As filed with the Securities and Exchange Commission on May 27, 2005 Registration No. 333-124352 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / PRE-EFFECTIVE AMENDMENT NO.__ / / POST-EFFECTIVE AMENDMENT NO.__ / / OPPENHEIMER STRATEGIC INCOME FUND (Exact Name of Registrant as Specified in Charter) 6803 South Tucson Way, Centennial, Colorado 80112 (Address of Principal Executive Offices) 303-768-3200 (Registrant's Telephone Number) Robert G. Zack, Esq. Executive Vice President & General Counsel OppenheimerFunds, Inc. Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10148 (212) 323-0250 (Name and Address of Agent for Service) As soon as practicable after the Registration Statement becomes effective. (Approximate Date of Proposed Public Offering) Title of Securities Being Registered: Class A, shares of Oppenheimer Strategic Income Fund. It is proposed that this filing will become effective on May 27, 2005 pursuant to Rule 488. No filing fee is due because of reliance on Section 24(f) of the Investment Company Act of 1940. CONTENTS OF REGISTRATION STATEMENT This Registration Statement contains the following pages and documents: Front Cover Contents Page Part A Proxy Statement for Oppenheimer Multi Sector Income Trust and Prospectus for Oppenheimer Strategic Income Fund Part B Statement of Additional Information Part C Other Information Signatures Exhibits
OPPENHEIMER MULTI-SECTOR INCOME TRUST 6803 South Tucson Way, Centennial, Colorado 80112 1.800.647.7374 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 12, 2005 To the Shareholders of Oppenheimer Multi-Sector Income Trust: Notice is hereby given that a Special Meeting of the Shareholders of Oppenheimer Multi-Sector Income Trust ("Multi-Sector Income Trust" , a registered investment management company, will be held at 6803 South Tucson Way, Centennial, CO 80112 at 1:00 P.M., Mountain time, on July 12, 2005, or any adjournments thereof (the "Meeting"), for the following purposes: 1. To approve an Agreement and Plan of Reorganization between Multi-Sector Income Trust and Oppenheimer Strategic Income Fund ("Strategic Income Fund"), and the transactions contemplated thereby, including (a) the transfer of substantially all the assets of Multi-Sector Income Trust to Strategic Income Fund in exchange for Class A shares of Strategic Income Fund, (b) the distribution of these Class A shares of Strategic Income Fund to the shareholders of Multi-Sector Income Trust in complete liquidation of Multi-Sector Income Trust and (c) the cancellation of the outstanding shares of Multi-Sector Income Trust (all of the foregoing being referred to as the "Proposal"). 2. To act upon such other matters as may properly come before the Meeting. Shareholders of record at the close of business on April 14, 2005 are entitled to notice of, and to vote at, the Meeting. The Proposal is more fully discussed in the combined Prospectus and Proxy Statement. Please read it carefully before telling us, through your proxy or in person, how you wish your shares to be voted. The Board of Trustees of Multi-Sector Income Trust recommends a vote in favor of the Proposal. WE URGE YOU TO VOTE PROMPTLY. YOU CAN VOTE BY TELEPHONE OR ON THE ENCLOSED BALLOT BY VOTING, SIGNING AND RETURNING THE BALLOT IN THE ENCLOSED ENVELOPE. By Order of the Board of Trustees, Robert G. Zack, Secretary May 27, 2005 - -------------------------------------------------------------------------------------------- PLEASE VOTE THE ENCLOSED PROXY TODAY. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN OPPENHEIMER STRATEGIC INCOME FUND 6803 South Tucson Way, Centennial, Colorado 80112 1.800.647.7374 COMBINED PROSPECTUS AND PROXY STATEMENT dated May 27, 2005 SPECIAL MEETING OF SHAREHOLDERS OF OPPENHEIMER MULTI-SECTOR INCOME TRUST to be held on July 12, 2005 Acquisition of the Assets of OPPENHEIMER MULTI-SECTOR INCOME TRUST 6803 South Tucson Way, Centennial, Colorado 80112 1.800.647.7374 By and in exchange for Class A shares of OPPENHEIMER STRATEGIC INCOME FUND This combined Prospectus and Proxy Statement solicits proxies from the shareholders of Oppenheimer Multi-Sector Income Trust ("Multi-Sector Income Trust") to be voted at a Special Meeting of Shareholders (the "Meeting") to approve the Agreement and Plan of Reorganization (the "Reorganization Agreement") and the transactions contemplated thereby (the "Reorganization") between Multi-Sector Income Trust and Oppenheimer Strategic Income Fund ("Strategic Income Fund") (Multi-Sector Income Trust and Strategic Income Fund also are sometimes referred to as the "Fund".). This combined Prospectus and Proxy Statement constitutes the Prospectus of Strategic Income Fund and the Proxy Statement of Multi-Sector Income Trust filed on Form N-14 with the Securities and Exchange Commission ("SEC"). If shareholders vote to approve the Reorganization Agreement and the Reorganization, the net assets of Multi-Sector Income Trust will be acquired by and in exchange for shares of Strategic Income Fund and the assumption of certain liabilities, if any, described in the Reorganization Agreement. The Meeting will be held at the offices of OppenheimerFunds, Inc. ("Manager") at 6803 South Tucson Way, Centennial, CO 80112 on July 12, 2005 at 1:00 P.M., Mountain time. The Board of Trustees of Multi-Sector Income Trust is soliciting these proxies on behalf of Multi-Sector Income Trust. This Prospectus and Proxy Statement will first be sent to shareholders on or about May 27, 2005. If the shareholders of Multi-Sector Income Trust vote to approve the Reorganization Agreement and the Reorganization, shareholders will receive Class A shares of Strategic Income Fund, an open-end management investment company, equal in value as of the "Valuation Date" (which is the business day preceding the Closing Date of the Reorganization) of the net assets delivered to Multi-Sector Income Trust, a closed-end fund, to Strategic Income Fund. Multi-Sector Income Trust will then be liquidated and de-registered under the Investment Company Act of 1940 (the "Investment Company Act"). Shareholders will then hold shares in an open-end management investment company and will have the right to redeem their shares at a price based on the net asset value ("NAV") of the shares rather than at a price set in the market, as is currently the case for shares of Multi-Sector Income Trust. This combined Prospectus and Proxy Statement gives information about the Class A shares of Strategic Income Fund that you should know before investing. You should retain it for future reference. A Statement of Additional Information, dated May 27, 2005, relating to the Reorganization, has been filed with the SEC as part of the Registration Statement on Form N-14 (the "Registration Statement") and is incorporated herein by reference. You may receive a free copy by writing to OppenheimerFunds Services (the "Transfer Agent") at P.O. Box 5270, Denver, Colorado 80217 or by calling toll-free 1.800.647.7374. The Prospectus of Strategic Income Fund dated November 29, 2004 and its supplement dated February 18, 2005, are enclosed herewith and considered a part of this combined Prospectus and Proxy Statement. It is intended to provide you with information about Strategic Income Fund. For more information regarding Strategic Income Fund, in addition to its Prospectus, see the Statement of Additional Information of Strategic Income Fund dated November 29, 2004, revised February 2, 2005, which includes audited financial statements of Strategic Income Fund for the 12-month period ended September 30, 2004. Both documents have been filed with the SEC and are incorporated herein by reference. You may receive a free copy of these documents by writing to the Transfer Agent at P.O. Box 5270, Denver, Colorado 80217 or by calling toll-free 1.800.647.7374. For more information regarding Multi-Sector Income Trust, see the registration statement on Form N-2 which was filed with the SEC on February 25, 2005 and is incorporated herein by reference. The registration statement includes the Statement of Additional Information of Multi-Sector Income Trust dated February 25, 2005, which includes audited financial statements of Multi-Sector Income Trust for the 12-month period ended October 31, 2004. You may receive a free copy of the Form N-2 filing by writing to the Transfer Agent at P.O. Box 5270, Denver, Colorado 80217 or by calling toll-free 1.800.647.7374. Mutual fund shares are not deposits or obligations of any bank, and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other U.S. government agency. Mutual fund shares involve investment risks including the possible loss of principal. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus and Proxy Statement. Any representation to the contrary is a criminal offense. This Prospectus and Proxy Statement is dated May 27, 2005. TABLE OF CONTENTS COMBINED PROSPECTUS AND PROXY STATEMENT Page ---- Synopsis................................................................................................ What am I being asked to vote on?.............................................................. What are the general tax consequences of the Reorganization?............................. How do the investment objectives and policies of the Funds compare? ..................... What are the fees and expenses of each Fund and what are they expected to be after the Reorganization?............................................................................ What are the capitalizations of the Funds and what would the capitalization be after the Reorganization?............................................................................ How have the Funds performed?................................................................ Differences In Fund Operations Between Open-End and Closed-End Investment Companies..................................................................................... How do the account features and shareholder services for the Funds compare?......... Purchases, Redemptions and Exchanges...................................................... Purchases....................................................................................... Share Redemption Procedures....................................................................... Exchange Privilege............................................................................ Other Shareholder Services................................................................... What are the Principal Risks of an Investment in Multi-Sector Income Trust or Strategic Income Fund? ......................................................................................................... Information About the Reorganization ................................................................................ How will the Reorganization be carried out?.................................................. Who will pay the expenses of the Reorganization?........................................... What are the tax consequences of the Reorganization?....................................... Reasons for the Reorganization.................................................................... Background.......................................................................................... Board Considerations What should I know about Class A Shares of Strategic Income Fund..................... What are the fundamental investment restrictions of the Funds........................... Other Comparisons Between the Funds......................................................... Management of the Funds Investment Management and Fees........................................................... Distribution Services........................................................................... Transfer Agency and Custody Services..................................................... Shareholder Rights............................................................................ Dividends and Distributions................................................................. Voting Information................................................................................... How many votes are necessary to approve the Reorganization Agreement?............... How do I ensure my vote is accurately recorded?............................................. Can I revoke my proxy?........................................................................... What other matters will be voted upon at the Meeting?...................................... Who is entitled to vote?........................................................................... What other solicitations will be made?......................................................... Additional Information About Multi-Sector Income Trust and Strategic Income Fund Pending Litigation..................................................................................... Principal Shareholders............................................................................... Exhibit A: Agreement and Plan of Reorganization between Oppenheimer Multi-Sector Income Trust and Oppenheimer Strategic Income Fund..................................... Exhibit B: Principal Shareholders.................................................................... Enclosure: Prospectus of Oppenheimer Strategic Income Fund dated November 29, 2004 and its supplement dated February 18, 2005. SYNOPSIS This is only a summary and is qualified in its entirety by the more detailed information contained in or incorporated by reference in this combined Prospectus and Proxy Statement and by the Reorganization Agreement which is attached as Exhibit A. Shareholders should carefully review this Prospectus and Proxy Statement and the Reorganization Agreement in their entirety and, in particular, the current Prospectus of Strategic Income Fund which accompanies this Prospectus and Proxy Statement and is incorporated herein by reference. What am I being asked to vote on? You are being asked by the Board of Trustees of Multi-Sector Income Trust to approve the reorganization of your fund, Multi-Sector Income Trust, with and into Strategic Income Fund. If shareholders of Multi-Sector Income Trust approve the Reorganization, the assets of Multi-Sector Income Trust will be transferred to Strategic Income Fund, in exchange for an equal value of Class A shares of Strategic Income Fund. The shares of Strategic Income Fund will then be distributed to Multi-Sector Income Trust shareholders, and Multi-Sector Income Trust will be liquidated. If the Reorganization is approved by shareholders of Multi-Sector Income Trust, you will no longer be a shareholder of Multi-Sector Income Trust, a closed-end fund and, instead, will become a shareholder of Strategic Income Fund, an open-end fund. This exchange will occur on the Closing Date (as such term is defined in the Reorganization Agreement attached hereto as Exhibit A) of the Reorganization. Approval of the Reorganization means that as a shareholder in Multi-Sector Income Trust, you will receive Class A shares of Strategic Income Fund equal in value of the net assets of Multi-Sector Income Trust transferred to Strategic Income Fund on the Closing Date. The shares you receive will be issued at NAV without a sales charge and will not be subject to any contingent deferred sales charge ("CDSC"). In considering whether to approve the Reorganization, you should consider, among other things: (i) The principal differences between a closed-end fund and an open-end fund (as discussed herein) and the relative advantages and disadvantages of each. (ii) That the Reorganization would allow you the ability to continue your investment in a vehicle that closely resembles the investment style you were seeking when you invested in Multi-Sector Income Trust. (iii) That owning shares of Strategic Income Fund will offer you a different type of liquidity in your investment. Although you will no longer be able to buy or sell your shares on a securities exchange at a price set by the market, you will have the ability to redeem your shares at the next determined NAV of the shares on any regular business day during which the Fund is open for business. (iv) The Reorganization will give you the opportunity to capture the value of any discount between the market price and the NAV of your shares in Multi-Sector Income Trust on the Valuation Date. (v) Although Strategic Income Fund has a lower management fee than Multi-Sector Income Trust, it has higher overall expenses than Multi-Sector Income Trust. As discussed in more detail in "Reasons for the Reorganization-Board Considerations" beginning on page 25, the higher expenses are largely the result of operating as an open-end fund due to, among other expenses, service-related expenses which are fees that are commonly borne by most open-end funds (but not closed-end funds), higher transfer agency fees and state registration costs. Multi-Sector Income Trust is a closed-end diversified management investment company organized as a Massachusetts business trust. Multi-Sector Income Trust has one class of shares which is listed on The New York Stock Exchange ("NYSE") under the symbol "OMS". Although the NAV per share of shares of Multi-Sector Income Trust is calculated weekly, the daily trading price of the shares is determined by market factors. Shares of Multi-Sector Income Trust may therefore trade at a premium or discount to its NAV. Over the past year on a weekly basis, shares of Multi-Sector Income Trust have always traded at a discount to its NAV. (See the table under the section titled "Reasons for the Reorganization--Background" beginning on page 24 of this combined Prospectus and Proxy Statement). If consummated, the Reorganization will give shareholders the opportunity to capture the value of any discount between market price and NAV of their Multi-Sector Income Trust shares, if any, at the time of the consummation of the Reorganization, because Multi-Income Sector Trust shareholders will become holders of Class A shares in Strategic Income Fund with the same aggregate NAV as their shares of Multi-Sector Income Trust. Conversely, if Multi-Sector Income Trust shares are trading at a premium to NAV at the time of the Reorganization, shareholders will not be able to realize the value of that premium. At a meeting on February 16, 2005, the Board of Trustees of Multi-Sector Income Trust considered several alternatives to reduce the trading discount. (See the discussion in "Reasons for the Reorganization" beginning on page 23.) The Board voted to recommend that shareholders of Multi-Sector Income Trust approve a proposal to reorganize the fund with and into Oppenheimer Strategic Income Fund, an open-end fund. OppenheimerFunds, Inc. (the "Manager") is the investment manager to both funds. Both funds have similar investment objectives and investment strategies and policies and have a common portfolio manager. The proposed Reorganization also was approved by the Board of Trustees of Strategic Income Fund at its meeting on March 1, 2005. Reorganizing Multi-Sector Income Trust into an open-end fund will eliminate immediately any market discount from NAV. If the Reorganization is approved by the shareholders of Multi-Sector Income Trust, such action could reduce the market discount or cause the shares to trade at a premium prior to the consummation of the Reorganization to the extent investors are able to purchase shares in the open market in anticipation of a prospective Reorganization into an open-end fund in order to avoid the payment of sales charges on Class A shares of Strategic Income Fund purchased outside of, or after the Reorganization. The Board of Multi-Sector Income Trust reviewed and discussed with the Manager and the Board's independent legal counsel the materials provided by the Manager relevant to the proposed Reorganization. Information with respect to each Fund's respective investment objectives and policies, management fees, distribution fees and other operating expenses, historical performance and asset size, was provided to and considered by the Board. The Board of Trustees of Multi-Sector Income Trust considered several options in an attempt to reduce or eliminate the market discount, including whether to: (i) continue to operate Multi-Sector Income Trust as a closed-end fund and repurchase shares in the open market or make a tender offer for a portion of Multi-Sector Income Trust's shares at their NAV per share; (ii) seek shareholder approval to convert Multi-Sector Income Trust to an open-end fund; and (iii) seek shareholder approval to reorganize Multi-Sector Income Trust with and into Strategic Income Fund. Each option is discussed in more detail under "Reasons for the Reorganization" beginning on page 23 below. Based on the considerations discussed above and the reasons more fully described under "Reasons for the Reorganization" (beginning on page 23 below), together with other factors and information considered relevant, the Board of Trustees of Multi-Sector Income Trust concluded that the Reorganization would be in the best interests of shareholders of Multi-Sector Income Trust and that the Fund would not experience any dilution as a result of the Reorganization and voted to recommend that shareholders approve the Reorganization. THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION What are the general tax consequences of the Reorganization? It is expected that shareholders of Multi-Sector Income Trust will not recognize any gain or loss for federal income tax purposes as a result of the exchange of their shares for shares of Strategic Income Fund. You should, however, consult your tax advisor regarding the effect, if any, of the Reorganization in light of your individual circumstances. You should also consult your tax advisor about state and local tax consequences. For federal income tax purposes, the holding period of your Multi-Sector Income Trust shares will be carried over to the holding period for Strategic Income Fund shares you receive in connection with the Reorganization. This exchange will occur on the Closing Date (as such term is defined in the Reorganization Agreement) of the Reorganization. For further information about the tax consequences of the Reorganization, please see the "Information About the Reorganization--What are the Tax Consequences of the Reorganization?" How do the investment objectives and policies of the Funds compare? As shown in the chart below, the respective investment objectives and strategies of the funds are similar. ------------------------------------------------------------------------------- MULTI-SECTOR INCOME TRUST STRATEGIC INCOME FUND ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Investment Objectives --------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Seeks high current income consistent Seeks high current income by investing with preservation of capital as its mainly in debt securities. primary objective. Its secondary objective is capital appreciation. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Investment Strategies --------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Allocates its assets among seven Invests mainly in debt securities of sectors of the fixed-income issuers in three market sectors: securities market to take advantage foreign governments and companies, U.S. of opportunities, which arise in government securities and lower-rated particular sectors in various high-yield securities of U.S. and economic environments. The seven foreign companies (commonly called sectors include the: "junk bonds"). Those debt securities o U.S. Government sector consisting typically include: of debt obligations of the U.S. o foreign government and U.S. government and its agencies and government bonds and notes, instrumentalities; o collateralized mortgage obligations o Corporate sector consisting of (CMOs), non-convertible debt obligations or o other mortgage-related securities and preferred stock of U.S. corporate asset-backed securities, issuers and participation interests o participation interests in loans in senior, fully-secured loans made o "structured" notes, primarily to U.S. companies; o lower-grade, high-yield domestic and o International sector, consisting foreign corporate debt obligations, of debt obligations of foreign and governments and their agencies and o "zero-coupon" or "stripped" instrumentalities, certain securities. supra-national entities and foreign and U.S. companies; The Fund normally invests in each of o Asset-Backed sector consisting of the three market sectors but is not undivided fractional interests in required to invest in all three sectors pools of consumer loans and at all times. The Fund can invest up to participation interests in pools of 100% of its assets in any one sector at residential mortgage loans; any time, if the Manager believes that o Municipal sector consisting of the Fund can achieve its objective debt obligations of states, without undue risk. The Fund can invest territories or possessions of the in issuers in any market capitalization United States and the District of range - large-cap, mid-cap and Columbia or their political small-cap, and can buy securities subdivisions, agencies, having short-, medium-, or long-term instrumentalities or authorities; maturities. o Convertible sector consisting of debt obligations and preferred stock The Fund's foreign investments can of U.S. corporations convertible include debt securities of issuers in into common stock; and developed markets and emerging markets. o Money Market sector, consisting of The Fund also uses derivative U.S. dollar-denominated debt investments for hedging purposes or to obligations having a maturity of 397 seek higher investment returns. These days or less and issued by the U.S. include options, futures, forward government or its agencies, certain contracts, CMOs and "structured" notes. domestic banks or corporations; or certain foreign governments, In selecting securities to buy or sell agencies or banks; and repurchase for the Fund, the Fund's portfolio agreements. manager analyzes the overall investment opportunities and risks among the three The Manager's allocation decisions sectors in which the Fund invests. The are based (i) the effect of interest overall strategy is to build a rate changes, on yields of broadly-diversified portfolio of debt securities in the particular securities to help moderate the special sectors, (ii) the effect of changes risks of investing in high-yield debt in tax laws and other legislation securities and foreign securities. The affecting securities in the various Fund may try to take advantage of any sectors, (iii) changes in the lack of correlation in the movement of relative values of foreign securities prices among the three currencies, and (iv) perceived sectors from time to time. When buying strengths of the abilities of or selling securities, the portfolio issuers in the various sectors to manager currently looks for: repay their obligations. o Securities offering high current income; Current income, preservation of o Overall portfolio diversification by capital and, secondarily, possible seeking securities whose market capital appreciation will be prices tend to move in different considerations in the allocation of directions; and assets among the seven investment o relative values among the three major sectors market sectors in which the Fund invests. The Fund's investments in the The Fund's portfolio manager may sell Corporate, International, securities from the portfolio when the Asset-Backed and Convertible sectors analytics underlying the factors can be in securities that are in the discussed above no longer appear lowest rating category of the favorable to the Fund. The Fund's nationally recognized rating diversification strategies, both with organizations, or which are unrated. respect to securities in different sectors, and securities issued by different companies and governments, are intended to help reduce the volatility of the Fund's share prices while seeking current income. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Manager ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- OppenheimerFunds, Inc. OppenheimerFunds, Inc. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Portfolio Managers ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Arthur Steinmetz Arthur Steinmetz Caleb Wong ------------------------------------------------------------------------------- What are the fees and expenses of each Fund and what are they expected to be after the Reorganization? Multi-Sector Income Trust and Strategic Income Fund each pay a variety of expenses directly for management of the respective Fund's assets, administration and/or distribution (in the case of Strategic Income Fund) of shares and other services. Those expenses are subtracted from each Fund's assets to calculate the Fund's net asset value per share. Shareholders pay these expenses indirectly. Shareholders pay other expenses directly, such as sales charges (in the case of Strategic Income Fund). The following table is provided to help you understand and compare the fees and expenses of investing in shares of Multi-Sector Income Trust with the fees and expenses of investing in shares of Strategic Income Fund. The pro forma fees and expenses of the surviving Strategic Income Fund show what the fees and expenses are expected to be after giving effect to the Reorganization of Multi-Sector Income Trust into Strategic Income Fund. PRO FORMA FEE TABLE For the 12 month period ended December 31, 2004 - --------------------------------------------------------------------------------- Multi-Sector Pro Forma Surviving Strategic Strategic Income Fund Income Fund (Class A (Class A Income Trust Shares) Shares) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Shareholder Fees (charges paid directly from a shareholder's investment) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Sales Charge (Load) on purchases (as a % of offering None 4.75% 4.75% price) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a % of the lower of None None(1) None(1) the original offering price or redemption proceeds) - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Annual Fund Operating Expenses (as a percentage of average daily net assets) - --------------------------------------------------------------------------------- ----------------- Strategic Pro Forma Surviving Strategic Multi-Sector Income Fund Income Fund Income Trust (Class A (Class A Shares) shares) - --------------------------------------------------------------------------------- - ----------------------------------------------------------------- Management Fees 0.65% 0.53% 0.53% - ----------------------------------------------------------------- - --------------------------------------------------------------------------------- Distribution and/or Service None 0.25% 0.25% (12b-1) Fees - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Other Expenses 0.09% 0.17% 0.17% - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- Total Fund Operating Expenses 0.74% 0.95% 0.95% - --------------------------------------------------------------------------------- 1. A contingent deferred sales charge ("CDSC") may apply to redemptions of investments of $1 million or more ($500,000 for certain retirement plan accounts) of Class A shares of Strategic Income Fund. See "How to Buy Shares" in that Fund's Prospectus. No CDSC will apply to any shares of Strategic Income Fund that are acquired as a result of the Reorganization. Expenses may vary in future years. "Other Expenses" include transfer agent fees, custodial fees, and accounting and legal expenses that each Fund pays. The "Other Expenses" shown for Strategic Income Fund are based on, among other things, the fees the Fund would have paid if the transfer agent had not waived a portion of its fees under a voluntary undertaking to the Fund to limit those transfer agent fees to 0.35% of average daily net assets per fiscal year for all classes. That undertaking may be amended or withdrawn at any time. After the waiver, the actual "Other Expenses" and "Total Annual Operating Expenses" were the same as shown above. As the Pro Forma Fee Table above shows, although Strategic Income Fund has lower management fees than Multi-Sector Income Trust, Strategic Income Fund has higher total fund operating expenses. As discussed more fully in "Reasons for the Reorganization" beginning on page 23 of this Prospectus and Proxy Statement, the higher expenses are primarily the result of the "Distribution and/or Service (12b-1) Fees of 0.25% of average daily net assets paid by Strategic Income Fund, a fee borne by most open-end funds but not closed-end funds. Examples These examples below are intended to help you compare the cost of investing in each Fund and the surviving Strategic Income Fund after the Reorganization. These examples assume an annual return for each class of 5%, the operating expenses described in the tables above and reinvestment of your dividends and distributions. Your actual costs may be higher or lower because expenses will vary over time. For each $10,000 investment, you would pay the following projected expenses if you sold (in the case of Multi-Sector Income Trust) or redeemed (in the case of Strategic Income Fund) your shares after the number of years shown or held your shares for the number of years shown without selling (in the case of Multi-Sector Income Trust) or redeeming (in the case of Strategic Income Fund), according to the following examples. - -------------------------------------------------------------------------------- If shares are sold or 1 year 3 years 5 years 10 years redeemed: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Multi-Sector Income Trust $79 $247 $429 $958 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Strategic Income Fund-Class A $568 $765 $978 $1,591 shares (with sales charge) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- If shares are not sold or 1 year 3 years 5 years 10 years redeemed: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Multi-Sector Income Trust $79 $247 $429 $958 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Strategic Income Fund-Class A $568 $765 $978 $1,591 shares (with sales charge) - -------------------------------------------------------------------------------- Pro Forma Surviving Strategic Income Fund - -------------------------------------------------------------------------------- If shares are redeemed: 1 year 3 years 5 years 10 years - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares(1) (without $97 $304 $528 $1,172 sales charge) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares(2) (with sales $568 $765 $978 $1,591 charge) - -------------------------------------------------------------------------------- Pro Forma Surviving Strategic Income Fund - -------------------------------------------------------------------------------- If shares are not redeemed: 1 year 3 years 5 years 10 years - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares1 (without $97 $304 $528 $1,172 sales charge) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A shares2 (with sales $568 $765 $978 $1,591 charge) - -------------------------------------------------------------------------------- (1.) Expenses do not include the initial sales charge for Class A shares of Strategic Income Fund because the Class A shares received by shareholders of Multi-Sector Income Trust under the Reorganization will be issued at net asset value without a sales charge. (2.) Expenses include the initial sales charge for Class A shares of the Pro Forma Surviving Strategic Income Fund and reflect the costs of investing $10,000 in the surviving Strategic Income Fund following the Reorganization. What are the capitalizations of the Funds and what would the capitalization be after the Reorganization? The following table sets forth the capitalization (unaudited) of Multi-Sector Income Trust and Strategic Income Fund as of December 31, 2004 and indicates the pro forma combined capitalization as of December 31, 2004 as if the Reorganization had occurred on that date. - -------------------------------------------------------------------------------- Net Assets Shares Net Asset Value Outstanding Per Share - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Multi-Sector Income 283,680,146.58 29,229,920.00 $9.71 Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Strategic Income Fund (Class A) 4,312,574,152.39 996,403,032.06 $4.33 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Strategic Income Fund (Pro Forma Surviving Fund) (Class A)* 4,596,254,298.97 1,061,946,196.82 $4.33 - -------------------------------------------------------------------------------- *Reflects the issuance of 65,543,164.75 Class A shares of Strategic Income Fund in a tax-free exchange for the net assets of Multi-Sector Income Trust, aggregating $283,680,146.58. How have the Funds performed? The following past performance information for the each Fund is set forth below: (i) a bar chart showing changes in each Fund's performance (Class A shares of Strategic Income Fund) from year to year for the last ten calendar years and (ii) a table showing how the average annual total returns of each Fund's shares (Class A shares of Strategic Income Fund), both before and after taxes compared to those of broad-based market indices. The table shows the performance of Strategic Income Fund's Class A shares both with and without sales charge in order to provide a more accurate comparison of the relative performance of each fund because Multi-Sector Income Trust, as a closed-end fund, does not have an initial sales charge. The past investment performance of either Fund is not necessarily an indication of how either Fund will perform in the future. Annual Total Returns for Strategic Income Fund (Class A) as of 12/31 each year - -------------------------------------------------------------------------------- Calendar Year Ended: Oppenheimer Strategic Income Fund Annual Total Returns - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/95 15.38% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/96 12.59% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/97 8.36% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/98 1.67% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/99 4.04% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/00 2.21% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/01 3.52% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/02 8.38% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/03 19.60% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12/31/04 9.62% - -------------------------------------------------------------------------------- Sales charges and taxes are not included in the calculations of return in this bar chart, and if those charges and taxes were included, the returns may be less than those shown. For the period from January 1, 2005 through March 31, 2005, the cumulative total return (not annualized) before taxes for Class A shares of Strategic Income Fund was -1.15%. During the period shown in the bar chart, the highest return for Strategic Income Fund (not annualized) before taxes for a calendar quarter was 6.55% (2nd Qtr `03) and the lowest return (not annualized) before taxes for a calendar quarter was -3.41% (3rd Qtr `98). Annual Total Returns for Multi-Sector Income Trust as of 12/31 each year Calendar Oppenheimer Year Multi-Sector Income Trust Ended Annual Total Returns - ----- --------------------- 12/31/95 15.08% 12/31/96 13.16% 12/31/97 8.48% 12/31/98 1.89% 12/31/99 3.53% 12/31/00 1.35% 12/31/01 4.70% 12/31/02 8.38% 12/31/03 19.30% 12/31/04 10.25% For the period from January 1, 2005 through March 31, 2005, the cumulative total return (not annualized) before taxes for Multi-Sector Income Trust was - -1.54%. During the period shown in the bar chart, the highest return for Multi-Sector Income Trust (not annualized) before taxes for a calendar quarter was 6.74% (2nd Qtr `03) and the lowest return (not annualized) before taxes for a calendar quarter was -4.36% (3rd Qtr `98). ---------------------------------------------------------------------------------- Average Annual Total Returns 1 Year 5 Years 10 Years for the periods ended December 31, 2004 ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- Strategic Income Fund (Class A Shares with sales 4.41% 7.14% 7.71% charges*) Return Before Taxes Return After Taxes on Distributions 2.04% 4.23% 4.44% Return After Taxes on Distributions and Sale of Fund Shares 2.81% 4.23% 4.49% ---------------------------------------------------------------------------------- Strategic Income Fund (Class A Shares without sales charges) 9.62% 8.19% 8.24% ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- Multi-Sector Income Trust (at NAV) 9.94% 11.52% 7.79% ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) 4.34% 7.71% 7.72% ---------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- Citigroup World Government Bond Index (reflects no deduction for fees, expenses or taxes) 10.35% 8.79% 7.60% ---------------------------------------------------------------------------------- * The average annual total returns of Strategic Income Fund (with sales charge) include applicable sales charges of 4.75%, the current maximum initial sales charges, for Class A shares. The returns measure the performance of a hypothetical account and assume that all dividends and capital gains distributions have been reinvested in additional shares. The performance of Strategic Income Fund's Class A shares is compared to the Lehman Brothers Aggregate Bond Index, an unmanaged index of U.S. corporate and government bonds, and the Citigroup World Government Bond Index, an unmanaged index of debt securities of major foreign government bond markets. The indices' performance includes reinvestment of income but does not reflect transaction costs, fees, expenses or taxes. The Funds' investments vary from those in the indices. Differences Between Fund Operations as an Open-End and as a Closed-End Investment Company Multi-Sector Income Trust is a "closed-end" management investment company under the Investment Company Act. (These funds are commonly referred to as "closed-end funds.") Closed-end funds do not redeem their outstanding shares nor generally engage in the continuous sale of new securities, and thus operate with a relatively fixed capitalization. The shares of closed-end funds are normally bought and sold on national securities exchanges. As a result, you may only purchase or sell shares of Multi-Sector Income Trust through a broker or dealer at the market price, plus a brokerage commission. The Fund's shares are currently traded on the NYSE under the symbol "OMS". The Fund's shares will be delisted from the NYSE upon the closing of the Reorganization. In contrast, open-end management investment companies, such as Strategic Income Fund, commonly referred to as "mutual funds," continuously issue new shares to investors through the fund's distributor at the public offering price (which is the net asset value ("NAV") plus any applicable sales charge) at the time of such issuance. Those shares also are redeemable which means the holders of those shares have the right to sell (or redeem) those shares back to the fund on any regular business day on which the fund is open and obtain in return their proportionate share of the value of the fund's net assets (less any redemption fee or deferred sales charge charged by the fund). No redemption fees or deferred sales charges will be applicable to the shares of Strategic Income Fund received by shareholders of Multi-Sector Income Trust in connection with the Reorganization. Some of the other significant differences between operations of a closed-end and an open-end investment company are as follows: Acquisition and Disposition of Shares. If the Reorganization is completed, Multi-Sector Income Trust's shares will no longer be listed on the NYSE. Investors wishing to acquire shares of Strategic Income Fund (including current Multi-Sector Income Trust shareholders wishing to purchase additional shares of Strategic Income Fund) would be able to purchase them from OppenheimerFunds Distributor, Inc. (the "Distributor") or any broker-dealer or financial institution that has a sales agreement with the Distributor at the public offering price (NAV plus any applicable sales charge). Shareholders desiring to realize the value of their shares would be able to do so by exercising their right to have such shares redeemed by the Fund at the next determined NAV. The Fund's NAV per share is calculated by dividing (i) the value of its portfolio securities plus all cash and other assets (including accrued interest and dividends received but not collected) less all liabilities (including accrued expenses) by (ii) the number of outstanding shares of the Fund. The SEC generally requires open-end investment companies to value their assets on each business day in order to determine the current NAV on the basis of which their shares may be redeemed by shareholders or purchased by investors. The NAV of Strategic Income Fund is published daily by leading financial publications. Portfolio Management. Because a closed-end fund does not continuously sell new shares and does not have to stand ready to redeem its shares, it may keep its assets more fully invested and make investment decisions without having to adjust for cash inflows and outflows from continuing sales and redemptions of its shares. In contrast, open-end funds may be forced to hold a higher cash position or sell portfolio securities at disadvantageous times or prices to satisfy redemption requests. Expenses. If Multi-Sector Income Trust is reorganized into Strategic Income Fund, an open-end fund, the shares of Multi-Sector Income Trust will be cancelled and new Class A shares of Strategic Income Fund will be issued to former Multi-Sector Income Trust shareholders. Shareholders of the combined Strategic Income Fund then will bear their allocable share of Strategic Income Fund's expenses. Open-end funds are generally more expensive to operate and administer than closed-end funds. Operational expenses of an open-end fund that are generally higher than those of a closed-end fund primarily include the costs associated with the distribution and/or servicing of the open-end fund's shares and higher transfer agency expenses. A comparison of the two funds' operating expenses aptly demonstrates this distinction. As shown in the Pro Forma Fee Table on page 5, Strategic Income Fund's annual total fund operating expenses are higher than the total operating expenses of Multi-Sector Income Trust. However, the table also demonstrates that the addition of the distribution and/or service (12b-1) fees is the most significant reason for the higher total expenses of Strategic Income Fund. Similar to most open-end funds, Strategic Income Fund pays 12b-1 fees because of the nature of how open-end funds sell their shares. Shares of Strategic Income Fund are sold to investors through a network of broker-dealers and other financial intermediaries. Most broker-dealers and financial intermediaries will only sell shares of the Fund if they can earn a competitive sales compensation and be compensated for ongoing support and services provided to shareholders. Rule 12b-1 under the Investment Company Act allows open-end funds to finance directly or indirectly any activity that is primarily intended to result in the sale of fund shares pursuant to a written plan of distribution. Strategic Income Fund's Class A service plan pursuant to Rule 12b-1 allows Strategic Income Fund to pay competitive compensation to brokers, dealers and other financial institutions for personal services they provide to their customers who hold Class A shares of Strategic Income Fund. As discussed below, the inability to pay 12b-1 fees would place an open-end fund at a severe competitive disadvantage with its competitor funds because most other competitor funds have such plans and are able to pay dealers to be included in their various distribution programs and to provide distribution related services. Strategic Income Fund's Class A service plan allows the Fund to pay broker-dealers and financial intermediaries to provide certain distribution assistance and/or administrative support services to Fund shareholders. Without the ability to pay these fees, Strategic Income Fund would be unable to pay broker-dealers and financial intermediaries to provide those services to Fund shareholders, which would likely result first, in a reduction or elimination of distribution assistance and/or administrative support services to the Fund's Class A shareholders, and, second, in substantially increased redemptions in the Fund because of the lack of those services being provided to shareholders. State Registration Requirements. As a closed-end fund listed on the NYSE, Multi-Sector Income Trust does not issue and offer new shares for purchase. As a result, it does not incur the expense of registering the sale of its shares with state securities commissions. However, as a result of being reorganized into an open-end fund which makes a continuous offering of its shares, Strategic Income Fund is required to register the sale of its shares with state securities authorities and incurs the costs related to such registration. HOW DO THE ACCOUNT FEATURES AND SHAREHOLDER SERVICES FOR THE FUNDS COMPARE? Purchases, Redemptions, and Exchanges Both Funds are part of the OppenheimerFunds family of mutual funds. However because of the differences between open-end and closed-end funds, the procedures for purchases, exchanges and redemptions of shares of the Funds are substantially different. These differences stem primarily from the fact that Multi-Sector Income Trust is a closed-end fund and Strategic Income Fund is an open-end fund. Purchases Multi-Sector Income Trust's shares are traded on the NYSE at prevailing market price, which may be equal to, less than or more than their NAV. These shares may be purchased by placing an order with any broker who effects trades in NYSE listed stocks. The market price of Multi-Sector Income Trust's shares are determined by the relative demand for and supply of shares in the market which may be affected by, among other things, the Fund's investment performance, the Fund's dividends and yield and the investor perception of the Fund's overall attractiveness as an investment as compared with other investment alternatives. Strategic Income Fund continuously offers new shares to investors at the offering price at the time of purchase, which is the NAV plus any initial sales charge that applies. The offering price is based on the next calculation of NAV per share that is made after the Distributor receives the purchase order at its offices in Colorado, or after any agent appointed by the Distributor receives the order. The Fund's NAV per share is determined as of close of regular trading on the NYSE, on each day that the NYSE is open for regular business, by dividing the value of the Fund's net assets by the total number of shares outstanding. The Fund's investments generally are valued based on market value or, where market quotations are not readily available, based on fair value as determined in good faith by the Fund' Board of Trustees. See "About Your Account--At What Price Are Shares Sold?" in the Fund's Prospectus. Class A shares of Strategic Income Fund are sold at their offering price, which is normally NAV plus an initial sales charge. However, in some cases, described in the Fund's Prospectus, purchases are not subject to an initial sales charge, and the offering price will be the NAV. In other cases, reduced sales charges may be available, as described in the Fund's Prospectus or Statement of Additional Information. The sales charge varies depending on the amount of your purchase. A portion of the sales charge may be retained by the Distributor or allocated to your dealer as a concession. The Distributor reserves the right to reallow the entire concession to dealers. The current sales charge rates and concessions paid to dealers and brokers for Strategic Income Fund are as follows: ---------------------------------------------------------------------------- Front-End Front-End Sales Sales Charge As a Concession Charge As a Percentage of As a Amount of Purchase Percentage Net Percentage of Amount Invested of Offering Offering Price Price ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Less than $50,000 4.75% 4.98% 4.00% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- $50,000 or more but less than $100,000 4.50% 4.71% 3.75% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- $100,000 or more but less than $250,000 3.50% 3.63% 2.75% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- $250,000 or more but less than $500,000 2.50% 2.56% 2.00% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- $500,000 or more but less than $1 million 2.00% 2.04% 1.60% ---------------------------------------------------------------------------- For additional information with respect to how to buy Class A shares of Strategic Income Fund, including how to reduce Class A sales charges and other special sales charge arrangements and waivers, see the current Prospectus of the Fund which accompanies this combined Prospectus and Proxy Statement. Share Redemption Procedures The redemption procedures for shares of Multi-Sector Income Trust and Strategic Income Fund also are different. A shareholder of Multi-Sector Income Trust has no right to redeem his or her shares at NAV by tendering those shares back to the Fund. Rather, Fund shareholders generally may sell their shares only in the secondary market at the then-current market price, which may be more or less than the Fund's NAV per share. In contrast, a shareholder of Strategic Income Fund may redeem some or all of his or her shares from Strategic Income Fund on any regular business day during which the Fund is open for business by tendering such shares to Strategic Income Fund. Shares of Strategic Income Fund may be redeemed in writing, over the phone or through the internet on any regular business day. The redemption price Strategic Income Fund will pay for such shares is equal to the next NAV (less any applicable contingent deferred sales charge) calculated after your order is received in proper form and is accepted by the Fund's transfer agent, OppenheimerFunds Services (the "Transfer Agent"). You can also set up Automatic Withdrawal Plans to redeem shares on a regular basis. See "About Your Account-How to Sell Shares" in Strategic Income Fund's Prospectus for additional information. None of these options is available to shareholders of Multi-Sector Income Trust. Exchange Privilege Multi-Sector Income Trust does not offer its shareholders the ability to exchange shares of Multi-Sector Income Trust for shares of any other Oppenheimer fund. Shareholders of Strategic Income Fund, however, may exchange at NAV all or a portion of their Strategic Income Fund shares for the same class of shares of certain other Oppenheimer funds at NAV. This is a benefit that would be available to shareholders of Multi-Sector Income Trust if the Reorganization is approved. OppenheimerFunds, Inc. (the "Manager") and the Board of Trustees of Strategic Income Fund have adopted certain policies and procedures to detect and prevent frequent and/or excessive exchanges, and/or purchase and redemption activity, while balancing the needs of investors who seek liquidity from their investment and the ability to exchange shares as investment needs change. For additional information about exchanges of Strategic Income Fund shares, see the Fund's current Prospectus Other Shareholder Services The shareholder services offered by Multi-Sector Income Trust and Strategic Income Fund are also different. In addition to the exchange privilege, Strategic Income Fund offers other services typically offered by open-end investment companies to their shareholders. These include: (i) the ability to reduce your sales charge on purchases of Class A shares through rights of accumulation or letters of intent, (ii) reinvestment of dividends and distributions at NAV, (iii) Asset Builder (automatic investment) Plans, (iv) Automatic Withdrawal and Exchange Plans for shareholders who own shares of the Funds valued at $5,000 or more, (v) AccountLink and PhoneLink arrangements, and (vi) telephone and internet redemptions. Strategic Income Fund also offers wire redemptions of fund shares and checkwriting for accounts that are not subject to a CDSC. All of such services and privileges are subject to amendment or termination at any time and are subject to the terms of Strategic Income Funds' prospectus. For additional information, please see the section in the current Prospectus of Strategic Income Fund titled "ABOUT YOUR ACCOUNT." WHAT ARE THE PRINCIPAL RISKS OF AN INVESTMENT IN MULTI-SECTOR INCOME TRUST OR STRATEGIC INCOME FUND? The risks associated with an investment in each Fund are very similar. Like all investments, an investment in either Fund involves risk. There is no assurance that either Fund will meet its investment objective. When you redeem your shares of Strategic Income Fund (or sell your shares of Multi-Sector Income Trust), those shares may be worth more or less than the amount you paid for them. This means that you can lose money by investing in either Fund. Both Funds can invest in various types of debt securities. Accordingly, both Funds may be subject to both credit risks and interest rate risks. There are risks that any holding by the Funds could have its credit rating downgraded, or the issuer could default, or that interest rates could rise sharply, causing the value of a Fund's investments (and its share prices) to fall. If there is a high redemption demand for Strategic Income Fund's shares that was not anticipated, although unlikely there is a possibility that portfolio securities might have to be sold prior to their maturity at a loss. Also, there is the risk that the value of your investment could be eroded over time by the effects of inflation, and that poor security selection by the Manager could cause either Fund to underperform other funds with similar investment objectives. In the OppenheimerFunds spectrum, both Funds are generally more aggressive and have more risks than funds that focus on U. S. government securities and investment-grade bonds, but the Funds' sector diversification strategy may help make the Funds less volatile than funds that focus solely on investments in high-yield bonds or a single foreign sector, such as emerging markets. In allocating either Fund's investments among the principal sectors in which both Funds invest, the Manager seeks to take advantage of the lack of correlation of the performance of these sectors. However, the Manager's expectations about the relative performance of those sectors may be inaccurate, and both Funds' returns might be less than other funds using similar strategies. SECTOR ALLOCATION RISKS. As set forth under the Investment Strategies section in this Prospectus and Proxy Statement on page 4, Strategic Income Fund invests mainly in debt securities of issuers in three market sectors; foreign governments and companies, U.S. government securities and lower-rated high-yield securities of U.S. and foreign companies. Multi-Sector Income Trust allocates its assets among seven sectors of the fixed-income securities: U.S. government, Corporate sector, international sector, asset-backed sector, municipal sector, convertible sector, and money market sector. In allocating the Fund's investments among the various principal sectors in which each Fund invests to seek to take advantage of the lack of correlation of the performance of these sectors, the Manager's expectations about the relative performance of those sectors may be inaccurate, and either Fund's returns might be less than other funds using similar strategies. CREDIT RISK. Both Funds' debt securities are subject to credit risk. Credit risk is the risk that the issuer of a debt security might not make interest and principal payments on the security as they become due. If the issuer fails to pay interest, a Fund's income might be reduced, and if the issuer fails to repay principal, the value of that security and of a Fund's shares might fall. A downgrade in an issuer's credit rating or other adverse news about an issuer can reduce the market value of that issuer's securities. While each Fund's investments in U.S. government securities are subject to little credit risk, each Fund's other investments in debt securities, particularly high-yield, lower-grade debt securities, are subject to risks of default. Special Risks of Lower-Grade Securities. Strategic Income Fund can invest without limit in securities below investment grade to seek high income. Multi-Sector Income Trust's investments in lower-rated securities cannot exceed 75% of the Fund's total assets, with no more than 50% of the Fund's total assets in lower-rated foreign securities. Both Funds normally invest a substantial part of their assets in , high-yield debt securities below investment-grade of both U.S. and foreign issuers, including bonds, debentures, notes, preferred stocks, loan participation interests, structured notes, asset-backed securities, among others. The Funds' ability to increase their investments in high-yield securities will enable them to seek higher investment return. However, high-yield securities, whether rated or unrated, will involve greater volatility of price and risk of loss of principal and income (including a greater possibility of default or bankruptcy of the issuer of such securities) than securities in the higher rating categories. These securities also could have less liquidity than lower yielding, higher-rated fixed-income securities. As a result, each Fund's credit risks are greater than those of funds that buy only investment-grade bonds. Lower-grade debt securities may be subject to greater market fluctuations and greater risks of loss of income and principal than investment-grade debt securities (particularly during general economic downturns). Securities that are (or that have fallen) below investment grade are exposed to a greater risk that the issuers of those securities might not meet their debt obligations. The market for these securities may be less liquid, making it difficult for each Fund to value or sell them at an acceptable price. These risks can reduce each Fund's share prices and the income it earns. Lower-grade debt securities are rated below "Baa" by Moody's Investors Service, Inc. ("Moody's") or lower than "BBB" by Standard & Poor's Rating Service ("S&P") or have comparable ratings by other nationally-recognized rating organizations. The Funds can invest in securities rated as low as "C" or "D" or which are in default at the time the Funds buy them. While securities rated "Baa" by Moody's or "BBB" by S&P are considered "investment grade," they have some speculative characteristics. The Manager does not rely solely on ratings issued by rating organizations when selecting investments for the Funds, and the Funds can buy unrated securities. The Manager may assign a rating to an unrated security that the Manager believes is equivalent to that of a rated security that offers comparable yields and risks. INTEREST RATE RISKS. Both Funds debt securities are subject to interest rate risks. The values of the Funds' debt securities, including U.S. government securities, are subject to change when prevailing interest rates change. When prevailing interest rates fall, the values of already-issued debt securities generally rise. When prevailing interest rates rise, the values of already-issued debt securities generally fall, and they may sell at a discount from their face amount. The magnitude of these fluctuations will often be greater for debt securities having longer maturities than for shorter-term debt securities. Each Fund's share prices can go up or down when interest rates change because of the effect of the changes on the value of the Fund's investments in debt securities. Also, if interest rates fall, either Fund's investments in new securities at lower yields will reduce the Fund's income. RISKS OF FOREIGN INVESTING. Both Funds will normally invest significant amounts of its assets in foreign securities. However, Strategic Income Fund can invest without limit in foreign government and corporate debt securities in both developed and emerging markets. Multi-Sector Income Trust cannot invest more than 50% of the Fund's total assets in lower-rated foreign securities. Additionally, Multi-Sector Income Trust may not invest more than 15% of its total assets in foreign securities of any one country. Both Funds' investments in foreign securities can consist of a variety of debt securities issued by foreign governments and companies, as well as "supra-national" entities, such as the World Bank. They can include bonds, debentures, and notes, including derivative investments called "structured" notes. The Funds' foreign debt investments can be denominated in U.S. dollars or in foreign currencies. While foreign securities may offer special investment opportunities, they also have special risks that can reduce each Fund's share prices and income. The change in value of a foreign currency against the U.S. dollar will result in a change in the U.S. dollar value of securities denominated in that foreign currency. Currency rate changes can also affect the distributions the Funds make from the income they receive from foreign securities if foreign currency values change against the U.S. dollar. Foreign investing can result in higher transaction and operating costs for either Fund. Foreign issuers are not subject to the same accounting and disclosure requirements that U.S. companies are subject to. The value of foreign investments may be affected by exchange control regulations, expropriation or nationalization of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental economic or monetary policy in the U.S. or abroad, or other political and economic factors. Special Risks of Emerging Markets. Both Funds can buy securities in emerging and developing markets. Investments in emerging and developing markets present risks not found in more mature markets. Those securities may be more difficult to sell at an acceptable price and their prices may be more volatile than securities of issuers in more developed markets. Settlements of trades may be subject to greater delays so that either Fund might not receive the sale proceeds of a security on a timely basis. PREPAYMENT RISK. Both Funds are subject to prepayment risk which is the risk that the issuer of a security can prepay the principal prior to the security's expected maturity. The prices and yields of mortgage-related securities are determined, in part, by assumptions about the cash flows from the rate of payments of the underlying mortgages. Changes in interest rates may cause the rate of expected prepayments of those mortgages to change. In general, prepayments increase when general interest rates fall and decrease when general interest rates rise. Securities subject to prepayment risk, including the mortgage-related securities that either Fund buys, have greater potential for losses when interest rates rise than other types of debt securities. U.S. GOVERNMENT SECURITIES. Both Funds normally invest some of their assets in securities issued or guaranteed by the U.S. Treasury or other government agencies or federally-chartered corporate entities referred to as "instrumentalities." These include Treasury bills (having maturities of one year or less when issued), Treasury notes (having maturities of more than one and up to ten years when issued), and Treasury bonds (having maturities of more than ten years when issued). Treasury securities are backed by the full faith and credit of the United States as to timely payments of interest and repayments of principal. These also include direct obligations and mortgage-related securities that have different levels of credit support from the U.S. government. Some are supported by the full faith and credit of the U.S. government, such as Government National Mortgage Association pass-through mortgage certificates (called "Ginnie Maes"). Some government securities are supported by the right of the issuer to borrow from the U.S. Treasury under certain circumstances, such as Federal National Mortgage Association bonds ("Fannie Maes"). Others are supported only by the credit of the entity that issued them, such as Federal Home Loan Mortgage Corporation obligations ("Freddie Macs"). Securities issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks are neither guaranteed nor issued by the U.S. government. Portfolio Turnover. Strategic Income Fund's portfolio turnover rate has been higher than Multi-Sector Income Trust's portfolio turnover rate over each Fund's five previous fiscal years. Each Fund may engage in short-term trading to try to achieve its objective. Increased portfolio turnover creates higher brokerage and transaction costs for the Fund (and may reduce performance); however, most of each Fund's portfolio transactions are principal trades that do not entail brokerage fees. If either Fund realizes capital gains when it sells its portfolio investments, it must generally pay those gains out to shareholders, increasing their taxable distributions. The Financial Highlights table at the end of Strategic Income Fund's Prospectus shows that Fund's portfolio turnover rates during recent fiscal years. Please refer to the financial statements of both Funds for a complete listing (as of the respective report dates) of the portfolio investments for each Fund. These are included in each Fund's Statement of Additional Information, which is available free of charge. INFORMATION ABOUT THE REORGANIZATION This is only a summary of the material terms of the Reorganization Agreement. You should read the form of Reorganization Agreement, which is attached as Exhibit A. How will the Reorganization be carried out? If the shareholders of Multi-Sector Income Trust approve the Reorganization Agreement, the Reorganization will take place after various conditions are satisfied by Multi-Sector Income Trust and Strategic Income Fund, including delivery of certain documents. The Closing Date is presently scheduled for on or about July 28, 2005 and the "Valuation Date" (which is the business day preceding the Closing Date of the Reorganization) is presently scheduled for on or about July 29, 2005. If the shareholders of Multi-Sector Income Trust vote to approve the Reorganization Agreement, you will receive Class A shares of Strategic Income Fund equal in value to the value as of the Valuation Date of your shares of Multi-Sector Income Trust. Multi-Sector Income Trust will then be liquidated and its outstanding shares will be cancelled. The stock transfer books of Multi-Sector Income Trust will be permanently closed at the close of business on the Valuation Date. Shareholders of Multi-Sector Income Trust who vote their shares in favor of the Reorganization will be electing in effect to redeem their shares of Multi-Sector Income Trust at its NAV on the Valuation Date, after Multi-Sector Income Trust subtracts a Cash Reserve (as that term is defined in the Reorganization Agreement), and reinvests the proceeds in shares of Strategic Income Fund at its NAV. The Cash Reserve is that amount retained by Multi-Sector Income Trust, which is deemed sufficient in the discretion of the Board for the payment of the Fund's outstanding debts, taxes and expenses of liquidation. The Cash Reserve will consist of approximately $150,000 in cash. Strategic Income Fund is not assuming any debts of Multi-Sector Income Trust except debts for unsettled securities transactions and outstanding dividend checks. Any debts paid out of the Cash Reserve will be those debts, taxes or expenses of liquidation incurred by Multi-Sector Income Trust on or before the Closing Date. Multi-Sector Income Trust will recognize capital gain or loss on any sales of portfolio securities made prior to the Reorganization. The sales of portfolio securities contemplated in the Reorganization are anticipated to be in the ordinary course of business of Multi-Sector Income Trust's activities. Under the Reorganization Agreement, within one year after the Closing Date, Multi-Sector Income Trust shall: (a) either pay or make provision for all of its debts and taxes; and (b) either (i) transfer any remaining amount of the Cash Reserve to Strategic Income Fund, if such remaining amount is not material (as defined below) or (ii) distribute such remaining amount to the shareholders of Multi-Sector Income Trust who were shareholders on the Valuation Date. The remaining amount shall be deemed to be material if the amount to be distributed, after deducting the estimated expenses of the distribution, equals or exceeds one cent per share of the number of Multi-Sector Income Trust shares outstanding on the Valuation Date. In order to qualify for this rebate, it is not necessary for a shareholder of Multi-Sector Income Trust to continue to hold Strategic Income Fund shares received in the Reorganization. If the Cash Reserve is insufficient to satisfy any of Multi-Sector Income Trust's liabilities, the Manager will assume responsibility for any such unsatisfied liability. Within one year after the Closing Date, Multi-Sector Income Trust will complete its liquidation. Under the Reorganization Agreement, either Multi-Sector Income Trust or Strategic Income Fund may abandon and terminate the Reorganization Agreement for any reason and there shall be no liability for damages or other recourse available to the other Fund, provided, however, that in the event that one of the Funds terminates the Reorganization Agreement without reasonable cause, it shall, upon demand, reimburse the other Fund for all expenses, including reasonable out-of-pocket expenses and fees incurred in connection with the Reorganization Agreement. To the extent permitted by law, the Funds may agree to amend the Reorganization Agreement without shareholder approval. They may also agree to terminate and abandon the Reorganization at any time before or, to the extent permitted by law, after the approval of shareholders of Multi-Sector Income Trust. Who will pay the expenses of the Reorganization? The cost of printing and mailing this Proxy will be borne by Multi-Sector Income Trust and is estimated to be less than $25,000. The Funds will share the cost of the tax opinion. Any documents such as existing prospectuses or annual reports that are included in the proxy mailing or at a shareholder's request will be a cost of the Fund issuing the document. Any other out-of-pocket expenses associated with the Reorganization will be paid by the Funds in the amounts incurred by each. The approximate cost of the Reorganization is $10,000 for Multi-Sector Income Trust and $10,000 for Strategic Income Fund. What are the tax consequences of the Reorganization? The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended. Based on certain assumptions and representations received from Multi-Sector Income Trust and Strategic Income Fund, it is expected to be the opinion of Deloitte & Touche LLP that shareholders of Multi-Sector Income Trust will not recognize any gain or loss for federal income tax purposes as a result of the exchange of their shares for shares of Strategic Income Fund, that shareholders of Strategic Income Fund will not recognize any gain or loss upon receipt of Multi-Sector Income Trust's assets, and that the holding period of Strategic Income Fund shares received in that exchange will include the period that Multi-Sector Income Trust shares were held (provided such shares were held as a capital asset on the Closing Date). Please see the Agreement and Plan of Reorganization for more details. If this tax opinion is not received by the Closing Date, the Fund may still choose to go forward with the Reorganization, pending re-solicitation of shareholders and shareholder approval. In addition, neither Fund is expected to recognize a gain or loss as a direct result of the Reorganization. Immediately prior to the Valuation Date, Multi-Sector Income Trust will pay a dividend which will have the effect of distributing to Multi-Sector Income Trust's shareholders all of Multi-Sector Income Trust's investment company taxable income, if any, for taxable years ending on or prior to the Closing Date (computed without regard to any deduction for dividends paid) and all of its net capital gains, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any available capital loss carry-forward). Any such dividends will be included in the taxable income of Multi-Sector Income Trust's shareholders as ordinary income and capital gain, respectively. You will continue to be responsible for tracking the purchase cost and holding period of your shares and should consult your tax advisor regarding the effect, if any, of the Reorganization in light of your individual circumstances. You should also consult your tax advisor as to state and local and other tax consequences, if any, of the Reorganization because this discussion only relates to federal income tax consequences. REASONS FOR THE REORGANIZATION Multi-Sector Income Trust's only class of shares is listed on the NYSE under the symbol "OMS". Although the NAV per share of shares of Multi-Sector Income Trust is calculated weekly, the daily trading price of the shares is determined by market factors. Shares of Multi-Sector Income Trust may therefore trade at a premium or discount to its NAV. Over the past year on a weekly basis, shares of Multi-Sector Income Trust have always traded at a discount to its NAV. Background The following table sets forth for the shares of Multi-Sector Income Trust for the three-month periods through April 30, 2005 and shows in Column (A) the per share high sales price on the NYSE (Market) and the date of that price; the NAV per share as of the last day of the week (and date) immediately preceding the day of the high sales price (NAV); and the premium or discount (expressed as a percentage of NAV) represented by the difference between such high sales price and the corresponding NAV. Column (B) shows the per share low sales price on the NYSE (Market) and the date of that price; the NAV per share as of the last day of the week (and date) immediately preceding the day of the low sales price (NAV); and the premium or discount (expressed as a percentage of NAV) represented by the difference between such low sales price and the corresponding NAV. Multi-Sector Income Trust ------------------------- (A) (B) - --------------------------------------------------------- 3-month Market Price High;(1) Market Price Low;(1) Period NAV and Premium/ NAV and Premium/ Ended Discount That Day(2) Discount That Day(2) - -------- ---------------------------- ---------------------------- 1/31/03 Market: $7.92 (1/31/03) Market: $7.32 (11/6/02) NAV: $8.54 (1/24/03) NAV: $8.19 (11/1/02) Premium//Discount: -7.28% Premium//Discount: -10.63% 4/30/03 Market: $8.15 (3/30/03) Market: $7.79 (3/18/03) NAV: $8.87 (4/25/03) NAV: $8.58 (3/14/03) Premium//Discount: -8.12% Premium//Discount: -9.21% 7/31/03 Market: $8.39 (6/9/03) Market: $8.05 (7/9/03) NAV: $9.07 (6/6/03) NAV: $9.07 (7/3/03) Premium//Discount: -7.50% Premium//Discount: -6.67% 10/31/03 Market: $8.45 (10/8/03) Market: $7.93 (8/19/03) NAV: $9.22 (10/3/03) NAV: $8.81 (8/15/03) Premium//Discount: -8.35% Premium//Discount: -9.99% 1/30/04 Market: $8.85 (1/29/04) Market: $8.21 (11/11/03) NAV: $9.56 (1/23/04) NAV: $9.29 (11/7/03) Premium//Discount: -7.43% Premium//Discount: -11.67% 4/30/04 Market: $8.85 (2/6/04) Market: $8.12 (4/30/04) NAV: $9.49 (1/30/04) NAV: $9.38 (4/23/04) Premium//Discount:-6.74% Premium//Discount:-13.44% 7/30/04 Market: $8.45 (5/5/04) Market: $7.68 (5/11/04) NAV: $9.36 (4/30/04) NAV: $9.19 (5/7/04) Premium//Discount:-9.63% Premium//Discount:-16.44% 10/29/04 Market: $8.54 (10/27/04) Market: $8.00 (8/4/04) NAV: $9.61 (10/22/04) NAV: $9.29 (7/30/04) Premium//Discount:-11.15% Premium//Discount:-13.89% 1/31/05 Market: $8.92 (12/30/04) Market: $8.23 (11/8/04) NAV: $9.68 (12/23/04) NAV: $9.66 (11/5/04) Premium//Discount:-7.95% Premium//Discount:-14.71% 4/29/05 Market: $9.40 (3/1/05) Market: $8.57(2/2/05) NAV: $9.69 (2/25/05) NAV: $9.64 (1/28/05) Premium//Discount:-2.30% Premium//Discount:-11.10% - --------------- (1.) As reported by the NYSE. (2.) The Fund's computation of net asset value (NAV) is as of the close of trading on the last day of the week immediately preceding the day for which the high and low market price is reported and the premium or discount (expressed as a percentage of NAV) is calculated based on the difference between that high or low market price and the corresponding NAV for that day, divided by the NAV. Board Considerations At a meeting on February 16, 2005, the Board of Trustees of Multi-Sector Income Trust considered several alternatives to reduce the trading discount. After considering several options, the Board approved a proposal to reorganize the Fund with and into Oppenheimer Strategic Income Fund. The Board of Multi-Sector Income Trust also approved a resolution to hold a meeting of shareholders of the Trust to vote on the reorganization and recommended that shareholders approve it. The options considered by the Board of Trustees included whether to: (i) continue to operate Multi-Sector Income Trust as a closed-end fund and repurchase shares in the open market or make a tender offer for a portion of Multi-Sector Income Trust's shares at their NAV per share; (ii) seek shareholder approval to convert Multi-Sector Income Trust to an open-end fund; and (iii) seek shareholder approval to reorganize Multi-Sector Income Trust with and into Strategic Income Fund. Each alternative is discussed below in more detail. Continuing Operations as a Closed-End Fund and Making a Share Repurchase or Tender Offer. In considering continuing to operate Multi-Sector Income Trust as a closed-end fund, the Board recognized that a closed-end mutual fund offers certain benefits that are not available to open-end funds. For example, because a closed-end fund does not continuously sell shares or have to stand ready to redeem its shares, it may keep all of its assets fully invested and make investment decisions without having to adjust for cash inflows and outflows from continuing sales and redemptions of its shares. In contrast, open-end funds may be subject to pressure to sell portfolio securities at disadvantageous times or prices to satisfy such redemption requests. Additionally, closed end funds generally do not have certain expenses, such as distribution costs and Rule 12b-1 fees, to which open-end funds are frequently subject. However, in spite of those advantages offered by continuing the operation of Multi-Sector Income Trust as a closed-end fund, the trading discount has existed for some time and the Manager informed the Board it does not believe the discount is likely to be eliminated for any substantial period by offering to repurchase shares or making a tender offer. Additionally, because the Fund is relatively small, OFI has been unable to attract analyst coverage of the Fund by any investment banking firms, including by its principal initial underwriter. The Board also agreed with the Manager's recommendation that it would be impracticable for the Manager to undertake a major advertising campaign to promote the Fund. Rule 23c-1 under the Investment Company Act permits a closed-end fund to repurchase its shares, subject to the conditions of that rule. A share repurchase or tender offer could help narrow the trading discount for Multi-Sector Income Trust by either decreasing the number of shares available or increasing the trading volume for shares of Multi-Sector Income Trust. However, the Board concluded there were a number of risks associated with a share repurchase or tender offer that did not make a share repurchase or tender offer in the best interests of the fund or its shareholders. For example, although Multi-Sector Income Trust would have been permitted to incur debt to finance a repurchase and/or tender offer, the interest on any such borrowings would reduce its net income. In addition, the acquisition of shares by Multi-Sector Income Trust would decrease the total assets of Multi-Sector Income Trust and therefore may increase its expense ratio. If Multi-Sector Income Trust were required to liquidate portfolio securities to purchase shares, the portfolio managers could be required to sell portfolio securities at unfavorable prices or the Fund could realize disadvantageous gains or losses. If Multi-Sector Income Trust were to offer a share repurchase or tender offer, speculators in Fund shares might profit from a temporary narrowing of its discount to the detriment of its long-term shareholders. In addition, the discount might revert to its current or even larger levels after the share repurchase, due to volatility of the general bond market or other factors. A share repurchase would be expected to increase demand for Multi-Sector Income Trust's shares and therefore to increase its market price in the short-term. However, it would also decrease the number of shares available, which could serve to increase the trading discount in the long-term. It is therefore difficult to estimate the impact of a share repurchase on the trading discount of Multi-Sector Income Trust. For these reasons, among others, the Board concluded that a share repurchase or tender offer would not be in the best interests of Multi-Sector Income Trust shareholders. Converting Multi-Sector Income Trust into an Open-End Fund. Alternatively, the Board considered seeking shareholder approval to convert Multi-Sector Income Trust into an open-end fund. That conversion would have the effect of eliminating the discount and providing shareholders the ability to redeem their shares daily at NAV. However, the Board concluded that the risk of significant redemptions following the conversion of changing a closed-end fund into an open-end fund could require the portfolio manager to sell holdings at unfavorable prices and may result in the realization of detrimental gains or losses. Multi-Sector Income Trust' expense ratio could be adversely affected by significant net redemptions which would result in a substantial reduction in asset size of the Fund. The Board did consider whether it would be practicable to impose a redemption fee to deter such redemptions, but determined that a redemption fee might not be enough to deter arbitrage in the Fund's shares or to prevent redemptions. Additionally, if Multi-Sector Income Trust were converted to an open-end fund, it would be in the same market niche as Strategic Income Fund. Strategic Income Fund is a much larger and better known fund, however, and the Board agreed with the Manager's view that Multi-Sector Income Trust may have difficulty attracting new assets. Reorganization of Multi-Sector Income Trust with Strategic Income Fund. In making its determination to recommend the Reorganization to the shareholders of Multi-Sector Income Trust, the Board of Trustees considered, among other things: (i) the principal differences between a closed-end fund and an open-end fund (as discussed further below) and the relative advantages and disadvantages of each; and (ii) that the conversion would allow the shareholders the ability to continue their investments in a vehicle that closely resembles what they were seeking when they invested in Multi-Sector Trust. In addition, the elimination of duplicative operations should enable the combined fund to be serviced and/or marketed more efficiently. In reviewing the Funds' expenses, the Board also considered the fact that Strategic Income Fund's annual expense ratio is higher than the annual expense ratio of Multi-Sector Income Trust. However, the Board considered that the only option in which Multi-Sector Income Trust would be able to maintain the lower annual expense ratio would be for Multi-Sector Income Trust to continue to operate as a closed-end fund, which as discussed above, the Board determined would not be a viable option. As a result, the Board determined that despite the higher expenses of Strategic Income Fund, the Reorganization of Multi-Sector Income Trust into Strategic Income Fund was the most viable option and was necessary in order to reduce the trading discount. The Board recognized that open-end funds are generally more expensive to operate and administer than closed-end funds. In particular, the Board considered that certain expenses of operating as an open-end fund, such as the costs associated with the distribution and servicing of the open-end fund's shares in particular, and higher transfer agency expenses, are not borne by a closed-end fund. The most significant difference in operating expenses of open-end funds from closed-end funds are the costs associated with the distribution and servicing of shares of open-end funds. Distribution and/or service fees are permitted to be paid by open-end funds pursuant to Rule 12b-1 under the Investment Company Act. Rule 12b-1 allows open-end funds to finance directly or indirectly any activity that is primarily intended to result in the sale of fund shares pursuant to a written plan of distribution. In accordance with Rule 12b-1, Strategic Income Fund has adopted a service plan for Class A shares. Under the plan, the Fund pays the Distributor for all or a portion of its costs incurred in connection with paying brokers, dealers and other financial institutions for personal services they provide to their customers who hold Class A shares of the Fund. The plan has been approved by the Fund's Board of Trustees, including a majority of the Independent Trustees. Shares of Strategic Income Fund are sold to investors through a network of broker-dealers and other financial intermediaries. Most financial intermediaries will only sell shares of the Fund if they can earn a competitive sales compensation and be compensated for ongoing support and services provided to shareholders. Accordingly, the plan allows Strategic Income Fund to offer competitive compensation for selling its shares. In this regard, the majority of competitor open-end funds also have adopted Rule 12b-1 plans to help pay for the distribution and/or servicing of shares. The 0.25% service fee paid by the Fund under its plan is consistent with the service fees paid by other non-proprietary funds that charge such fees. Furthermore, without the payment of the service fees under the plan, it is likely that redemptions would increase substantially because most other competitor funds have such plans and are able to pay dealers for rendering those services. As a result, it is unlikely that the Fund would be able to retain the existing shareholders and compete for new investments, or its ability to do so would be substantially reduced, without the ability to pay the service fees. In sum, the absence of such a plan would likely result in reduced sales of Fund shares, net redemptions, and a reduction or elimination of distribution assistance and/or administrative support services to the Fund. The Manager also believes that Strategic Income Fund's higher expense ratio would be offset by other benefits, such as the more extensive account features and shareholder services (as discussed further above) shareholders would receive from Strategic Income Fund. Finally, although Strategic Income Fund's total expenses are higher than Multi-Sector Income Trust's total expenses, Strategic Income Fund's total expenses for its last fiscal year ended September 30, 2004 were lower than the majority of the Fund's peer group of similar funds (87th out of 108 funds in Lipper Multi-Sector Income Funds category where 100th percentile equals the lowest expenses) (according to Lipper Inc.). After consideration of the above factors, together with other factors and information considered relevant, including that the costs of the Reorganization were expected to be relatively moderate, the Board of Multi-Sector Income Trust, including the Trustees who are not "interested persons" (as defined in the Investment Company Act) of either Multi-Sector Income Trust or the Manager (the "Independent Trustees"), concluded that the Fund would not experience dilution as a result of the Reorganization and concluded the Fund's participation in the Reorganization is in the best interests of the Fund and its shareholders. Accordingly, the Board of Multi-Sector Income Trust, including the Independent Trustees, unanimously approved the Reorganization and the Reorganization Agreement and voted to recommend its approval to the shareholders of Multi-Sector Income Trust. The Board of Trustees of Strategic Income Fund also considered the relatively moderate costs of the reorganization and concluded that the Fund would not experience dilution as a result of the Reorganization. Therefore, the Board of Trustees of Strategic Income Fund, including the Trustees who are not "interested persons" (as defined in the Investment Company Act) of either Strategic Income Fund or the Manager (the "Strategic Income Fund's Independent Trustees"), concluded that the Fund's participation in the Reorganization is in the best interests of the Fund and its shareholders. Accordingly, the Board of Strategic Income Fund, including Strategic Income Fund's Independent Trustees, unanimously approved the Reorganization and the Reorganization Agreement. Strategic Income Fund shareholders do not vote on the Reorganization. For the reasons discussed above, the Board, on behalf of Multi-Sector Income Trust, recommends that you vote FOR the Reorganization Agreement. If shareholders of Multi-Sector Income Trust do not approve the Reorganization Agreement, the Reorganization will not take place and Multi-Sector Income Trust will continue to operate as a closed-end investment company. In that case, Multi-Sector Income Trust would send its annual proxy statement to shareholders to elect the Class C trustees. What should I know about Class A Shares of Strategic Income Fund? Upon consummation of the Reorganization, you will receive Class A shares of Strategic Income Fund equal in value as of the Valuation Date of the net assets delivered by Multi-Sector Income Trust to Strategic Income Fund. Each Class A share of Strategic Income Fund distributed to shareholders of Multi-Sector Income Trust in connection with the Reorganization will be fully paid and nonassessable when issued, will have no preemptive or conversion rights and will be transferable on the books of Strategic Income Fund. Each Fund's Declaration of Trust contains an express disclaimer of shareholder or Trustee liability for the Fund's obligations, and provides for indemnification and reimbursement of expenses out of its property for any shareholder held personally liable for its obligations. Neither Fund permits cumulative voting. The shares of Strategic Income Fund will be recorded electronically in each shareholder's account. Strategic Income Fund will then send a confirmation to each shareholder. Shareholders of Multi-Sector Income Trust holding certificates representing their shares will not be required to surrender their certificates in connection with the reorganization. However, former shareholders of Multi-Sector Income Trust whose shares are represented by outstanding share certificates will not be allowed to redeem, transfer or pledge shares of Strategic Income Fund they receive in the Reorganization until the exchanged Multi-Sector Income Trust certificates have been returned to the Transfer Agent. Unlike Multi-Sector Income Trust, Strategic Income Fund does not hold annual shareholder meetings. WHAT ARE THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS? Both Multi-Sector Income Trust and Strategic Income Fund have certain additional investment restrictions that, together with their investment objectives, are fundamental policies, changeable only by shareholder approval. Generally, these investment restrictions are similar between the Funds. Please see the Statement of Additional Information for each Fund for descriptions of those investment restrictions. OTHER COMPARISONS BETWEEN THE FUNDS The description of certain other key features of the Funds below is supplemented by Strategic Income Fund's Prospectus and Statement of Additional Information, which are incorporated by reference. Management of the Funds The Funds are governed by separate Boards of Trustees, who are responsible for protecting the interests of their respective Fund's shareholders under federal and Massachusetts law and other applicable laws. For a listing of the Strategic Income Fund's Board of Trustees and biographical information, please refer to the Statement of Additional Information to this Prospectus and Proxy Statement. Investment Management and Fees The day-to-day management of the business and affairs of each Fund is the responsibility of the Manager. Pursuant to each Fund's investment advisory agreement, the Manager acts as the investment advisor for both Funds, manages the assets of both Funds and makes their respective investment decisions. The Manager employs the Funds' portfolio manager. Arthur Steinmetz is the portfolio manager for Strategic Income Fund and has been principally responsible for the day-to-day management of the Fund's investments since the Fund's inception in 1989. Mr. Steinmetz is a Vice President of both Funds and a Senior Vice President of the Manager. Multi-Sector Income Trust is managed by a portfolio management team comprised of Mr. Steinmetz and Caleb Wong. Mr. Wong is a Vice President of Multi-Sector Income Trust and the Manager. Both Funds obtain investment management services from the Manager according to the terms of management agreements that are substantially similar except that Strategic Income Fund's management fee rates were lower than those of Multi-Sector Income Trust during each Fund's last completed fiscal year. Multi-Sector Income Trust pays the Manager an advisory fee computed and paid weekly at an annual rate of 0.65% of the net assets of the Fund. The management fee for Strategic Income Fund for the fiscal year ended September 30, 2004, was 0.53%. Strategic Income Fund pays the Manager an advisory fee at an annual rate that declines on additional assets as the Fund grows: 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million, and 0.50% of average annual net assets in excess of $1 billion. The management fees paid by Strategic Income Fund are expected to be lower than those paid by Multi-Sector Income Trust. The advisory agreements require the Manager, at its expense, to provide the Funds with adequate office space, facilities and equipment. The agreements also require the Manager to provide and supervise the activities of all administrative and clerical personnel required to provide effective administration for the Funds. Those responsibilities include the compilation and maintenance of records with respect to their operations, the preparation and filing of specified reports, and composition of proxy materials and registration statements for continuous public sale of shares of the Funds (with respect to Strategic Income Fund). Each Fund pays expenses not expressly assumed by the Manager under the advisory agreement. The advisory agreements list examples of expenses paid by each Fund. The major categories relate to interest, taxes, brokerage commissions, fees to Independent Trustees, legal and audit expenses, custodian bank and transfer agent expenses, share issuance costs, certain printing and registration costs, and non-recurring expenses, including litigation costs. Both investment advisory agreements generally provide that in the absence of willful misfeasance, bad faith, gross negligence in the performance of its duties or reckless disregard of its obligations and duties under the investment advisory agreement, the Manager is not liable for any loss sustained by reason of good faith errors or omissions in connection with any matters to which the agreement(s) relate. The agreements permit the Manager to act as investment advisor for any other person, firm or corporation. Pursuant to each agreement, the Manager is permitted to use the name "Oppenheimer" in connection with other investment companies for which it may act as investment advisor or general distributor. If the Manager shall no longer act as investment advisor to either Fund, the Manager may withdraw the right of that Fund to use the name "Oppenheimer" as part of its name. The Manager is controlled by Oppenheimer Acquisition Corp., a holding company owned in part by senior officers of the Manager and ultimately controlled by Massachusetts Mutual Life Insurance Company, a mutual life insurance company that also advises pension plans and investment companies. The Manager has been an investment advisor since January 1960. The Manager (including subsidiaries and an affiliate) managed more than $170 billion in assets as of March 31, 2005, including other Oppenheimer funds with more than 7 million shareholder accounts. The Manager is located at 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Distribution Services OppenheimerFunds Distributor, Inc. (the "Distributor") acts as the principal underwriter in a continuous public offering of shares of Strategic Income Fund, but is not obligated to sell a specific number of shares. Strategic Income Fund, as an open-end investment company, is permitted to reimburse the Distributor for a portion of its costs incurred in connection with the personal service and the maintenance of shareholder accounts by adopting a plan of distribution pursuant to Rule 12b-1 under the Act. If the Reorganization is approved and Multi-Sector Income Trust is reorganized into Strategic Income Fund, shareholders will become subject to the Service Plan adopted by Strategic Income Fund pursuant to Rule 12b-1. The Service Plan allows Strategic Income Fund to reimburse the Distributor for services provided and activities undertaken for the personal service and the maintenance of shareholder accounts. Under that plan the Fund pays the Distributor for all or a portion of its costs incurred in connection with the servicing of the Class A shares. Expenses normally attributable to sales, including advertising and the cost of printing and mailing prospectuses other than those furnished to existing shareholders, are borne by the Distributor. Under the Class A Service Plan for Strategic Income Fund, the Distributor currently uses the fees it receives from the Fund to pay brokers, dealers and other financial institutions (they are referred to as "recipients") for personal services and account maintenance services they provide for their customers who hold Class A shares. The services include, among others, answering customer inquiries about the Fund, assisting in establishing and maintaining accounts in the Fund, making the Fund's investment plans available and providing other services at the request of the Fund or the Distributor. The Class A Service Plan permits reimbursements to the Distributor at a rate of up to 0.25% of average annual net assets of Class A shares. The Board has set the rate at that level. The Distributor does not receive or retain the service fee on Class A shares in accounts for which the Distributor has been listed as the broker-dealer of record. While the Service Plan permits the Board to authorize payments to the Distributor to reimburse itself for services under the plan, the Board has not yet done so, except in the case of the special arrangement described in the Fund's Statement of Additional Information, regarding grandfathered retirement accounts. The Distributor makes payments to recipients quarterly at an annual rate not to exceed 0.25% of the average annual net assets consisting of Class A shares held in the accounts of the recipients or their customers. Transfer Agency and Custody Services OppenheimerFunds Services, a division of the Manager, serves as the transfer agent and dividend paying agent for Strategic Income Fund. OppenheimerFunds Services is responsible for maintaining the Fund's shareholder registry and shareholder accounting records, and for paying dividends and distributions to shareholders. It also handles shareholder servicing and administrative functions. OppenheimerFunds Services serves as the Transfer Agent for an annual per account fee. OppenheimerFunds Services has voluntarily undertaken to limit its transfer agent fees to 0.35% of average daily net assets per fiscal year for the Class A shares (and for all classes of shares) of Strategic Income Fund. That undertaking may be amended or withdrawn at any time. Shareholder Financial Services, Inc. ("SFSI"), a subsidiary of the Manager, acts as primary transfer agent, shareholder servicing agent and dividend paying agent for Multi-Sector Fund. SFSI is paid an agreed upon fee for each account plus out-of-pocket costs and expenses. United Missouri Trust Company of New York acts as co-transfer agent and co-registrar with SFSI to provide such services as SFSI may request. JP Morgan Chase Bank, located at 4 Chase Metro Tech Center, Brooklyn, NY 11245, acts as custodian of the securities and other assets of both Funds. Shareholder Rights Both Multi-Sector Income Trust and Strategic Income Fund are organized as Massachusetts business trusts and thus their shareholders have the same rights due them under state law. However, because the shares of Multi-Sector Income Trust are listed on the NYSE, Multi-Sector Income Trust currently holds annual meetings of shareholders. Strategic Income Fund is not required to, and does not hold annual meetings of shareholders and has no current intention to hold such meetings, except as required by the Investment Company Act. Under the Investment Company Act, the Fund is required to hold a shareholder meeting if, among other reasons, the numbers of Trustees elected by shareholders is less than a majority of the total number of Trustees, or if Strategic Income Fund seeks to change its fundamental investment policies. In addition, holders of at least 10% of Strategic Income Fund's outstanding shares may require Strategic Income Fund to hold a shareholder meeting for the purpose of voting on the removal of any Trustee. Dividends and Distributions The dividends and distributions policies of Multi-Sector Income Trust and Strategic Income Fund are also different. Although it may do so more frequently, Strategic Income Fund anticipates paying its shareholders dividends once a month and any capital gain distribution annually. Dividends and distributions paid by Strategic Income Fund are automatically reinvested in Strategic Income Fund shares at NAV, unless a shareholder requests to receive a check. There are no fees or sales charges on reinvestments. See "Dividends, Capital Gains and Taxes" in Strategic Income Fund's Prospectus for further information. Multi-Sector Income Trust has a Dividend Reinvestment and Cash Purchase Plan (the "Plan"). Under the Plan, all dividends and capital gains distributions ("Distributions") declared by the Fund will be automatically reinvested in additional full and fractional shares of the Fund unless (i) a shareholder elects to receive cash or (ii) shares are held in nominee name, in which event the nominee should be consulted as to participation in the Plan. Shareholders that participate in the Plan ("Participants") may, at their option, make additional cash investments in shares, semi-annually in amounts of at least $100, through payment to Shareholder Financial Services, Inc., the agent for the Plan (the "Agent"), and a service fee of $0.75. Depending upon the circumstances hereinafter described, Plan shares of Multi-Sector Income Trust will be acquired by the Agent for the Participant's account through receipt of newly issued shares or the purchase of outstanding shares on the open market. If the market price of shares on the relevant date (normally the payment date) equals or exceeds their NAV, the Agent will ask the Fund for payment of the Distribution in additional shares at the greater of the Fund's NAV determined as of the date of purchase or 95% of the then-current market price. If the market price is lower than NAV, the Distribution will be paid in cash, which the Agent will use to buy shares on the NYSE, or otherwise on the open market to the extent available. If the market price exceeds the NAV before the Agent has completed its purchases, the average purchase price per share paid by the Agent may exceed the NAV, resulting in fewer shares being acquired than if the Distribution had been paid in shares issued by the Fund. The Plan may be terminated or amended at any time upon 30 days' prior written notice to Participants which, with respect to a Plan termination, must precede the record date of any Distribution by the Trust. Additional information concerning the Plan may be obtained by shareholders holding shares registered directly in their names by writing the Agent, Shareholder Financial Services, Inc., P.O. Box 173673, Denver, CO, 80217-3673 or by calling 1.800.647.7374. Shareholders holding shares in nominee name should contact their brokerage firm or other nominee for more information. Class A shares of Strategic Income Fund received in the Reorganization will be issued at NAV, without a sales charge and no contingent deferred sales charge or redemption fee will be imposed on any Multi-Sector Income Trust shares exchanged for Strategic Income Fund shares as a result of the Reorganization. VOTING INFORMATION How many votes are necessary to approve the Reorganization Agreement? The affirmative vote of the holders of a "majority of the outstanding voting securities" (as defined in the Investment Company Act) of Multi-Sector Income Trust is necessary to approve the Reorganization Agreement and the transactions contemplated thereby. As defined in the Investment Company Act, the vote of a majority of the outstanding voting securities means the vote of (1) 67% or more of Multi-Sector Income Trust's outstanding shares present at a meeting if the holders of more than 50% of the outstanding shares of the Fund are present or represented by proxy; or (2) more than 50% of the Fund's outstanding shares, whichever is less. Strategic Income Fund shareholders do not vote on the Reorganization. Each shareholder will be entitled to one vote for each full share, and a fractional vote for each fractional share of Multi-Sector Income Trust held on the Record Date. In the absence of a quorum, the shareholders present or represented by proxy and entitled to vote thereat have the power to adjourn the meeting from time to time without further notice. If a quorum is present but sufficient votes to approve the proposal are not received by the date of the Meeting, the Meeting may be adjourned to permit further solicitation of proxies. The holders of a majority of shares entitled to vote at the Meeting and present in person or by proxy (whether or not sufficient to constitute a quorum) may adjourn the Meeting to permit further solicitation of proxies. For purposes of the Meeting, a quorum exists if a majority of shares outstanding and entitled to vote are present in person or represented by proxy. How do I ensure my vote is accurately recorded? You can vote either by telephone or by mail, with the enclosed proxy card or in person at the Meeting (if you are a record owner). A proxy card is, in essence, a ballot. If you simply sign and date the proxy but give no voting instructions, your shares will be voted in favor of the Reorganization Agreement. Can I revoke my proxy? Yes. You may revoke your proxy at any time before it is voted by: (i) telephone; (ii) writing to the Secretary of Multi-Sector Income Trust at 6803 South Tucson Way, Centennial, CO 80112 (if received in time to be acted upon); (ii) signing and returning a later-dated proxy (if returned and received in time to be voted); or (iv) attending the Meeting and re-voting in person. What other matters will be voted upon at the Meeting? The Board of Trustees of Multi-Sector Income Trust does not intend to bring any matters before the Meeting other than those described in this proxy. It is not aware of any other matters to be brought before the Meeting by others. If any other matters legally come before the Meeting, the proxy ballots confer discretionary authority with respect to such matters, and it is the intention of the persons named to vote proxies to vote in accordance with their judgment in such matters. Who is entitled to vote? Shareholders of record of Multi-Sector Income Trust at the close of business on April 14, 2005, (the "record date") will be entitled to vote at the Meeting. On April 14, 2005, there were 29,229,920 outstanding shares of Multi-Sector Income Trust. Proxies representing abstentions and broker non-votes may be included for purposes of determining whether a quorum is present at the Meeting, but will be treated as votes not cast and, therefore, will not be counted for purposes of determining whether the matters and proposals and motions to be voted upon at the Meeting have been approved. For purposes of the Meeting, a majority of shares outstanding and entitled to vote, present in person or represented by proxy, constitutes a quorum. Strategic Income Fund shareholders do not vote on the Reorganization. What other solicitations will be made? Multi-Sector Income Trust will request broker-dealer firms, custodians, nominees and fiduciaries to forward proxy material to the beneficial owners of the shares of record, and may reimburse them for their reasonable expenses incurred in connection with such proxy solicitation. In addition to solicitations by mail, officers of Multi-Sector Income Trust or officers and employees of OppenheimerFunds Services, without extra pay, may conduct additional solicitations personally or by telephone or telegraph. Any expenses so incurred will be borne by OppenheimerFunds Services. Proxies may also be solicited by a proxy solicitation firm hired at Multi-Sector Income Trust's expense. If a proxy solicitation firm is hired, it is anticipated that the cost to Multi-Sector Income Trust of engaging a proxy solicitation firm would not exceed $7,500, plus the additional costs which would be incurred in connection with contacting those shareholders who have not voted, in the event of a need for re-solicitation of votes. Shares owned of record by broker-dealers for the benefit of their customers ("street account shares") will be voted by the broker-dealer based on instructions received from its customers. If no instructions are received, the broker-dealer does not have discretionary power to vote such street account shares under applicable stock exchange rules. Accordingly, the shares represented thereby will not be considered to be present at the Meeting for purposes of determining the quorum ("broker non-votes"). Because of the need to obtain a vote of the "majority of the outstanding voting securities" for the Reorganization proposal to pass, abstentions will have the same effect as a vote "against" the Proposal. ADDITIONAL INFORMATION ABOUT MULTI-SECTOR INCOME TRUST AND STRATEGIC INCOME FUND Both Funds also file proxy materials, proxy voting reports and other information with the SEC in accordance with the informational requirements of the Securities and Exchange Act of 1934 and the Investment Company Act. These materials can be inspected and copied at: the SEC's Public Reference Room in Washington, D.C. (Phone: 1.202.942.8090) or the EDGAR database on the SEC's website at www.sec.gov. Copies may be obtained upon payment of a duplicating fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102. Multi-Sector Income Trust's shares are listed on the NYSE under the symbol "OMS". Reports, proxy statements and other information concerning Multi-Sector Income Trust can be inspected at the NYSE. Pending Litigation A consolidated amended complaint has been filed as putative derivative and class actions against the Manager, Distributor and Transfer Agent, as well as 51 of the Oppenheimer funds (collectively the "funds") including Strategic Income Fund (but not Multi-Sector Income Trust), 31 present and former Directors or Trustees and 9 present and former officers of certain of the funds. This complaint, initially filed in the U.S. District Court for the Southern District of New York on January 10, 2005 and amended on March 4, 2005, consolidates into a single action and amends six individual previously-filed putative derivative and class action complaints. Like those prior complaints, the complaint alleges that the Manager charged excessive fees for distribution and other costs, improperly used assets of the funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the funds, and failed to properly disclose the use of fund assets to make those payments in violation of the Investment Company Act and the Investment Advisers Act of 1940. Also, like those prior complaints, the complaint further alleges that by permitting and/or participating in those actions, the Directors/Trustees and the Officers breached their fiduciary duties to Strategic Income Fund shareholders under the Investment Company Act and at common law. The complaint seeks unspecified compensatory and punitive damages, rescission of the funds' investment advisory agreements, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. The Manager and the Distributor believe the claims asserted in these law suits to be without merit, and intend to defend the suits vigorously. The Manager and the Distributor do not believe that the pending actions are likely to have a material adverse effect on Strategic Income or on their ability to perform their respective investment advisory or distribution agreements with the Fund. Principal Shareholders As of April 14, 2005, the officers and Trustees of Multi-Sector Income Trust as a group and the officers and Trustees of Strategic Income Fund as a group, respectively, owned less than 1% of the outstanding voting shares of their respective Fund. As of April 14, 2005, the only persons who owned of record or were known by Multi-Sector Income Trust to own beneficially 5% or more of any class of the outstanding shares of Multi-Sector Income Trust are listed in Exhibit B. As of April 25, 2005, there were no persons who owned of record or were known by Strategic Income Fund to own beneficially 5% or more of the Class A outstanding shares of Strategic Income Fund. By Order of the Board of Trustees, Robert G. Zack, Secretary May 27, 2005 35 2 EXHIBIT A AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of February 16 , 2005 by and between Oppenheimer Multi-Sector Income Trust ("Multi-Sector Income Trust"), a Massachusetts business trust and Oppenheimer Strategic Income Fund ("Strategic Income Fund"), a Massachusetts business trust. W I T N E S S E T H: WHEREAS, Multi-Sector Income Trust is a closed-end investment company of the management type and Strategic Income Fund is an open-end investment company of the management type; and WHEREAS, the parties hereto desire to provide for the reorganization pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), of Multi-Sector Income Trust through the acquisition by Strategic Income Fund of substantially all of the assets of Multi-Sector Income Trust in exchange for the voting shares of beneficial interest ("shares") of Class A shares of Strategic Income Fund and the assumption by Strategic Income Fund of certain liabilities of Multi-Sector Income Trust, which Class A shares of Strategic Income Fund are to be distributed by Multi-Sector Income Trust pro rata to its shareholders in complete liquidation of Multi-Sector Income Trust and complete cancellation of its shares; NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto agree as follows: 1.The parties hereto hereby adopt this Agreement and Plan of Reorganization (the "Agreement") pursuant to Section 368(a)(1) of the Code as follows: The reorganization will be comprised of the acquisition by Strategic Income Fund of substantially all of the assets of Multi-Sector Income Trust in exchange for Class A shares of Strategic Income Fund and the assumption by Strategic Income Fund of certain liabilities of Multi-Sector Income Trust, followed by the distribution of such Class A shares of Strategic Income Fund to the shareholders of Multi-Sector Income Trust in exchange for their shares of Multi-Sector Income Trust, all upon and subject to the terms of the Agreement hereinafter set forth. The share transfer books of Multi-Sector Income Trust will be permanently closed at the close of business on the Valuation Date (as hereinafter defined). 2. On the Closing Date (as hereinafter defined), all of the assets of Multi-Sector Income Trust on that date, excluding a cash reserve (the "cash reserve") to be retained by Multi-Sector Income Trust sufficient in its discretion for the payment of the expenses of Multi-Sector Income Trust's dissolution and its liabilities, but not in excess of the amount contemplated by Section 10E, shall be delivered as provided in Section 8 to Strategic Income Fund, in exchange for and against delivery to Multi-Sector Income Trust on the Closing Date of a number of Class A shares of Strategic Income Fund, having an aggregate net asset value equal to the value of the assets of Multi-Sector Income Trust so transferred and delivered. 3. The net asset value of Class A shares of Strategic Income Fund and the value of the assets of Multi-Sector Income Trust to be transferred shall in each case be determined as of the close of business of The New York Stock Exchange on the Valuation Date. The computation of the net asset value of the Class A shares of Strategic Income Fund shall be done in the manner used by Strategic Income Fund , in the computation of such net asset value per share as set forth in its prospectus. The methods used by Strategic Income Fund in such computation shall be applied to the valuation of the assets of Multi-Sector Income Trust to be transferred to Strategic Income Fund. Multi-Sector Income Trust shall declare and pay, immediately prior to the Valuation Date, a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to Multi-Sector Income Trust's shareholders all of Multi-Sector Income Trust's investment company taxable income for taxable years ending on or prior to the Closing Date (computed without regard to any dividends paid) and all of its net capital gain, if any, realized in taxable years ending on or prior to the Closing Date (after reduction for any capital loss carry-forward). 4. The closing (the "Closing") shall be at the offices of OppenheimerFunds, Inc. (the "Agent"), 6803 S. Tucson Way, Centennial, CO 80112, on such time or such other place as the parties may designate or as provided below (the "Closing Date"). The business day preceding the Closing Date is herein referred to as the "Valuation Date." In the event that on the Valuation Date Strategic Income Fund has, pursuant to the Investment Company Act of 1940, as amended (the "Act"), or any rule, regulation or order thereunder, suspended the redemption of its shares or postponed payment therefore, the Closing Date shall be postponed until the first business day after the date when the Fund has ceased such suspension or postponement; provided, however, that if such suspension shall continue for a period of 60 days beyond the Valuation Date, then Multi-Sector Income Trust shall be permitted to terminate the Agreement without liability to either party for such termination. 5. In conjunction with the Closing, Multi-Sector Income Trust shall distribute on a pro rata basis to the shareholders of Multi-Sector Income Trust as of the Valuation Date Class A shares of Strategic Income Fund received by Multi-Sector Income Trust on the Closing Date in exchange for the assets of Multi-Sector Income Trust in complete liquidation of Multi-Sector Income Trust; for the purpose of the distribution by Multi-Sector Income Trust of Class A shares of Strategic Income Fund to Multi-Sector Income Trust's shareholders, Strategic Income Fund will promptly cause its transfer agent to: (a) credit an appropriate number of Class A shares of Strategic Income Fund on the books of Strategic Income Fund to each shareholder of Multi-Sector Income Trust in accordance with a list (the "Shareholder List") of Multi-Sector Income Trust shareholders received from Multi-Sector Income Trust; and (b) confirm an appropriate number of Class A shares of Strategic Income Fund to each shareholder of Multi-Sector Income Trust. The Shareholder List shall indicate, as of the close of business on the Valuation Date, the name and address of each shareholder of Multi-Sector Income Trust, indicating his or her share balance. Multi-Sector Income Trust agrees to supply the Shareholder List to Strategic Income Fund not later than the Closing Date. Shareholders of Multi-Sector Income Trust holding certificates representing their shares shall not be required to surrender their certificates to anyone in connection with the reorganization. After the Closing Date, however, it will be necessary for such shareholders to surrender their certificates in order to redeem, transfer or pledge the shares of Strategic Income Fund which they received. 6. Within one year after the Closing Date, Multi-Sector Income Trust shall (a) either pay or make provision for payment of all of its liabilities and taxes, and (b) either (i) transfer any remaining amount of the cash reserve to Strategic Income Fund, if such remaining amount (as reduced by the estimated cost of distributing it to shareholders) is not material (as defined below) or (ii) distribute such remaining amount to the shareholders of Multi-Sector Income Trust on the Valuation Date. Such remaining amount shall be deemed to be material if the amount to be distributed, after deduction of the estimated expenses of the distribution, equals or exceeds one cent per share of Multi-Sector Income Trust outstanding on the Valuation Date. 7. Prior to the Closing Date, there shall be coordination between the parties as to their respective portfolios so that, after the Closing, Strategic Income Fund will be in compliance with all of its investment policies and restrictions. At the Closing, Multi-Sector Income Trust shall deliver to Strategic Income Fund two copies of a list setting forth the securities then owned by Multi-Sector Income Trust. Promptly after the Closing, Multi-Sector Income Trust shall provide Strategic Income Fund a list setting forth the respective federal income tax bases thereof. 8. Portfolio securities or written evidence acceptable to Strategic Income Fund of record ownership thereof by Multi-Sector Income Trust's Custodian Bank, The Depository Trust Company or through the Federal Reserve Book Entry System or any other depository approved by Multi-Sector Income Trust pursuant to Rule 17f-4 and Rule 17f-5 under the Act shall be endorsed and delivered, or transferred by appropriate transfer or assignment documents, by Multi-Sector Income Trust on the Closing Date to Strategic Income Fund, or at its direction, to its custodian bank, in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers and shall be accompanied by all necessary state transfer stamps, if any. The cash delivered shall be in the form of certified or bank cashiers' checks or by bank wire or intra-bank transfer payable to the order of Strategic Income Fund for the account of Strategic Income Fund. Class A shares of Strategic Income Fund representing the number of Class A shares of Strategic Income Fund being delivered against the assets of Multi-Sector Income Trust, registered in the name of Multi-Sector Income Trust, shall be transferred to Multi-Sector Income Trust on the Closing Date. Such shares shall thereupon be assigned by Multi-Sector Income Trust to its shareholders so that the shares of Strategic Income Fund may be distributed as provided in Section 5. If, at the Closing Date, Multi-Sector Income Trust is unable to make delivery under this Section 8 to Strategic Income Fund of any of its portfolio securities or cash for the reason that any of such securities purchased by Multi-Sector Income Trust, or the cash proceeds of a sale of portfolio securities, prior to the Closing Date have not yet been delivered to it or Multi-Sector Income Trust's custodian, then the delivery requirements of this Section 8 with respect to said undelivered securities or cash will be waived and Multi-Sector Income Trust will deliver to Strategic Income Fund by or on the Closing Date with respect to said undelivered securities or cash executed copies of an agreement or agreements of assignment in a form reasonably satisfactory to Strategic Income Fund, together with such other documents, including a due bill or due bills and brokers' confirmation slips as may reasonably be required by Strategic Income Fund. 9. Strategic Income Fund shall not assume the liabilities (except for portfolio securities purchased which have not settled and for dividend checks outstanding) of Multi-Sector Income Trust, but Multi-Sector Income Trust will, nevertheless, use its best efforts to discharge all known liabilities, so far as may be possible, prior to the Closing Date. The cost of printing and mailing the proxies and proxy statements will be borne by Multi-Sector Income Trust. Multi-Sector Income Trust and Strategic Income Fund share the cost of the tax opinion. Any documents such as existing prospectuses or annual reports that are included in that mailing will be a cost of the Fund issuing the document. Any other out-of-pocket expenses of Strategic Income Fund and Multi-Sector Income Trust associated with this reorganization, including legal, accounting and transfer agent expenses, will be borne by Multi-Sector Income Trust and Strategic Income Fund, respectively, in the amounts so incurred by each. 10. The obligations of Strategic Income Fund hereunder shall be subject to the following conditions: A. The Board of Trustees of Multi-Sector Income Trust shall have authorized the execution of the Agreement, and the shareholders of Multi-Sector Income Trust shall have approved the Agreement and the transactions contemplated hereby, and Multi-Sector Income Trust shall have furnished to Strategic Income Fund copies of resolutions to that effect certified by the Secretary or the Assistant Secretary of Multi-Sector Income Trust; such shareholder approval shall have been by the affirmative vote required by the Massachusetts Law and its charter documents at a meeting for which proxies have been solicited by the Proxy Statement and Prospectus (as hereinafter defined). B. Strategic Income Fund shall have received an opinion dated as of the Closing Date from counsel to Multi-Sector Income Trust, to the effect that (i) Multi-Sector Income Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full corporate powers to carry on its business as then being conducted and to enter into and perform the Agreement; and (ii) that all action necessary to make the Agreement, according to its terms, valid, binding and enforceable on Multi-Sector Income Trust and to authorize effectively the transactions contemplated by the Agreement have been taken by Multi-Sector Income Trust. Massachusetts counsel may be relied upon for this opinion. C. The representations and warranties of Multi-Sector Income Trust contained herein shall be true and correct at and as of the Closing Date, and Strategic Income Fund shall have been furnished with a certificate of the President, or a Vice President, or the Secretary or the Assistant Secretary or the Treasurer or the Assistant Treasurer of Multi-Sector Income Trust, dated as of the Closing Date, to that effect. D. On the Closing Date, Multi-Sector Income Trust shall have furnished to Strategic Income Fund a certificate of the Treasurer or Assistant Treasurer of Multi-Sector Income Trust as to the amount of the capital loss carry-over and net unrealized appreciation or depreciation, if any, with respect to Multi-Sector Income Trust as of the Closing Date. E. The cash reserve shall not exceed 10% of the value of the net assets, nor 30% in value of the gross assets, of Multi-Sector Income Trust at the close of business on the Valuation Date. F. A Registration Statement on Form N-14 filed by Strategic Income Fund under the Securities Act of 1933, as amended (the "1933 Act"), containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under the 1933 Act. G. On the Closing Date, Strategic Income Fund shall have received a letter from the general counsel of OppenheimerFunds, Inc. acceptable to Strategic Income Fund, stating that nothing has come to his or her attention which in his or her judgment would indicate that as of the Closing Date there were any material, actual or contingent liabilities of Multi-Sector Income Trust arising out of litigation brought against Multi-Sector Income Trust or claims asserted against it, or pending or to the best of his or her knowledge threatened claims or litigation not reflected in or apparent from the most recent audited financial statements and footnotes thereto of Multi-Sector Income Trust delivered to Strategic Income Fund. Such letter may also include such additional statements relating to the scope of the review conducted by such person and his or her responsibilities and liabilities as are not unreasonable under the circumstances. H. Strategic Income Fund shall have received an opinion, dated as of the Closing Date, of Deloitte & Touche LLP (or an appropriate substitute tax expert), to the same effect as the opinion contemplated by Section 11.E. of the Agreement. I. Strategic Income Fund shall have received at the Closing all of the assets of Multi-Sector Income Trust to be conveyed hereunder, which assets shall be free and clear of all liens, encumbrances, security interests, restrictions and limitations whatsoever. 11. The obligations of Multi-Sector Income Trust hereunder shall be subject to the following conditions: A. The Board of Trustees of Strategic Income Fund shall have authorized the execution of the Agreement, and the transactions contemplated thereby, and Strategic Income Fund shall have furnished to Multi-Sector Income Trust copies of resolutions to that effect certified by the Secretary or the Assistant Secretary of Strategic Income Fund. B. Multi-Sector Income Trust's shareholders shall have approved the Agreement and the transactions contemplated hereby, by an affirmative vote required by the Massachusetts Law and its charter documents and Multi-Sector Income Trust shall have furnished Strategic Income Fund copies of resolutions to that effect certified by the Secretary or an Assistant Secretary of Multi-Sector Income Trust. C. Multi-Sector Income Trust shall have received an opinion dated as of the Closing Date from counsel to Strategic Income Fund, to the effect that (i) Strategic Income Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full powers to carry on its business as then being conducted and to enter into and perform the Agreement; (ii) all actions necessary to make the Agreement, according to its terms, valid, binding and enforceable upon Strategic Income Fund and to authorize effectively the transactions contemplated by the Agreement have been taken by Strategic Income Fund, and (iii) the shares of Strategic Income Fund to be issued hereunder are duly authorized and when issued will be validly issued, fully-paid and non-assessable, except as set forth under "Shareholder and Trustee Liability" in Strategic Income Fund's Statement of Additional Information. Massachusetts counsel may be relied upon for this opinion. D. The representations and warranties of Strategic Income Fund contained herein shall be true and correct at and as of the Closing Date, and Multi-Sector Income Trust shall have been furnished with a certificate of the President, a Vice President or the Secretary or the Assistant Secretary or the Treasurer or the Assistant Treasurer of the Trust to that effect dated as of the Closing Date. E. Multi-Sector Income Trust shall have received an opinion of Deloitte & Touche LLP (or an appropriate substitute tax expert) to the effect that the federal tax consequences of the transaction, if carried out in the manner outlined in the Agreement and in accordance with (i) Multi-Sector Income Trust's representation that there is no plan or intention by any Multi-Sector Income Trust shareholder who owns 5% or more of Multi-Sector Income Trust's outstanding shares, and, to Multi-Sector Income Trust's best knowledge, there is no plan or intention on the part of the remaining Multi-Sector Income Trust shareholders, to redeem, sell, exchange or otherwise dispose of a number of Strategic Income Fund shares received in the transaction that would reduce Multi-Sector Income Trust shareholders' ownership of Strategic Income Fund shares to a number of shares having a value, as of the Closing Date, of less than 50% of the value of all of the formerly outstanding Multi-Sector Income Trust shares as of the same date, and (ii) the representation by each of Multi-Sector Income Trust and Strategic Income Fund that, as of the Closing Date, Multi-Sector Income Trust and Strategic Income Fund will qualify as regulated investment companies or will meet the diversification test of Section 368(a)(2)(F)(ii) of the Code, will be as follows: 1. The transactions contemplated by the Agreement will qualify as a tax-free "reorganization" within the meaning of Section 368(a)(1) of the Code, and under the regulations promulgated thereunder. 2. Multi-Sector Income Trust and Strategic Income Fund will each qualify as a "party to a reorganization" within the meaning of Section 368(b)(2) of the Code. 3. No gain or loss will be recognized by the shareholders of Multi-Sector Income Trust upon the distribution of Class A shares of beneficial interest in Strategic Income Fund to the shareholders of Multi-Sector Income Trust pursuant to Section 354 of the Code. 4. Under Section 361(a) of the Code no gain or loss will be recognized by Multi-Sector Income Trust by reason of the transfer of substantially all its assets in exchange for Class A shares of Strategic Income Fund. 5. Under Section 1032 of the Code no gain or loss will be recognized by Strategic Income Fund by reason of the transfer of substantially all of Multi-Sector Income Trust's assets in exchange for Class A shares of Strategic Income Fund and Strategic Income Fund's assumption of certain liabilities of Multi-Sector Income Trust. 6. The shareholders of Multi-Sector Income Trust will have the same tax basis and holding period for the Class A shares of beneficial interest in Strategic Income Fund that they receive as they had for Multi-Sector Income Trust shares that they previously held, pursuant to Section 358(a) and 1223(1), respectively, of the Code. 7. The securities transferred by Multi-Sector Income Trust to Strategic Income Fund will have the same tax basis and holding period in the hands of Strategic Income Fund as they had for Multi-Sector Income Trust, pursuant to Section 362(b) and 1223(1), respectively, of the Code. F. The cash reserve shall not exceed 10% of the value of the net assets, or 30% in value of the gross assets, of Multi-Sector Income Trust at the close of business on the Valuation Date. G. A Registration Statement on Form N-14 filed by Strategic Income Fund under the 1933 Act, containing a preliminary form of the Proxy Statement and Prospectus, shall have become effective under the 1933 Act. H. On the Closing Date, Multi-Sector Income Trust shall have received a letter from the general counsel of OppenheimerFunds, Inc. acceptable to Multi-Sector Income Trust, stating that nothing has come to his or her attention which in his or her judgment would indicate that as of the Closing Date there were any material, actual or contingent liabilities of Strategic Income Fund arising out of litigation brought against Strategic Income Fund or claims asserted against it, or pending or, to the best of his or her knowledge, threatened claims or litigation not reflected in or apparent by the most recent audited financial statements and footnotes thereto of Strategic Income Fund delivered to Multi-Sector Income Trust. Such letter may also include such additional statements relating to the scope of the review conducted by such person and his or her responsibilities and liabilities as are not unreasonable under the circumstances. I. Multi-Sector Income Trust shall acknowledge receipt of the Class A shares of Strategic Income Fund. 12. Multi-Sector Income Trust hereby represents and warrants that: A. The audited financial statements of Multi-Sector Income Trust as of October 31, 2004 and unaudited financial statements as of April 30, 2005 heretofore furnished to Strategic Income Fund, present fairly the financial position, results of operations, and changes in net assets of Multi-Sector Income Trust as of that date, in conformity with generally accepted accounting principles applied on a basis consistent with the preceding year; and that from April 30, 2005 through the date hereof there have not been, and through the Closing Date there will not be, any material adverse change in the business or financial condition of Multi-Sector Income Trust that have not been disclosed to Strategic Income Fund, it being agreed that a decrease in the size of Multi-Sector Income Trust due to a diminution in the value of its portfolio and/or redemption of its shares shall not be considered a material adverse change; B. Contingent upon approval of the Agreement and the transactions contemplated thereby by Multi-Sector Income Trust's shareholders, Multi-Sector Income Trust has authority to transfer all of the assets of Multi-Sector Income Trust to be conveyed hereunder free and clear of all liens, encumbrances, security interests, restrictions and limitations whatsoever; C. The Registration Statement, as amended, was, as of the date of the filing of the last Post-Effective Amendment, true, correct and complete, conformed to the requirements of the Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; D. There is no material contingent liability of Multi-Sector Income Trust and no material claim and no material legal, administrative or other proceedings pending or, to the knowledge of Multi-Sector Income Trust, threatened against Multi-Sector Income Trust, not reflected in such Prospectus; E. Except for the Agreement, there are no material contracts outstanding to which Multi-Sector Income Trust is a party other than those ordinary in the conduct of its business; F. Multi-Sector Income Trust is a Massachusetts business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; and has all necessary and material Federal and state authorizations to own all of its assets and to carry on its business as now being conducted; and Multi-Sector Income Trust that is duly registered under the Act and such registration has not been rescinded or revoked and is in full force and effect; G. All Federal and other tax returns and reports of Multi-Sector Income Trust required by law to be filed have been filed, and all federal and other taxes shown due on said returns and reports have been paid or provision shall have been made for the payment thereof and to the best of the knowledge of Multi-Sector Income Trust no such return is currently under audit and no assessment has been asserted with respect to such returns; and H. Multi-Sector Income Trust has elected that Multi-Sector Income Trust be treated as a regulated investment company and, for each fiscal year of its operations, Multi-Sector Income Trust has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and Multi-Sector Income Trust intends to meet such requirements with respect to its current taxable year. 13. Strategic Income Fund hereby represents and warrants that: A. The audited financial statements of Strategic Income Fund as of September 30, 2004 and unaudited financial statements as of March 31, 2005 heretofore furnished to Multi-Sector Income Trust, present fairly the financial position, results of operations, and changes in net assets of Strategic Income Fund, as of that date, in conformity with generally accepted accounting principles applied on a basis consistent with the preceding year; and that from March 31, 2005 through the date hereof there have not been, and through the Closing Date there will not be, any material adverse changes in the business or financial condition of Strategic Income Fund that have not been disclosed to Multi-Sector Income Trust, it being understood that a decrease in the size of Strategic Income Fund due to a diminution in the value of its portfolio and/or redemption of its shares shall not be considered a material or adverse change; B. The Prospectus, as amended and supplemented, contained in Strategic Income Fund's Registration Statement under the 1933 Act, is true, correct and complete, conforms to the requirements of the 1933 Act and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Registration Statement, as amended, was, as of the date of the filing of the last Post-Effective Amendment, true, correct and complete, conformed to the requirements of the 1933 Act and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; C. Except for this Agreement, there is no material contingent liability of Strategic Income Fund and no material claim and no material legal, administrative or other proceedings pending or, to the knowledge of Strategic Income Fund, threatened against Strategic Income Fund, not reflected in such Prospectus; D. Except for this Agreement, there are no material contracts outstanding to which Strategic Income Fund is a party other than those ordinary in the conduct of its business; E. Strategic Income Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; Strategic Income Fund has all necessary and material Federal and state authorizations to own all its properties and assets and to carry on its business as now being conducted; the Class A shares of Strategic Income Fund which it issues to Multi-Sector Income Trust pursuant to the Agreement will be duly authorized, validly issued, fully-paid and non-assessable, except as set forth under "Shareholder & Trustee Liability" in Strategic Income Fund's Statement of Additional Information, will conform to the description thereof contained in Strategic Income Fund's Registration Statement and will be duly registered under the 1933 Act and in the states where registration is required; and Strategic Income Fund is duly registered under the Act and such registration has not been revoked or rescinded and is in full force and effect; F. All federal and other tax returns and reports of Strategic Income Fund required by law to be filed have been filed, and all federal and other taxes shown due on said returns and reports have been paid or provision shall have been made for the payment thereof and to the best of the knowledge of Strategic Income Fund, no such return is currently under audit and no assessment has been asserted with respect to such returns and to the extent such tax returns with respect to the taxable year of Strategic Income Fund ended September 30, 2005 have not been filed, such returns will be filed when required and the amount of tax shown as due thereon shall be paid when due; G. Strategic Income Fund has elected to be treated as a regulated investment company and, for each fiscal year of its operations, Strategic Income Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company and Strategic Income Fund intends to meet such requirements with respect to its current taxable year; H. Strategic Income Fund has no plan or intention (i) to dispose of any of the assets transferred by Multi-Sector Income Trust, other than in the ordinary course of business, or (ii) to redeem or reacquire any of the Class A shares issued by it in the reorganization other than pursuant to valid requests of shareholders; and I. After consummation of the transactions contemplated by the Agreement, Strategic Income Fund intends to operate its business in a substantially unchanged manner. 14. Each party hereby represents to the other that no broker or finder has been employed by it with respect to the Agreement or the transactions contemplated hereby. Each party also represents and warrants to the other that the information concerning it in the Proxy Statement and Prospectus will not as of its date contain any untrue statement of a material fact or omit to state a fact necessary to make the statements concerning it therein not misleading and that the financial statements concerning it will present the information shown fairly in accordance with generally accepted accounting principles applied on a basis consistent with the preceding year. Each party also represents and warrants to the other that the Agreement is valid, binding and enforceable in accordance with its terms and that the execution, delivery and performance of the Agreement will not result in any violation of, or be in conflict with, any provision of any charter, by-laws, contract, agreement, judgment, decree or order to which it is subject or to which it is a party. Strategic Income Fund hereby represents to and covenants with Multi-Sector Income Trust that, if the reorganization becomes effective, Strategic Income Fund will treat each shareholder of Multi-Sector Income Trust who received any of Strategic Income Fund's shares as a result of the reorganization as having made the minimum initial purchase of shares of Strategic Income Fund received by such shareholder for the purpose of making additional investments in shares of Strategic Income Fund, regardless of the value of the shares of Strategic Income Fund received. 15. Strategic Income Fund agrees that it will prepare and file a Registration Statement on Form N-14 under the 1933 Act which shall contain a preliminary form of proxy statement and prospectus contemplated by Rule 145 under the 1933 Act. The final form of such proxy statement and prospectus is referred to in the Agreement as the "Proxy Statement and Prospectus." Each party agrees that it will use its best efforts to have such Registration Statement declared effective and to supply such information concerning itself for inclusion in the Proxy Statement and Prospectus as may be necessary or desirable in this connection. Multi-Sector Income Trust covenants and agrees to liquidate and dissolve under the laws of the Commonwealth of Massachusetts, following the Closing, and, upon Closing, to cause the cancellation of its outstanding shares. 16.The obligations of the parties shall be subject to the right of either party to abandon and terminate the Agreement for any reason and there shall be no liability for damages or other recourse available to a party not so terminating this Agreement, provided, however, that in the event that a party shall terminate this Agreement without reasonable cause, the party so terminating shall, upon demand, reimburse the party not so terminating for all expenses, including reasonable out-of-pocket expenses and fees incurred in connection with this Agreement. 17. The Agreement may be executed in several counterparts, each of which shall be deemed an original, but all taken together shall constitute one Agreement. The rights and obligations of each party pursuant to the Agreement shall not be assignable. 18. All prior or contemporaneous agreements and representations are merged into the Agreement, which constitutes the entire contract between the parties hereto. No amendment or modification hereof shall be of any force and effect unless in writing and signed by the parties and no party shall be deemed to have waived any provision herein for its benefit unless it executes a written acknowledgment of such waiver. 19. Strategic Income Fund understands that the obligations of Multi-Sector Income Trust under the Agreement are not binding upon any Trustee or shareholder of Multi-Sector Income Trust personally, but bind only Multi-Sector Income Trust and Multi-Sector Income Trust's property. Strategic Income Fund represents that it has notice of the provisions of the Declaration of Trust of Multi-Sector Income Trust disclaiming shareholder and trustee liability for acts or obligations of Multi-Sector Income Trust. 20. Multi-Sector Income Trust understands that the obligations of Strategic Income Fund under the Agreement are not binding upon any trustee or shareholder of Strategic Income Fund personally, but bind only Strategic Income Fund and Strategic Income Fund's property. Multi-Sector Income Trust represents that it has notice of the provisions of the Declaration of Trust of Strategic Income Fund disclaiming shareholder and trustee liability for acts or obligations of Strategic Income Fund. IN WITNESS WHEREOF, each of the parties has caused the Agreement to be executed and attested by its officers thereunto duly authorized on the date first set forth above. OPPENHEIMER MULTI-SECTOR INCOME TRUST By: /s/ Robert G. Zack ------------------------- Robert G. Zack Secretary OPPENHEIMER STRATEGIC INCOME FUND By: /s/ Robert G. Zack ------------------ Robert G. Zack Secretary and Vice President EXHIBIT B PRINCIPAL SHAREHOLDERS Major Shareholders of Multi-Sector Income Trust. As of April 14, 2005, the only persons who owned of record or were known by the Fund to own beneficially 5% or more of the outstanding shares of the Fund were: Charles Schwab & Co., Inc., 101 Montgomery St. San Francisco, CA 94104, which owned 1,533,508 shares (5.2% of the then outstanding shares); UBS Financial Services, 1000 Harbor Boulevard, Weehawken, NJ 07087, which owned 2,002,555.000 shares (6.9% of the then outstanding shares); A G Edwards, 1 N Jefferson, Saint Louis, MO, 63131, which owned 1,530,705 shares (5.2% of the then outstanding shares); JP Morgan Chase, 270 Park Ave., New York, NY 100171, which owned 1,503,548.000 shares (5.1% of the then outstanding shares); First Clearing LLC, Riverfront Plaza, 901 E. Byrd St., Richmond VA 23219-4052, which owned 1,730,360 shares (5.9% of the then outstanding shares); National Financial Services Corp., 200 Liberty St., 1 World Financial Center, New York, NY 10281-5503, which owned 1,552,066 shares (5.3% of the then outstanding shares.) Northern Trust Brokerage Inc., 50 S. La Salle St., 12th Floor, Chicago, IL 60603-1003, which owned 2,108,350 shares (7.2% of the then outstanding shares.) SIT Investment Associates, Inc., 4600 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402 which owned 3,416,700 shares (as of March 9, 2005) (11.69% of the then outstanding shares). Karpus Management, Inc., 14 Tobey Village Office Park, Pittsford, NY 14534 which owned 1,798,580 shares (as of May 9, 2005) (6.15% of the then outstanding shares). Major Shareholders of Strategic Income Fund. As of April 25, 2005, there were no persons who owned of record or were known by Strategic Income Fund to own beneficially 5% or more of the Class A outstanding shares of Strategic Income Fund. 2 STATEMENT OF ADDITIONAL INFORMATION TO PROSPECTUS AND PROXY STATEMENT PART B Acquisition of the Assets of OPPENHEIMER MULTI-SECTOR INCOME TRUST By and in exchange for Shares of OPPENHEIMER STRATEGIC INCOME FUND This Statement of Additional Information to this Prospectus and Proxy Statement (the "SAI") relates specifically to the proposed delivery of substantially all of the assets of Oppenheimer Multi-Sector Income Trust ("Multi-Sector Income Trust") for Class A shares of Oppenheimer Strategic Income Fund ("Strategic Income Fund") (the "Reorganization"). This SAI consists of this Cover Page and the following documents which are incorporated into this SAI by reference: (i) the Statement of Additional Information of Multi-Sector Income Trust dated February 25, 2005, which includes audited financial statements of Multi-Sector Income Trust for the 12-month period ended October 31, 2004; and (ii) and the Statement of Additional Information of Strategic Income Fund dated November 29, 2004, revised February 2, 2005, which includes audited financial statements of Strategic Income Fund for the 12-month period ended September 30, 2004. This SAI is not a Prospectus; you should read this SAI in conjunction with the Prospectus and Proxy Statement dated May 27, 2005, relating to the Reorganization. You can request a copy of the Prospectus and Proxy Statement by calling 1.800.647.1963 or by writing OppenheimerFunds Services at P.O. Box 5270, Denver, Colorado 80217. The date of this SAI is May 27, 2005. PRO FORMA FINANCIAL STATEMENTS Pro forma financial statements demonstrating the effect of the Reorganization on Strategic Income Fund are not necessary because the net asset value of Multi-Sector Income Trust does not exceed ten percent of the net asset value of Strategic Income Fund, measured as of April 26, 2005. PROXY CARD OPPENHEIMER MULTI-SECTOR INCOME TRUST Proxy for a Special Meeting of Shareholders to be held on July 12, 2005 The undersigned, revoking prior proxies, hereby appoints Brian Wixted, Philip Vottiero and Kathleen Ives, and each of them, as attorneys-in-fact and proxies of the undersigned, with full power of substitution, to vote shares held in the name of the undersigned on the record date at the Special Meeting of Shareholders of Oppenheimer Multi-Sector Income Trust (the "Fund") to be held at 6803 South Tucson Way, Centennial, Colorado, 80112, on July 12, 2005, at 1:00 p.m. Mountain time, or at any adjournment thereof, upon the proposal described in the Notice of Meeting and accompanying Prospectus and Proxy Statement, which have been received by the undersigned. This proxy is solicited on behalf of the Fund's Board of Trustees, and the proposal (set forth on the reverse side of this proxy card) has been proposed by the Board of Trustees. When properly executed, this proxy will be voted as indicated on the reverse side or "FOR" the proposal if no choice is indicated. The proxy will be voted in accordance with the proxy holders' best judgment as to any other matters that may arise at the Meeting. CONTROL NUMBER: 999 9999 9999 999 Note: Please sign this proxy exactly as your name or names appear hereon. Each joint owner should sign. Trustees and other fiduciaries should indicate the capacity in which they sign. If a corporation, partnership or other entity, this signature should be that of a duly authorized individual who should state his or her title. Signature Signature of joint owner, if any Date PLEASE VOTE ON THE REVERSE SIDE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example: [ ] 1. To approve an Agreement and Plan of Reorganization between Oppenheimer Multi-Sector Income Trust ("Multi-Sector Income Trust") and Oppenheimer Strategic Income Fund ("Strategic Income Fund") and the transactions contemplated thereby, including: (a) the transfer of substantially all the assets of Multi-Sector Income Trust to Strategic Income Fund in exchange for Class A shares of Strategic Income Fund, (b) the distribution of such shares of Strategic Income Fund to the shareholders of Multi-Sector Income Trust in complete liquidation of Multi-Sector Income Trust and (c) the cancellation of the outstanding shares of Multi-Sector Income Trust.
OPPENHEIMER STRATEGIC INCOME FUND FORM N-14 PART C OTHER INFORMATION Item 16. Exhibits - ------------------ (1) Amended and Restated Declaration of Trust dated September 25, 2002: Filed with Registrant's Post-Effective Amendment No. 23 (11/22/02), and incorporated herein by reference. (2) Amended By-Laws dated October 24, 2000: Filed with Registrant's Post-Effective Amendment No. 21 (1/25/01), and incorporated herein by reference. (3) Not Applicable (4) Not Applicable (5) Specimen Class A Share Certificate: Filed with Registrant's Post-Effective Amendment No. 22 (1/28/02), and incorporated herein by reference. (6) Investment Advisory Agreement dated 10/22/90: Filed with Registrant's Post-Effective Amendment No. 3, 11/26/90 and refiled with Registrant's Post-Effective Amendment No. 9, 1/31/95, pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (7) (i) General Distributor's Agreement dated 10/13/92: Filed with Registrant's Post-Effective Amendment No. 5, 12/3/92 and refiled with Registrant's Post-Effective Amendment No. 9, 1/31/95, pursuant to Item 102 of Regulation S-T, and incorporated herein by reference. (ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (iii) Form of Broker Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (iv) Form of Agency Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (v) Form of Trust Company Fund/SERV Purchase Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (vi) Form of Trust Company Agency Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and incorporated herein by reference. (8) Form of Deferred Compensation Plan for Disinterested Trustees/Directors: Filed with Post-Effective Amendment No. 40 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/27/98, and incorporated herein by reference. (9) (i) Global Custody Agreement dated August 16, 2002 between Registrant and JP Morgan Chase Bank: Previously filed with Post-Effective Amendment No. 10 to the Registration Statement of Oppenheimer International Bond Fund (Reg. No. 33-58383), 11/21/02, and incorporated herein by reference. (ii) Amendment dated October 2, 2003 to the Global Custody Agreement dated August 16, 2002: Previously filed with Pre-Effective Amendment No. 1 to the Registration Statement of Oppenheimer Principal Protected Trust II (Reg. 333-108093), 11/6/03, and incorporated herein by reference. (10) (i) Amended and Restated Service Plan and Agreement for Class A shares dated 4/26/04: Filed with Registrant's Post-Effective Amendment No. 25 (11/24/04) and incorporated herein by reference (ii) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through 9/15/04: Previously filed with Post-Effective Amendment No. 24 to the Registration Statement of Oppenheimer Cash Reserves (Reg. No. 33-23223), 9/27/04, and incorporated herein by reference. (11) Powers of Attorney dated June 28, 2004 for all Trustees and Officers: Filed with Registrant's Post-Effective Amendment No. 25 (11/24/04) and incorporated herein by reference. (12) Consent of KPMG LLP: Filed herewith Item 17. - Undertakings - ----------------------- (1) The undersigned registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c], the reoffering prospectus will contain the information called for by the applicable registration form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement or the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. SIGNATURES As required by the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in the City of New York and State of New York, on the 26th day of May, 2005. Oppenheimer Strategic Income Fund By: /s/ John V. Murphy* - --------------------------------------------- John V. Murphy, President, Principal Executive Officer & Trustee Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities on the dates indicated: Signatures Title Date - ---------- ----- ---- /s/ William L. Armstrong* Chairman of the May 26, 2005 - ------------------------------- Board of Trustees William L. Armstrong /s/ John V. Murphy* President, Principal May 26, 2005 - ------------------------ Executive Officer & Trustee John V. Murphy /s/ Brian W. Wixted* Treasurer, Principal May 26, 2005 - ------------------------- Financial & Brian W. Wixted Accounting Officer /s/ Robert G. Avis* Trustee May 26, 2005 - ---------------------- Robert G. Avis /s/ George Bowen* Trustee May 26, 2005 - ---------------------- George Bowen /s/ Edward Cameron* Trustee April 26, 2005 - ------------------------ Edward Cameron /s/ Jon S. Fossel* Trustee April 26, 2005 - -------------------- Jon S. Fossel /s/ Sam Freedman* Trustee April 26, 2005 - ---------------------- Sam Freedman /s/ Beverly L. Hamilton* - ------------------------------ Trustee April 26, 2005 Beverly L. Hamilton /s/ Robert J. Malone* - -------------------------- Trustee April 26, 2005 Robert J. Malone /s/ F. William Marshall, Jr.* Trustee April 26, 2005 - -------------------------------- F. William Marshall, Jr. *By: /s/ Phillip Gillespie ----------------------------------------- Phillip Gillespie, Attorney-in-Fact OPPENHEIMER STRATEGIC INCOME FUND Registration Statement No. 333-124352 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 12 Consent of Independent Registered Public Accounting Firm