Oppenheimer Strategic Diversified Income Fund
Semiannual Report March 31, 1995
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Yield
- - ---------------------------------
Standardized Yield
- - ---------------------------------
For the 30 Days Ended 3/31/95:(1)
- - ---------------------------------
8.15%
- - ---------------------------------
This Fund is for people who want high income from an investment that's
strategically designed to lower risk.
- - --------------------------------------------------------------------------------
How Your Fund Is Managed
- - --------------------------------------------------------------------------------
Oppenheimer Strategic Diversified Income Fund seeks high current income by
strategically allocating its assets among three sectors: U.S. government issues,
foreign fixed income securities and higher-yielding, lower-rated corporate
bonds. Strategic investing gives the Fund's managers the flexibility to shift
assets among three fixed income sectors to capitalize on worldwide investment
opportunities. At the same time, allocating the Fund's assets among three
distinct fixed income sectors can provide the diversification necessary to lower
risk.
- - --------------------------------------------------------------------------------
Performance
- - --------------------------------------------------------------------------------
Total return at net asset value for the 6 months ended 3/31/95 was -1.84%.(2)
Your Fund's average annual total returns at maximum offering price for the
1-year period ended 3/31/95 and since inception of the Fund on 2/1/94 were
- - -1.04% and -1.06%, respectively.(3)
- - --------------------------------------------------------------------------------
Outlook
- - --------------------------------------------------------------------------------
"The outlook for the bond market is more positive today than it has been in some
time, both in terms of income and potential total returns. The Fund's ability to
shift assets strategically among bond-market sectors worldwide remains a major
advantage for shareholders in the current environment. It has allowed us to seek
high yields, while keeping portfolio risks under careful control."
David Negri and Art Steinmetz, Portfolio Managers
March 31, 1995
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment and principal
value on an investment in the Fund will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost.
1. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 3/31/95, divided by the maximum offering price
at the end of the period, compounded semiannually and then annualized. Falling
net asset values will tend to artificially raise yields.
2. Based on the change in net asset value per share from 9/30/94 to 3/31/95,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
3. Returns show results of hypothetical investments on 4/1/94 and 2/1/94
(inception of Fund), with the 1% contingent deferred sales charge deducted for
the 1-year result.
2 Oppenheimer Strategic Diversified Income Fund
<PAGE>
James C. Swain
Chairman
Oppenheimer
Strategic Short-Term
Income Fund
Jon S. Fossel
President
Oppenheimer
Strategic Short-Term
Income Fund
Dear OppenheimerFunds Shareholder,
1994 was marked by one of the greatest tests the bond markets faced in more than
six decades. As the U.S. Federal Reserve undertook the most aggressive moves in
its history to raise interest rates, bond prices and bond mutual funds declined
across the board. Changing interest rates are a fact of life and they affect the
short-term performance of all bond markets. That is why we believe the best
measure of any fixed income mutual fund is its performance over the long term.
And we believe the long-term outlook for the bond markets is very positive.
To see how greatly the U.S. bond market has improved since last fall, we
need look no further than the market's reaction to the Fed's most recent
short-term rate increase in February. While the markets had already anticipated
this move, unlike previous rate increases, long-term interest rates continued to
decline and bonds rallied further. Although the Fed could raise rates again, we
believe that this positive environment will prove more than momentary as a
result of several factors.
First, concerns about the effects of inflation on bond prices are fading
fast. By most indicators, economic growth is slowing to a pace that can be
sustained without reigniting inflation or causing a recession. Second, at
current prices, intermediate and long-term bonds are producing some of the best
inflation-adjusted returns in years. With the actual inflation rate running just
over 3 percent today, many fixed income investors are clearly being rewarded.
Attracted by the strong, real returns intermediate and long-term bonds offer,
investors are returning to bonds in a significant way. This rising demand is
providing solid support for bond prices. Third, as the Fed concludes its
tightening efforts--and recent reports suggest that point is near--long-term
interest rates will likely stay within their current range, and could decline
further. Of course, rates could rise later this year if future reports indicate
that the economy isn't slowing as quickly as it seems to be today; however, we
believe that over the longer term, the downward trend of rates will continue.
Two uncertainties affecting the fixed income markets are foreign investors'
attitudes toward U.S. debt and the weakness of the U.S. dollar abroad relative
to other major currencies. But investors' attitudes overseas and the dollar's
decline, in our view, should prove temporary. Both have been driven by the
government's moves to support the Mexican peso, a widening trade deficit, and
Congress's apparent inability to limit the Federal budget deficit.
We believe the trade deficit will narrow with increasing U.S. exports as
European economies come out of recession and emerging world markets stabilize.
Additionally, the need to support the peso has begun to decline as Mexico's
tough domestic economic policy has gained credibility. Finally, we are confident
that Congress will be able to get the budget deficit issue dealt with because
Americans are demanding it.
Of course, no one can predict the future with perfect clarity. The bond
markets are always subject to fluctuations and, as we saw in 1994, the shifts
can sometimes be sharp. Overall, however, we believe the outlook for the bond
markets today appears positive.
Your portfolio manager discusses the outlook for your Fund on the following
pages. We appreciate your trust, and we'll continue to do our best to help you
meet your long-term investment objectives.
James C. Swain Jon S. Fossel
April 24, 1995
3 Oppenheimer Strategic Diversified Income Fund
<PAGE>
David Negri and Art Steinmetz
Portfolio Managers
Q+A
An interview with your Fund's managers.
Investments in emerging markets historically have played an important role in
the Fund's portfolio. Did the devaluation of the peso affect your strategy?
It certainly did with regard to Mexico itself, where we have drastically reduced
our positions. In other emerging markets, however, we think the perception of
risk has been exaggerated. We've reduced our emerging-market holdings as a
defensive measure, but for the most part we've redirected our investments among
emerging markets, to countries like Morocco and Poland, with stronger markets
and economies, and where we believe attractive yields compensate for perceived
risks.
These markets don't, of course, develop in straight lines. Foreign
investments are always subject to adverse market changes as a result of currency
fluctuations, and sometimes the shifts can be sharp. But over time, the
long-term returns more than compensate for temporary risks, especially when
these investments are part of a diversified portfolio.(1)
Have changes in interest rates and the economy affected your allocations among
fixed income sectors?
While where we allocate the Fund's assets among fixed income sectors is critical
to producing good returns, how we allocate assets within each sector is just as
important to meeting the Fund's objectives. For example, last year, when
interest rates were rising and the economy was gaining strength, our strategy
was to avoid interest rate risk by shortening Treasury maturities and investing
in corporate bonds with stronger prospects than their credit ratings suggested.
That strategy worked well for us, but today, as the economic expansion
and interest rates approach what we believe will be their peak, we're reversing
that strategy. With interest rates poised to fall and the economy slowing,
we're extending Treasury maturities and upgrading the quality of the high yield
portion of the portfolio.
Have you made any changes in the high yield sector of the portfolio?
While we think the expansion phase of the economic cycle is drawing to a close,
cyclical companies continue to do well, and we are still focusing on industrial
companies whose earnings benefit in the later stages of the economic cycle.
At the same time, however, there's little doubt that the Fed's efforts to
control inflation are slowing the economy. For high yield issuers, that means
earnings and cash flow may come under pressure, and we've been managing the
Fund's high yield sector more conservatively, focusing on issuers' financial
strength and orienting the portfolio toward higher quality.
Of course, investments in high yield bonds are subject to greater risk that
the issuer will default in principal or interest payments. Our focus on
quality, however, helps reduce that risk.
Has the recent weakness of the dollar affected the Fund?
It has to some extent. The dol-lar's decline was driven largely by the U.S.
government's attempt to support Mexico by buying peso-denominated securities.
The government pumped U.S. dollars into the system, and as the supply of dollars
rose, their value fell. But as investors sought stability, other markets and
currencies, notably Germany and the mark, benefitted--thus, currency declines
affecting one sector of the Fund were largely offset by currency gains in
Europe. //
1. The Fund's portfolio is subject to change.
4 Oppenheimer Strategic Diversified Income Fund
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<TABLE>
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Statement of Investments March 31, 1995 (Unaudited)
<CAPTION>
Face Market Value
Amount (1) See Note 1
===================================================================================================================================
<S> <C> <C> <C>
Certificates of Deposit -- 1.7%
- - -----------------------------------------------------------------------------------------------------------------------------------
Citibank CD:
10.50%, 7/14/95 (2) ARA $ 150,000 $ 150,037
10.75%, 11/20/95 (2) CLP 107,888,289 267,348
16%, 5/3/95 (2) CLP 129,000,000 319,663
16%, 8/17/95 (2) CLP 41,501,570 102,841
-----------------
Total Certificates of Deposit (Cost $822,407) 839,889
===================================================================================================================================
Mortgage-Backed Obligations -- 8.0%
- - -----------------------------------------------------------------------------------------------------------------------------------
Government Agency -- 5.9%
- - -----------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored -- 4.4%
--------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Series 176, Cl. F, 8.95%,
3/15/20 78,000 79,390
--------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, 10.50%, 11/25/20 355,000 402,478
Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl. 2,
7%, 2/25/24 (3) 3,820,482 1,398,058
Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl. 2,
7%, 9/25/23 (3) 313,428 113,520
Series 1994-83, Cl. Z, 7.50%, 6/25/24 169,228 142,929
-----------------
2,136,375
- - -----------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed -- 1.5%
--------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7.50%, 6/1/25 735,000 750,389
- - -----------------------------------------------------------------------------------------------------------------------------------
Private -- 2.1%
- - -----------------------------------------------------------------------------------------------------------------------------------
Commercial -- 0.9%
--------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 231,080 224,509
Series 1993-C1, Cl. D, 9.45%, 5/25/24 227,500 226,149
-----------------
450,658
- - -----------------------------------------------------------------------------------------------------------------------------------
Multi-Family -- 1.2%
--------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1991-M6, Cl. B4, 6.45%, 6/25/21 (4) 103,894 100,226
Series 1994-C2, Cl. E, 8%, 4/25/25 394,865 330,638
Series 1994-C2, Cl. G, 8%, 4/25/25 244,842 182,277
-----------------
613,141
-----------------
Total Mortgage-Backed Obligations (Cost $3,864,819) 3,950,563
===================================================================================================================================
U.S. Government Obligations - 35.2%
- - -----------------------------------------------------------------------------------------------------------------------------------
Treasury - 35.2%
- - -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
10.375%, 5/15/95 2,700,000 2,713,500
11.50%, 11/15/95 600,000 618,750
11.625%, 11/15/02 3,800,000 4,778,500
11.75%, 11/15/14 3,260,000 4,478,425
8.125%, 8/15/19 326,000 345,662
8.75%, 8/15/00 3,450,000 3,701,201
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</TABLE>
5 Oppenheimer Strategic Diversified Income Fund
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<TABLE>
<CAPTION>
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Statement of Investments (Unaudited)(Continued) Face Market Value
Amount (1) See Note 1
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury (Continued)
- - -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 9.375%, 4/15/96 $ 636,000 $ 653,689
-----------------
Total U.S. Government Obligations (Cost $17,127,464) 17,289,727
===================================================================================================================================
Foreign Government Obligations -- 17.8%
- - -----------------------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Bonds, Bonos del Tesoro:
Series I, 6.188%, 5/31/96 (4) 56,000 51,830
Series II, 6.188%, 9/1/97 (4) 58,000 49,061
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Bonos de la Tesoreria de la Federacion, Zero Coupon, 5/4/95 50,000 48,591
--------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts., Banco Estado Minas Gerais:
10%, 1/15/96 50,000 46,125
8.25%, 2/10/00 500,000 307,500
--------------------------------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento Sr. Unsec. Debs., 7.25%, 4/30/98 150,000 138,750
--------------------------------------------------------------------------------------------------------------------------
Ecuador (Republic of) Bonds, 7.25%, 2/28/25 (4) 500,000 222,500
--------------------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development Bonds,
12.50%, 7/25/97 NZD 980,000 696,177
--------------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 7.375%, 1/1/09 (4) 2,100,000 1,223,250
Tranche B, 7.375%, 1/1/04 (4) 50,000 31,563
--------------------------------------------------------------------------------------------------------------------------
New South Wales Treasury Corp. Gtd. Exch. Bonds, 12%, 12/1/01 AUD 240,000 193,268
--------------------------------------------------------------------------------------------------------------------------
New Zealand (Republic of) Bonds:
10%, 7/15/97 NZD 635,000 429,209
8%, 11/15/95 NZD 1,000,000 649,530
--------------------------------------------------------------------------------------------------------------------------
Petroquimica do Nordeste Sr. Unsec. Unsub. Nts., 9.50%,
10/19/01 100,000 88,000
--------------------------------------------------------------------------------------------------------------------------
Poland (Republic of) Past Due Interest Bonds, 3.25%, 10/27/14 (5) 2,750,000 1,096,563
--------------------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Gtd. Nts., 8%, 8/14/01 AUD 1,633,000 1,086,705
--------------------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
10.25%, 11/30/98 ESP 98,000,000 739,277
--------------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts.:
12%, 11/20/98 GBP 306,000 553,861
12.25%, 3/26/99 GBP 240,000 440,631
13%, 7/14/00 GBP 210,000 405,541
--------------------------------------------------------------------------------------------------------------------------
United Mexican States:
Combined Facility 3, Loan Participation Agreement, Tranche A,
7.625%, 9/20/97 (4)(6) 190,476 107,619
Petroleos Mexicanos Gtd. Medium-Term Nts., 7.60%, 6/15/00 50,000 30,500
--------------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Debs., 9%, 5/27/96 125,000 118,124
-----------------
Total Foreign Government Obligations (Cost $8,897,761) 8,754,175
===================================================================================================================================
Corporate Bonds and Notes - 37.6%
- - -----------------------------------------------------------------------------------------------------------------------------------
Basic Industry - 6.4%
- - -----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 2.3%
--------------------------------------------------------------------------------------------------------------------------
Harris Chemical North America, Inc., 0%/10.25% Gtd. Sr. Sec. (7) 200,000 175,000
Disc. Nts., 7/15/01
--------------------------------------------------------------------------------------------------------------------------
NL Industries, Inc.:
0%/13% Sr. Sec. Disc. Nts., 10/15/05 (7) 400,000 262,000
11.75% Sr. Sec. Nts., 10/15/03 200,000 205,500
--------------------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02 (8) 300,000 291,000
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
6 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
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Statement of Investments (Unaudited)(Continued) Face Market Value
Amount (1) See Note 1
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chemicals (Continued)
--------------------------------------------------------------------------------------------------------------------------
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05 (8) $ 200,000 $ 210,750
-----------------
1,144,250
- - -----------------------------------------------------------------------------------------------------------------------------------
Metals/Mining -- 0.6%
--------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corp., 9.875% Sr. Nts., 2/15/02 300,000 282,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Paper -- 3.0%
--------------------------------------------------------------------------------------------------------------------------
Gaylord Container Corp., 0%/12.75% Sr. Sub. Disc. Debs.,
5/15/05 (7) 550,000 523,875
--------------------------------------------------------------------------------------------------------------------------
Rainy River Forest Products, 10.75% Sr. Sec. Nts., 10/15/01 50,000 51,375
--------------------------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.75% Sr. Nts., 6/15/00 200,000 209,500
11.25% Sr. Sub. Nts., 6/15/02 100,000 105,750
--------------------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04 (8) 100,000 106,500
--------------------------------------------------------------------------------------------------------------------------
Stone Consolidated Corp., 10.25% Sr. Sec. Nts., 12/15/00 250,000 254,063
--------------------------------------------------------------------------------------------------------------------------
Stone Container Corp.:
10.75% Fst. Mtg. Nts., 10/1/02 100,000 103,750
9.875% Sr. Nts., 2/1/01 100,000 97,500
---------------
1,452,313
- - -----------------------------------------------------------------------------------------------------------------------------------
Steel -- 0.5%
--------------------------------------------------------------------------------------------------------------------------
Jorgensen (Earle M.) Co., 10.75% Sr. Nts., 3/1/00 100,000 96,000
--------------------------------------------------------------------------------------------------------------------------
Wheel-Pittsburgh Corp., 9.375% Sr. Nts., 11/15/03 200,000 175,500
-----------------
271,500
- - -----------------------------------------------------------------------------------------------------------------------------------
Consumer Related -- 7.5%
- - -----------------------------------------------------------------------------------------------------------------------------------
Consumer Products -- 2.0%
--------------------------------------------------------------------------------------------------------------------------
Harman International Industries, Inc., 12% Sr. Sub. Nts., 8/1/02 200,000 219,000
--------------------------------------------------------------------------------------------------------------------------
International Semi-Tech Microelectronics, Inc., 0%/11.50% Sr.
Sec. Disc. Nts., 8/15/03 (7) 400,000 178,000
--------------------------------------------------------------------------------------------------------------------------
Revlon Consumer Products Corp., 9.375% Sr. Nts., 4/1/01 100,000 94,250
--------------------------------------------------------------------------------------------------------------------------
Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 300,000 292,500
--------------------------------------------------------------------------------------------------------------------------
Williams (J. B.) Holdings, Inc., 12% Sr. Nts., 3/1/04 200,000 192,500
-----------------
976,250
- - -----------------------------------------------------------------------------------------------------------------------------------
Food/Beverages/Tobacco -- 1.6%
--------------------------------------------------------------------------------------------------------------------------
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03 100,000 95,000
--------------------------------------------------------------------------------------------------------------------------
Di Giorgio Corp., 12% Sr. Nts., 2/15/03 150,000 128,250
--------------------------------------------------------------------------------------------------------------------------
Dr. Pepper Bottling Holdings, Inc., 0%/11.625% Sr. Disc.
Nts., 2/15/03 (7) 300,000 211,500
--------------------------------------------------------------------------------------------------------------------------
Pulsar Internacional, SA de C.V., 9% Nts., 9/19/95 (6) 250,000 237,500
--------------------------------------------------------------------------------------------------------------------------
Royal Crown Corp., 9.75% Sr. Sec. Nts., 8/1/00 100,000 94,000
-----------------
766,250
- - -----------------------------------------------------------------------------------------------------------------------------------
Healthcare -- 2.8%
--------------------------------------------------------------------------------------------------------------------------
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 300,000 302,250
--------------------------------------------------------------------------------------------------------------------------
Healthsouth Rehabilitation Corp., 9.50% Sr. Sub. Nts., 4/1/01 100,000 100,250
--------------------------------------------------------------------------------------------------------------------------
Icon Health & Fitness, Inc., 13% Sr. Sub. Nts., 7/15/02 (8) 300,000 319,500
--------------------------------------------------------------------------------------------------------------------------
National Medical Enterprises, Inc., 10.125% Sr. Sub. Nts., 3/1/05 200,000 206,500
--------------------------------------------------------------------------------------------------------------------------
Total Renal Care, Inc., Units (7) 500,000 437,500
-----------------
1,366,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Hotel/Gaming -- 0.0%
--------------------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc. Promissory Nts. 2,500 --
- - -----------------------------------------------------------------------------------------------------------------------------------
Leisure -- 0.2%
--------------------------------------------------------------------------------------------------------------------------
Kloster Cruise Ltd., 13% Sr. Sec. Nts., 5/1/03 150,000 117,750
- - -----------------------------------------------------------------------------------------------------------------------------------
Restaurants -- 0.4%
--------------------------------------------------------------------------------------------------------------------------
Flagstar Corp., 10.75% Sr. Nts., 9/15/01 200,000 192,500
</TABLE>
7 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
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Statement of Investments (Unaudited)(Continued) Face Market Value
Amount (1) See Note 1
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Textile/Apparel -- 0.5%
--------------------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts., 10/23/96 IDR 500,000,000 $ 154,714
--------------------------------------------------------------------------------------------------------------------------
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05 100,000 92,125
-----------------
246,839
- - -----------------------------------------------------------------------------------------------------------------------------------
Energy -- 0.9%
- - -----------------------------------------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc., 12.25% Sub. Debs., 2/1/05 200,000 209,000
--------------------------------------------------------------------------------------------------------------------------
Triton Energy Corp., Zero Coupon Sr. Sub. Disc. Nts., 11/1/97 300,000 237,000
-----------------
446,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Financial Services -- 1.3%
- - -----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial -- 1.1%
--------------------------------------------------------------------------------------------------------------------------
Card Establishment Services, Inc., 10% Sr. Sub. Nts., Series B,
10/1/03 300,000 333,375
--------------------------------------------------------------------------------------------------------------------------
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98 250,000 197,500
-----------------
530,875
- - -----------------------------------------------------------------------------------------------------------------------------------
Insurance -- 0.2%
--------------------------------------------------------------------------------------------------------------------------
Nacolah Holding Corp., 9.50% Sr. Nts., 12/1/03 100,000 92,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Housing Related -- 2.6%
- - -----------------------------------------------------------------------------------------------------------------------------------
Building Materials -- 2.0%
--------------------------------------------------------------------------------------------------------------------------
Nortek, Inc., 9.875% Sr. Sub. Nts., 3/1/04 200,000 183,000
--------------------------------------------------------------------------------------------------------------------------
Triangle Pacific Corp., 10.50% Sr. Nts., 8/1/03 250,000 247,500
--------------------------------------------------------------------------------------------------------------------------
USG Corp., 9.25% Sr. Nts., Series B, 9/15/01 200,000 197,250
--------------------------------------------------------------------------------------------------------------------------
Walter Industries, Inc., 14.625% Sr. Nts., Series B, 1/1/49 (9) 200,000 377,000
-----------------
1,004,750
- - -----------------------------------------------------------------------------------------------------------------------------------
Homebuilders/Real Estate -- 0.6%
--------------------------------------------------------------------------------------------------------------------------
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Nts., 4/1/02 300,000 279,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Manufacturing -- 3.3%
- - -----------------------------------------------------------------------------------------------------------------------------------
Aerospace/Electronics/Computers -- 1.3%
--------------------------------------------------------------------------------------------------------------------------
Berg Electronics Holdings Corp., 11.375% Sr. Sub. Debs., 5/1/03 100,000 103,250
--------------------------------------------------------------------------------------------------------------------------
Rohr, Inc., 11.625% Sr. Nts., 5/15/03 300,000 306,000
--------------------------------------------------------------------------------------------------------------------------
Unisys Corp., 13.50% Credit Sensitive Nts., 7/1/97 (4) 200,000 220,486
-----------------
629,736
- - -----------------------------------------------------------------------------------------------------------------------------------
Automotive -- 2.0%
--------------------------------------------------------------------------------------------------------------------------
Aftermarket Technology Corp., 12% Sr. Sub. Nts., 8/1/04 100,000 105,500
--------------------------------------------------------------------------------------------------------------------------
Foamex LP/Foamex Capital Corp.:
11.25% Sr. Nts., 10/1/02 300,000 295,500
9.50% Sr. Sec. Nts., 6/1/00 50,000 48,750
--------------------------------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 300,000 270,750
--------------------------------------------------------------------------------------------------------------------------
SPX Corp., 11.75% Sr. Sub. Nts., 6/1/02 50,000 52,250
--------------------------------------------------------------------------------------------------------------------------
Terex Corp., 13% Sr. Nts., 8/1/96 (8) 200,000 194,000
-----------------
966,750
- - -----------------------------------------------------------------------------------------------------------------------------------
Media -- 6.1%
- - -----------------------------------------------------------------------------------------------------------------------------------
Broadcasting -- 2.0%
--------------------------------------------------------------------------------------------------------------------------
Act III Broadcasting, Inc., 9.625% Sr. Sub. Nts., 12/15/03 100,000 97,250
--------------------------------------------------------------------------------------------------------------------------
Chancellor Broadcasting Co., 12.50% Sr. Sub. Nts., 10/1/04 300,000 303,000
--------------------------------------------------------------------------------------------------------------------------
New City Communications, Inc., 11.375% Sr. Sub. Nts., 11/1/03 300,000 274,500
--------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcasting Group, Inc., 10% Sr. Sub. Nts., 12/15/03 300,000 289,500
-----------------
964,250
- - -----------------------------------------------------------------------------------------------------------------------------------
Cable Television -- 3.4%
--------------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc., 0%/12.50% Sr. Disc. Nts.,
6/15/04 (7) 300,000 151,500
--------------------------------------------------------------------------------------------------------------------------
Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04 (7) 400,000 242,500
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
8 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
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Statement of Investments (Unaudited)(Continued) Face Market Value
Amount (1) See Note 1
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cable Television (Continued)
--------------------------------------------------------------------------------------------------------------------------
Cablevision Industries Corp., 10.75% Sr. Nts., 1/30/02 $ 100,000 $ 105,750
--------------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.:
10.75% Sr. Sub. Debs., 4/1/04 300,000 312,750
9.875% Sr. Sub. Debs., 4/1/23 100,000 94,625
--------------------------------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 11% Sr. Sub. Debs., 6/1/07 300,000 321,015
--------------------------------------------------------------------------------------------------------------------------
Marcus Cable Operating Co. LP/Marcus Capital Corp., 0%/13.50%
Gtd. Sr. Sub. Disc. Nts., Series II, 8/1/04 (7) 300,000 172,875
--------------------------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.15% Debs., 2/1/23 100,000 95,211
--------------------------------------------------------------------------------------------------------------------------
Time Warner, Inc./Time Warner Entertainment LP, 8.375% Sr.
Debs., 3/15/23 200,000 179,952
-----------------
1,676,178
- - -----------------------------------------------------------------------------------------------------------------------------------
Diversified Media -- 0.6%
--------------------------------------------------------------------------------------------------------------------------
Ackerley Communications, Inc., 10.75% Sr. Sec. Nts.,
Series A, 10/1/03 200,000 202,000
--------------------------------------------------------------------------------------------------------------------------
Echostar Communications Corp., Units (7) 250,000 113,750
-----------------
315,750
- - -----------------------------------------------------------------------------------------------------------------------------------
Entertainment/Film -- 0.1%
--------------------------------------------------------------------------------------------------------------------------
Imax Corp., 7% Sr. Nts., 3/1/01 (5) 80,000 69,600
- - -----------------------------------------------------------------------------------------------------------------------------------
Other -- 2.2%
- - -----------------------------------------------------------------------------------------------------------------------------------
Conglomerates -- 0.6%
--------------------------------------------------------------------------------------------------------------------------
MacAndrews & Forbes Holdings, Inc., 13% Sub. Debs., 3/1/99 300,000 298,500
- - -----------------------------------------------------------------------------------------------------------------------------------
Environmental -- 0.9%
--------------------------------------------------------------------------------------------------------------------------
EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 200,000 175,000
--------------------------------------------------------------------------------------------------------------------------
Envirotest Systems Corp., 9.125% Sr. Nts., 3/15/01 350,000 264,250
-----------------
439,250
- - -----------------------------------------------------------------------------------------------------------------------------------
Services -- 0.7%
--------------------------------------------------------------------------------------------------------------------------
Borg-Warner Security Corp., 9.125% Sr. Sub. Nts., 5/1/03 400,000 330,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Retail -- 0.5%
- - -----------------------------------------------------------------------------------------------------------------------------------
Specialty Retailing -- 0.1%
--------------------------------------------------------------------------------------------------------------------------
Cole National Group, Inc., 11.25% Sr. Nts., 10/1/01 50,000 48,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Supermarkets -- 0.4%
--------------------------------------------------------------------------------------------------------------------------
Grand Union Co., 11.75% Sr. Nts., 2/15/99 (9) 100,000 101,500
--------------------------------------------------------------------------------------------------------------------------
Purity Supreme, Inc., 11.75% Sr. Sec. Nts., Series B, 8/1/99 100,000 86,000
-----------------
187,500
- - -----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 0.8%
- - -----------------------------------------------------------------------------------------------------------------------------------
Shipping -- 0.8%
--------------------------------------------------------------------------------------------------------------------------
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts., 7/1/04 400,000 386,000
- - -----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 6.0%
- - -----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities -- 2.0%
--------------------------------------------------------------------------------------------------------------------------
Beaver Valley II Funding Corp., 9% 2nd Lease Obligation
Bonds, 6/1/17 299,000 230,750
--------------------------------------------------------------------------------------------------------------------------
California Energy Co., 0%/10.25% Sr. Disc. Nts., 1/15/04 (7) 300,000 226,500
--------------------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 10.375% Lease Obligation Bonds, Series (9) 210,000 128,054
1986A, 1/2/11
--------------------------------------------------------------------------------------------------------------------------
First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 200,000 194,722
1986B, 1/15/16
--------------------------------------------------------------------------------------------------------------------------
Subic Power Corp., 9.50% Sinking Fund Debs., 12/28/08 241,375 196,117
-----------------
976,143
- - -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications -- 4.0%
--------------------------------------------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts.,
12/1/04 (7) 400,000 221,000
--------------------------------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04 (7)(8) 100,000 67,156
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
9 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited)(Continued) Face Market Value
Amount (1) See Note 1
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telecommunications (Continued)
--------------------------------------------------------------------------------------------------------------------------
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03 (7) $ 280,000 $ 194,600
--------------------------------------------------------------------------------------------------------------------------
Horizon Cellular Telephone LP/Horizon Finance Corp.,
0%/11.375% Sr. Sub. Disc. Nts., 10/1/00 (7) 500,000 380,000
--------------------------------------------------------------------------------------------------------------------------
MFS Communications, Inc., 0%/9.375% Sr. Disc. Nts.,
1/15/04 (7) 500,000 321,250
--------------------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc.
Nts., 8/1/03 (7) 500,000 328,750
--------------------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts.,
11/15/01 (7) 300,000 222,000
--------------------------------------------------------------------------------------------------------------------------
USA Mobile Communications, Inc. II, 14% Sr. Nts., 11/1/04 200,000 215,000
-----------------
1,949,756
-----------------
Total Corporate Bonds and Notes (Cost $18,471,685) 18,405,690
<CAPTION>
Shares
===================================================================================================================================
<S> <C> <C> <C>
Common Stocks -- 0.2%
- - -----------------------------------------------------------------------------------------------------------------------------------
Celcaribe SA (8)(10) 16,260 14,844
--------------------------------------------------------------------------------------------------------------------------
Kash 'N Karry Food Stores, Inc. (10) 5,019 96,616
-----------------
Total Common Stocks (Cost $93,380) 111,460
===================================================================================================================================
Preferred Stocks -- 2.0%
- - -----------------------------------------------------------------------------------------------------------------------------------
AK Steel Holding Corp., 7% Cv. Stock Appreciation Income
Linked Securities 5,000 143,750
--------------------------------------------------------------------------------------------------------------------------
California Federal Bank, 10.625% Non-Cum., Series B 2,500 255,000
--------------------------------------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum. 3,000 302,250
--------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp., $.65 Cv., Series A 2,100 17,325
--------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp., 8.255% Provisionally Redeemable Income
Debt Exchangeable for Stock 10,000 105,000
--------------------------------------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B 8,000 139,000
-----------------
Total Preferred Stocks (Cost $1,036,704) 962,325
Units
===================================================================================================================================
Rights, Warrants and Certificates -- 0.0%
- - -----------------------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99 1,500 3,000
--------------------------------------------------------------------------------------------------------------------------
Capital Gaming International, Inc. Wts., Exp. 2/99 5,062 12,655
--------------------------------------------------------------------------------------------------------------------------
Terex Corp. Rts., Exp. 7/96 (8) 6 5
-----------------
Total Rights, Warrants and Certificates (Cost $22,524) 15,660
Shares
===================================================================================================================================
Put Options Purchased -- 0.0%
- - -----------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.50%, Exp. 4/95 (Cost $11,602) 4,500 2,109
Face
Amount (1)
===================================================================================================================================
Structured Instruments -- 1.5%
- - -----------------------------------------------------------------------------------------------------------------------------------
Argentina Local Market Securities Trust, Series 1994-II,
11.30%, 4/1/00 (2)(8) 273,913 214,337
--------------------------------------------------------------------------------------------------------------------------
Repackaged Argentina Domestic Securities Trust I, 14.75%,
9/1/02 (2)(8) 500,000 286,250
--------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp. Investment Banking, Inc., 10% CD Sterling
Rate Linked Nts., 7/3/95 (2) 230,000 226,320
-----------------
Total Structured Instruments (Cost $1,002,096) 726,907
</TABLE>
10 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
--------------------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited)(Continued)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Investments, at Value (Cost $51,350,442) 104.0% 51,058,505
--------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (4.0) (1,963,624)
========== ==============
Net Assets 100.0% $ 49,094,881
========== ==============
</TABLE>
1. Face amount is reported in local currency. Foreign currency abbreviations
are as follows:
ARA - Argentine Austral GBP - British Pound Sterling
AUD - Australian Dollar IDR - Indonesian Rupiah
CLP - Chilean Peso NZD - New Zealand Dollar
DEM - German Deutsche Mark USD - U.S. Dollar
ESP - Spanish Peseta
2. Indexed instrument for which the principal amount and/or interest due at
maturity is affected by the relative value of a foreign currency.
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities
typically decline in price as interest rates decline. Most other
fixed-income securities increase in price when interest rates decline. The
principal amount of the underlying pool represents the notional amount on
which current interest is calculated. The price of these securities is
typically more sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs).
4. Represents the current interest rate for a variable rate security.
5. Represents the current interest rate for an increasing rate security.
6. Identifies issues considered to be illiquid -- See Note 7 of Notes to
Financial Statements.
7. Represents a zero coupon bond that converts to a fixed rate of interest at
a designated future date.
8. Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $1,704,342 or 3.47% of the Fund's
net assets, at March 31, 1995.
9. Non-income producing--issuer is in default of interest payment.
10. Non-income producing security.
11. A sufficient amount of securities is segregated to collateralize
outstanding forward foreign currency exchange contracts. See Note 5 of
Notes to Financial Statements.
12. A sufficient amount of liquid assets has been designated to cover
outstanding call and put options, as follows:
<TABLE>
<CAPTION>
Face
Subject
to Expiration Exercise Premium Market Value
Call/Put Date Price Received See Note 1
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 434,000 AUD 4/20/95 0.74 USD/AUD $ 751 $ 1,285
Call Option on New South Wales
Treasury Corp.
Gtd. Exch. Bonds, 12%, 12/1/01 100,000 AUD 4/28/95 109.056 AUD 678 880
Call Option on Pound Sterling 425,000 GBP 5/8/95 1.60 USD/DEM 4,199 16,456
Call Option on Spanish Peseta/
Deutsche Mark 2,500,000 ESP 5/4/95 89.00 ESP/DEM 1,395 821
Put Option on Deutsche Mark 200,000 DEM 6/6/95 1.46 DEM/USD 1,416 1,000
--------- ----------
$ 8,439 $ 20,442
========= ==========
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Investments, at value (cost $51,350,442) -- see accompanying statement $51,058,505
---------------------------------------------------------------------------------------------------------
Receivables:
Interest 1,234,738
Investment sold 993,781
Shares of beneficial interest sold 363,670
---------------------------------------------------------------------------------------------------------
Other 6,043
------------
Total assets 53,656,737
- - ------------------------------------------------------------------------------------------------------------------------------------
Liabilities Bank overdraft 552,458
---------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $8,439) -- see
accompanying statement -- Note 4 20,442
---------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency
exchange contracts -- Note 5 965
---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 3,669,447
Shares of beneficial interest redeemed 147,446
Dividends 102,072
Service plan fees -- Note 6 28,578
Trustees' fees 1,482
Transfer and shareholder servicing agent fees -- Note 6 579
Other 38,387
------------
Total liabilities 4,561,856
- - ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $49,094,881
=============
- - ------------------------------------------------------------------------------------------------------------------------------------
Composition of Paid-in capital $52,546,681
Net Assets
---------------------------------------------------------------------------------------------------------
Undistributed net investment income 148,195
---------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transaction and
written option transactions (3,299,235)
---------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments, options written and
translation of assets and liabilities denominated in foreign currencies (300,760)
--------------
Net assets $49,094,881
=============
- - ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Net asset value, redemption price and offering price per share
Per Share (based on net assets of $49,094,881 and 10,832,351 shares of
beneficial interest outstanding) $4.53
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income Interest (net of foreign withholding taxes of $4,777) $ 2,381,797
Dividends 55,370
------------
Total income 2,437,167
- - ------------------------------------------------------------------------------------------------------------------------------------
Expenses Management fees -- Note 6 171,570
---------------------------------------------------------------------------------------------------------
Service plan fees -- Note 6 228,602
---------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees -- Note 6 25,519
---------------------------------------------------------------------------------------------------------
Shareholder reports 24,759
---------------------------------------------------------------------------------------------------------
Custodian fees and expenses 21,982
---------------------------------------------------------------------------------------------------------
Legal and auditing fees 15,339
---------------------------------------------------------------------------------------------------------
Registration and filing fees 4,394
---------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,388
---------------------------------------------------------------------------------------------------------
Other 6,771
------------
Total expenses 501,324
- - ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 1,935,843
- - ------------------------------------------------------------------------------------------------------------------------------------
Realized and Net realized loss on:
Unrealized Gain (Loss) Investments (2,345,688)
On Investments, Expiration and closing of option contracts written -- Note 4 (63,983)
Options Written and Foreign currency transactions (428,672)
Foreign Currency ------------
Transactions Net realized loss (2,838,343)
---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written 94,940
Translation of assets and liabilities denominated in foreign currencies 12,559
------------
Net change 107,499
------------
Net realized and unrealized gain (loss) on investments, options written
and foreign currency transactions (2,730,844)
- - ------------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting From Operations $ (795,001)
============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
Six Months Ended Period Ended
March 31, September 30,
1995 (Unaudited) 994(1)
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations Net investment income $ 1,935,843 $ 1,050,539
---------------------------------------------------------------------------------------------------------
Net realized loss on investments, options written and foreign
currency transactions (2,838,343) (460,892)
---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on
investments, options written and translation of assets and
liabilities denominated in foreign currencies 107,499 (408,259)
------------- ------------
Net increase (decrease) in net assets resulting from
operations (795,001) 181,388
- - ------------------------------------------------------------------------------------------------------------------------------------
Dividends to Dividends from net investment income ($.181 and
Shareholders $.228 per share, respectively) (1,791,718) (1,046,469)
- - ------------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net increase in net assets resulting from beneficial
Transactions interest transactions -- Note 2 8,793,859 43,752,822
- - ------------------------------------------------------------------------------------------------------------------------------------
Net Assets Total increase 6,207,140 42,887,741
---------------------------------------------------------------------------------------------------------
Beginning of period 42,887,741 --
-------------- --------------
End of period (including undistributed net
investment income of $148,195 and $4,070,
respectively) $ 49,094,881 $42,887,741
============= ===========
1. For the period from February 1, 1994 (commencement
of operations) to September 30, 1994.
</TABLE>
See accompanying Notes to Financial Statements.
14 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
Financial Highlights
Six Months Ended Period Ended
March 31, September 30,
1995 (Unaudited) 1994(1)
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 4.80 $ 5.00
- - ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .19 .23
Net realized and unrealized loss on
investments, options written and foreign currency
transactions (.28) (.20)
------- --------
Total income from investment operations (.11) .03
- - ---------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.18) (.23)
- - ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.53 $ 4.80
======== =======
- - ---------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(2) (1.84)% .58%
- - ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $49,095 $42,888
- - ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $45,916 $22,046
- - ---------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at end of period
(in thousands) 10,832 8,944
- - ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets(3):
Net investment income 8.46% 7.19%
Expenses, before voluntary reimbursement by the Manager 2.19% 2.13%
Expenses net of voluntary reimbursement by the Manager N/A 1.71%
- - ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 79.7% 108.8%
</TABLE>
1. For the period from February 1, 1994 (commencement of operations) to
September 30, 1994.
2. Assumes a hypothetical initial investment on the business day before
commencement of operations, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net
asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not
annualized for periods of less than one full year.
3. Annualized.
4. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the six months ended March 31, 1995 were
$44,097,093 and $34,051,060, respectively.
See accompanying Notes to Financial Statements.
15 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- - ------------------------------------------------------------------------------------------------------------------------------------
1. Significant Oppenheimer Strategic Diversified Income Fund (the Fund) is a separate series of Oppenheimer
Accounting Policies Strategic Funds Trust, a diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers a single class of shares, designated as Class C shares,
which may be subject to a contingent deferred sales charge. The following is a summary of significant
accounting policies consistently followed by the Fund.
------------------------------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on
each trading day. Listed and unlisted securities for which such information is regularly reported are
valued at the last sale price of the day or, in the absence of sales, at values based on the closing
bid or asked price or the last sale price on the prior trading day. Long-term and short-term "non-
money market" debt securities are valued by a portfolio pricing service approved by the Board of
Trustees. Such securities which cannot be valued by the approved portfolio pricing service are valued
using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes
is reliable and that the quotes reflect current market value, or under consistently applied
procedures established by the Board of Trustees to determine fair value in good faith. Short-term
"money market type" debt securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any premium or discount.
Forward contracts are valued based on the closing prices of the forward currency contract rates in
the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on which the option is
traded or, in the absence of any transactions that day, the value is based upon the last sale price
on the prior trading date if it is within the spread between the closing bid and asked prices. If the
last sale price is outside the spread, the closing bid or asked price closest to the last reported
sale price is used.
------------------------------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high yield securities, which may be subject to a greater
degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may
be more sensitive to economic conditions than lower yielding, higher rated fixed income securities.
The Fund may acquire securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. At March 31, 1995, securities with an aggregate market value of
$606,554, representing 1.24% of the Fund's net assets were in default.
------------------------------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars.
Prices of securities denominated in foreign currencies are translated into U.S. dollars at the
closing rates of exchange. Amounts related to the purchase and sale of securities and investment
income are translated at the rates of exchange prevailing on the respective dates of such
transactions.
The effect of changes in foreign currency exchange rates on investments is separately identified from
the fluctuations arising from changes in market values of securities held and reported with all other
foreign currency gains and losses in the Fund's results of operations.
------------------------------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated
in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market value of the underlying
securities is required to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the seller enters an
insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or
limited.
</TABLE>
16 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- - ------------------------------------------------------------------------------------------------------------------------------------
1. Significant Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code
Accounting Policies applicable to regulated investment companies and to distribute all of its taxable income, including
(continued) any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
------------------------------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends from net investment income each
day the New York Stock Exchange is open for business and pay such dividends monthly. Distributions
from net realized gains on investments, if any, will be declared at least once each year.
------------------------------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are purchased or sold
(trade date) and dividend income is recorded on the ex-dividend date. Discount on securities
purchased is amortized over the life of the respective securities, in accordance with federal income
tax requirements. Realized gains and losses on investments and options written and unrealized
appreciation and depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. Dividends in kind are recognized as income on the ex-dividend
date, at the current market value of the underlying security. Interest on payment-in-kind debt
instruments is accrued as income at the coupon rate and a market adjustment is made on the ex-date.
------------------------------------------------------------------------------------------------------
2. Shares of The Fund has authorized an unlimited number of no par value shares of beneficial interest.
Beneficial Interest Transactions in shares of beneficial interest were as follows:
<CAPTION>
Six Months Ended Period Ended
March 31, 1995 September 30, 1994(1)
---------------------------- ---------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sold 3,862,873 $17,871,337 9,579,653 $46,855,355
Dividends reinvested 227,402 1,044,924 132,003 640,038
Redeemed (2,201,624) (10,122,402) (767,956) (3,742,571)
----------- ------------ ---------- ------------
Net increase 1,888,651 $ 8,793,859 8,943,700 $43,752,822
=========== ============ ========== ===========
1. For the period from February 1, 1994 (commencement of operations) to September 30, 1994.
- - ------------------------------------------------------------------------------------------------------------------------------------
3. Unrealized Gains At March 31, 1995, net unrealized depreciation on investments and options written of $303,940
And Losses on was composed of gross appreciation of $928,540, and gross depreciation of $1,232,480.
Investments and
Options Written
- - ------------------------------------------------------------------------------------------------------------------------------------
4. Option Activity The Fund may buy and sell put and call options, or write covered call options on portfolio securities
in order to produce incremental earnings or protect against changes in the value of portfolio
securities.
The Fund generally purchases put options or writes covered call options to hedge against adverse
movements in the value of portfolio holdings. When an option is written, the Fund receives a premium
and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of
the option.
Options are valued daily based upon the last sale price on the principal exchange on which the option
is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or
loss upon the expiration or closing of the option transaction. When an option is exercised, the
proceeds on sales for a written call option, the purchase cost for a written put option, or the cost
of the security for a purchased put or call option is adjusted by the amount of premium received or
paid.
</TABLE>
17 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<S> <C>
-----------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- - ------------------------------------------------------------------------------------------------------------------------------------
4. Option Activity In this report, securities designated to cover outstanding call options are noted in the Statement of
(continued) Investments. Shares subject to call, expiration date, exercise price, premium received and market
value are detailed in a footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement
of Operations.
The risk in writing a call option is that the Fund gives up the opportunity for profit if the market
price of the security increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market price of the security decreases and the option is exercised.
The risk in buying an option is that the Fund pays a premium whether or not the option is exercised.
The Fund also has the additional risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist.
Written option activity for the six months ended March 31, 1995 was as follows:
<CAPTION>
Call Options Put Options
---------------------------- ---------------------------
Number of Amount of Number of Amount of
Options Premiums Options Premiums
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
September 30, 1994 1,926,322 $ 24,421 -- $ --
Options written 2,984 15,263 136,986 1,416
Options expired prior
to exercise (1,928,031) (32,661) -- --
----------- --------- --------- -------
Options outstanding at
March 31, 1995 1,275 $ 7,023 136,986 $ 1,416
=========== ========= ========= =======
</TABLE>
18 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- - ------------------------------------------------------------------------------------------------------------------------------------
5. Forward Contracts A forward foreign currency exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks. They may also be used to
tactically shift portfolio currency risk. The Fund generally enters into forward contracts as a hedge
upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the closing prices of the forward currency contract rates in
the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. The
Fund will realize a gain or loss upon the closing or settlement of the forward transaction.
In this report, securities held in segregated accounts to cover net exposure on outstanding forward
contracts are noted in the Statement of Investments where applicable. Gains and losses on outstanding
contracts (unrealized appreciation or depreciation on forward contracts) are reported in the
Statement of Assets and Liabilities. Realized gains and losses are reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms of the contract and
unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
At March 31, 1995, outstanding forward contracts to buy and sell currencies were as follows:
<CAPTION>
Contract Unrealized
Expiration Amount Valuation as of Appreciation
Contracts to Buy Date (000s) March 31, 1995 (Depreciation)
---------------- --------------- -------- --------------- --------------
<S> <C> <C> <C> <C>
Deutsche Mark 4/10/95-5/16/95 946 $ 692,132 $ 17,097
New Zealand Dollar 5/4/95 243 159,245 184
---------- -------
$ 851,377 $ 17,281
========== =======
Contracts to Sell
-----------------
Australian Dollar 5/4/95 217 $(159,291) $ (230)
Spanish Peseta 4/10/95-5/16/95 87,500 (693,050) (18,016)
---------- ---------
$(852,341) $(18,246)
========== =========
- - ------------------------------------------------------------------------------------------------------------------------------------
6. Management Fees Management fees paid to the Manager were in accordance with the investment advisory agreement with
And Other the Fund which provides for an annual fee of .75% on the first $200 million of net assets with a
Transactions With reduction of .03% on each $200 million thereafter to $800 million, .60% on the next $200 million and
Affiliates .50% on net assets in excess of $1 billion. The Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent state regulatory limit on Fund
expenses.
During the six months ended March 31, 1995, Oppenheimer Funds Distributor, Inc. (OFDI) received
contingent deferred sales charges of $32,307 upon redemption of Fund shares, as reimbursement for
sales commissions advanced by OFDI at the time of sale of such shares.
</TABLE>
19 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- - ------------------------------------------------------------------------------------------------------------------------------------
6. Management Fees Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and shareholder
And Other servicing agent for the Fund, and for other registered investment companies. OSS's total costs of
Transactions With providing such services are allocated ratably to these companies.
Affiliates
(continued)
Under an approved distribution and service plan, the Fund may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in connection with the personal service and maintenance
of accounts that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other
institutions. In addition, the Fund's shares are subject to an asset-based sales charge of .75% of
net assets annually, to reimburse OFDI for sales commissions paid from its own resources at the time
of sale and associated financing costs. In the event of termination or discontinuance of the plan,
the Board of Trustees may allow the Fund to continue payment of the asset-based sales charge to OFDI
for distribution expenses incurred on Fund shares sold prior to termination or discontinuance of the
plan. During the six months ended March 31, 1995, OFDI paid $55 to an affiliated broker/dealer as
reimbursement for personal service and maintenance expenses and retained $227,583 as reimbursement
for sales commissions and service fee advances, as well as financing costs.
- - ------------------------------------------------------------------------------------------------------------------------------------
7. Illiquid At March 31, 1995, investments in securities included issues that are illiquid or restricted. The
Securities securities are often purchased in private placement transactions, are not registered under the
Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase) in illiquid or restricted securities. The
aggregate value of these securities subject to this limitation at March 31, 1995 was $395,119 which
represents .70% of the Fund's net assets. Information concerning these securities is as follows:
<CAPTION>
Valuation Per
Acquisition Cost Unit as of
Security Date Per Unit March 31, 1995
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pulsar Internacional, SA de C.V. 9% Nts.,
9/19/95 9/16/94 $99.82 $95.00
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A,
7.625%, 9/20/97 10/25/94 $89.77 $56.50
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered securities are
determined to be liquid and are not included within the 10% limitation specified above.
</TABLE>
20 Oppenheimer Strategic Diversified Income Fund
<PAGE>
<TABLE>
<S> <C>
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Oppenheimer Strategic Diversified Income Fund
A Series of Oppenheimer Strategic Funds Trust
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Officers and Trustees James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
David P. Negri, Vice President
Arthur P. Steinmetz, Vice President
George C. Bowen, Vice President, Secretary, and Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
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Investment Advisor Oppenheimer Management Corporation
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Distributor Oppenheimer Funds Distributor, Inc.
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Transfer and Oppenheimer Shareholder Services
Shareholder Servicing
Agent
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Custodian of The Bank of New York
Portfolio Securities
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Independent Auditors Deloitte & Touche LLP
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Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been taken from the records of the Fund without
examination by the independent auditors.
This is a copy of a report to shareholders of Oppenheimer Strategic Diversified Income Fund. This
report must be preceded or accompanied by a Prospectus of Oppenheimer Strategic Diversified Income
Fund. For material information concerning the Fund, see the Prospectus.
</TABLE>
21 Oppenheimer Strategic Diversified Income Fund
