategic
Income Fund will add to its gross assets all of the assets (net of any
liability for portfolio securities purchased but not settled and
outstanding shareholder redemption and dividend checks) of Strategic
Diversified Income Fund other than its Cash Reserve; and (ii) the
shareholders of Strategic Diversified Income Fund as of the close of
business on the Closing Date will become shareholders of Class C shares
of Strategic Income Fund.
The effect of the Reorganization will be that shareholders of Strategic
Diversified Income Fund who vote their shares in favor of the
Reorganization will be electing to redeem their shares of Strategic
Diversified Income Fund (at net asset value on the Valuation Date referred
to below under "Method of Carrying Out the Reorganization Plan,"
calculated after subtracting the Cash Reserve) and reinvest the proceeds
in Class C shares of Strategic Income Fund at net asset value without
sales charge and without recognition of taxable gain or loss for Federal
income tax purposes (see "Tax Aspects of the Reorganization" below). The
Cash Reserve is that amount retained by Strategic Diversified Income Fund
which is sufficient in the discretion of the Board for the payment of: (a)
Strategic Diversified Income Fund's expenses of liquidation, and (b) its
liabilities, other than those assumed by Strategic Income Fund. Strategic
Diversified Income Fund and Strategic Income Fund, each as a series of
Oppenheimer Strategic Funds Trust will bear all of their respective
expenses associated with the Reorganization, as set forth under "Costs of
the Solicitation and the Reorganization" above. Management estimates that
such expenses associated with the Reorganization to be borne by Strategic
Diversified Income Fund will not exceed $30,000. Liabilities as of the
date of the transfer of assets will consist primarily of accrued but
unpaid normal operating expenses of Strategic Diversified Income Fund,
excluding the cost of any portfolio securities purchased but not yet
settled and outstanding shareholder redemption and dividend checks. See
"Method of Carrying Out the Reorganization Plan" below.
The Reorganization Agreement provides for coordination between the funds
as to their respective portfolios so that, after the closing, Strategic
Income Fund will be in compliance with all of its investment policies and
restrictions. Strategic Diversified Income Fund will recognize capital
gain or loss on any sales made pursuant to this paragraph. As noted in
"Tax Aspects of the Reorganization" below, if Strategic Diversified Income
Fund realizes net gain from the sale of securities in 1995, such gain, to
the extent not offset by capital loss carry forward, will be distributed
to shareholders prior to the Closing Date and will be taxable to
shareholders as capital gain.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the Reorganization
Agreement, Strategic Diversified Income Fund will pay a dividend or
dividends which, together with all previous such dividends, will have the
effect of distributing to Strategic Diversified Income Fund's shareholders
all of Strategic Diversified Income Fund's investment company taxable
income for taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for 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 available capital loss carry-
forward). Such dividends will be included in the taxable income of
Strategic Diversified Income Fund's shareholders as ordinary income and
capital gain, respectively.
The exchange of the assets of Strategic Diversified Income Fund for Class
C shares of Strategic Income Fund and the assumption by Strategic Income
Fund of certain liabilities of Strategic Diversified Income Fund is
intended to qualify for Federal income tax purposes as a tax-free
reorganization under Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"). Strategic Diversified Income Fund has
represented to Deloitte & Touche LLP, tax adviser to Strategic Diversified
Income Fund, that there is no plan or intention by any Fund shareholder
who owns 5% or more of Strategic Diversified Income Fund's outstanding
shares, and, to Strategic Diversified Income Fund's best knowledge, there
is no plan or intention on the part of the remaining Strategic Diversified
Income Fund shareholders, to redeem, sell, exchange or otherwise dispose
of a number of Strategic Income Fund Class C shares received in the
transaction that would reduce Strategic Diversified Income Fund
shareholders' ownership of Strategic Income Fund shares to a number of
shares having a value, as of the Closing Date, of less than 50% of the
value of all the formerly outstanding Strategic Diversified Income Fund
shares as of the same date. Oppenheimer Strategic Funds Trust has
represented to Deloitte & Touche LLP that, as of the Closing Date, it will
qualify as a regulated investment company or will meet the diversification
test of Section 368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Strategic Income Fund
and Strategic Diversified Income Fund will receive the opinion of Deloitte
& Touche LLP to the effect that, based on the Reorganization Agreement,
the above representations, existing provisions of the Code, Treasury
Regulations issued thereunder, current Revenue Rulings, Revenue Procedures
and court decisions, for Federal income tax purposes:
1. The transactions contemplated by the Reorganization Agreement will
qualify as a tax-free "reorganization" within the meaning of Section
368(a)(1) of the Code.
2. Strategic Diversified Income Fund and Strategic Income Fund will each
qualify as "a party to a reorganization" within the meaning of Section
368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of Strategic
Diversified Income Fund upon the distribution of Class C shares of
beneficial interest in Strategic Income Fund to the shareholders of
Strategic Diversified Income Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be recognized
by Strategic Diversified Income Fund by reason of the transfer of its
assets solely in exchange for Class C shares of Strategic Income Fund.
5. Under Section 1032 of the Code no gain or loss will be recognized by
Strategic Income Fund by reason of the transfer of Strategic
Diversified Income Fund's assets solely in exchange for Class C shares
of Strategic Income Fund.
6. The shareholders of Strategic Diversified Income Fund will have the
same tax basis and holding period for the shares of beneficial
interest in Strategic Income Fund that they receive as they had for
Strategic Diversified Income Fund stock that they previously held,
pursuant to Sections 358(a) and 1223(1) of the Code, respectively.
7. The securities transferred by Strategic Diversified Income Fund to
Strategic Income Fund will have the same tax basis and holding period
in the hands of Strategic Income Fund as they had for Strategic
Diversified Income Fund, pursuant to Sections 362(b) and 1223(1) of
the Code, respectively.
Shareholders of Strategic Diversified Income Fund should consult their tax
advisors regarding the effect, if any, of the Reorganization in light of
their individual circumstances. Since the foregoing discussion only
relates to the Federal income tax consequences of the Reorganization,
shareholders of Strategic Diversified Income Fund should also consult
their tax advisers as to state and local tax consequences, if any, of the
Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Strategic Diversified
Income Fund and Strategic Income Fund and indicates the pro forma combined
capitalization as of March 31, 1995 as if the Reorganization had occurred
on such dates.
March 31, 1995
<TABLE>
<CAPTION> Net Asset
Shares Value
Net Assets Outstanding Per Share
<S> <C> <C> <C>
Oppenheimer Strategic
Income Fund
Class A $2,990,586,689 663,783,585 $4.51
Class B $1,652,677,216 366,177,811 $4.51
Oppenheimer Strategic
Diversified Income Fund
Class C $ 49,094,881 10,832,351 $4.53
Pro Forma Surviving Oppenheimer
Strategic Income Fund
Class A $2,990,586,689 663,783,585 $4.51
Class B $1,652,677,216 366,177,811 $4.51
Class C $ 49,094,881 10,885,787 $4.51
</TABLE>
Reflects issuance of 10,885,787 shares of Strategic Income Fund in a tax-
free exchange for the net assets of Strategic Diversified Income Fund,
aggregating $49,094,881.
The pro forma ratio of expenses to average annual net assets of the Class
C shares at September 30, 1994 and at March 31, 1995 would have been 1.71%
and 1.69%, respectively, for Class C shares. The pro forma ratio of
expenses to average net assets of Class A shares of September 30, 1994 and
March 31, 1995 would have been .95% and .94%, respectively. The pro forma
ratio of expenses to average net assets of Class B shares at September 30,
1994 and March 31, 1995 would have been 1.71% and 1.69%, respectively.
COMPARISON BETWEEN Strategic Diversified Income Fund AND
STRATEGIC INCOME FUND
Information about Strategic Diversified Income Fund and Strategic Income
Fund is presented below. Additional information about Strategic Income
Fund is set forth in its Prospectus, accompanying this Proxy Statement and
Prospectus, and additional information about both funds is set forth in
documents that may be obtained upon request of the transfer agent and upon
review at the offices of the SEC. See "Miscellaneous - Public
Information."
Investment Objectives and Policies
As their investment objective, both Strategic Diversified and Strategic
Income Fund seek a high level of current income by investing mainly in
debt securities and by writing covered calls on them. The funds do not
invest with the objective of capital appreciation. In seeking their
investment objectives, the funds employ virtually identical investment
policies as described in detail below. The Manager is the investment
adviser to both Strategic Diversified Income Fund and Strategic Income
Fund.
Each of the funds seek their investment objective by investing principally
in three market sectors: (1) debt securities of foreign governments and
companies, (2) U.S. Government securities, and (3) lower-rated, high-yield
debt securities of U.S. companies. Under normal market conditions the
funds will invest in each of these three sectors, but from time to time
the Manager will adjust the amounts Strategic Diversified Income Fund
invests in each sector.
By investing in all three sectors, the funds seek to reduce the volatility
of fluctuations in their net asset values per share, because the overall
securities price and interest rate movements in each of the different
sectors are not necessarily correlated with each other. Changes in one
sector may be offset by changes in another sector that moves in a
different direction. Therefore, this strategy may help reduce some of the
risks from negative market movements and interest rate changes in any one
sector. However, Strategic Diversified Income Fund may invest up to 100%
of their respective assets in any one sector if the Manager believes that
in doing so the funds can achieve their objective without undue risk to
a fund's assets.
When investing the funds' respective assets, the Manager considers many
factors, including general economic conditions in the U.S. and abroad,
prevailing interest rates, and the relative yields of U.S. and foreign
securities. While each fund may seek to earn income by writing covered
call options, market price movements may make it disadvantageous to do so.
The funds may also try to hedge against losses by using hedging strategies
described below. When market conditions are unstable, the funds may
invest substantial amounts of their assets in money market instruments for
defensive purposes. These instruments include U.S. Government Securities,
bank obligations, commercial paper, corporate obligations and other
instruments approved by the Board of Trustees.
Lower Rated Securities
In seeking high current income, each fund may invest in higher-yielding,
lower-rated debt securities, commonly known as "junk bonds." There is no
restriction on the amount of each fund's assets that could be invested in
these types of securities. Lower-rated debt securities are those rated
below "investment grade," which means they have a rating of "Baa" or lower
by Moody's Investors Service, Inc. ("Moody's") or "BBB" or lower by
Standard & Poor's Corporation ("S&P"). These securities may be rated as
low as "C" or "D" or may be in default at time of purchase.
The Manager does not rely solely on ratings of securities by rating
agencies when selecting investments for the fund, but evaluates other
economic and business factors as well. Each fund may invest in unrated
securities that the Manager believes offer yields and risks comparable to
rated securities. High yield, lower-grade securities, whether rated or
unrated, often have speculative characteristics. Lower-grade securities
have special risks that make them riskier investments than investment
grade securities. They may be subject to greater market fluctuations and
risk of loss of income and principal than lower yielding, investment grade
securities. There may be less of a market for them and therefore they may
be harder to sell at an acceptable price. They are also subject to
greater credit risk. For example, there is a relatively greater
possibility that the issuer's earnings may be insufficient to make the
payments of interest due on the bonds. The issuer's low creditworthiness
may increase the potential for its insolvency. All corporate debt
securities (whether foreign or domestic) are subject to some degree of
credit risk.
These risks mean that either fund may not achieve the expected income from
lower-grade securities, and that either fund's net asset value per share
may be affected by declines in value of these securities. Strategic
Diversified Income Fund is not obligated to dispose of securities when
issuers are in default or if the rating of the security is reduced. These
risks are discussed in more detail in each fund's Statement of Additional
Information.
Interest Rate Risks
In addition to credit risks, referred to above, debt securities are
subject to changes in value due to changes in prevailing interest rates.
When prevailing interest rates fall, the values of outstanding debt
securities generally rise. Conversely, when interest rates rise, the
values of outstanding debt securities generally decline. The magnitude of
these fluctuations will be greater when the average maturity of the
portfolio securities is longer. Changes in the value of securities held
by each fund mean that each fund's share prices can go up or down when
interest rates change because of the effect of the change on the value of
each fund's portfolio of debt securities.
Risk of Foreign Securities
Both Strategic Diversified Income Fund and Strategic Income Fund may
invest in debt securities issued or guaranteed by foreign companies,
"supranational" entities such as the World Bank, and foreign governments
or their agencies. These foreign securities may include debt obligations
such as government bonds, debentures issued by companies, as well as
notes. Some of these debt securities may have variable interest rates or
"floating" interest rates that change in different market conditions.
Those changes will affect the income each fund receives. Each fund can
also invest in preferred stocks and "zero coupon" securities, which have
similar features to the ones described below in "Debt Securities of U.S.
Companies." However, if the assets of either fund are held abroad, the
countries in which they are held and the sub-custodians holding them must
be approved by the Board of Trustees. Each of the funds may buy or sell
foreign currencies and foreign currency forward contracts (agreements to
exchange one currency for another at a future date) to hedge currency
risks and to facilitate transactions in foreign investments. Although
currency forward contracts can be used to protect a fund from adverse
exchange rate changes, there is a risk of loss if the Manager fails to
predict currency exchange movements correctly. For example, foreign
issuers are not required to use accounting methods that correspond to
generally-accepted accounting principles. If foreign securities are not
registered under the Securities Act of 1933, as amended (the "Securities
Act"), the issuer may not have to comply with the disclosure requirements
of the Securities Exchange Act of 1934, as amended. The values of foreign
securities investments will be affected by a variety of factors,
including, among others, incomplete or inaccurate information available
as to foreign issuers, changes in currency rates, exchange control
regulations or currency blockage, expropriation or nationalization of
assets, application of foreign tax laws (including withholding taxes),
changes in governmental administration or economic or monetary policy in
the U.S. or abroad, or changed circumstances in dealings between nations.
In addition, it is generally more difficult to obtain court judgments
outside the U.S. Additional costs may be incurred in connection with
investments in foreign securities because of generally higher foreign
commissions and the additional custodial costs associated with monitoring
foreign securities. Foreign securities markets may be less liquid, more
volatile and less subject to governmental regulation than in the U.S.
Debt Securities of Foreign Governments and Companies. The funds may
invest in debt securities issued or guaranteed by foreign companies,
"supranational" entities such as the World Bank, and foreign governments
or their agencies. These foreign securities may include debt obligations
such as government bonds, debentures issued by companies, as well as
notes. The funds will not invest more than 25% of their respective total
assets in government securities of any one foreign country or more than
25% of their respective assets in companies in one foreign country.
Otherwise, the funds are not restricted in the amount of assets they may
invest in foreign countries or in which countries. Both funds may buy or
sell foreign currencies and foreign currency forward contracts (agreements
to exchange one currency for another at a future date) to hedge currency
risks and to facilitate transactions in foreign investments. Although
currency forward contracts can be used to protect the funds from adverse
exchange rate changes, there is a risk of loss if the Manager fails to
predict currency exchange movements correctly.
U.S. Government Securities. The funds may invest in debt securities
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities ("U.S. Government Securities"). Certain U.S. Government
Securities, including U.S. Treasury bills, notes and bonds, and mortgage
participation certificates guaranteed by the Government National Mortgage
Association ("Ginnie Mae") are supported by the full faith and credit of
the U.S. Government. Ginnie Mae certificates are one type of mortgage-
related U.S. Government Security the funds invest in. Other mortgage-
related U.S. Government Securities Strategic Diversified Income Fund
invests in that are issued or guaranteed by federal agencies or
government-sponsored entities are not supported by the full faith and
credit of the U.S. Government. Those securities include obligations
supported by the right of the issuer to borrow from the U.S. Treasury,
such as obligations of Federal Home Loan Mortgage Corporation ("Freddie
Mac") and obligations supported only by the credit of the instrumentality,
such as Federal National Mortgage Association ("Fannie Mae"). Other U.S.
Government Securities Strategic Diversified Income Fund invests in may be
zero coupon Treasury securities and collateralized mortgage obligations
("CMOs").
Although U.S. Government Securities involve little credit risk, their
values will fluctuate depending on prevailing interest rates. Because the
yields on U.S. Government Securities are generally lower than on corporate
debt securities, when one of the funds holds U.S. Government Securities
it may attempt to increase the income it can earn from them by writing
covered call options against them when market conditions are appropriate.
Zero Coupon Treasury Securities. Zero coupon Treasury securities
generally are U.S. Treasury notes or bonds that have been "stripped" of
their interest coupons, U.S. Treasury bills issued without interest
coupons, or certificates representing an interest in the stripped
securities. A zero coupon Treasury security pays no current interest and
trades at a deep discount from its face value and will be subject to
greater market fluctuations from changes in interest rates than interest-
paying securities. Each of the funds accrues interest into holdings
without receiving the accrual costs. As a result, the funds may be forced
to seek portfolio securities to pay cash dividends or net redemptions.
The funds may invest up to 50% of their respective total assets in zero
coupon securities issued by either the U.S. Government or U.S. companies.
Mortgage-Backed U.S. Government Securities and CMOs. Certain mortgage-
backed U.S. Government securities "pass-through" to investors the interest
and principal payments generated by a pool of mortgages assembled for sale
by government agencies. Pass-through mortgage-backed securities entail the
risk that principal may be repaid at any time because of prepayments on
the underlying mortgages. That may result in greater price and yield
volatility than traditional fixed-income securities that have a fixed
maturity and interest rate.
The funds may also invest in CMOs, which generally are obligations fully
collateralized by a portfolio of mortgages or mortgage-related securities.
Payment of the interest and principal generated by the pool of mortgages
is passed through to the holders as the payments are received. CMOs are
issued with a variety of classes or series which have different
maturities. Certain CMOs may be more volatile and less liquid than other
types of mortgage-related securities, because of the possibility of the
prepayment of principal due to prepayments on the underlying mortgage
loans.
The funds may also enter into "forward roll" transactions with banks and
dealers with respect to the mortgage-related securities in which they can
invest. These require a fund to secure its obligation in the transaction
by segregating assets with its custodian bank equal in amount to its
obligation under the roll.
The funds may also invest in CMOs that are "stripped." That means that
the security is divided into two parts, one of which receives some or all
of the principal payments (and is known as a "P/O") and the other which
receives some or all of the interest (and is known as an "I/O"). P/Os and
I/Os are generally referred to as "derivative investments," discussed
further below.
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the
underlying mortgages. Principal prepayments increase that sensitivity.
Stripped securities that pay "interest only" are therefore subject to
greater price volatility when interest rates change, and they have the
additional risk that if the underlying mortgages are prepaid, the funds
will lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates fall, and
in times of rapidly falling interest rates, the funds might receive back
less than their investment.
The value of "principal only" securities generally increases as interest
rates decline and prepayment rates rise. The price of these securities
is typically more volatile than that of coupon-bearing bonds of the same
maturity.
Debt Securities of U.S. Companies. Each of the funds may invest in debt
securities issued by U.S. companies, including bonds, debentures, notes,
preferred stocks, zero coupon securities, participation interests, asset-
backed securities and sinking fund and callable bonds. The funds may
purchase these securities in public offerings or through private
placements. The funds have no limitations on the maturity, capitalization
of the issuer or credit rating of the domestic debt securities in which
it invests, although it is expected that most issuers will have total
assets in excess of $100 million.
Zero Coupon Corporate Securities. Zero coupon corporate securities are
similar to U.S. Government zero coupon treasury securities but are issued
by companies. They have an additional risk that the issuing company may
fail to pay interest or repay the principal on the obligation.
Corporate Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of consumer loans and other trade receivables, similar
to mortgage-backed securities. They are issued by trusts and special
purpose corporations. They are backed by a pool of assets, such as credit
card or auto loan receivables, which are the obligations of a number of
different parties. The income from the underlying pool is passed through
to holders, such as the funds. These securities are frequently supported
by a credit enhancement, such as a letter of credit, a guarantee or a
preference right. However, the extent of the credit enhancement may be
different for different securities and generally applies to only a
fraction of the security's value. These securities present special risks.
For example, in the case of credit card receivables, the issuer of the
security may have no security interest in the related collateral.
Participation Interests. Each of the funds may acquire participation
interests in loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan and
are acquired from banks or brokers that have made the loan or are members
of the lending syndicate. No more than 5% of each fund's net assets can
be invested in participation interests of the same borrower. The Manager
has set certain creditworthiness standards for issuers of loan
participations, and monitors their creditworthiness. The value of loan
participation interests depends primarily upon the creditworthiness of the
borrower, and its ability to pay interest and principal. Borrowers may
have difficulty making payments. If a borrower fails to make scheduled
interest or principal payments, each fund could experience a decline in
the net asset value of its shares. Some borrowers may have senior
securities rated as low as "C" by Moody's or "D" by Standard & Poor's, but
may be deemed acceptable credit risks. Participation interests are
subject to each fund's limitations on investments in illiquid securities.
See "Illiquid and Restricted Securities" below.
Special Investment Methods
Strategic Diversified Income Fund and Strategic Income Fund both use the
special investment methods summarized below.
Borrowing For Leverage. From time to time, Strategic Diversified Income
Fund and Strategic Income Fund may increase their ownership of securities
by borrowing up to 50% of the value of their respective assets from banks
on an unsecured basis and investing the borrowed funds (on which the fund
will pay interest), subject to the 300% asset coverage requirement of the
Investment Company Act. Purchasing securities with borrowed funds is a
speculative investment method known as leveraging. There are risks
associated with leveraging purchases of portfolio securities by borrowing,
including a possible reduction of income and increased fluctuation of net
asset value per share.
Short Sales Against-the-Box. The funds may not sell securities short
except in transactions referred to as "short sales against-the-box." No
more than 15% of each fund's net assets will be held as collateral for
such short sales at any one time.
Hedging. Each of the funds may purchase and sell certain kinds of futures
contracts, put and call options, forward contracts, and options on futures
and broadly-based securities indices, or enter into interest rate swap
agreements. These are all referred to as "hedging instruments."
Strategic Diversified Income Fund does not use hedging instruments for
speculative purposes, and has limits on the use of them, described below.
The funds may buy and sell options, futures and forward contracts for a
number of purposes. They may do so to try to manage their exposure to the
possibility that the prices of their portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. They may do so to try to manage
their exposure to changing interest rates. Some of these strategies, such
as selling futures, buying puts and writing covered calls, hedge each
fund's portfolio against price fluctuations. Other hedging strategies,
such as buying futures and call options, tend to increase the funds'
exposure to the securities market. Forward contracts are used to try to
manage foreign currency risks on each fund's foreign investments. Foreign
currency options are used to try to protect against declines in the dollar
value of foreign securities each fund owns, or to protect against an
increase in the dollar cost of buying foreign securities. Writing covered
call options may also provide income to each fund for liquidity purposes
or defensive reasons or to raise cash to distribute to shareholders.
Futures. The funds may buy and sell futures contracts that relate to (1)
broadly-based securities indices (these are referred to as Stock Index
Futures and Bond Index Futures), and (2) interest rates (these are
referred to as Interest Rate Futures). Each of the funds may buy and sell
certain kinds of put options (puts) and call options (calls). The funds
may purchase calls on (1) debt securities, (2) Futures, (3) broadly-based
securities indices and (4) foreign currencies, or to terminate its
obligation on a call Strategic Diversified Income Fund previously wrote.
The funds may write (that is, sell) covered call options on debt
securities to raise cash for income to distribute to shareholders or for
defensive reasons. When the fund writes a call, it receives cash (called
a premium). The call gives the buyer the ability to buy the investment
on which the call was written from the fund at the call price during the
period in which the call may be exercised. If the value of the investment
does not rise above the call price, it is likely that the call will lapse
without being exercised, while the fund keeps the cash premium (and the
investment).
Each of the funds may purchase put options. Buying a put on an investment
gives a fund the right to sell the investment at a set price to a seller
of a put on that investment. Each fund can purchase those puts that
relate to (1) debt securities (whether or not it holds such securities in
its portfolio), (2) Interest Rate Futures, (3) Stock or Bond Index Futures
or (4) foreign currencies. Each fund may purchase puts on investments it
does not own. Writing puts requires the segregation of liquid assets to
cover the put. Neither fund will write a put if it will require more than
50% of that fund's respective net assets to be segregated to cover the put
obligation.
Each of the funds may buy or sell foreign currency puts and calls only if
they are traded on a securities or commodities exchange or on the over-
the-counter market, or are quoted by recognized dealers in those options.
Foreign currency options are used to try to protect against declines in
the dollar value of foreign securities the fund owns, or to protect
against increases in the dollar cost of buying foreign securities.
Each fund may buy and sell calls if certain conditions are met: (1) the
calls must be listed on a domestic or foreign securities or commodities
exchange or quoted on the Automated Quotation System of the National
Association of Securities Dealers, Inc. or on the over-the-counter market;
and (2) each call must be "covered" while it is outstanding; that means
the fund must own the securities on which the call is written or it must
own other securities that are acceptable for the escrow arrangements
required for calls. There is no limit on the amount of each fund's total
assets that may be subject to covered calls. Each fund can also write
calls on foreign currencies (discussed below). Each fund may also write
covered calls on Futures Contracts it owns, but these calls must be
covered by securities or other liquid assets Strategic Diversified Income
Fund owns and segregates to enable it to satisfy its obligations if the
call is exercised. A call or put option may not be purchased if the value
of all of a fund's put and call options would exceed 5% of a fund's total
assets.
Forward Contracts. Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The funds use them to "lock-in" the U.S.
dollar price of a security denominated in a foreign currency that each
fund, respectively has bought or sold, or to protect against losses from
changes in the relative values of the U.S. dollar and a foreign currency.
Each fund may also use "cross hedging," where the fund hedges against
changes in currencies other than the currency in which a security it holds
is denominated.
Interest Rate Swaps. In an interest rate swap, a fund and another party
exchange their right to receive or their obligation to pay interest on a
security. For example, they may swap a right to receive floating rate
payments for fixed rate payments. The funds enter into swaps only on
securities they own. The funds may not enter into swaps with respect to
more than 25% of their total assets. Also, each fund will segregate
liquid assets (such as cash or U.S. Government securities) to cover any
amounts it could owe under swaps that exceed the amounts it is entitled
to receive, and it will adjust that amount daily, as needed.
Hedging instruments can be volatile investments and may involve special
risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce a fund's return. Each of the funds could
also experience losses if the prices of its futures and options positions
were not correlated with its other investments or if it could not close
out a position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on each fund. There are also special risks in particular hedging
strategies. If a covered call written by one of the funds is exercised
on a security that has increased in value, that fund will be required to
sell the security at the call price and will not be able to realize any
profit if the security has increased in value above the call price. The
use of forward contracts may reduce the gain that would otherwise result
from a change in the relationship between the U.S. dollar and a foreign
currency. To limit its exposure in foreign currency exchange contracts,
each fund limits its exposure to the amount of its assets denominated in
the foreign currency. Interest rate swaps are subject to credit risks (if
the other party fails to meet its obligations) and also to interest rate
risks. Each of the funds could be obligated to pay more under their
respective swap agreements than it receives under them, as a result of
interest rate changes. The funds will not enter into swaps with respect
to more than 25% of their respective total assets.
Derivative Investments. Strategic Diversified Income Fund and Strategic
Income Fund can invest in a number of different kinds of "derivative
investments." Each of the funds may use some types of derivatives for
hedging purposes, and may invest in others because they offer the
potential for increased income and principal value. In general, a
"derivative investment" is a specially-designed investment whose
performance is linked to the performance of another investment or
security, such as an option, future, index or currency. In the broadest
sense, derivative investments include exchange-traded options and futures
contracts.
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the Manager expected it to perform.
The performance of derivative investments may also be influenced by
interest rate changes in the U.S. and abroad. All of these risks can mean
that a fund will realize less income than expected from its investments,
or that it can lose part of the value of its investments, which will
affect a fund's share price. Certain derivative investments held by each
of the funds may trade in the over-the-counter markets and may be
illiquid. If that is the case, the fund's investment in them will be
limited.
Illiquid and Restricted Securities. Strategic Diversified Income Fund
will not purchase or otherwise acquire any securities that may be illiquid
by virtue of the absence of a readily-available market or because their
disposition would be subject to legal restrictions ("restricted
securities") if, as a result, more than 10% of Strategic Diversified
Income Fund's net assets would be invested in securities that are illiquid
(including repurchase agreements maturing in more than seven days). This
limit may increase to 15% if certain state laws are changed or Strategic
Diversified Income Fund's shares are no longer sold in those states. This
policy does not limit the acquisition of restricted securities eligible
for resale to qualified institutional buyers pursuant to Rule 144A under
the Securities Act that are determined to be liquid by Strategic
Diversified Income Fund's Board of Trustees or by the Manager under Board-
approved guidelines. Such guidelines take into account, among other
factors, trading activity for such securities and the availability of
reliable pricing information. If there is a lack of trading interest in
particular Rule 144A securities, Strategic Diversified Income Fund's
holdings of those securities may be illiquid. There may be undesirable
delays in selling such securities at prices representing their fair value.
Strategic Income Fund has an identical policy with respect to investment
in restricted and illiquid securities.
Loans of Portfolio Securities. To attempt to increase income for
liquidity purposes, each fund may lend its portfolio securities (other
than in repurchase transactions) to brokers, dealers and other financial
institutions meeting specified credit conditions if the loan is
collateralized in accordance with applicable regulatory requirements and
if, after any loan, the value of the securities loaned does not exceed 25%
of the value of that fund's total assets. Each fund presently does not
intend that the value of securities loaned in the current fiscal year will
exceed 5% of the value of its respective total assets.
Repurchase Agreements. Each fund may acquire securities subject to
repurchase agreements to generate income for liquidity purposes to meet
anticipated redemptions, or pending the investment of proceeds from sales
of fund shares or settlement of purchases of portfolio investments. If
the vendor fails to pay the agreed-upon resale price on the delivery date,
the fund's risks may include any costs of disposing of such collateral,
and any loss from any delay in foreclosing on the collateral. Each fund's
repurchase agreements will be fully collateralized. There is no limit on
the amount of the fund's net assets that may be subject to repurchase
agreements having a maturity of seven days or less.
Warrants and Rights. Warrants basically are options to purchase stock at
set prices that are valid for a limited period of time. Rights are
options to purchase securities, normally granted to current holders by the
issuer. Strategic Diversified Income Fund may invest up to 5% of its
total assets in warrants or rights. That 5% does not apply to warrants
and rights Strategic Diversified Income Fund acquired as part of units
with other securities or that were attached to other securities. No more
than 2% of Strategic Diversified Income Fund's assets may be invested in
warrants that are not listed on the New York or American Stock Exchanges.
Strategic Income Fund has the same policy with respect to warrants and
rights.
"When-Issued" and Delayed Delivery Transactions. Strategic Diversified
Income Fund may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "delayed delivery" basis. These terms
refer to securities that have been created and for which a market exists,
but which are not available for immediate delivery. There may be a risk
of loss to Strategic Diversified Income Fund if the value of the security
declines prior to the settlement date. Strategic Income Fund has the same
policy with respect to when-issued and delayed delivery transactions.
Investment Restrictions
Strategic Diversified Income Fund and Strategic Income Fund have certain
investment restrictions that, together with their investment objectives,
are fundamental policies, changeable only by shareholder approval. Set
forth below is a summary of these investment restrictions which is
qualified in its entirety by the investment policies and restrictions of
the funds contained in their respective Prospectus and Statement of
Additional Information.
Strategic Diversified Income Fund and Strategic Income Fund each have
other investment restrictions which are fundamental policies. Under these
fundamental policies, the funds cannot do any of the following: (1) as to
75% of total assets, the funds may not buy securities issued or guaranteed
by a single issuer if, as a result, the funds would have invested more
than 5% of their assets in the securities of that issuer or would own more
than 10% of the voting securities of that issuer (purchases of U.S.
Government Securities are not restricted by this policy); (2) the funds
may not borrow money in excess of 50% of the value of total assets, and
it may borrow only subject to the restrictions described under "Borrowing
for Leverage;" (3) the funds may not invest more than 25% of total assets
in any one industry (this limit does not apply to U.S. Government
Securities but each foreign government is treated as an "industry," and
utilities are divided according to the services they provide); (4) the
funds may not invest more than 5% of total assets in securities of issuers
(including their predecessors) that have been in operation less than three
years; (5) buy or sell real estate, or commodities or commodity contracts;
however, the funds may invest in debt securities secured by real estate
or interests therein or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein, and
the funds may buy and sell Hedging Instruments; (6) buy securities on
margin, except that the funds may make margin deposits in connection with
any of the Hedging Instruments which it may use; (7) underwrite securities
issued by other persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be an
underwriter for purposes of the Securities Act of 1933; (8) buy and retain
securities of any issuer if those officers, Trustees or Directors of
Strategic Diversified Income Fund or the Manager who beneficially own more
than .5% of the securities of such issuer together own more than 5% of the
securities of such issuer; (9) invest in oil, gas, or other mineral
exploration or development programs; (10) buy the securities of any
company for the purpose of exercising management control; (11) make loans,
except by purchasing debt obligations in accordance with its investment
objectives and policies, or by entering into repurchase agreements, or as
described in "Loans of Portfolio Securities"; (12) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or by virtue
of ownership of other securities has the right, without payment of any
further consideration, to obtain an equal amount of securities sold short
("short sales against-the-box"); short sales against-the-box may be made
to defer realization of gain or loss for Federal income tax purposes.
Portfolio Turnover
Holding a portfolio security for any particular length of time is not
generally a consideration in investment decisions. As a result of each
fund's investment policies and market factors, their portfolio securities
are actively traded to try to benefit from short-term yield differences
among debt securities. As a result, portfolio turnover of each of the
funds may be higher than other mutual funds. This strategy may involve
greater transaction costs from brokerage commissions and dealer mark-ups.
Additionally, high portfolio turnover may result in increased short-term
capital gains and affect the ability of each of the funds to qualify for
tax deductions for payments made to shareholders as a "regulated
investment company" under the Internal Revenue Code. Strategic
Diversified Income Fund and Oppenheimer Strategic Income Fund each
qualified in their last fiscal year and intend to do so in the coming
year, although they reserve the right not to qualify.
For the fiscal year ended September 30, 1994, the portfolio turnover rates
for Strategic Diversified Income Fund and Strategic Income Fund were
108.8% and 119.0%, respectively. For the six months ended March 31, 1995
(unaudited), the portfolio turnover rates for Strategic Diversified Income
Fund and Strategic Income Fund were 79.7% and 66.9%, respectively.
Description of Brokerage Practices
Subject to the provisions of the advisory agreement, when brokers are used
for each fund's portfolio transactions, allocations of brokerage are
generally made by the Manager's portfolio traders based upon
recommendations from the Manager's portfolio managers. In certain
circumstances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the advisory agreement and
other procedures and rules. Brokerage is allocated under the supervision
of the Manager's executive officers. Transactions in securities other than
those for which an exchange is the primary market are generally done with
principals or market makers. Brokerage commissions are paid primarily for
effecting transactions in listed securities and otherwise only if it
appears likely that a better price or execution can be obtained. When
either of the funds engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any
transactions in the securities to which the option relates. When
possible, concurrent orders to purchase or sell the same security by more
than one of the accounts managed by the Manager or its affiliates are
combined. Transactions effected pursuant to such combined orders are
averaged as to price and allocated in accordance with the purchase or sale
orders actually placed for each account. Option commissions may be
relatively higher than those which would apply to direct purchases and
sales of portfolio securities.
As most purchases made by each fund are principal transactions at net
prices, each fund incurs little or no brokerage costs. Each of the funds
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 it is determined that a better price or execution can be obtained
by utilizing the services of a broker. Purchases of portfolio securities
from underwriters include a commission or concession paid by the issuer
to the underwriter, and purchases from dealers include a spread between
the bid and asked prices. The funds seek to obtain prompt execution of
such orders at the most favorable net price.
The research services provided by a particular broker may be useful only
to one or more of the advisory accounts of the Manager and its affiliates,
and investment research received for the commissions of those other
accounts may be useful both to the funds and one or more of such other
accounts. Such research, which may be supplied by a third party at the
instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid for in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions 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 by making available additional
views for consideration and comparisons, and enabling the Manager to
obtain market information for the valuation of securities held in the
portfolio of the funds or being considered for purchase. The Board of
Trustees, including the "Independent Trustees" (those Trustees of the
Trust who are not "interested persons," as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the Agreement, the Plans of Distribution described below or
in any agreements relating to those Plans), annually reviews information
furnished by the Manager as to the commissions paid to brokers furnishing
such services so that the Board may ascertain whether the amount of such
commissions was reasonably related to the value or the benefit of such
services.
Expense Ratios and Performance
The ratio of expenses to average net assets for Strategic Diversified
Income Fund for the fiscal year ended September 30, 1994 was 2.13% (before
expense reimbursement). For the six months ended March 31, 1995
(unaudited) the ratio of expenses to average net assets for Strategic
Diversified Income Fund was 2.19% (annualized). Further details are set
forth under "Fund Expenses" and "Financial Highlights" in Strategic Income
Fund's Prospectus dated May 26, 1995, which accompanies this Proxy
Statement and Prospectus, and in Strategic Diversified Income Fund's
Annual Report as of September 30, 1994 and Semi-Annual Report as of March
31, 1995 (unaudited), and Strategic Income Fund's Annual Report as of
September 30, 1994 and Semi-Annual Report as of March 31, 1995
(unaudited), which are included in the Additional Statement. The
standardized yield for Strategic Diversified Income Fund for the 30 day
period ended March 31, 1995 was 8.15% and the average annual return for
the one year period ended March 31, 1995 and since inception of Strategic
Diversified Income Fund (February 1, 1994) was -1.04% and -1.06%,
respectively. For the 30 day period ended March 31, 1995, the
standardized yield for Strategic Income's Class B shares was 8.40%. For
the one year period ended March 31, 1995, and since inception (November
30, 1992) the average annual return on an investment in Class B shares of
Strategic Income Fund were -14.96% and 5.06%, respectively. See page 25
of Strategic Income Fund's Prospectus dated May 26, 1995 for more
information.
For the one year period ended March 31, 1995, and since inception of
Strategic Diversified Income Fund (February, 1994), the average annual
return at net asset value was -.11% and -1.06%. For the one year period
ended March 31, 1995 and since inception of Strategic Income Fund Class
B shares (November 30, 1992), the average annual return at net asset value
was -.39% and 6.16%.
Shareholder Services
The policies of Strategic Diversified Income Fund and Strategic Income
Fund with respect to minimum initial investments and subsequent
investments by its shareholders are substantially the same. Both
Strategic Diversified Income Fund and Strategic Income Fund offer the
following privileges: (i) Rights of Accumulation, (ii) Letters of Intent,
(iii) reinvestment of dividends and distributions at net asset value, (iv)
net asset value purchases by certain individuals and entities, (v) Asset
Builder (automatic investment) Plans, (vi) Automatic Withdrawal and
Exchange Plans for shareholders who own shares of the fund valued at
$5,000 or more, (vii) reinvestment of net redemption proceeds at net asset
value within six months of a redemption, (viii) AccountLink and PhoneLink
arrangements, (ix) exchanges of shares for shares of certain other funds
at net asset value, and (x) telephone redemption and exchange privileges.
Shareholders may purchase shares through OppenheimerFunds AccountLink,
which links a shareholder account to an account at a bank or financial
institution and enables shareholders to send money electronically between
those accounts to perform a number of types of account transactions. This
includes the purchase of shares through the automated telephone system
(PhoneLink). Exchanges can also be made by telephone, automatically
through PhoneLink. After AccountLink privileges have been established
with a bank account, shares may be purchased by telephone up to $100,000.
Shares of either fund may be exchanged only for Class C shares of other
OppenheimerFunds although the number of funds offering Class C shares is
limited. Shareholders of the funds may redeem their shares by written
request or by telephone request in an amount up to $50,000 in any seven-
day period. Shareholders may arrange to have share redemption proceeds
wired to a pre-designated account at a U.S. bank or other financial
institution that is an ACH member ("AccountLink redemption"). There is
no dollar limit on telephone redemption proceeds sent to a bank account
when an AccountLink has been established. Shareholders may also redeem
shares automatically by telephone by using PhoneLink. Shareholders may
also have the Transfer Agent send redemption proceeds of $2,500 or more
by Federal Funds wire to a designated commercial bank, which is a member
of the Federal Reserve wire system. Shareholders of the funds may
reinvest redemption proceeds within six months of a redemption at net
asset value in Class A shares of the funds or any of numerous "Eligible
Funds" within the OppenheimerFunds complex. Strategic Diversified Income
Fund and Strategic Income Fund may redeem accounts valued at less than
$200 if the account has fallen below such stated amount for reasons other
than market value fluctuations. Both funds offer Automatic Withdrawal and
Automatic Exchange Plans under certain conditions.
Rights of Shareholders
Shares of both Strategic Diversified Income Fund and Strategic Income
Fund, Class C are sold without sales charge, but if the shares are sold
within 12 months of their purchase, a contingent deferred sales charge
will be imposed. Thereafter, shares of Strategic Diversified Income Fund
and Strategic Income Fund are redeemable at their net asset value. The
shares of each such fund, including shareholders of each class, entitle
the holder to one vote per share on the election of trustees and all other
matters submitted to shareholders of the fund. Shares of Strategic
Diversified Income Fund and the Class C shares of Strategic Income Fund
which Fund shareholders will receive in the Reorganization participate
equally in the fund's dividends and distributions and in the fund's net
assets upon liquidation. All shares of Strategic Diversified Income Fund,
and Class A, Class B, and Class C shares, when issued, are fully paid and
non-assessable. It is not contemplated that the Trust, Strategic
Diversified Income Fund or Strategic Income Fund will hold regular annual
meetings of shareholders. Under the Investment Company Act, shareholders
of Strategic Diversified Income Fund do not have rights of appraisal as
a result of the transactions contemplated by the Reorganization Agreement.
However, they have the right at any time prior to the consummation of such
transaction to redeem their shares at net asset value subject to the
contingent deferred sales charge. Shareholders of the Trust have the
right, under certain circumstances, to remove a Trustee and will be
assisted in communicating with other shareholders for such purpose.
Oppenheimer Strategic Funds Trust is organized as a Massachusetts Business
Trust and is governed principally by its Declaration of Trust and by-laws.
Although the Trust was originally organized with one series, in December
1993, the Trust was reorganized to become a multi-series business trust.
The Trust is an open-end, diversified management investment company, with
an unlimited number of authorized shares of beneficial interest. Each of
the two series of the Trust (Strategic Diversified Income Fund and
Strategic Income Fund) has its own shares. The Board of Trustees has the
power, without shareholder approval, to establish and designate one or
more series and to divide unissued shares of Strategic Diversified Income
Fund or Strategic Income Fund into two or more classes. The Board has
done so with respect to its Oppenheimer Strategic Income Fund series,
which has three classes of shares, Class A, Class B and Class C. Each
class has its own dividends and distributions and pays certain expenses
which may be different for the different classes. Each share has one vote
at shareholder meetings, with fractional shares voting proportionately.
Shares of a particular class vote together on matters that affect that
class. Shares are free transferable. Most Amendments to the Declaration
of Trust require the approval of a "majority" (as defined in the
Investment Company Act) of a fund's shareholders. Under certain
circumstances, shareholders of the funds may be held personally liable as
partners for the fund's obligations, and under the Declaration of Trust
such a shareholder is entitled to indemnification rights by the funds; the
risk of a shareholder incurring any such loss is limited to the remote
circumstances in which the fund is unable to meet its obligations.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York 10048-
0203, acts as the investment adviser for Strategic Diversified Income Fund
pursuant to an investment advisory agreement with Strategic Diversified
Income Fund dated February 1, 1994 (the "Fund Advisory Agreement") and
acts as the investment adviser to Strategic Income Fund pursuant to an
investment advisory agreement with Strategic Income Fund dated October 22,
1990 (the "Strategic Income Fund Advisory Agreement"). The Strategic
Diversified Income Fund Advisory Agreement has not been submitted to or
approved by the shareholders of Strategic Diversified Income Fund. The
Strategic Income Fund Advisory Agreement was submitted to and approved by
the shareholders of Strategic Income Fund at a meeting held on October 1,
1990. The monthly management fee payable to the Manager by each fund is
set forth under "Synopsis - Investment Advisory and Service Plan Fees."
The 12b-1 Distribution and Service Plan fees paid by Strategic Diversified
Income Fund to the Distributor (including the asset-based sales charge)
and the 12b-1 Distribution and Service Plan fees with respect to Class C
shares (including the asset-based sales charge) of Strategic Income Fund
are set forth under "Synopsis - Investment Advisory and Service Plan
Fees," and are more fully explained below.
The terms and conditions of the investment advisory agreement for each
fund are the same.
Pursuant to the Strategic Diversified Income Fund Advisory Agreement and
the Strategic Income Fund Advisory Agreement, the Manager supervises the
investment operations of the funds and the composition of their portfolios
and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities. The
Investment Advisory Agreements require the Manager to provide Strategic
Diversified Income Fund and Strategic Income Fund with adequate office
space, facilities and equipment and to provide and supervise the
activities of, all administrative and clerical personnel required to
provide effective administration for the funds, including the compilation
and maintenance of records with respect to its operations, the preparation
and filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of each fund.
For the fiscal year ended September 30, 1994 and the six months ended
March 31, 1995 (unaudited), the management fees paid by Strategic
Diversified Income Fund were $109,624 and $171,570, respectively. For the
fiscal year ended September 30, 1994 and the six months ended March 31,
1995 (unaudited) the management fees for Strategic Income Fund were
$23,416,092 and $12,485,016, respectively. Neither fund's advisory
agreement contains any expense limitation. However, independently of the
advisory agreement, the Manager has undertaken that the total expenses of
Strategic Diversified Income Fund and Strategic Income Fund in any fiscal
year (including the management fee but exclusive of taxes, interest,
brokerage commissions, distribution plan payments and any extraordinary
non-recurring expenses, including litigation) shall not exceed the most
stringent state regulatory limitation on fund expenses applicable to the
funds. At present, that limitation is imposed by California and limits
expenses (with specified exclusions) to 2.5% of the first $30 million of
average annual net assets, 2% of the next $70 million and 1.5% of average
annual net assets in excess of $100 million.
In addition, independently of the advisory agreement, during the fiscal
year ended September 30, 1994, the Manager previously had voluntarily
agreed to assume any expense of Strategic Diversified Income Fund in a
fiscal year to the extent required to enable Strategic Diversified Income
Fund to accrue income, net of expenses, to allow Strategic Diversified
Income Fund to pay dividends at the annualized rate of $.3525 per share.
As a result of the expense assumption, the yield and total return of
Strategic Diversified Income Fund may have been higher during that period
than they otherwise would have been. After September 30, 1994, there has
been no reimbursement by the Manager. With respect to Strategic Income
Fund, the Manager has undertaken to assume Strategic Diversified Income
Fund's expenses (other than extraordinary non-recurring expenses) to
enable Strategic Diversified Income Fund to pay a dividend of $0.438 per
share per annum. The Manager reserves the right to change or eliminate
the expense limitations at any time and there can be no assurance as to
the duration of the expense limitation by either fund. It is not expected
that Strategic Income Fund will maintain a fixed dividend rate for its
Class C shares and there can be no assurance as to the payment of any
dividends or the realization of any capital gains by either fund.
The Manager is controlled by OAC, a holding company owned in part by
senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company that also advises pension plans and investment companies. The
Manager has operated as an investment company adviser since 1959. The
Manager and its affiliates currently advise investment companies with
combined net assets aggregating over $32 billion as of March 31, 1995,
with more than 2.4 million shareholder accounts. Oppenheimer Shareholder
Services, a division of the Manager, acts as transfer and shareholder
servicing agent on an at-cost basis for Strategic Diversified Income Fund
and Strategic Income Fund and for certain other open-end funds managed by
the Manager and its affiliates.
The Distributor, a wholly-owned subsidiary of the Manager, acts as the
general distributor of each fund's shares under a General Distributor's
Agreement for each fund dated February 1, 1994. For the fiscal year ended
September 30, 1994, the contingent deferred sales charge collected on Fund
shares totalled $18,270, all of which the Distributor retained.
Under the Distribution and Service Plans adopted by both Strategic
Diversified Income Fund and Strategic Income Fund for their Class C
shares, the Distributor is paid an annual asset-based sales charge of
0.75% per year in addition to the 0.25% annual service fee. The asset-
based sales charge allows an investor to buy shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell shares of the funds. The Distributor uses the service fee to
compensate dealers for providing personal services for accounts that hold
shares of the funds. The asset-based sales charge and service fees
increase expenses by 1% of average net assets per year. The Distributor
pays the 0.25% service fee to dealers in advance for the first year after
Class C shares have been sold by the dealer. After the shares have been
held for a year, the Distributor pays the fee on a quarterly basis. The
Distributor pays sales commissions of 0.75% of the purchase price to
dealers from its own resources at the time of sale. The Distributor
retains the asset-based sales charge during the first year shares are
outstanding. The Distributor plans to pay the asset-based sales charge
as an ongoing commission to the dealer on shares of Strategic Diversified
Income Fund, or Class C shares of Strategic Income, respectively, which
have been outstanding for a year or more.
Purchase of Additional Shares
Shares of Strategic Diversified Income Fund and Class C shares of
Strategic Income Fund are sold without a sales charge. If shares of
Strategic Diversified Income Fund or Strategic Income Fund, Class C are
redeemed within 12 months of buying them, a contingent deferred sales
charge of 1% may be imposed.
The contingent deferred sales charge on Class C shares of Strategic Income
Fund will only affect shareholders of Strategic Diversified Income Fund
to the extent that they desire to make additional purchases of shares of
Strategic Income Fund in addition to the shares which they will receive
as a result of the Reorganization. The Class C shares to be issued under
the Reorganization Agreement will be issued by Strategic Income Fund at
net asset value without a sales charge. Future dividends and capital gain
distributions of Strategic Income Fund, if any, may be reinvested without
sales charge. Any Fund shareholder who is entitled to a reduced sales
charge on additional purchases by reason of a Letter of Intent or Right
of Accumulation based upon holdings of shares of Strategic Diversified
Income Fund will continue to be entitled to a reduced sales charge on any
future purchase of shares of Strategic Income Fund.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent upon the approval of the Reorganization by the
shareholders of Strategic Diversified Income Fund and the receipt of the
other opinions and certificates set forth in Sections 10 and 11 of the
Reorganization Agreement and the occurrence of the events described in
those Sections. Under the Reorganization Agreement, all the assets of
Strategic Diversified Income Fund, excluding the Cash Reserve, will be
delivered to Strategic Income Fund in exchange for Class C shares of
Strategic Income Fund. The Cash Reserve to be retained by Strategic
Diversified Income Fund will be sufficient in the discretion of the Board
for the payment of Strategic Diversified Income Fund's liabilities, and
Strategic Diversified Income Fund's expenses of liquidation.
Assuming the shareholders of Strategic Diversified Income Fund approve the
Reorganization, the actual exchange of assets is expected to take place
on August 4, 1995 or as soon thereafter as is practicable (the "Closing
Date") on the basis of net asset values as of the close of business on the
business day preceding the Closing Date (the "Valuation Date"). Under the
Reorganization Agreement, all redemptions of shares of Strategic
Diversified Income Fund shall be permanently suspended on the Valuation
Date; only redemption requests received in proper form on or prior to the
close of business on that date shall be fulfilled by it; redemption
requests received by Strategic Diversified Income Fund after that date
will be treated as requests for redemptions of Class C shares of Strategic
Income Fund to be distributed to the shareholders requesting redemption.
The exchange of assets for shares will be done on the basis of the per
share net asset value of the Class C shares of Strategic Income Fund, and
the value of the assets of Strategic Diversified Income Fund to be
transferred as of the close of business on the Valuation Date, in the
manner used by Strategic Income Fund in the valuation of assets.
Strategic Income Fund is not assuming any of the liabilities of Strategic
Diversified Income Fund, except for portfolio securities purchased which
have not settled and outstanding shareholder redemption and dividend
checks.
The net asset value of the shares transferred by Strategic Income Fund to
Strategic Diversified Income Fund will be the same as the value of the
assets of the portfolio received by Strategic Income Fund. For example,
if, on the Valuation Date, Strategic Diversified Income Fund were to have
securities with a market value of $95,000 and cash in the amount of
$10,000 (of which $5,000 was to be retained by it as the Cash Reserve),
the value of the assets which would be transferred to Strategic Income
Fund would be $100,000. If the net asset value per share of Strategic
Income Fund were $10 per share at the close of business on the Valuation
Date, the number of shares to be issued would be 10,000 ($100,000 divided by
$10). These 10,000 shares of Strategic Income Fund would be distributed to the
former shareholders of Strategic Diversified Income Fund. This example
is given for illustration purposes only and does not bear any relationship
to the dollar amounts or shares expected to be involved in the
Reorganization.
After the Closing Date, Strategic Diversified Income Fund will distribute
on a pro rata basis to its shareholders of record on the Valuation Date
the Class C shares of Strategic Income Fund received by Strategic
Diversified Income Fund at the closing, in liquidation of the outstanding
shares of Strategic Diversified Income Fund, and the outstanding shares
of Strategic Diversified Income Fund will be cancelled. To assist
Strategic Diversified Income Fund in this distribution, Strategic Income
Fund will, in accordance with a shareholder list supplied by Strategic
Diversified Income Fund, cause its transfer agent to credit and confirm
an appropriate number of shares of Strategic Income Fund to each
shareholder of Strategic Diversified Income Fund. Certificates for Class
C shares of Strategic Income Fund will be issued upon written request of
a former shareholder of Strategic Diversified Income Fund but only for
whole shares with fractional shares credited to the name of the
shareholder on the books of Strategic Income Fund. Former shareholders
of Strategic Diversified Income Fund who wish certificates representing
their shares of Strategic Income Fund must, after receipt of their
confirmations, make a written request to OSS, P.O. Box 5270, Denver,
Colorado 80217. Shareholders of Strategic Diversified Income Fund holding
certificates representing their shares will not be required to surrender
their certificates to anyone in connection with the Reorganization. After
the Reorganization, however, it will be necessary for such shareholders
to surrender such certificates in order to redeem, transfer or exchange
any shares of Strategic Income Fund.
Under the Reorganization Agreement, within one year after the Closing
Date, Strategic Diversified Income Fund shall: (a) either pay or make
provision for all of its debts and taxes; and (b) either (i) transfer any
remaining amount of the Cash Reserve to Strategic Income Fund, if such
remaining amount is not material (as defined below) or (ii) distribute
such remaining amount to the shareholders of Strategic Diversified Income
Fund who were such on the Valuation Date. Such remaining amount shall be
deemed to be material if the amount to be distributed, after deducting the
estimated expenses of the distribution, equals or exceeds one cent per
share of the number of Fund shares outstanding on the Valuation Date.
Within one year after the Closing Date, Strategic Diversified Income Fund
will complete its liquidation.
Under the Reorganization Agreement, either Strategic Diversified Income
Fund or Strategic Income Fund may abandon and terminate the Reorganization
Agreement without liability if the other party breaches any material
provision of the Reorganization Agreement or, if prior to the closing, any
legal, administrative or other proceeding shall be instituted or
threatened (i) seeking to restrain or otherwise prohibit the transactions
contemplated by the Reorganization Agreement and/or (ii) asserting a
material liability of either party, which proceeding or liability has not
been terminated or the threat thereto removed prior to the Closing Date.
In the event that the Reorganization Agreement is not consummated for any
reason, the Board will consider and may submit to the shareholders other
alternatives.
MISCELLANEOUS
Additional Information
Financial Information
The Reorganization will be accounted for by the surviving fund in its
financial statements similar to a pooling. Further financial information
as to Strategic Diversified Income Fund is contained in its current
Prospectus, which is available without charge from Oppenheimer Shareholder
Services, the Transfer Agent, P.O. Box 5270, Denver, Colorado 80217, and
is incorporated herein, and in its audited financial statements as of
September 30, 1994, and unaudited financial statements as of March 31,
1995, which are included in the Additional Statement. Financial
information for Strategic Income Fund is contained in its current
Prospectus accompanying this Proxy Statement and Prospectus and
incorporated herein, and in its audited financial statements as of
September 30, 1994 and unaudited financial statements as of March 31,
1995, which are included in the Additional Statement.
Public Information
Additional information about Strategic Diversified Income Fund and
Strategic Income Fund is available, as applicable, in the following
documents which are incorporated herein by reference: (i) Strategic Income
Fund's Prospectus dated May 26, 1995, supplemented May 26, 1995,
accompanying this Proxy Statement and Prospectus and incorporated herein;
(ii) Strategic Diversified Income Fund's Prospectus dated February 1,
1995, supplemented May 26, 1995, which may be obtained without charge by
writing to OSS, P.O. Box 5270, Denver, Colorado 80217; (iii) Strategic
Income Fund's Annual Report as of September 30, 1994 and Semi-Annual
Report (unaudited) as of March 31, 1995, which may be obtained without
charge by writing to OSS at the address indicated above; and (iv)
Strategic Diversified Income Fund's Annual Report as of September 30, 1994
and unaudited Semi-Annual Report as of March 31, 1995, which may be
obtained without charge by writing to OSS at the address indicated above.
All of the foregoing documents may be obtained by calling the toll-free
number on the cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in the
Additional Statement, which incorporates by reference the Strategic Income
Fund Statement of Additional Information dated May 26, 1995, and Strategic
Diversified Income Fund's Prospectus dated February 1, 1995, supplemented
May 26, 1995, and Statement of Additional Information dated May 26, 1995:
the organization and operation of Strategic Income Fund and Strategic
Diversified Income Fund; more information on investment policies,
practices and risks; information about Strategic Diversified Income Fund's
and Strategic Income Fund's Board of Trustees and their responsibilities;
a further description of the services provided by Strategic Income Fund's
and Strategic Diversified Income Fund's investment adviser, distributor,
and transfer and shareholder servicing agent; dividend policies; tax
matters; an explanation of the method of determining the offering price
of the shares and/or contingent deferred sales charges, as applicable of
Class A, B and C shares of Strategic Income Fund and Class C shares of
Strategic Diversified Income Fund; purchase, redemption and exchange
programs; and distribution arrangements.
Strategic Diversified Income Fund and Strategic Income Fund are subject
to the informational requirements of the Securities Exchange Act of 1934,
as amended, and in accordance therewith, file reports and other
information with the SEC. Proxy material, reports and other information
about Strategic Diversified Income Fund and Strategic Income Fund which
are of public record can be inspected and copied at public reference
facilities maintained by the SEC in Washington, D.C. and certain of its
regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer
Affairs and Information Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of Strategic Diversified Income Fund knows of no business other
than the matters specified above which will be presented at the Meeting.
Since matters not known at the time of the solicitation may come before
the Meeting, the proxy as solicited confers discretionary authority with
respect to such matters as properly come before the Meeting, including any
adjournment or adjournments thereof, and it is the intention of the
persons named as attorneys-in-fact in the proxy to vote this proxy in
accordance with their judgment on such matters.
By Order of the Board of Trustees
George C. Bowen, Secretary
June 2, 1995387
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
February 28, 1995 by and between Oppenheimer Strategic Diversified Income
Fund (the "Fund"), a series of Oppenheimer Strategic Funds Trust (the
"Trust"), a Massachusetts business trust, and Oppenheimer Strategic Income
Fund ("Strategic Income Fund"), also a series of the Trust.
W I T N E S S E T H:
WHEREAS, the parties are each a series of the Trust, an open-end
investment company of the management type; and
WHEREAS, the parties hereto desire to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), of Strategic Diversified Income Fund through the
acquisition by Strategic Income Fund of substantially all of the assets
of Strategic Diversified Income Fund in exchange for the voting shares of
beneficial interest ("shares") of Strategic Income Fund and the assumption
by Strategic Income Fund of certain liabilities of Strategic Diversified
Income Fund, which shares of Strategic Income Fund are thereafter to be
distributed by Strategic Diversified Income Fund pro rata to its
shareholders in complete liquidation of Strategic Diversified Income Fund
and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt this Agreement pursuant to
Section 368(a)(1) of the Code as follows: The reorganization will be
comprised of the acquisition by Strategic Income Fund of substantially all
of the properties and assets of Strategic Diversified Income Fund in
exchange for shares of Strategic Income Fund and the assumption by
Strategic Income Fund of certain liabilities of Strategic Diversified
Income Fund, followed by the distribution of such Strategic Income Fund
shares to the shareholders of Strategic Diversified Income Fund in
exchange for their shares of Strategic Diversified Income Fund, all upon
and subject to the terms of the Agreement hereinafter set forth.
The share transfer books of Strategic Diversified Income 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 Strategic Diversified Income Fund; redemption requests
received by Strategic Diversified Income Fund after that date shall be
treated as requests for the redemption of the shares of Strategic Income
Fund to be distributed to the shareholder in question as provided in
Section 5.
2. On the Closing Date (as hereinafter defined), all of the assets
of Strategic Diversified Income Fund on that date, excluding a cash
reserve (the "Cash Reserve") to be retained by Strategic Diversified
Income Fund sufficient in its discretion for the payment of the expenses
of Strategic Diversified Income Fund's dissolution and its liabilities,
but not in excess of the amount contemplated by Section 10E, shall be
delivered as provided in Section 8 to Strategic Income Fund, in exchange
for and against delivery to Strategic Diversified Income Fund on the
Closing Date of a number of shares of Strategic Income Fund having an
aggregate net asset value equal to the value of the assets of Strategic
Diversified Income Fund so transferred and delivered.
3. The net asset value of shares of Strategic Income Fund and the
value of the assets of Strategic Diversified Income Fund to be transferred
shall in each case be determined as of the close of business of the New
York Stock Exchange on the Valuation Date. The computation of the net
asset value of the shares of Strategic Income Fund and Strategic
Diversified Income Fund shall be done in the manner used by Strategic
Income Fund and Strategic Diversified Income Fund, respectively, in the
computation of such net asset value per share as set forth in their
respective prospectuses. The methods used by Strategic Income Fund in
such computation shall be applied to the valuation of the assets of
Strategic Diversified Income Fund to be transferred to Strategic Income
Fund.
Strategic Diversified Income 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 Strategic Diversified Income Fund's shareholders all of
Strategic Diversified Income 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 at the office of
Oppenheimer Management Corporation (the "Agent"), Two World Trade Center,
Suite 3400, New York, New York 10048, at 4:00 P.M. New York time on August
4, 1995, or at such other time or place as the parties may designate or
as provided below (the "Closing Date"). The business day preceding the
Closing Date is herein referred to as the "Valuation Date."
In the event that on the Valuation Date either party 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 parties
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 to the Agreement shall be permitted
to terminate the Agreement without liability for such termination.
5. As soon as practicable after the Closing, Strategic Diversified
Income Fund shall distribute on a pro rata basis to the shareholders of
Strategic Diversified Income Fund on the Valuation Date the shares of
Strategic Income Fund received by Strategic Diversified Income Fund on the
Closing Date in exchange for the assets of Strategic Diversified Income
Fund in complete liquidation of Strategic Diversified Income Fund; for the
purpose of the distribution by Strategic Diversified Income Fund of such
shares of Strategic Income Fund to its shareholders, Strategic Income Fund
will promptly cause its transfer agent to: (a) credit an appropriate
number of shares of Strategic Income Fund on the books of Strategic Income
Fund to each shareholder of Strategic Diversified Income Fund in
accordance with a list (the "Shareholder List") of its shareholders
received from Strategic Diversified Income Fund; and (b) confirm an
appropriate number of shares of Strategic Income Fund to each shareholder
of Strategic Diversified Income Fund; certificates for shares of Strategic
Income Fund will be issued upon written request of a former shareholder
of Strategic Diversified Income Fund but only for whole shares with
fractional shares credited to the name of the shareholder on the books of
Strategic Income Fund.
The Shareholder List shall indicate, as of the close of business
on the Valuation Date, the name and address of each shareholder of
Strategic Diversified Income Fund, indicating his or her share balance.
Strategic Diversified Income Fund agrees to supply the Shareholder List
to Strategic Income Fund not later than the Closing Date. Shareholders
of Strategic Diversified Income 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
Strategic Income Fund which they received.
6. Within one year after the Closing Date, Strategic Diversified
Income 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 Strategic Income Fund, if such remaining
amount (as reduced by the estimated cost of distributing it to
shareholders) is not material (as defined below) or (ii) distribute such
remaining amount to the shareholders of Strategic Diversified Income 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
Strategic Diversified Income Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between
the parties as to their respective portfolios so that, after the closing,
Strategic Income Fund will be in compliance with all of its investment
policies and restrictions. At the Closing, Strategic Diversified Income
Fund shall deliver to Strategic Income Fund two copies of a list setting
forth the securities then owned by Strategic Diversified Income Fund.
Promptly after the Closing, Strategic Diversified Income Fund shall
provide Strategic Income Fund a list setting forth the respective federal
income tax bases thereof.
8. Portfolio securities or written evidence acceptable to Strategic
Income Fund of record ownership thereof by The Depository Trust Company
or through the Federal Reserve Book Entry System or any other depository
or custodian approved by Strategic Diversified Income Fund pursuant to
Rule 17f-4 or Rule 17f-5 under the Act shall be endorsed and delivered,
or transferred by appropriate transfer or assignment documents, by
Strategic Diversified Income Fund on the Closing Date to Strategic Income
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 cash delivered shall be in
the form of certified or bank cashiers' checks or by bank wire or intra-
bank transfer payable to the order of Strategic Income Fund for the
account of Strategic Income Fund. Shares of Strategic Income Fund
representing the number of shares of Strategic Income Fund being delivered
against the assets of Strategic Diversified Income Fund, registered in the
name of Strategic Diversified Income Fund, shall be transferred to
Strategic Diversified Income Fund on the Closing Date. Such shares shall
thereupon be assigned by Strategic Diversified Income Fund to its
shareholders so that the shares of Strategic Income Fund may be
distributed as provided in Section 5.
If, at the Closing Date, Strategic Diversified Income Fund is
unable to make delivery under this Section 8 to Strategic Income Fund of
any of its portfolio securities or cash for the reason that any of such
securities purchased by Strategic Diversified Income Fund, or the cash
proceeds of a sale of portfolio securities, prior to the Closing Date have
not yet been delivered to it or Strategic Diversified Income Fund's
custodian, then the delivery requirements of this Section 8 with respect
to said undelivered securities or cash will be waived and Strategic
Diversified Income Fund will deliver to Strategic Income Fund by or on the
Closing Date and with respect to said undelivered securities or cash
executed copies of an agreement or agreements of assignment in a form
reasonably satisfactory to Strategic Income Fund, together with such other
documents, including a due bill or due bills and brokers' confirmation
slips as may reasonably be required by Strategic Income Fund.
9. Strategic Income Fund shall not assume the liabilities (except
for portfolio securities purchased which have not settled and for
shareholder redemption and dividend checks outstanding) of Strategic
Diversified Income Fund, but Strategic Diversified Income Fund will,
nevertheless, use its best efforts to discharge all known liabilities, so
far as may be possible, prior to the Closing Date. The cost of printing
and mailing the proxies and proxy statements will be borne by Strategic
Diversified Income Fund. Strategic Diversified Income Fund and Strategic
Income Fund will bear the cost of their respective tax opinion. Any
documents such as existing prospectuses or annual reports that are
included in that mailing will be a cost of the fund issuing the document.
Any other out-of-pocket expenses of Strategic Income Fund and Strategic
Diversified Income Fund associated with this reorganization, including
legal, accounting and transfer agent expenses, will be borne by Strategic
Diversified Income Fund and Strategic Income Fund, respectively, in the
amounts so incurred by each.
10. The obligations of Strategic Income Fund hereunder shall be
subject to the following conditions:
A. The Board of Trustees of the Trust shall have authorized
the execution of the Agreement, and the shareholders of Strategic
Diversified Income Fund shall have approved the Agreement and the
transactions contemplated thereby, and Strategic Diversified Income Fund
shall have furnished to Strategic Income Fund copies of resolutions to
that effect certified by the Secretary or an Assistant Secretary; such
shareholder approval shall have been by the affirmative vote of "a
majority of the outstanding voting securities" (as defined in the Act) of
Strategic Diversified Income Fund at a meeting for which proxies have been
solicited by the Proxy Statement and Prospectus (as hereinafter defined).
B. Strategic Income Fund shall have received an opinion dated
the Closing Date of counsel to Strategic Diversified Income Fund, to the
effect that (i) the Trust 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 enter into and perform the Agreement on behalf of
Strategic Diversified Income Fund; and (ii) that all action necessary to
make the Agreement, according to its terms, valid, binding and enforceable
on Strategic Diversified Income Fund and to authorize effectively the
transactions contemplated by the Trust on behalf of the Agreement have
been taken by the Trust on behalf of Strategic Diversified Income Fund.
C. The representations and warranties of Strategic Diversified
Income Fund contained herein shall be true and correct at and as of the
Closing Date, and Strategic Income Fund shall have been furnished with a
certificate of the President, or a Vice President, or the Secretary or
Assistant Secretary or the Treasurer of the Trust, dated the Closing Date,
to that effect.
D. On the Closing Date, Strategic Diversified Income Fund
shall have furnished to Strategic Income Fund a certificate of the
Treasurer or Assistant Treasurer of the Trust as to the amount of the
capital loss carry-over and net unrealized appreciation or depreciation,
if any, with respect to Strategic Diversified Income Fund as of the
Closing Date.
E. The Cash Reserve shall not exceed 10% of the value of the
net assets, nor 30% of the value of the gross assets, of Strategic
Diversified Income Fund at the close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Oppenheimer
Strategic Funds Trust under the Securities Act of 1933, as amended (the
"1933 Act"), containing a preliminary form of the Proxy Statement and
Prospectus, shall have become effective under the 1933 Act not later than
June 2, 1995.
G. On the Closing Date, Strategic Income Fund shall have
received a letter of Andrew J. Donohue or other senior executive officer
of Oppenheimer Management Corporation acceptable to Strategic Income 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 there were any
material actual or contingent liabilities of Strategic Diversified Income
Fund arising out of litigation brought against Strategic Diversified
Income Fund or claims asserted against it, or pending or to the best of
his or her knowledge threatened claims or litigation not reflected in or
apparent from the most recent audited financial statements and footnotes
thereto of Strategic Diversified Income Fund delivered to Strategic Income
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. Strategic Income Fund shall have received an opinion, dated
the Closing Date, of Deloitte & Touche LLP, to the same effect as the
opinion contemplated by Section 11.E. of the Agreement.
I. Strategic Income Fund shall have received at the closing
all of the assets of Strategic Diversified Income Fund to be conveyed
hereunder, which assets shall be free and clear of all liens,
encumbrances, security interests, restrictions and limitations whatsoever.
11. The obligations of Strategic Diversified Income Fund hereunder
shall be subject to the following conditions:
A. The Board of Trustees of the Trust shall have authorized
the execution of the Agreement, and the transactions contemplated thereby,
and Strategic Income Fund shall have furnished to Strategic Diversified
Income Fund copies of resolutions to that effect certified by the
Secretary or an Assistant Secretary of the Trust.
B. Strategic Diversified Income Fund's shareholders shall have
approved the Agreement and the transactions contemplated hereby, by an
affirmative vote of "a majority of the outstanding voting securities" (as
defined in the Act) of Strategic Diversified Income Fund, and Strategic
Diversified Income Fund shall have furnished Strategic Income Fund copies
of resolutions to that effect certified by the Secretary or an Assistant
Secretary of the Trust.
C. Strategic Diversified Income Fund shall have received an
opinion dated the Closing Date of counsel to Strategic Income Fund, to the
effect that (i) the Trust 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 enter into and perform the Agreement on behalf of
Strategic Income Fund; (ii) all action necessary to make the Agreement,
according to its terms, valid, binding and enforceable upon Strategic
Income Fund and to authorize effectively the transactions contemplated by
the Agreement have been taken by the Trust, and (iii) the shares of
Strategic Income Fund to be issued hereunder are duly authorized and when
issued will be validly issued, fully-paid and non-assessable, except as
set forth in Strategic Income Fund's then current Prospectus and Statement
of Additional Information.
D. The representations and warranties of Strategic Income Fund
contained herein shall be true and correct at and as of the Closing Date,
and Strategic Diversified Income Fund shall have been furnished with a
certificate of the President, a Vice President or the Secretary or an
Assistant Secretary or the Treasurer of the Trust to that effect dated the
Closing Date.
E. Strategic Diversified Income Fund shall have received an
opinion of Deloitte & Touche LLP to the effect that the Federal tax
consequences of the transaction, if carried out in the manner outlined in
this Plan of Reorganization and in accordance with (i) Strategic
Diversified Income Fund's representation that there is no plan or
intention by any Fund shareholder who owns 5% or more of Strategic
Diversified Income Fund's outstanding shares, and, to Strategic
Diversified Income Fund's best knowledge, there is no plan or intention
on the part of the remaining Fund shareholders, to redeem, sell, exchange
or otherwise dispose of a number of Strategic Income Fund shares received
in the transaction that would reduce Strategic Diversified Income Fund
shareholders' ownership of Strategic Income 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 Fund shares as of the same date,
and (ii) the representation by each of Strategic Diversified Income Fund
and Strategic Income Fund that, as of the Closing Date, Strategic
Diversified Income Fund and Strategic Income Fund will qualify as
regulated investment companies or will meet the diversification test of
Section 368(a)(2)(F)(ii) of the Code, will be as follows:
1. 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.
2. Strategic Diversified Income Fund and Strategic Income
Fund will each qualify as a "party to a reorganization" within the meaning
of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders
of Strategic Diversified Income Fund upon the distribution of Class C
shares of beneficial interest in Strategic Income Fund to the shareholders
of Strategic Diversified Income Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will
be recognized by Strategic Diversified Income Fund by reason of the
transfer of substantially all its assets in exchange for shares of
Strategic Income Fund.
5. Under Section 1032 of the Code no gain or loss will
be recognized by Strategic Income Fund by reason of the transfer of
substantially all Strategic Diversified Income Fund's assets in exchange
for Class C shares of Strategic Income Fund and Strategic Income Fund's
assumption of certain liabilities of Strategic Diversified Income Fund.
6. The shareholders of Strategic Diversified Income Fund
will have the same tax basis and holding period for the Class C shares of
beneficial interest in Strategic Income Fund that they receive as they had
for Strategic Diversified Income Fund shares that they previously held,
pursuant to Section 358(a) and 1223(1), respectively, of the Code.
7. The securities transferred by Strategic Diversified
Income Fund to Strategic Income Fund will have the same tax basis and
holding period in the hands of Strategic Income Fund as they had for
Strategic Diversified Income 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, nor 30% of the value of the gross assets, of Strategic
Diversified Income Fund at the close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by Oppenheimer
Strategic Funds Trust under the 1933 Act, containing a preliminary form
of the Proxy Statement and Prospectus, shall have become effective under
the 1933 Act not later than June 2, 1995.
H. On the Closing Date, Strategic Diversified Income Fund
shall have received a letter of Andrew J. Donohue or other senior
executive officer of Oppenheimer Management Corporation acceptable to
Strategic Diversified Income 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 there were any material actual or contingent liabilities
of Strategic Income Fund arising out of litigation brought against
Strategic Income Fund or claims asserted against it, or pending or, to the
best of his or her knowledge, threatened claims or litigation not
reflected in or apparent by the most recent audited financial statements
and footnotes thereto of Strategic Income Fund delivered to Strategic
Diversified Income 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. Strategic Diversified Income Fund shall acknowledge receipt
of the shares of Strategic Income Fund.
12. Strategic Diversified Income Fund hereby represents and warrants
that:
A. The financial statements of Strategic Diversified Income
Fund as at September 30, 1994 (audited) and March 31, 1995 (unaudited)
heretofore furnished to Strategic Income Fund, present fairly the
financial position, results of operations, and changes in net assets of
Strategic Diversified Income 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, 1994 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
Strategic Diversified Income Fund, it being agreed that a decrease in the
size of Strategic Diversified Income 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. Contingent upon approval of the Agreement and the
transactions contemplated thereby by Strategic Diversified Income Fund's
shareholders, Strategic Diversified Income Fund has authority to transfer
all of the assets of Strategic Diversified Income Fund to be conveyed
hereunder free and clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained in
Strategic Diversified Income Fund's Registration Statement under the 1933
Act, as amended, is true, correct and complete, conforms to the
requirements of the 1933 Act 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, conformed
to the requirements of the 1933 Act 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 Strategic
Diversified Income Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge of
Strategic Diversified Income Fund, threatened against Strategic
Diversified Income Fund, not reflected in such Prospectus;
E. There are no material contracts outstanding to which
Strategic Diversified Income Fund is a party other than those ordinary in
the conduct of its business;
F. Strategic Diversified Income Fund is a series of the Trust,
a business trust duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts; and the Trust, on
behalf of Strategic Diversified Income Fund 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 Strategic Diversified Income Fund
is duly registered under the Act and such registration has not been
rescinded or revoked and is in full force and effect;
G. All Federal and other tax returns and reports of Strategic
Diversified Income 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 Strategic Diversified Income 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 Strategic Diversified Income Fund ended September
30, 1994 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; and
H. Strategic Diversified Income Fund has elected to be treated
as a regulated investment company and, for each fiscal year of its
operations, Strategic Diversified Income Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company and Strategic Diversified Income Fund intends to meet
such requirements with respect to its current taxable year.
13. Strategic Income Fund hereby represents and warrants that:
A. The financial statements of Strategic Income Fund as at
September 30, 1994 (audited) and March 31, 1995 (unaudited) heretofore
furnished to Strategic Diversified Income Fund, present fairly the
financial position, results of operations, and changes in net assets of
Strategic Income 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, 1994 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
Strategic Income Fund, it being understood that a decrease in the size of
Strategic Income 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 Strategic Funds Trust's Registration Statement under the 1933
Act, is true, correct and complete, conforms to the requirements of the
1933 Act 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, conformed to the
requirements of the 1933 Act 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 Strategic
Income Fund and no material claim and no material legal, administrative
or other proceedings pending or, to the knowledge of Strategic Income
Fund, threatened against Strategic Income Fund, not reflected in such
Prospectus;
D. There are no material contracts outstanding to which
Strategic Income Fund is a party other than those ordinary in the conduct
of its business;
E. Strategic Income Fund is a series of the Trust, a business
trust duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts; the Trust, on behalf of Strategic
Income 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; the shares of Strategic Income Fund which
it issues to Strategic Diversified Income Fund pursuant to the Agreement
will be duly authorized, validly issued, fully-paid and non-assessable,
except as otherwise set forth in Strategic Income Fund's Registration
Statement; and will conform to the description thereof contained in
Strategic Income Fund's Registration Statement, will be duly registered
under the 1933 Act and in the states where registration is required; and
Strategic Income Fund is duly registered under the Act and such
registration has not been revoked or rescinded and is in full force and
effect;
F. All Federal and other tax returns and reports of Strategic
Income 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 Strategic Income 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
Strategic Income Fund ended September 30, 1994 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. Strategic Income Fund has elected to be treated as a
regulated investment company and, for each fiscal year of its operations,
Strategic Income Fund has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company and
Strategic Income Fund intends to meet such requirements with respect to
its current taxable year;
H. Strategic Income Fund has no plan or intention (i) to
dispose of any of the assets transferred by Strategic Diversified Income
Fund, other than in the ordinary course of business, or (ii) to redeem or
reacquire any of the shares issued by it in the reorganization other than
pursuant to valid requests of shareholders; and
I. After consummation of the transactions contemplated by the
Agreement, Strategic Income Fund intends to operate its business in a
substantially unchanged manner.
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 in the Proxy Statement and
Prospectus 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 not misleading and that the financial statements
concerning it will present the information shown fairly 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 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.
15. A Registration Statement on Form N-14 under the 1933 Act for
Strategic Income Fund shall be prepared and filed and 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." Each party agrees that it will use its best efforts to have
such Registration Statement declared effective and to supply such
information concerning itself for inclusion in the Proxy Statement and
Prospectus as may be necessary or desirable in this connection. Strategic
Diversified Income Fund shall deregister as an investment company under
the Investment Company Act of 1940, as amended, as soon as practicable
and, thereafter, to cause the cancellation of its outstanding shares.
16. The obligations of the parties under the Agreement shall be
subject to the right of either party to abandon and terminate the
Agreement without liability if the other party breaches any material
provision of the Agreement or if any material legal, administrative or
other proceeding shall be instituted or threatened between the date of the
Agreement and the Closing Date (i) seeking to restrain or otherwise
prohibit the transactions contemplated hereby and/or (ii) asserting a
material liability of either party, which proceeding has not been
terminated or the threat thereof removed prior to the Closing Date.
17. The Agreement may be executed in several 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.
18. 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 acknowledgement of such waiver.
19. Strategic Diversified Income Fund understands that the
obligations of Strategic Income Fund under the Agreement are not binding
upon any Trustee or shareholder of Strategic Income Fund personally, but
bind only Strategic Income Fund and Strategic Income Fund's property.
Strategic Diversified Income Fund represents that it has notice of the
provisions of the Declaration of Trust of Strategic Income Fund
disclaiming shareholder and Trustee liability for acts or obligations of
Strategic Income Fund.
20. Strategic Income Fund understands that the obligations of
Strategic Diversified Income Fund under the Agreement are not binding upon
any Trustee or shareholder of Strategic Diversified Income Fund
personally, but bind only Strategic Diversified Income Fund and Strategic
Diversified Income Fund's property. Strategic Income Fund represents that
it has notice of the provisions of the Declaration of Trust of Strategic
Diversified Income Fund disclaiming shareholder and Trustee liability for
acts or obligations of Strategic Diversified Income Fund.
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.
Attest: OPPENHEIMER STRATEGIC FUNDS TRUST
on behalf of Oppenheimer Strategic
Diversified Income Fund
/s/ Robert G. Zack /s/ George C. Bowen
__________________________ __________________________________
Robert G. Zack George C. Bowen
Assistant Secretary Treasurer
Attest: OPPENHEIMER STRATEGIC FUNDS TRUST
on behalf of Oppenheimer Strategic
Income Fund
/s/ Robert G. Zack /s/ Andrew J. Donohue
__________________________ _________________________________
Robert G. Zack Andrew J. Donohue
Assistant Secretary Vice President
<PAGE>
OPPENHEIMER STRATEGIC DIVERSIFIED INCOME FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD JULY 12, 1995
The undersigned shareholder of Oppenheimer Strategic Diversified Income
Fund (the "Fund"), does hereby appoint George C. Bowen, Rendle Myer and
James C. Swain, and each of them, as attorneys-in-fact and proxies of the
undersigned, with full power of substitution, to attend the Special
Meeting of Shareholders of Strategic Diversified Income Fund to be held
on July 12, 1995, at 3410 South Galena Street, Denver, Colorado at 10:00
A.M., Denver time, and at all adjournments thereof, and to vote the shares
held in the name of the undersigned on the record date for said meeting
on the Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A VOTE
FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL
BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS
INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization between Strategic
Diversified Income Fund and Oppenheimer Strategic Income Fund, and the
transactions contemplated thereby, including the transfer of
substantially all the assets of Strategic Diversified Income Fund,
which is a series of Oppenheimer Strategic Funds Trust (the "Trust"),
having one class of shares, designated as Class C, in exchange for
Class C shares of Strategic Income Fund, which is also a series of the
Trust and the distribution of Class C shares to the shareholders of
Strategic Diversified Income Fund in complete liquidation of Strategic
Diversified Income Fund, the cancellation of the outstanding shares
of Strategic Diversified Income Fund and its termination as a series
of the Trust.
FOR____ AGAINST____ ABSTAIN____
Dated: ___________________________, 1995
(Month) (Day)
___________________________________
Signature(s)
___________________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give his or her title.
230
<PAGE>
OPPENHEIMER STRATEGIC FUNDS TRUST
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
June 2, 1995
___________________________________
This Statement of Additional Information of Oppenheimer Strategic
Funds Trust consists of this cover page and the following documents:
1. Prospectus of Oppenheimer Strategic Income Fund dated May 26, 1995,
supplemented May 26, 1995, filed herein and is incorporated herein by
reference.
2. Statement of Additional Information of Oppenheimer Strategic Income
Fund dated May 26, 1995, filed herein and is incorporated herein by
reference.
3. Prospectus of Oppenheimer Strategic Diversified Income Fund dated
February 1, 1995, supplemented May 26, 1995, filed herein and is
incorporated herein by reference.
4. Statement of Additional Information of Oppenheimer Strategic
Diversified Income Fund dated May 26, 1995, filed herein and is
incorporated herein by reference.
5. Strategic Income Fund's Annual Report as of September 30, 1994, which
has been previously filed and is incorporated herein by reference.
6. Strategic Income Fund's Semi-Annual Report (unaudited) as of March 31,
1995, filed herein and is incorporated herein by reference.
7. Strategic Diversified Income Fund's Annual Report as of September 30,
1994, which has been previously filed and is incorporated herein by
reference.
8. Strategic Diversified Income Fund's Semi-Annual Report as of March 31,
1995, filed herein and is incorporated herein by reference.
This Statement of Additional Information (the "Additional Statement")
is not a Prospectus. This Additional Statement should be read in
conjunction with the Proxy Statement and Prospectus, which may be obtained
by written request to Oppenheimer Shareholder Services ("OSS"), P.O. Box
5270, Denver, Colorado 80217, or by calling OSS at the toll-free number
shown above.
