- ------------------------------------------
Oppenheimer Strategic Income & Growth Fund
Semiannual Report March 31, 1995
- ------------------------------------------
"We want
our money to
work hard,
but we're
concerned
about risk."
[LOGO] OppenheimerFunds(R)
<PAGE>
Yield
- ---------------------------------
Standardized Yield
- ---------------------------------
For the 30 Days Ended 3/31/95:(1)
- ---------------------------------
Class A
- ---------------------------------
5.63%
- ---------------------------------
Class B
- ---------------------------------
5.17%
- ---------------------------------
This Fund is for people who want high income
with the potential for growth, from an investment
that's strategically designed to lower risk.
- --------------------------------------------------------------------------------
How Your Fund Is Managed
- --------------------------------------------------------------------------------
Oppenheimer Strategic Income & Growth Fund seeks its objectives by strategically
allocating assets among four sectors: U.S. government issues, foreign fixed
income securities, higher-yielding, lower-rated corporate bonds, and domestic
stocks. Strategic investing gives the Fund's managers the flexibility to shift
assets among three fixed income sectors to capitalize on worldwide investment
opportunities to seek high income. Investing in stocks can help the Fund seek
its growth objective. Combining strategically managed fixed income investments
with stock investments may reduce the investment risk in any sector, such as
high yield bonds, which are subject to greater risk that the issuer will default
in principal or interest payments. And the ability to move assets quickly and
decisively among a wide variety of investments and global financial markets is
crucial to good performance and reduced risk.
- --------------------------------------------------------------------------------
Performance
- --------------------------------------------------------------------------------
Total returns at net asset value for the 6 months ended 3/31/95 for Class A and
B shares were 1.34% and 0.96%, respectively.(2)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1-year period ended 3/31/95 and since inception of the
Class on 6/1/92 were -0.99% and 2.31%, respectively.
For Class B shares, average annual total returns for the 1-year period
ended 3/31/95 and since inception of the Class on 11/30/92 were -1.68% and
1.20%, respectively.(3)
- --------------------------------------------------------------------------------
Outlook
- --------------------------------------------------------------------------------
"At this time, bonds are more attractive than stocks on a relative basis, and
the Fund's portfolio reflects that. That doesn't mean we think the bull market
in equities is over, however. As interest rates stabilize and begin to decline,
businesses should post good gains in earnings and stock prices. With its
flexibility to shift assets strategically among investment market sectors, the
Fund is well positioned to capitalize on these developments."
Bob Doll, 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) Class A returns show results of hypothetical investments on 4/1/94 and
6/1/92 (inception of class), after deducting the current maximum initial sales
charge of 4.75%. Class B returns show results of hypothetical investments on
4/1/94 and 11/30/92 (inception of class), and the deduction of the applicable
contingent deferred sales charge of 5% (1-year) and 4% (since inception). An
explanation of the different total returns is in the Fund's prospectus.
2 Oppenheimer Strategic Income & Growth Fund
<PAGE>
[PHOTOGRAPH]
James C. Swain
Chairman
Oppenheimer
Strategic Income &
Growth Fund
[PHOTOGRAPH]
Jon S. Fossel
President
Oppenheimer
Strategic Income &
Growth 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.
/s/ James C. Swain /s/ Jon S. Fossel
James C. Swain Jon S. Fossel
April 24, 1995
3 Oppenheimer Strategic Income & Growth Fund
<PAGE>
Bob Doll, David Negri,
and Art Steinmetz
Portfolio Managers
Q + A
An interview with your Fund's managers.
Over the last few months, you've changed the Fund's allocation between stocks
and bonds substantially. What drove that shift?
The answer is fairly straightforward. Over the past year, bonds were hit hard,
both by the Federal Reserve's efforts to fend off future inflation by raising
interest rates, and by developments in markets offshore, notably the collapse of
the Mexican peso. As a result, we took advantage of the low prices of bonds and
focused the portfolio more on income. Thus, our emphasis on bonds, which
currently make up about 70 percent of the portfolio, reflects that.
That's not to say, though, that we're bearish on stocks. Our position in
equities is substantial. In fact, we've increased our position in several
technology issues--notably Compaq, Hewlett-Packard, and Oracle Systems, as well
as in the shares of several companies that have large revenue streams from
Europe, where earnings momentum is building. For the near term, we believe bonds
will lead the way.(1)
Looking at bonds, 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 attractive yields compensate for perceived risks.
These markets don't, of course, develop in a straight line. 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.
Has the recent weakness of the dollar affected the Fund?
It has to some extent. The dollar's decline was driven largely by the U.S.
government's attempt to support Mexico by buying peso-denominated securities. As
our 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. Currency declines
affecting one sector of the Fund were largely offset by currency gains in
Europe.
These developments demonstrate the benefit of investing in a diverse
portfolio of income securities. Each sector of the bond market is affected
differently by economic events, and setbacks in one area often are offset by
higher performance in others. The dollar's recent weakness is a good example of
that dynamic.
What's your outlook for the Fund?
The Fund's flexibility and diversification should continue to help us manage
risk and seek solid returns. And now that prospects for the bond markets in
general are positive, as bonds gain ground, so should stocks. In sum, we think
the Fund is positioned for good performance in 1995. |_|
(1) The Fund's portfolio is subject to change.
4 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
====================================================================================================================================
<S> <C> <C>
Mortgage-Backed Obligations--7.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Government Agency--5.5%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/ Federal Home Loan Mortgage Corp., Series 176, Cl. F, 8.95%, 3/15/20 $ 226,000 $ 230,027
Sponsored--2.8% ----------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg
Investment Conduit Pass-Through Certificates, 10.50%, 11/25/20 315,000 357,128
Interest-Only Stripped Mtg.-Backed Security, Trust 257, Cl. 2, 7%, 2/25/24(2) 1,910,241 699,029
Series 1994-83, Cl. Z, 7.50%, 6/25/24 338,456 285,857
------------
1,572,041
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed Government National Mortgage Assn., 7.50%, 6/1/25 1,470,000 1,500,778
- --2.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Private--2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial--0.9% Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-CHF, Cl. D, 8.25%, 12/25/20 277,296 269,412
Series 1993-C1, Cl. D, 9.45%, 5/25/24 252,980 251,478
------------
520,890
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Family--1.2% Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1991-M6, Cl. B4, 6.45%, 6/25/21(3) 89,052 85,908
Series 1994-C2, Cl. E, 8%, 4/25/25 493,581 413,298
Series 1994-C2, Cl. G, 8%, 4/25/25 244,842 182,277
------------
681,483
------------
Total Mortgage-Backed Obligations (Cost $4,158,495) 4,275,192
====================================================================================================================================
U.S. Government Obligations--27.5%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
10.375%, 5/15/95 1,100,000 1,105,500
11.50%, 11/15/95 900,000 928,125
8.75%, 8/15/00 650,000 697,328
11.625%, 11/15/02(4)(5) 7,600,000 9,557,000
8.125%, 8/15/19 292,000 309,611
----------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.125%, 11/15/95 980,000 972,956
9.375%, 4/15/96 1,300,000 1,266,280
5.75%, 10/31/97 568,000 583,798
------------
Total U.S. Government Obligations (Cost $15,286,139) 15,420,598
====================================================================================================================================
Foreign Government Argentina (Republic of):
Obligations--9.9% Bonds, Bonos de Consolidacion de Deudas, Series I, 3.032%, 4/1/01(3)(6) ARA 352,055 118,634
Bonds, Bonos del Tesoro, Series I, 6.188%, 5/31/96(3) 70,000 64,788
Bonds, Bonos del Tesoro, Series II, 6.188%, 9/1/97(3) 29,000 24,530
Discount Bonds, 4.25%, 3/31/23(3) 250,000 130,859
----------------------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento Sr. Unsec. Debs., 7.25%, 4/30/98 100,000 92,500
----------------------------------------------------------------------------------------------------------------
Ecuador (Republic of) Bonds, 7.25%, 2/28/25(3) 500,000 222,500
----------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development Bonds, 12.50%,
7/25/97 NZD 1,015,000 721,041
----------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 7.375%, 1/1/09(3) 1,100,000 640,750
----------------------------------------------------------------------------------------------------------------
New South Wales Treasury Corp. Gtd. Exch. Bonds, 12%, 12/1/01 AUD 510,000 410,694
</TABLE>
5 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Government New Zealand (Republic of) Bonds:
Obligations 10%, 7/15/97 NZD $ 390,000 $ 263,609
(continued) 8%, 11/15/95 NZD 400,000 259,812
----------------------------------------------------------------------------------------------------------------
Poland (Republic of) Past Due Interest Bonds, 3.25%, 10/27/14(7) 1,750,000 697,813
----------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Gtd. Nts., 8%, 8/14/01 AUD 480,000 319,423
----------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
10.25%, 11/30/98 ESP 54,000,000 407,357
----------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts.:
12%, 11/20/98 GBP 390,000 705,901
13%, 7/14/00 GBP 182,000 351,469
----------------------------------------------------------------------------------------------------------------
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A, 7.625%, 9/20/97(3)(8) 190,476 107,619
------------
Total Foreign Government Obligations (Cost $5,664,421) 5,539,299
====================================================================================================================================
Corporate Bonds and Notes--27.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials--3.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--1.3% NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03 200,000 205,500
----------------------------------------------------------------------------------------------------------------
Polymer Group, Inc., 12.25% Sr. Nts., 7/15/02(9) 300,000 291,000
----------------------------------------------------------------------------------------------------------------
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05(9) 250,000 263,438
------------
759,938
- ------------------------------------------------------------------------------------------------------------------------------------
Metals--0.6% Kaiser Aluminum & Chemical Corp., 12.75% Sr. Sub. Nts., 2/1/03 100,000 103,500
----------------------------------------------------------------------------------------------------------------
Wheel-Pittsburgh Corp., 9.375% Sr. Nts., 11/15/03 250,000 219,375
------------
322,875
- ------------------------------------------------------------------------------------------------------------------------------------
Paper--1.6% Gaylord Container Corp., 11.50% Sr. Nts., 5/15/01 300,000 316,500
----------------------------------------------------------------------------------------------------------------
PT Inti Indorayon Utama, 9.125% Sr. Nts., 10/15/00 75,000 63,375
----------------------------------------------------------------------------------------------------------------
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04(9) 200,000 213,000
----------------------------------------------------------------------------------------------------------------
Stone Consolidated Corp., 10.25% Sr. Sec. Nts., 12/15/00 125,000 127,031
----------------------------------------------------------------------------------------------------------------
Stone Container Corp., 10.75% Fst. Mtg. Nts., 10/1/02 200,000 207,500
------------
927,406
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--11.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Autos & Housing Amstar Corp., 11.375% Sr. Sub. Nts., 2/15/97 300,000 300,000
- --2.8% ----------------------------------------------------------------------------------------------------------------
Blue Bell Funding, Inc., 11.85% Extd. Sec. Nts., 5/1/99 400,000 416,000
----------------------------------------------------------------------------------------------------------------
Penda Corp., 10.75% Sr. Nts., Series B, 3/1/04 300,000 270,750
----------------------------------------------------------------------------------------------------------------
Terex Corp., 13% Sr. Nts., 8/1/96(9) 270,000 261,900
----------------------------------------------------------------------------------------------------------------
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(9) 500,000 301,250
------------
1,549,900
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & Flagstar Corp., 10.75% Sr. Nts., 9/15/01 300,000 288,750
Entertainment--1.9% ----------------------------------------------------------------------------------------------------------------
Foodmaker, Inc., 14.25% Sr. Sub. Nts., 5/15/98 500,000 516,250
----------------------------------------------------------------------------------------------------------------
Imax Corp., 7% Sr. Nts., 3/1/01(7) 320,000 278,400
------------
1,083,400
</TABLE>
6 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media--5.1% Adelphia Communications Corp., 12.50% Sr. Nts., 5/15/02 $ 300,000 $ 288,000
----------------------------------------------------------------------------------------------------------------
American Telecasting, Inc., 0%/12.50% Sr. Disc. Nts., 6/15/04(10) 400,000 202,000
----------------------------------------------------------------------------------------------------------------
Bell & Howell Holdings Co., 0%/11.50% Sr. Disc. Debs., Series B, 3/1/05(10) 250,000 135,625
----------------------------------------------------------------------------------------------------------------
Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04(10) 500,000 303,125
----------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 9.875% Sr. Sub. Debs., 2/15/13 250,000 241,250
----------------------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13 400,000 386,000
----------------------------------------------------------------------------------------------------------------
Echostar Communications Corp., Units(10) 200,000 91,000
----------------------------------------------------------------------------------------------------------------
Gillett Holdings, Inc., 12.25% Sr. Sub. Nts., Series A, 6/30/02 300,000 316,500
----------------------------------------------------------------------------------------------------------------
New City Communications, Inc., 11.375% Sr. Sub. Nts., 11/1/03 200,000 183,000
----------------------------------------------------------------------------------------------------------------
Time Warner, Inc., 9.125% Debs., 1/15/13 400,000 384,208
----------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs., 10/30/07 300,000 319,500
------------
2,850,208
------------
- ------------------------------------------------------------------------------------------------------------------------------------
Retail--General PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts., 10/23/96 IDR 1,200,000,000 371,314
- --0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Retail--Specialty Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03 400,000 374,000
- --0.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--4.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Food--0.7% Grand Union Co., 11.25% Sr. Nts., 7/15/00(11) 350,000 366,188
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies AmeriSource Corp., 11.25% Sr. Debs., 7/15/05(6) 586,838 611,229
& Services--2.5% ----------------------------------------------------------------------------------------------------------------
Capstone Capital Corp., 10.50% Cv. Sub. Debs., 4/1/02 500,000 503,750
----------------------------------------------------------------------------------------------------------------
National Medical Enterprises, Inc., 10.125% Sr. Sub. Nts., 3/1/05 300,000 309,750
------------
1,424,729
- ------------------------------------------------------------------------------------------------------------------------------------
Household Goods Synthetic Industries, Inc., 12.75% Sr. Sub. Debs., 12/1/02 200,000 195,000
- --0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Services & Triton Energy Corp., Zero Coupon Sr. Sub. Disc. Nts., 11/1/97 400,000 316,000
Producer--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Financial--0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance--0.5% Life Partners Group, Inc., 12.75% Sr. Sub. Nts., 7/15/02 300,000 328,500
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial--2.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Owens-Illinois, Inc., 10% Sr. Sub. Nts., 8/1/02 100,000 100,500
Materials--1.0% ----------------------------------------------------------------------------------------------------------------
USG Corp., 10.25% Sr. Sec. Nts., 12/15/02 500,000 506,875
------------
607,375
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Services EnviroSource, Inc., 9.75% Sr. Nts., 6/15/03 200,000 175,000
- --0.4% ----------------------------------------------------------------------------------------------------------------
Grupo Mexicano de Desarrollo SA, 8.25% Gtd. Nts., 2/17/01(9) 300,000 73,500
------------
248,500
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation Sea Containers Ltd., 12.50% Sr. Sub. Debs., Series A, 12/1/04 400,000 424,000
- --0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--2.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications- Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts., 12/1/04(10) 200,000 110,500
Technology--2.8% ----------------------------------------------------------------------------------------------------------------
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(9)(10) 400,000 268,624
----------------------------------------------------------------------------------------------------------------
Comcast Cellular Corp., Zero Coupon Nts., Series B, 3/5/00 250,000 177,500
----------------------------------------------------------------------------------------------------------------
MFS Communications, Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04(10) 300,000 192,750
----------------------------------------------------------------------------------------------------------------
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(10) 750,000 493,125
----------------------------------------------------------------------------------------------------------------
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01(10) 500,000 370,000
------------
1,612,499
</TABLE>
7 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Utilities--2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities First PV Funding Corp., 10.15% Lease Obligation Bonds, Series 1986B, 1/15/16 $ 300,000 $ 292,082
- --1.4% ----------------------------------------------------------------------------------------------------------------
Subic Power Corp.:
9.50% Sinking Fund Debs., 12/28/08 482,750 392,234
9.50% Sinking Fund Debs., 12/28/08(9) 96,551 83,517
------------
767,833
- ------------------------------------------------------------------------------------------------------------------------------------
Gas Utilities--1.0% California Energy Co., 0%/10.25% Sr. Disc. Nts., 1/15/04(10) 450,000 339,750
----------------------------------------------------------------------------------------------------------------
El Paso Electric Co., 10.375% Lease Obligation Bonds, Series 1986A, 1/2/11(11) 400,000 243,912
------------
583,662
------------
Total Corporate Bonds and Notes (Cost $15,719,399) 15,113,327
Shares
====================================================================================================================================
Common Stocks--31.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials--2.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--2.5% Morton International, Inc. 20,000 580,000
- ------------------------------------------------------------------------------------------------------------------------------------
Union Carbide Corp. 26,000 796,250
------------
1,376,250
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--2.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Autos & Housing Goodyear Tire & Rubber Co. 20,000 735,000
- --1.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & McDonald's Corp. 20,000 682,500
Entertainment--1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals--10.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Beverages--2.0% Coca-Cola Co. (The) 20,000 1,130,000
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Drugs Pfizer, Inc. 9,000 771,750
- --2.6% ----------------------------------------------------------------------------------------------------------------
Schering-Plough 9,000 669,375
------------
1,441,125
- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies Stryker Corp. 3,000 137,250
& Services--2.6% ----------------------------------------------------------------------------------------------------------------
Medtronic, Inc. 16,000 1,110,000
------------
1,247,250
- ------------------------------------------------------------------------------------------------------------------------------------
Household Goods Colgate-Palmolive Co. 11,000 726,000
- --1.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Tobacco--1.9% UST, Inc. 33,000 1,047,750
- ------------------------------------------------------------------------------------------------------------------------------------
Financial--5.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Banks--4.4% First Interstate BanCorp 8,000 632,000
----------------------------------------------------------------------------------------------------------------
NationsBank Corp. 14,000 710,500
----------------------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 21,000 1,123,500
------------
2,466,000
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Federal National Mortgage Assn. 8,000 651,000
Financial--1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Equitable Bag, Inc.(12) 1,861 5,583
Materials--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Technology--11.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Hardware Compaq Computer Corp.(12) 27,000 931,500
- --1.6%
</TABLE>
8 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Computer Software Automatic Data Processing, Inc. 13,000 $ 819,000
- --5.0% ----------------------------------------------------------------------------------------------------------------
Microsoft Corp.(12) 17,000 1,209,125
----------------------------------------------------------------------------------------------------------------
Oracle Systems Corp.(12) 24,000 750,000
------------
2,778,125
- ------------------------------------------------------------------------------------------------------------------------------------
Electronics--4.3% Hewlett-Packard Co. 7,000 842,625
----------------------------------------------------------------------------------------------------------------
Intel Corp. 9,000 763,875
----------------------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 9,000 796,500
------------
2,403,000
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications- Celcaribe SA(9)(12) 65,040 59,376
Technology--0.1% ------------
Total Common Stocks (Cost $14,718,755) 17,680,459
====================================================================================================================================
Preferred Stocks--1.4%
- ------------------------------------------------------------------------------------------------------------------------------------
First Nationwide Bank, 11.50% Non-Cum 2,500 251,875
----------------------------------------------------------------------------------------------------------------
Kaiser Aluminum Corp., 8.255% Provisionally Redeemable
Income Debt Exchangeable for Stock 4,400 46,200
----------------------------------------------------------------------------------------------------------------
Prime Retail, Inc., $19.00 Cv., Series B 12,000 208,500
----------------------------------------------------------------------------------------------------------------
Unisys Corp., $3.75 Cv., Series A 7,000 272,125
------------
Total Preferred Stocks (Cost $840,289) 778,700
Units
====================================================================================================================================
Rights, Warrants and Certificates--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
American Telecasting, Inc. Wts., Exp. 6/99 (Cost $0) 2,000 4,000
Date/Price Shares
====================================================================================================================================
Put Options Purchased--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.50% (Cost $3,867) Apr. 11/.2578 1,500 703
</TABLE>
9 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
----------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
Amount(1) See Note 1
===================================================================================================================================
<S> <C> <C>
Structured Instruments--0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp. Investment Banking, Inc., 10% CD
Sterling Rate Linked Nts., 7/3/95 (Cost $300,000)(13) $ 300,000 $ 295,200
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $56,691,365) 105.5% 59,107,478
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (5.5) (3,091,995)
------ ------------
Net Assets 100.0% $ 56,015,483
====== ============
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
DEM--German Deutsche Mark NZD--New Zealand Dollar
ESP--Spanish Peseta USD--U.S. Dollar
2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of
mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed-income
securities increase in price when interest rates decline. The principal amount of the underlying pool represents
the notional amount on which current interest is calculated. The price of these securities is typically more
sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs).
3. Represents the current interest rate for a variable rate security.
4. A sufficient amount of securities is segregated to collateralize outstanding forward foreign currency
exchange contracts. See Note 5 of Notes to Financial Statements.
5. A sufficient amount of liquid assets has been designated to cover outstanding call and put options, as
follows:
</TABLE>
<TABLE>
<CAPTION>
Face Subject Expiration Exercise Premium Market Value
To Call/Put Date Price Received See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 247,000 AUD 4/20/95 0.74 USD/AUD $ 427 $ 731
- ------------------------------------------------------------------------------------------------------------------------------------
Call Option on New South Wales
Treasury Corp. Gtd. Exch. Bonds, 12% 100 AUD 4/28/95 109.056 AUD 678 880
- ------------------------------------------------------------------------------------------------------------------------------------
Call Option on Pound Sterling 325,000 GBP 5/8/95 1.60 USD/GBP 3,211 12,584
- ------------------------------------------------------------------------------------------------------------------------------------
Call Option on Spanish Peseta/Deutsche Mark 13,000 ESP 5/4/95 89.00 ESP/DEM 725 427
- ------------------------------------------------------------------------------------------------------------------------------------
Put Option on Deutsche Mark 200,000 DEM 6/6/95 1.46 DEM/USD 1,417 1,000
------- -------
$ 6,458 $15,622
======= =======
6. Interest or dividend is paid in kind.
7. Represents the current interest rate for an increasing rate security.
8. Identifies issues considered to be illiquid--See Note 7 of Notes to Financial Statements.
9. 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 $1,818,605, or 3.24% of the Fund's net assets, at March 31, 1995.
10. Represents a zero coupon bond that converts to a fixed rate of interest at a designated future date.
11. Non-income-producing--issuer is in default of interest payment.
12. Non-income-producing security.
13. Indexed instrument for which the principal amount and/or interest due at maturity is affected by the
relative value of a foreign currency.
See accompanying Notes to Financial Statements.
</TABLE>
10 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
====================================================================================================================================
<S> <C>
Assets Investments, at value (cost $56,691,365)--see accompanying statement $ 59,107,478
----------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 1,748,935
Interest and dividends 1,013,032
Shares of beneficial interest sold 66,104
----------------------------------------------------------------------------------------------------------------
Deferred organization costs 7,908
----------------------------------------------------------------------------------------------------------------
Other 5,450
------------
Total assets 61,948,907
====================================================================================================================================
Liabilities Bank overdraft 728,976
----------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $6,458)--Note 4 15,622
----------------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency exchange contracts--Note 5 504
----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 4,569,876
Shares of beneficial interest redeemed 278,590
Dividends 244,679
Distribution and service plan fees--Note 6 34,638
Other 60,539
------------
Total liabilities 5,933,424
====================================================================================================================================
Net Assets $56,015,483
============
====================================================================================================================================
Composition of
Net Assets
Paid-in capital $58,352,103
----------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (170,489)
----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment, written option and foreign
currency transactions (4,574,558)
----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments, options written and translation
of assets and liabilities denominated in foreign currencies 2,408,427
------------
Net assets $56,015,483
============
====================================================================================================================================
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $39,428,448
and 8,162,126 shares of beneficial interest outstanding) $4.83
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price) $5.07
----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $16,587,035 and 3,439,548 shares of beneficial interest outstanding) $4.82
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------
====================================================================================================================================
<S> <C>
Investment Income Interest (net of foreign withholding taxes of $3,907) $1,896,670
----------------------------------------------------------------------------------------------------------------
Dividends 257,464
------------
Total income 2,154,134
====================================================================================================================================
Expenses Management fees--Note 6 213,342
----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 6 49,373
Class B--Note 6 80,891
----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 6 37,214
----------------------------------------------------------------------------------------------------------------
Shareholder reports 32,959
----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 17,754
----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 10,698
----------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,890
----------------------------------------------------------------------------------------------------------------
Registration and filing fees--Class B 339
----------------------------------------------------------------------------------------------------------------
Other 9,624
-----------
Total expenses 455,084
====================================================================================================================================
Net Investment Income 1,699,050
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Net realized loss from:
Unrealized Gain Investments and options written (including premiums on options expired) (2,590,058)
(Loss) on Closing and expiration of options written (91,090)
Investments, Foreign currency transactions (878,411)
Options Written -----------
and Foreign Net realized loss (3,559,559)
Currency
Transactions ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written 2,462,442
Translation of assets and liabilities denominated in foreign currencies 74,408
-----------
Net change 2,536,850
-----------
Net realized and unrealized loss on investments, options written and foreign
currency transactions (1,022,709)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations $ 676,341
===========
</TABLE>
See accompanying Notes to Financial Statements.
12 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
----------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
March 31, 1995 September 30,
(Unaudited) 1994
====================================================================================================================================
<S> <C> <C>
Operations Net investment income $1,699,050 $2,781,748
----------------------------------------------------------------------------------------------------------------
Net realized loss on investments, options written and foreign
currency transactions (3,559,559) (891,333)
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated in
foreign currencies 2,536,850 (2,128,001)
------------ ------------
Net increase (decrease) in net assets resulting from operations 676,341 (237,586)
====================================================================================================================================
Dividends and Dividends from net investment income:
Distributions to Class A ($.153 and $.209 per share, respectively) (1,293,242) (1,931,946)
Shareholders Class B ($.135 and $.185 per share, respectively) (456,303) (722,244)
----------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.011 per share) -- (98,470)
Class B ($.011 per share) -- (36,812)
----------------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments, options
written and foreign currency transactions:
Class A ($.097 per share) -- (885,559)
Class B ($.097 per share) -- (331,059)
====================================================================================================================================
Beneficial Interest Net decrease in net assets resulting from Class A beneficial
Transactions interest transactions--Note 2 (2,533,058) (9,347,360)
----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B beneficial interest
transactions--Note 2 836,129 4,699,403
====================================================================================================================================
Net Assets Total decrease (2,770,133) (8,891,633)
----------------------------------------------------------------------------------------------------------------
Beginning of period 58,785,616 67,677,249
------------ ------------
End of period (including overdistributed net investment income of $170,489
and $119,994, respectively) $ 56,015,483 $ 58,785,616
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
13 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Financial Highlights
----------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------------ ---------------------------------------
Six Months Ended Six Months Ended
March 31, 1995 Year Ended September 30, March 31, 1995 Year Ended September 30,
(Unaudited) 1994 1993 1992(2) (Unaudited) 1994 1993(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $4.92 $5.26 $5.03 $5.00 $4.91 $5.26 $5.10
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .15 .21 .22 .07(3) .13 .19 .14
Net realized and unrealized gain (loss)
on investments, options written
and foreign currency transactions (.09) (.23) .22 .02 (.08) (.25) .16
----- ----- ----- ----- ----- ----- -----
Total income (loss) from
investment operations .06 (.02) .44 .09 .05 (.06) .30
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.15) (.21) (.20) (.06) (.14) (.18) (.13)
Dividends in excess of
net investment income -- (.01) -- -- -- (.01) --
Distributions from net realized
gain on investments, options written
and foreign currency transactions -- -- (.01) -- -- -- (.01)
Distributions in excess of net
realized gain on investments,
options written, and foreign
currency transactions -- (.10) -- -- -- (.10) --
----- ----- ----- ----- ----- ----- -----
Total dividends and
distributions to shareholders (.15) (.32) (.21) (.06) (.14) (.29) (.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.83 $4.92 $5.26 $5.03 $4.82 $4.91 $5.26
===== ===== ===== ===== ===== ===== =====
====================================================================================================================================
Total Return, at Net Asset Value(4) 1.34% (.23)% 8.84% 1.74% .96% (1.17)% 5.86%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $39,428 $42,733 $55,291 $48,397 $16,587 $16,053 $12,386
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $40,759 $48,360 $59,209 $30,264 $16,277 $14,986 $ 7,541
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 8,162 8,683 10,513 9,628 3,440 3,267 2,357
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.19%(5) 4.56% 4.33% 4.59%(5) 5.43%(5) 3.86% 3.32%(5)
Expenses 1.39%(5) 1.43% 1.36% 1.46%(3)(5) 2.14%(5) 2.17% 2.21%(5)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 85.1% 80.0% 122.4% 25.8% 85.1% 80.0% 122.4%
</TABLE>
1. For the period from November 30, 1992 (inception of offering) to September
30, 1993.
2. For the period from June 1, 1992 (commencement of operations) to September
30, 1992.
3. Net investment income would have been $.07 absent the voluntary expense
reimbursement, resulting in an expense ratio of 1.74%.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
5. Annualized.
6. 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 $48,908,363 and $46,268,719, respectively.
See accompanying Notes to Financial Statements.
14 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
----------------------------------------------------------------------------------------------------------------
====================================================================================================================================
<S> <C>
1. Significant Oppenheimer Strategic Income & Growth Fund (the Fund) is registered under the Investment Company Act of
Accounting Policies 1940, as amended, as a diversified, open-end management investment company. The Fund's investment advisor
is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class B shares. Class
A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred
sales charge. Both classes of shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution and/or service plan, expenses directly attributable to a
particular class and exclusive voting rights with respect to matters affecting a single class. Class B
shares will automatically convert to Class A shares six years after the date of purchase. The following is
a summary of significant accounting policies consistently followed by the Fund.
-----------------------------------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each
trading day. Listed and unlisted securities for which such information is regularly reported are valued at
the last sale price of the day or, in the absence of sales, at values based on the closing bid or 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.
-----------------------------------------------------------------------------------------------------------
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.
-----------------------------------------------------------------------------------------------------------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly attributable to a specific
class are charged against the operations of that class.
-----------------------------------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its taxable income, including any net
realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income
or excise tax provision is required.
-----------------------------------------------------------------------------------------------------------
Organization Costs. The Manager advanced $20,590 for organization and start-up costs of the Fund. Such
expenses are being amortized over a five-year period from the date operations commenced. In the event that
all or part of the Manager's initial investment in shares of the Fund is withdrawn during the amortization
period, the redemption proceeds will be reduced to reimburse the Fund for any unamortized expenses, in the
same ratio as the number of shares redeemed bears to the number of initial shares outstanding at the time
of such redemption.
-----------------------------------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately for Class A and Class B
shares from net investment income each day the New York Stock Exchange is open for business and pay such
dividends monthly. Distributions from net realized gains on investments, if any, will be declared at least
once each year.
</TABLE>
15 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
====================================================================================================================================
<S> <C>
1. Significant Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss)
Accounting Policies may differ for financial statement and tax purposes primarily because of paydown gains and losses and the
(continued) recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the
income or realized gain (loss) was recorded by the Fund. Effective October 1, 1993, the Fund adopted
Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the Fund changed
the classification of distributions to shareholders to better disclose the differences between financial
statement amounts and distributions determined in accordance with income tax regulations.
-----------------------------------------------------------------------------------------------------------
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.
====================================================================================================================================
2. Shares of The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class.
Beneficial Interest Transactions in shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31, 1995 Year Ended September 30, 1994
------------------------------- -----------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 428,117 $ 2,047,517 1,797,523 $ 9,177,865
Dividends and distributions reinvested 229,874 1,108,861 535,980 2,757,772
Redeemed (1,179,261) (5,689,436) (4,163,212) (21,282,997)
------------ ------------ ------------ ------------
Net decrease (521,270) $ (2,533,058) (1,829,709) $ (9,347,360)
============ ============ ============ ============
- --------------------------------------------------------------------------------------------------------
Class B:
Sold 535,747 $ 2,583,783 1,752,588 $ 8,784,884
Dividends and distributions reinvested 78,803 379,557 100,839 724,590
Redeemed (442,108) (2,127,211) (943,022) (4,810,071)
------------ ------------ ------------ ------------
Net increase 172,442 $ 836,129 910,405 $ 4,699,403
============ ============ ============ ============
</TABLE>
<TABLE>
====================================================================================================================================
<S> <C>
3. Unrealized Gains and At March 31, 1995, net unrealized appreciation on investments and options written of $2,406,949 was
Losses on Investments composed of gross appreciation of $3,934,234 and gross depreciation of $1,527,285.
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.
In this report, securities designated to cover outstanding call options are noted in
the Statement of 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.
</TABLE>
16 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
====================================================================================================================================
<S> <C>
4. Option Activity The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price
(Continued) 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:
</TABLE>
<TABLE>
<CAPTION>
Call Options Put Options
------------------------- ----------------------
Number Amount Number Amount
of Options of Premiums of Options of Premiums
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1994 2,621,646 $ 33,236 -- $ --
- -----------------------------------------------------------------------------------------------
Options written 2,064 11,063 136,986 1,416
- -----------------------------------------------------------------------------------------------
Options expired prior to exercise (2,622,829) (39,257) -- --
---------- ---------- ---------- ----------
Options outstanding at March 31, 1995 881 $ 5,042 136,986 $ 1,416
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C>
5. Forward Contracts A forward foreign currency exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks. They may also
be used to tactically shift portfolio currency risk. The Fund generally enters into forward contracts as a
hedge upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the closing prices of the forward currency
contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. The Fund will realize a gain or loss upon the closing or settlement of the forward transaction.
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, the Fund had outstanding forward contracts to purchase and sell foreign currencies as
follows:
</TABLE>
<TABLE>
<CAPTION>
Contract Unrealized
Amount Valuation as of Appreciation
Contracts to Purchase Expiration Date (000's) March 31, 1995, (Depreciation)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutsche Mark 4/10/95--5/16/95 492 $359,909 $8,891
- ----------------------------------------------------------------------------------------------
New Zealand Dollar 5/4/95 138 90,630 105
-------- ------
$450,539 $8,996
======== ======
Contract Unrealized
Amount Valuation as of Appreciation
Contracts to Sell Expiration Date (000's) March 31, 1995, (Depreciation)
- ----------------------------------------------------------------------------------------------
Australian Dollar 5/4/95 123 $ 90,656 $(131)
- ----------------------------------------------------------------------------------------------
Spanish Peseta 4/10/95--5/16/95 45,500 360,387 (9,369)
-------- ------
$451,043 (9,500)
======== ------
$(504)
======
</TABLE>
17 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
----------------------------------------------------------------------------------------------------------------
====================================================================================================================================
<S> <C>
6. Management Fees and Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund
Other Transactions which provides for an annual fee of .75% on the first $200 million of net assets, with a reduction of .03%
With Affiliates on each $200 million thereafter to $800 million, .60% on the next $200 million and .50% on net assets in
excess of $1 billion. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified
exceptions) exceed the most stringent state regulatory limit on Fund expenses.
For the six months ended March 31, 1995, commissions (sales charges paid by investors)
on sales of Class A shares totaled $46,265, of which $13,727 was retained by Oppenheimer Funds Distributor,
Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B shares totaled $94,320, of which
$13,601 was paid to an affiliated broker/dealer. During the six months ended March 31, 1995, OFDI received
contingent deferred sales charges of $43,496 upon redemption of Class B shares, as reimbursement for sales
commissions advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total costs
of providing such services are allocated ratably to these companies.
Under separate approved plans, each class 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, Class B 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 Class B 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 Class B shares sold prior to termination or discontinuance of the plan. During the six
months ended March 31, 1995, OFDI paid $5,866 and $992, respectively, to an affiliated broker/dealer as
reimbursement for Class A and Class B personal service and maintenance expenses and retained $67,680 as
reimbursement for Class B sales commissions and service fee advances, as well as financing costs.
====================================================================================================================================
7. Illiquid Securities At March 31, 1995, investments in securities included issues that are illiquid or restricted. The
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 $107,619 which represents .19% of the Fund's
net assets. Information concerning these securities is as follows:
</TABLE>
<TABLE>
<CAPTION>
Valuation
Per Unit as of
Security Acquisition Date Cost Per Unit March 31, 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Mexican States, Combined Facility 3,
Loan Participation Agreement, Tranche A, 7.625%, 9/20/97 10/25/94 $89.00 $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>
18 Oppenheimer Strategic Income & Growth Fund
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Income & Growth Fund
----------------------------------------------------------------------------------------------------------------
================================================================================
<S> <C>
Officers and Trustees James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Robert C. Doll, Jr., Senior Vice President
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
================================================================================
Investment Advisor Oppenheimer Management Corporation
================================================================================
Distributor Oppenheimer Funds Distributor, Inc.
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Transfer and Shareholder Oppenheimer Shareholder Services
Servicing Agent
================================================================================
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 Income &
Growth Fund. This report must be preceded or
accompanied by a Prospectus of Oppenheimer Strategic
Income & Growth Fund. For material information
concerning the Fund, see the Prospectus.
</TABLE>
19 Oppenheimer Strategic Income & Growth Fund
<PAGE>
Information
General Information
Monday-Friday 8:30 a.m.-8 p.m. ET
Saturday 10 a.m.-2 p.m. ET
- -------------------------------------
1-800-525-7048
- -------------------------------------
Telephone Transactions
Monday-Friday 8:30 a.m.-8 p.m. ET
- -------------------------------------
1-800-852-8457
- -------------------------------------
PhoneLink
24 hours a day, automated
information and transactions
- -------------------------------------
1-800-533-3310
- -------------------------------------
Telecommunications Device
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
- -------------------------------------
1-800-843-4461
- -------------------------------------
OppenheimerFunds
Information Hotline
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
- -------------------------------------
1-800-835-3104
- -------------------------------------
RS0865.001.0595 May 31, 1995
[PHOTOGRAPH]
Jennifer Leonard, Customer Service Representative
Oppenheimer Shareholder Services
"How may I help you?"
As an OppenheimerFunds shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the OppenheimerFunds' transfer agent,
Oppenheimer Shareholder Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
- --------------------------------------------------------------------------------
[LOGO] Oppenheimer Funds(R) ---------------
Oppenheimer Funds Distributor, Inc. Bulk Rate
P.O. Box 5270 U.S. Postage
Denver, CO 80217-5270 PAID
Permit No. 469
Denver,CO
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