-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FMJv+07LwAnXyM/CxRC6B/AsAEZddclFW2NwsfHx0BxRNZsPbO5t4wXFD0lA62Z3 8TXQH75S8R/BFtH0CJ6EtA== 0000950146-96-001585.txt : 19960906 0000950146-96-001585.hdr.sgml : 19960906 ACCESSION NUMBER: 0000950146-96-001585 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960905 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER EQUITY INCOME FUND INC CENTRAL INDEX KEY: 0000045156 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 840578481 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01512 FILM NUMBER: 96626010 BUSINESS ADDRESS: STREET 1: 3410 S GALENA ST CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 FORMER COMPANY: FORMER CONFORMED NAME: CENTENNIAL EQUITY INCOME FUND INC DATE OF NAME CHANGE: 19830428 FORMER COMPANY: FORMER CONFORMED NAME: HAMILTON INCOME FUND INC DATE OF NAME CHANGE: 19811115 FORMER COMPANY: FORMER CONFORMED NAME: HAMILTON MILE HI FUND INC DATE OF NAME CHANGE: 19701016 N-30D 1 OPPENHEIMER EQUITY INCOME FUND A/R 6/30/96 [FRONT COVER] Oppenheimer Equity Income Fund Annual Report June 30, 1996 [Picture of BarBQ] "We need our investment to do a lot- we want it to provide money to live on and increase in value too." [LOGO-OPPENHEIMERFUNDS (R)] This Fund is for people who want their investment to work two ways: provide both current income and the potential for long-term growth. How Your Fund Is Managed Oppenheimer Equity Income Fund is designed to give you the benefits of a diversified portfolio of stocks, bonds, and other fixed income investments. We manage your Fund to provide quarterly income from dividend-paying stocks and other income-producing instruments, with a secondary objective of capital appreciation by investing in stocks, while maintaining principal as well. Diversification provides another advantage to shareholders: less risk. Because the Fund's assets are allocated across different types of securities, investment risk may be reduced. Performance Total return at net asset value for the twelve months ended 6/30/96 was 18.61% for Class A shares and 17.58% for Class B shares. Cumulative total return at net asset value for Class C shares since inception on 11/1/95 was 10.50%.(1) Your Fund's average annual total returns at maximum offering price for Class A shares for the 1-, 5-, and 10-year periods ended 6/30/96 were 11.79%, 10.87% and 10.19%, respectively. For Class B shares, average annual total returns for the 1-year period ended 6/30/96 and since inception of the Class on 8/17/93 were 12.58% and 9.24%, respectively. For Class C shares, cumulative total return since inception on 11/1/95 was 9.50%.(2) Outlook "Our outlook is positive. This is a conservative fund, so, as we would do in any market, we're working to limit our risk exposure as well as provide opportunities for income and long-term growth." John Doney, Portfolio Manager June 30, 1996 Total returns include change in share price and reinvestment of dividends and capital gains distributions. Past performance does not guarantee future results. Investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. For more complete information, please review the prospectus carefully before you invest. 1. Based on the change in net asset value per share for the period shown, without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. 2. Class A returns show results of hypothetical investments on 6/30/95, 6/30/91, and 6/30/86, after deducting the current maximum initial sales charge of 5.75%. Class A shares were first publicly offered on 12/1/70. The Fund's maximum sales charge for Class A shares was higher during a portion of some of the periods shown, and actual investment results will be different as a result of the change. Class B returns show results of hypothetical investments on 6/30/95 and 8/17/93 (inception of class), after the deduction of the applicable contingent deferred sales charge of 5% (1-year) and 3% (since inception). Class C shares show results of a hypothetical investment on 11/1/95 after the 1% contingent deferred sales charge. An explanation of the different performance calculations is in the Fund's prospectus. 2 Oppenheimer Equity Income Fund [PHOTO-JAMES C. SWAIN] James C. Swain Chairman Oppenheimer Equity Income Fund [PHOTO-BRIDGET A. MACASKILL] Bridget A. Macaskill President Oppenheimer Equity Income Fund Dear Shareholder, Against all odds, the stock market showed remarkable strength during the first five months of 1996. However, in the few months that followed, the market experienced significant volatility that resulted in a decline in the Dow of about 7 percent. Many experts said the stock market, having advanced to record heights in 1995 and void of any real market correction since 1990, was due for a downturn. This was, after all, the longest bull market of the post-World War II era. Thanks to the 10% rise in blue chip stocks during the first half of 1996 and the early success of small stocks, the decline that occurred recently was somewhat cushioned. While it's impossible to tell what will happen next, we are optimistic that this turn was a correction within a bull market rather than the onset of a bear market. What made the market perform so well during the first part of the year? It was another surprise: corporate profits. Between 1992 and 1995, corporate profits of U.S. companies advanced at a double-digit rate. Investors widely expected this year's profit tallies to be flat compared to 1995. After all, the economy had been sluggish--growing at an annual rate of just 2.3% in the first quarter of 1996. But corporate America continued to perform. The reason corporate profits were so strong is that many U.S. companies continued to successfully reduce costs. Often when a company achieves a small increase in sales, the benefit goes straight to the bottom line. Indeed, the U.S. Commerce Department reports indicated that corporate profits rose 15% for the four quarters ended March 1996, while the economy grew only marginally. Still, profits are not what they were in the early 1990s. That's why investors are seeking out companies that can grow earnings regardless of the fortunes of the economy. Which is just what many small companies in such fields as technology, healthcare and specialty retailing have been doing, growing earnings at double-digit--and even triple-digit rates. So it's not surprising that the stocks of many of these small fast-growing companies have been such strong performers. The early strength of the stock market is all the more remarkable when you consider that during the same period, interest rates moved up sharply. The yield on the benchmark 30-year U.S. Treasury bond rose from about 6% in January to over 7% today. Interest rates have been rising partly because investors are concerned that the economy is growing fast enough to generate higher inflation. However, we are watching this very closely, and would become very cautious regarding the stock market's performance if inflation were to flare up. As always, remember stock investments are generally meant for long-term growth objectives, and often involve short-term volatility. So, it's critical for investors to keep their focus on long-term goals and to put near-term setbacks in proper prospective. Your portfolio managers discuss the outlook for your Fund in light of these broad issues on the following pages. Thank you for your confidence in OppenheimerFunds. We look forward to helping you reach your investment goals in the future. /s/ James C. Swain /s/ Bridget A. Macaskill James C. Swain Bridget A. Macaskill July 22, 1996 3 Oppenheimer Equity Income Fund Q + A [PHOTO-JOHN DONEY] [PHOTO-MARK BINNING AND LAWRENCE APOLITO] Q How did the Fund perform? An interview with your Fund's managers. How did the Fund perform over the period? The Fund did very well, benefiting significantly from the very strong stock market, which in turn, was driven by strong corporate earnings, low interest rates, and an unprecedented level of cash flowing into mutual funds. There has been considerably more volatility, due to concerns that growth was slowing, and that interest rates were rising. In contrast to the stock market's resilience, however, the bull market in bonds has faded. Still, even while bonds have suffered from fears that renewed economic growth would spur inflation, our dividend has remained steady. [PHOTO-RICHARD RUBINSTEIN] What investments made positive contributions to performance? We've continued to have success with our holdings in financial stocks, particularly banks. We've focused on banks that showed potential for substantial earnings improvements and increased dividends despite somewhat higher interest rates. Other areas where we did well were airline, machinery and auto stocks. The endurance of a relatively strong economic environment, both here and abroad, strengthened stocks in these sectors. Finally, by investing in convertible stocks and bonds, we were able to maintain our dividend through a changing bond market.(1) Were there any investments that didn't perform as well as you'd expected? Some of our energy holdings were minor disappointments. Though their performance was not bad, it didn't compare to the strength of many of our other holdings. Energy stocks lagged the market most of the year, until recently, when oil prices spiked upward, and drove their stock prices higher. We've taken advantage 1. The Fund's portfolio is subject to change. 4 Oppenheimer Equity Income Fund Facing page Top left: John Doney, Portfolio Manager Top right: Mark Binning and Lawrence Apolito, Equity Trading Bottom: Richard Rubinstein, Member of Equity Investments Team This page Top: Robert Doll, Executive VP, Director of Equity Investments Bottom: Diane Sobin and Bruce Bartlett, Members of Equity Investments Team A We did very well due to strong corporate earnings and low interest rates. of this rise to sell a portion of the holdings that have reached what we consider their full price. What areas are you currently targeting? Recently, we've been adding to our convertible preferred and bond holdings when we can find a competitive level of income at attractive prices and where we believe the issuing company's stock has the potential to appreciate. In addition to providing income, convertibles can be converted into common stock, so when the stock market is doing well, they offer appreciation potential. With rates at a twelve-month high, we've also been building our position in longer-term Treasury bonds. Not only do longer-term bonds provide higher yields to the Fund, they also have the best positioning for price appreciation should rates decline. [PHOTO-ROBERT DOLL] We continue to look for value and long-term growth potential in our stock considerations and, as always, we employ a bottom-up approach, evaluating each company independently rather than targeting whole industries. What is your outlook for the Fund? Our outlook is positive. Though the stock market has reached new highs, we expect common stocks to continue to perform well. At the same time, we expect to see greater volatility in the prices of many stocks, and we feel that a relatively cautious posture is appropriate for the portfolio going forward. This is a conservative fund, so as we do in any market, we're working to limit our risk exposure as well as provide opportunities for income and long-term growth. [solid box] [PHOTO-DIANE SOBIN AND BRUCE BARTLETT] 5 Oppenheimer Equity Income Fund
Statement of Investments June 30, 1996 Face Market Value Amount(1) See Note 1 =================================================================================================================================== U.S. Government Obligations--14.2% - ----------------------------------------------------------------------------------------------------------------------------------- Treasury--14.2% - ----------------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds, STRIPS, Zero Coupon, 7.26%, 8/15/08(2) $150,000,000 $ 65,520,286 --------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds, STRIPS, Zero Coupon, 7.20%, 8/15/20(2) 687,800,000 125,729,097 --------------------------------------------------------------------------------------------------------------- U.S. Treasury Nts., 7.50%, 12/31/96 146,500,000 148,010,692 -------------- Total U.S. Government Obligations (Cost $330,022,764) 339,260,075 =================================================================================================================================== Foreign Government Obligations--4.8% - ----------------------------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Par Bonds, 5.25%, 3/31/23(3) 5,750,000 3,158,877 --------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Past Due Interest Bonds, Series L, 6.312%, 3/31/05(4) 2,475,000 1,938,222 --------------------------------------------------------------------------------------------------------------- Banco Nacional de Comercio Exterior SNC International Finance BV Gtd. Nts., 8%, 8/5/03 2,000,000 1,708,750 --------------------------------------------------------------------------------------------------------------- Banco Nacional de Obras y Servicios Publicos SA Nts., 10.75%, 8/16/96 6,000,000 6,007,500 --------------------------------------------------------------------------------------------------------------- Brazil (Federal Republic of) Interest Due and Unpaid Bonds, 6.375%, 1/1/01(4) 9,300,000 8,730,375 --------------------------------------------------------------------------------------------------------------- Canada (Government of) Bonds, Series H62, 9.25%, 10/1/96 CAD 37,800,000 28,043,446 --------------------------------------------------------------------------------------------------------------- Ecuador (Republic of) Disc. Bonds, 6.063%, 2/28/25(4) 6,000,000 3,405,000 --------------------------------------------------------------------------------------------------------------- Nafin Securities Ltd., 6% Gtd. Bonds, 12/19/96 2,000,000 1,995,000 --------------------------------------------------------------------------------------------------------------- New South Wales State Bank Bonds, 9.25%, 2/18/03 AUD 9,900,000 7,923,315 --------------------------------------------------------------------------------------------------------------- Panama (Republic of) Debs., 6.629%, 5/10/02(4) 4,615,400 4,338,476 --------------------------------------------------------------------------------------------------------------- Quebec, Canada (Province of) Debs., 10.25%, 4/7/98 CAD 10,000,000 7,842,591 --------------------------------------------------------------------------------------------------------------- Queensland Treasury Corp. Exchangeable Gtd. Nts., 8%, 8/14/01 AUD 33,650,000 25,706,365 --------------------------------------------------------------------------------------------------------------- South Australia (Government of) Bonds, 9%, 9/23/02 AUD 3,000,000 2,372,966 --------------------------------------------------------------------------------------------------------------- Venezuela (Republic of) Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 20,000,000 12,300,000 -------------- Total Foreign Government Obligations (Cost $116,269,984) 115,470,883 =================================================================================================================================== Non-Convertible Corporate Bonds and Notes--5.7% - ----------------------------------------------------------------------------------------------------------------------------------- Auburn Hills Trust, 12% Gtd. Exchangeable Certificates, 5/1/20(4) 5,000,000 7,233,410 --------------------------------------------------------------------------------------------------------------- Boyd Gaming Corp., 10.75% Sr. Sub. Nts., Series B, 9/1/03 5,000,000 5,275,000 --------------------------------------------------------------------------------------------------------------- California Energy Co., 0%/10.25% Sr. Disc. Nts., 1/15/04(6) 4,350,000 4,263,000 --------------------------------------------------------------------------------------------------------------- Chesapeake Energy Corp., 9.125% Sr. Nts., 4/15/06 4,000,000 3,960,000 --------------------------------------------------------------------------------------------------------------- Comcast Corp., 10.25% Sr. Sub. Debs., 10/15/01 6,000,000 6,210,000 --------------------------------------------------------------------------------------------------------------- Cott Corp., 9.375% Sr. Nts., 7/1/05 6,350,000 6,103,937 --------------------------------------------------------------------------------------------------------------- El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 6,000,000 5,985,000 --------------------------------------------------------------------------------------------------------------- Falcon Drilling, Inc., 8.875% Sr. Nts., Series B, 3/15/03 5,850,000 5,652,562 --------------------------------------------------------------------------------------------------------------- Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., 6/15/06(7) 5,000,000 4,850,000 --------------------------------------------------------------------------------------------------------------- Granite Broadcasting Corp., 9.375% Sr. Sub. Nts., Series A, 12/1/05(7) 5,000,000 4,600,000 --------------------------------------------------------------------------------------------------------------- Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 4,500,000 4,207,500 --------------------------------------------------------------------------------------------------------------- HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B, 5/15/05 5,000,000 4,775,000 --------------------------------------------------------------------------------------------------------------- Hollinger International Publishing, Inc., 9.25% Sr. Sub. Gtd. Nts., 2/1/06 5,000,000 4,612,500 --------------------------------------------------------------------------------------------------------------- Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04 8,250,000 8,910,000 --------------------------------------------------------------------------------------------------------------- MagneTek, Inc., 10.75% Sr. Sub. Debs., 11/15/98 3,000,000 2,958,750 --------------------------------------------------------------------------------------------------------------- MFS Communications Co., Inc., 0%/9.375% Sr. Disc Nts., 1/15/04(6) 4,500,000 3,420,000 --------------------------------------------------------------------------------------------------------------- Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(6) 3,750,000 3,281,250 --------------------------------------------------------------------------------------------------------------- Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 9,000,000 8,977,500 --------------------------------------------------------------------------------------------------------------- Rowan Cos., Inc., 11.875% Sr. Nts., 12/1/01 7,000,000 7,595,000
6 Oppenheimer Equity Income Fund
Face Market Value Amount(1) See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Non-Convertible Corporate Bonds and Notes (continued) Sociedad Comercial del Plata SA, 11.50% Medium-Term Nts., 5/9/00 $ 1,600,000 $ 1,616,000 --------------------------------------------------------------------------------------------------------------- Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03 2,700,000 2,659,500 --------------------------------------------------------------------------------------------------------------- Tenet Healthcare Corp., 10.125% Sr. Sub. Nts., 3/1/05 5,000,000 5,300,000 --------------------------------------------------------------------------------------------------------------- Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(7) 2,500,000 1,900,000 --------------------------------------------------------------------------------------------------------------- Triton Energy Corp., 0%/9.75% Sr. Sub. Disc. Nts., 12/15/00(6) 3,500,000 3,412,500 --------------------------------------------------------------------------------------------------------------- Viacom International, Inc., 10.25% Sr. Sub. Nts., 9/15/01 12,000,000 13,040,400 --------------------------------------------------------------------------------------------------------------- WestPoint Stevens, Inc., 8.75% Sr. Nts., 12/15/01 6,000,000 5,970,000 -------------- Total Non-Convertible Corporate Bonds and Notes (Cost $134,229,625) 136,768,809 =================================================================================================================================== Convertible Corporate Bonds and Notes--3.9% - ----------------------------------------------------------------------------------------------------------------------------------- ALZA Corp., 5% Cv. Sub. Debs., 5/1/06 10,000,000 9,725,000 --------------------------------------------------------------------------------------------------------------- Banco de Galicia y Buenos Aires SA de CV, 7% Cv. Sub. Negotiable Obligation Bonds, 8/1/02 3,100,000 3,417,750 --------------------------------------------------------------------------------------------------------------- Box Energy Corp., 8.25% Cv. Sub. Nts., 12/1/02 5,000,000 5,225,000 --------------------------------------------------------------------------------------------------------------- Cooper Industries, Inc., 7.05% Cv. Unsec. Sub. Bonds, 1/1/15 6,741,000 7,196,017 --------------------------------------------------------------------------------------------------------------- ICN Pharmaceuticals, Inc., 8.50% Cv. Sub. Debs., 11/15/99 4,500,000 5,512,500 --------------------------------------------------------------------------------------------------------------- Inco Ltd., 5.75% Cv. Debs., 7/1/04 9,700,000 12,209,875 --------------------------------------------------------------------------------------------------------------- Inco Ltd., 7.75% Cv. Debs., 3/15/16 9,800,000 10,314,500 --------------------------------------------------------------------------------------------------------------- Integrated Device Technology, Inc., 5.50% Cv. Sub. Nts., 6/1/02 7,000,000 5,687,500 --------------------------------------------------------------------------------------------------------------- IntelCom Group, Inc., 7% Redeemable Cv. Sub. Payable-in-Kind Nts., 10/30/98(8) 5,000,000 6,538,540 --------------------------------------------------------------------------------------------------------------- IntelCom Group, Inc., 7% Simple Interest Redeemable Cv. Sub. Nts., 10/30/98 875,000 1,144,245 --------------------------------------------------------------------------------------------------------------- Mutual Risk Management Ltd., Zero Coupon Cv. Exchangeable Sub. Debs., 4.85%, 10/30/15(2)(7) 19,500,000 7,483,125 --------------------------------------------------------------------------------------------------------------- Oryx Energy Co., 7.50% Cv. Sub. Debs., 5/15/14 7,000,000 6,177,500 --------------------------------------------------------------------------------------------------------------- Stone Container Corp., 8.875% Cv. Sr. Sub. Nts., 7/15/00(7) 3,000,000 3,911,250 --------------------------------------------------------------------------------------------------------------- VLSI Technology, Inc., 8.25% Cv. Sub. Nts., 10/1/05 11,800,000 10,428,250 -------------- Total Convertible Corporate Bonds and Notes (Cost $86,748,833) 94,971,052 Shares =================================================================================================================================== Common Stocks--51.7% - ----------------------------------------------------------------------------------------------------------------------------------- Basic Materials--3.0% - ----------------------------------------------------------------------------------------------------------------------------------- Chemicals--1.5% Dexter Corp. 400,000 11,900,000 --------------------------------------------------------------------------------------------------------------- Dow Chemical Co. (The) 100,000 7,600,000 --------------------------------------------------------------------------------------------------------------- Du Pont (E.I.) De Nemours & Co. 200,000 15,825,000 -------------- 35,325,000 - ----------------------------------------------------------------------------------------------------------------------------------- Metals--0.2% Reynolds Metals Co. 100,000 5,212,500 - ----------------------------------------------------------------------------------------------------------------------------------- Paper--1.3% Union Camp Corp. 200,000 9,750,000 --------------------------------------------------------------------------------------------------------------- Westvaco Corp. 375,000 11,203,125 --------------------------------------------------------------------------------------------------------------- Weyerhaeuser Co. 250,000 10,625,000 -------------- 31,578,125
7 Oppenheimer Equity Income Fund
Statement of Investments (Continued) Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--5.0% - ----------------------------------------------------------------------------------------------------------------------------------- Autos & Housing--2.1% Ford Motor Co. 500,000 $ 16,187,500 --------------------------------------------------------------------------------------------------------------- General Motors Corp. 475,000 24,878,125 --------------------------------------------------------------------------------------------------------------- Snap-On, Inc. 200,000 9,475,000 -------------- 50,540,625 - ----------------------------------------------------------------------------------------------------------------------------------- Leisure & Entertainment--1.9% AMR Corp.(9) 189,900 17,280,900 --------------------------------------------------------------------------------------------------------------- Delta Air Lines, Inc. 348,640 28,937,120 -------------- 46,218,020 - ----------------------------------------------------------------------------------------------------------------------------------- Retail: General--1.0% Sears Roebuck & Co. 500,000 24,312,500 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Non-Cyclicals--4.9% - ----------------------------------------------------------------------------------------------------------------------------------- Healthcare/Drugs--1.3% American Home Products Corp. 200,000 12,025,000 --------------------------------------------------------------------------------------------------------------- Bristol-Myers Squibb Co. 200,000 18,000,000 -------------- 30,025,000 - ----------------------------------------------------------------------------------------------------------------------------------- Tobacco--3.6% Philip Morris Cos., Inc. 600,000 62,400,000 --------------------------------------------------------------------------------------------------------------- RJR Nabisco Holdings Corp. 240,000 7,440,000 --------------------------------------------------------------------------------------------------------------- UST, Inc. 500,000 17,125,000 -------------- 86,965,000 - ----------------------------------------------------------------------------------------------------------------------------------- Energy--2.6% - ----------------------------------------------------------------------------------------------------------------------------------- Energy Services & Producers--0.2% Pacific Enterprises 150,000 4,443,750 - ----------------------------------------------------------------------------------------------------------------------------------- Oil-Integrated--2.4% Mobil Corp. 100,000 11,212,500 --------------------------------------------------------------------------------------------------------------- Occidental Petroleum Corp. 400,000 9,900,000 --------------------------------------------------------------------------------------------------------------- Phillips Petroleum Co. 300,000 12,562,500 --------------------------------------------------------------------------------------------------------------- Royal Dutch Petroleum Co. 100,000 15,375,000 --------------------------------------------------------------------------------------------------------------- Texaco, Inc. 100,000 8,387,500 -------------- 57,437,500 - ----------------------------------------------------------------------------------------------------------------------------------- Financial--27.3% - ----------------------------------------------------------------------------------------------------------------------------------- Banks--21.3% Banc One Corp. 770,000 26,180,000 --------------------------------------------------------------------------------------------------------------- Bank of Boston Corp. 505,636 25,028,982 --------------------------------------------------------------------------------------------------------------- Bank of New York Co., Inc. (The) 396,419 20,316,474 --------------------------------------------------------------------------------------------------------------- BankAmerica Corp. 600,000 45,450,000 --------------------------------------------------------------------------------------------------------------- Bankers Trust New York Corp. 100,000 7,387,500 --------------------------------------------------------------------------------------------------------------- Chase Manhattan Corp. (New) 1,122,000 79,241,250 --------------------------------------------------------------------------------------------------------------- Citicorp 741,398 61,258,010 --------------------------------------------------------------------------------------------------------------- Crestar Financial Corp. 275,000 14,678,125 --------------------------------------------------------------------------------------------------------------- First Chicago NBD Corp. 452,500 17,704,062 --------------------------------------------------------------------------------------------------------------- First Union Corp. 839,055 51,077,473
8 Oppenheimer Equity Income Fund
Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Banks (continued) Fleet Financial Group, Inc. 400,000 $ 17,400,000 --------------------------------------------------------------------------------------------------------------- Great Western Financial Corp. 600,000 14,325,000 --------------------------------------------------------------------------------------------------------------- Greenpoint Financial Corp. 500,000 14,125,000 --------------------------------------------------------------------------------------------------------------- KeyCorp 400,000 15,500,000 --------------------------------------------------------------------------------------------------------------- Klamath First Bancorp, Inc. 270,000 3,948,750 --------------------------------------------------------------------------------------------------------------- Magna Group, Inc. 400,000 9,600,000 --------------------------------------------------------------------------------------------------------------- Mellon Bank Corp. 450,000 25,650,000 --------------------------------------------------------------------------------------------------------------- National City Corp. 500,000 17,562,500 --------------------------------------------------------------------------------------------------------------- PNC Bank Corp. 301,600 8,972,600 --------------------------------------------------------------------------------------------------------------- Signet Banking Corp. 400,000 9,300,000 --------------------------------------------------------------------------------------------------------------- Summit Bancorp 500,000 17,562,500 --------------------------------------------------------------------------------------------------------------- U.S. Bancorp, Inc. 245,000 8,850,625 -------------- 511,118,851 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial--1.5% American Express Co. 600,000 26,775,000 --------------------------------------------------------------------------------------------------------------- Capital One Financial Corp. 300,000 8,550,000 -------------- 35,325,000 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance--4.5% Allstate Corp. 724,432 33,052,210 --------------------------------------------------------------------------------------------------------------- American General Corp. 400,000 14,550,000 --------------------------------------------------------------------------------------------------------------- American States Financial Corp. (9) 550,000 11,825,000 --------------------------------------------------------------------------------------------------------------- Everest Reinsurance Holdings, Inc. 248,000 6,417,000 --------------------------------------------------------------------------------------------------------------- GCR Holdings Ltd. 100,000 2,650,000 --------------------------------------------------------------------------------------------------------------- General Re Corp. 50,000 7,612,500 --------------------------------------------------------------------------------------------------------------- IPC Holdings Ltd. 419,000 8,432,375 --------------------------------------------------------------------------------------------------------------- ITT Hartford Group, Inc. 150,000 7,987,500 --------------------------------------------------------------------------------------------------------------- Reliance Group Holdings, Inc. 2,141,500 16,061,250 -------------- 108,587,835 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial--3.2% - ----------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment--0.7% AMP, Inc. 400,000 16,050,000 - ----------------------------------------------------------------------------------------------------------------------------------- Manufacturing--2.5% Keystone International, Inc. 300,000 6,225,000 --------------------------------------------------------------------------------------------------------------- Minnesota Mining & Manufacturing Co. 400,000 27,600,000 --------------------------------------------------------------------------------------------------------------- Tenneco, Inc. 500,000 25,562,500 -------------- 59,387,500 - ----------------------------------------------------------------------------------------------------------------------------------- Technology--1.5% - ----------------------------------------------------------------------------------------------------------------------------------- Aerospace/Defense--0.5% United Technologies Corp. 100,000 11,500,000 - ----------------------------------------------------------------------------------------------------------------------------------- Computer Hardware--0.5% Moore Corp. Ltd. 616,000 11,627,000 - ----------------------------------------------------------------------------------------------------------------------------------- Electronics--0.5% Tektronix, Inc. 275,000 12,306,250
9 Oppenheimer Equity Income Fund
Statement of Investments (Continued) Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Utilities--4.2% - ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities--3.7% Allegheny Power System, Inc. 300,000 $ 9,262,500 --------------------------------------------------------------------------------------------------------------- Central & South West Corp. 400,000 11,600,000 --------------------------------------------------------------------------------------------------------------- DTE Energy Co. 300,000 9,262,500 --------------------------------------------------------------------------------------------------------------- Entergy Corp. 550,000 15,606,250 --------------------------------------------------------------------------------------------------------------- Florida Progress Corp. 500,000 17,375,000 --------------------------------------------------------------------------------------------------------------- Ohio Edison Co. 400,000 8,750,000 --------------------------------------------------------------------------------------------------------------- Potomac Electric Power Co. 400,000 10,600,000 --------------------------------------------------------------------------------------------------------------- Public Service Co. of Colorado 200,000 7,350,000 -------------- 89,806,250 - ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities--0.1% NorAm Energy Corp. 225,000 2,446,875 - ----------------------------------------------------------------------------------------------------------------------------------- Telephone Utilities--0.4% Portugal Telecom SA, Sponsored ADR 410,000 10,762,500 -------------- Total Common Stocks (Cost $844,970,239) 1,240,976,081 =================================================================================================================================== Preferred Stocks--4.7% --------------------------------------------------------------------------------------------------------------- Armco, Inc., $3.625 Cum. Cv.(10) 200,000 9,475,000 --------------------------------------------------------------------------------------------------------------- Banco Commercial Portuguese International Bank Ltd., 8% Cv. Preferred Stock, Series A 396,000 19,701,000 --------------------------------------------------------------------------------------------------------------- Case Equipment Corp., Cum. Cv., Series A(5) 65,000 7,621,250 --------------------------------------------------------------------------------------------------------------- Fidelity Federal Bank, 12% Non-Cum. Exchangeable Perpetual Preferred Stock, Series A(10) 100,000 2,750,000 --------------------------------------------------------------------------------------------------------------- First Chicago NBD Corp., Depositary Shares (each representing a one-hundredth interest in a share of 5.75% cum. cv. preferred stock, series B) 135,000 8,994,375 --------------------------------------------------------------------------------------------------------------- Glendale Federal Bank, F.S.B., 8.75% Non-Cum. Cv., Series E 200,000 9,600,000 --------------------------------------------------------------------------------------------------------------- Noble Drilling Corp., $1.50 Cv. Exchangeable 92,000 3,243,000 --------------------------------------------------------------------------------------------------------------- Noram Financing I, 6.25% Cv. Preferred Stock 85,000 4,611,250 --------------------------------------------------------------------------------------------------------------- Occidental Petroleum Corp., $3.875 Cum. Cv. (7) 400,000 23,850,000 --------------------------------------------------------------------------------------------------------------- Sovereign Bancorp Inc., 6.25% Cv., Series B 36,500 2,071,375 --------------------------------------------------------------------------------------------------------------- Valero Energy Corp., 6.25% Cv. Preferred 200,000 10,500,000 --------------------------------------------------------------------------------------------------------------- Washington Mutual, Inc., $6.00 Non-Cum. Cv. Perpetual Preferred Stock, Series D 96,800 11,325,600 -------------- Total Preferred Stocks (Cost $99,577,538) 113,742,850 =================================================================================================================================== Other Securities--10.3% - ----------------------------------------------------------------------------------------------------------------------------------- Allstate Corp., $2.30 Debt Exchangeable for Common Stock of PMI Group, Inc. 111,000 4,384,500 --------------------------------------------------------------------------------------------------------------- American Express Co., Debt Exchangeable for Common Stock of First Data Corp., 6.25%, 10/15/96 450,000 29,531,250 --------------------------------------------------------------------------------------------------------------- American General Delaware, LLC, $3.00 Cv Monthly Income Preferred Securities, Series A 75,000 3,937,500 --------------------------------------------------------------------------------------------------------------- Atlantic Richfield Co., 9% Exchangeable Notes for Common Stock of Lyondell Petrochemical Co., 9/15/97 400,000 9,750,000 --------------------------------------------------------------------------------------------------------------- Browning-Ferris Industries, Inc., 7.25% Cv. Automatic Common Exchangeable Securities 225,000 7,143,750
10 Oppenheimer Equity Income Fund
Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Other Securities (continued) Compania de Inversiones en Telecomunicaciones SA, Provisionally Redeemable Income Debt Exchangeable for Stock, 7%, 3/3/98(7) 200,000 $ 11,725,000 --------------------------------------------------------------------------------------------------------------- Continental Airlines Finance Trust, 8.50% Cv. Trust Originated Preferred Securities(7) 250,000 18,375,000 --------------------------------------------------------------------------------------------------------------- Corning Delaware LP, 6% Cv. Monthly Income Preferred Securities 150,000 8,568,750 --------------------------------------------------------------------------------------------------------------- Elsag Bailey Financing Trust, 5.50% Cv. Trust Originated Preferred Securities(7) 250,000 12,375,000 --------------------------------------------------------------------------------------------------------------- Enron Corp., 6.25% Cv. Automatic Common Exchangeable Securities, redeemable into Enron Oil & Gas Co. Common Stock 270,000 6,986,250 --------------------------------------------------------------------------------------------------------------- James River Corp. of Virginia, Depositary Shares each representing a one-hundredth interest in a share of Series P, 9% Cum. Cv. Preferred Stock, Dividend Enhanced Convertible Stock 700,000 17,675,000 --------------------------------------------------------------------------------------------------------------- MCN Corp., 8.75% Cv. Preferred Redeemable Increased Dividend Equity Securities(9) 135,000 3,442,500 --------------------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc., 6% Cv. Preferred, Structured Yield Product Exchangeable for Cox Communications, Inc., Common Stock(9) 202,500 4,480,313 --------------------------------------------------------------------------------------------------------------- Owens Corning Capital LLC, 6.50% Cv. Monthly Income Preferred Securities, Non-Vtg.(7) 200,000 11,275,000 --------------------------------------------------------------------------------------------------------------- Reynolds Metals Co., 7% Preferred Redeemable Increased Dividend Equity Securities, $3.31 Cv., 12/31/97 160,000 7,420,000 --------------------------------------------------------------------------------------------------------------- RJR Nabisco Holdings Corp., $6.50 Cv., Series C 4,315,000 28,047,500 --------------------------------------------------------------------------------------------------------------- Salomon, Inc., 7.625% Cv. Preferred, Debt Exchangeable for Common Stock(9) 460,000 12,650,000 --------------------------------------------------------------------------------------------------------------- Santa Fe Energy Resources, Inc., 8.25% Dividend Enhanced Convertible Stock(10) 805,000 8,855,000 --------------------------------------------------------------------------------------------------------------- U S West, Inc., 7.625% Cv. Debt Exchangeable for Common Stock of Enhance Financial Services Group, Inc. 415,000 11,464,375 --------------------------------------------------------------------------------------------------------------- U.S. Surgical Corp., $2.20 Depositary Shares representing one-fiftieth share of Series A Preferred Stock 550,000 17,118,750 --------------------------------------------------------------------------------------------------------------- Westinghouse Electric Corp., Participating Equity Preferred Shares, $1.30 Cv., Series C(7) 600,000 10,575,000 -------------- Total Other Securities (Cost $206,995,502) 245,780,438 Units =================================================================================================================================== Rights, Warrants and Certificates--0.0% - ----------------------------------------------------------------------------------------------------------------------------------- Tandon Computers Wts., Exp. 11/93 379 -- --------------------------------------------------------------------------------------------------------------- Venezuela Government Wts., Exp. 4/20 100,000 -- --------------- Total Rights, Warrants and Certificates (Cost $0) --
11 Oppenheimer Equity Income Fund
Statement of Investments (Continued) Face Market Value Amount(1) See Note 1 =================================================================================================================================== Structured Instrument--0.2% - ----------------------------------------------------------------------------------------------------------------------------------- CS First Boston Corp. Argentina Structured Product Asset Return Trust Certificates, 9.40%, 9/1/97 [representing debt of Argentina (Republic of) Bonos del Tesoro Bonds, Series II, 5.492%, 9/1/97 and an interest rate swap between Credit Suisse Financial Products and the Trust] (Cost $4,000,000)(7) $ 4,000,000 $ 3,979,564 =================================================================================================================================== Repurchase Agreement--3.9% - ----------------------------------------------------------------------------------------------------------------------------------- Repurchase agreement with J. P. Morgan Securities, Inc., 5.45%, dated 6/28/96, to be repurchased at $94,242,783 on 7/1/96, collateralized by U.S. Treasury Bonds, 11.25%, 2/15/15, with a value of $87,956,225, and U.S. Treasury Nts., 8.50%, 5/15/97 with a value of $8,846,932 (Cost $94,200,000) 94,200,000 94,200,000 - ----------------------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $1,917,014,485) 99.4% 2,385,149,752 - ----------------------------------------------------------------------------------------------------------------------------------- Other Assets Net of Liabilities 0.6 13,862,694 -------------- -------------- Net Assets 100.0% $2,399,012,446 ============== ==============
1. Face amount is reported in U.S. Dollars, except for those denoted in the following currencies: AUD--Australian Dollar CAD--Canadian Dollar 2. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 3. Represents the current interest rate for an increasing rate security. 4. Represents the current interest rate for a variable rate security. 5. Identifies issues considered to be illiquid--See Note 5 of Notes to Financial Statements. 6. Denotes a step bond: a zero coupon bond that converts to a fixed rate of interest at a designated future date. 7. Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $114,898,939 or 4.79% of the Fund's net assets, at June 30, 1996. 8. Interest or dividend is paid in kind. 9. Non-income producing security. 10. Affiliated company. Represents ownership of at least 5% of the voting securities of the issuer and is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended June 30, 1996. The aggregate fair value of all securities of affiliated companies as of June 30, 1996 amounted to $18,330,000. Transactions during the period in which the issuer was an affiliate are as follows:
Balance Balance June 30, 1995 Gross Additions Gross Reductions June 30, 1996 ------------- --------------- ---------------- ------------- Dividend Shares Cost Shares Cost Shares Cost Shares Cost Income - ----------------------------------------------------------------------------------------------------------------------------------- Armco, Inc., $3.625 Cum. Cv. -- $ -- 200,000 $9,966,165 -- $ -- 200,000 $9,966,165 $725,000 - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity Federal Bank, 12% Non-Cum. Exchangeable Perpetual Preferred Stock, Series A(11) -- -- 100,000 2,500,000 -- -- 100,000 2,500,000 150,000 - ----------------------------------------------------------------------------------------------------------------------------------- Santa Fe Energy Resources, Inc., 8.25% Dividend Enhanced Convertible Stock -- -- 805,000 7,144,375 -- -- 805,000 7,144,375 589,260 ----------- ----------- ----------- ----------- ----------- $ -- $19,610,540 $ -- $19,610,540 $1,464,260 =========== =========== =========== =========== ========== 11. No longer an affiliate at June 30, 1996. See accompanying Notes to Financial Statements.
12 Oppenheimer Equity Income Fund
Statement of Assets and Liabilities June 30, 1996 =================================================================================================================================== Assets Investments, at value--see accompanying statement: Unaffiliated companies (cost $1,897,403,945) $2,366,819,752 Affiliated companies (cost $19,610,540) 18,330,000 --------------------------------------------------------------------------------------------------------------- Cash 1,863,490 --------------------------------------------------------------------------------------------------------------- Receivables: Interest and dividends 17,315,258 Shares of beneficial interest sold 1,615,417 --------------------------------------------------------------------------------------------------------------- Other 409,304 -------------- Total assets 2,406,353,221 =================================================================================================================================== Liabilities Payables and other liabilities: Shares of beneficial interest redeemed 4,655,753 Distribution and service plan fees 1,159,715 Dividends 830,391 Shareholder reports 348,299 Transfer and shareholder servicing agent fees 153,656 Trustees' fees 3,404 Other 189,557 -------------- Total liabilities 7,340,775 ==================================================================================================================================== Net Assets $2,399,012,446 ============== =================================================================================================================================== Composition of Net Assets Paid-in capital $1,872,514,684 --------------------------------------------------------------------------------------------------------------- Undistributed net investment income 2,274,563 --------------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investment transactions 56,078,570 --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments 468,144,629 -------------- Net assets $2,399,012,446 ============== =================================================================================================================================== Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $2,140,809,971 and 187,893,082 shares of beneficial interest outstanding) $11.39 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $12.08 --------------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price and offering price per share (based on net assets of $252,366,388 and 22,267,580 shares of beneficial interest outstanding) $11.33 --------------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price and offering price per share (based on net assets of $5,836,087 and 514,164 shares of beneficial interest outstanding) $11.35 See accompanying Notes to Financial Statements.
13 Oppenheimer Equity Income Fund
Statement of Operations For the Year Ended June 30, 1996 =================================================================================================================================== Investment Income Interest $68,337,314 --------------------------------------------------------------------------------------------------------------- Dividends: Unaffiliated companies (net of withholding taxes of $259,580) 52,472,894 Affiliated companies 1,464,260 ------------ Total income 122,274,468 =================================================================================================================================== Expenses Management fees--Note 4 12,078,956 --------------------------------------------------------------------------------------------------------------- Distribution and service plan fees--Note 4: Class A 3,872,138 Class B 2,077,724 Class C 16,702 --------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees--Note 4 2,688,008 --------------------------------------------------------------------------------------------------------------- Shareholder reports 608,737 --------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 165,431 --------------------------------------------------------------------------------------------------------------- Registration and filing fees: Class A 53,250 Class B 33,448 Class C 2,141 --------------------------------------------------------------------------------------------------------------- Legal and auditing fees 80,779 --------------------------------------------------------------------------------------------------------------- Trustees' fees and expenses 66,081 --------------------------------------------------------------------------------------------------------------- Insurance expenses 42,476 --------------------------------------------------------------------------------------------------------------- Other 167,101 ------------ Total expenses 21,952,972 =================================================================================================================================== Net Investment Income 100,321,496 =================================================================================================================================== Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 75,856,513 Foreign currency transactions (4,049,609) ------------ Net realized gain 71,806,904 --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments 198,519,095 Translation of assets and liabilities denominated in foreign currencies 8,097,685 ------------ Net change 206,616,780 ------------ Net realized and unrealized gain 278,423,684 =================================================================================================================================== Net Increase in Net Assets Resulting From Operations $378,745,180 ============ See accompanying Notes to Financial Statements.
14 Oppenheimer Equity Income Fund
Statements of Changes in Net Assets Year Ended June 30, ----------------------- 1996 1995 =================================================================================================================================== Operations Net investment income $100,321,496 $97,932,280 --------------------------------------------------------------------------------------------------------------- Net realized gain 71,806,904 33,525,676 --------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation 206,616,780 153,278,187 -------------- -------------- Net increase in net assets resulting from operations 378,745,180 284,736,143 =================================================================================================================================== Dividends and Distributions to Shareholders Dividends from net investment income: Class A (88,933,508) (88,319,907) Class B (7,653,335) (5,380,964) Class C (81,369) -- --------------------------------------------------------------------------------------------------------------- Distributions from net realized gain: Class A (45,033,840) (23,241,171) Class B (4,472,521) (1,584,662) Class C (15,717) -- ==================================================================================================================================== Beneficial Interest Transactions Net increase (decrease) in net assets resulting from beneficial interest transactions--Note 2: Class A 35,013,412 (34,706,185) Class B 70,965,886 62,397,726 Class C 5,782,628 -- =================================================================================================================================== Net Assets Total increase 344,316,816 193,900,980 --------------------------------------------------------------------------------------------------------------- Beginning of period 2,054,695,630 1,860,794,650 -------------- -------------- End of period [including undistributed (overdistributed) net investment income of $2,274,563 and ($970,447), respectively] $2,399,012,446 $2,054,695,630 ============== ============== See accompanying Notes to Financial Statements.
15 Oppenheimer Equity Income Fund Financial Highlights
Class A ------------------------------------------------------------------------------------ Year Ended June 30, 1996 1995 1994 1993 1992 =================================================================================================================================== Per Share Operating Data: Net asset value, beginning of period $10.25 $9.44 $10.01 $9.15 $8.86 - ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .50 .50 .47 .50 .50 Net realized and unrealized gain (loss) 1.36 .92 (.39) .99 .39 ---------- ---------- ---------- ---------- ---------- Total income (loss) from investment operations 1.86 1.42 .08 1.49 .89 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends and distributions to shareholders: Dividends from net investment income (.48) (.48) (.47) (.48) (.48) Dividends in excess of net investment income -- -- (.01) -- -- Distributions from net realized gain (.24) (.13) (.12) (.15) (.12) Distributions in excess of capital gains -- -- (.05) -- -- ---------- ---------- ---------- ---------- ---------- Total dividends and distributions to shareholders (.72) (.61) (.65) (.63) (.60) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $11.39 $10.25 $9.44 $10.01 $9.15 ========== ========== ========== ========== ========== ==================================================================================================================================== Total Return, at Net Asset Value(3) 18.61% 15.66% 0.65% 16.76% 10.26% ==================================================================================================================================== Ratios/Supplemental Data: Net assets, end of period (in thousands) $2,140,810 $1,893,249 $1,772,944 $1,790,346 $1,555,924 - ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $2,054,132 $1,797,670 $1,831,606 $1,657,692 $1,525,599 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net investment income 4.51% 5.15% 4.72% 5.12% 5.33% Expenses 0.89% 0.96% 0.90% 0.79% 0.82% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(5) 42.9% 45.7% 30.4% 59.0% 37.0% Average brokerage commission rate(6) $0.0592 -- -- -- -- Class B Class C -------------------------------------------- ---------------- Period Ended Year Ended June 30, June 30, 1996 1995 1994(2) 1996(1) ================================================================================ $10.21 $9.40 $10.22 $10.76 - -------------------------------------------------------------------------------- .41 .43 .36 .28 1.35 .91 (.58) .88 -------- -------- ------- ------ 1.76 1.34 (.22) 1.16 - -------------------------------------------------------------------------------- (.40) (.40) (.42) (.33) -- -- (.01) -- (.24) (.13) (.12) (.24) -- -- (.05) -- -------- -------- ------- ------ (.64) (.53) (.60) (.57) - -------------------------------------------------------------------------------- $11.33 $10.21 $9.40 $11.35 ======== ======== ======= ====== ================================================================================ 17.58% 14.87% (2.35)% 10.50% ================================================================================ $252,366 $161,447 $87,850 $5,836 - -------------------------------------------------------------------------------- $207,785 $122,471 $47,414 $2,535 - -------------------------------------------------------------------------------- 3.68% 4.34% 3.99%(4) 3.53%(4) 1.72% 1.79% 1.82%(4) 1.81%(4) - -------------------------------------------------------------------------------- 42.9% 45.7% 30.4% 42.9% $0.0592 -- -- $0.0592
1. For the period from November 1, 1995 (inception of offering) to June 30, 1996. 2. For the period from August 17, 1993 (inception of offering) to June 30, 1994. 3. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 4. Annualized. 5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended June 30, 1996 were $1,162,412,317 and $911,585,778, respectively. 6. Total brokerage commissions paid on applicable purchases and sales of portfolio securities for the period divided by the total number of related shares purchased and sold. See accompanying Notes to Financial Statements. 16 Oppenheimer Equity Income Fund Notes to Financial Statements ================================================================================ 1. Significant Accounting Policies Oppenheimer Equity Income Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund's investment objective is to seek as much current income as is compatible with prudent investment. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge. Class B and Class C shares may be subject to a contingent deferred sales charge. All classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution and/or service plan, expenses directly attributable to a particular class and exclusive voting rights with respect to matters affecting a single class. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Investment Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on each trading day. Listed and unlisted securities for which such information is regularly reported are valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid or asked price or the last sale price on the prior trading day. Long-term and short-term "non-money market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Such securities which cannot be valued by the approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited. - -------------------------------------------------------------------------------- Allocation of Income, Expenses and Gains and Losses. Income, expenses (other than those attributable to a specific class) and gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income or excise tax provision is required. - -------------------------------------------------------------------------------- Distributions to Shareholders. Dividends and distributions to shareholders are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of the distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gain (loss) was recorded by the Fund. 17 Oppenheimer Equity Income Fund Notes to Financial Statements (Continued) ================================================================================ 1. Significant Accounting Policies (continued) During the year ended June 30, 1996, the Fund changed the classification of distributions to shareholders to better disclose the differences between the financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended June 30, 1996, amounts have been reclassified to reflect a decrease in undistributed net investment income of $408,274 and accumulated net realized gain on investments was increased by the same amount. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for on the date the investments are purchased or sold (trade date) and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made on the ex-date. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
Year Ended June 30, 1996(1) Year Ended June 30, 1995 ------------------------------- -------------------------------- Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------------------------------ Class A: Sold 20,146,940 $ 223,283,409 19,327,605 $ 207,336,132 Dividends and distributions reinvested 11,433,753 125,568,723 11,012,028 83,402,034 Redeemed (28,310,542) (313,838,720) (33,557,623) (325,444,351) ----------- ------------- ----------- ------------ Net increase (decrease) 3,270,151 $ 35,013,412 (3,217,990) $ (34,706,185) =========== ============= =========== ============= - ------------------------------------------------------------------------------------------------------------------------------------ Class B: Sold 8,424,677 $ 92,863,112 7,529,176 $ 72,586,104 Dividends and distributions reinvested 1,014,528 11,086,597 670,317 6,342,433 Redeemed (2,987,292) (32,983,823) (1,724,724) (16,530,811) ----------- ------------- ----------- ------------ Net increase 6,451,913 $ 70,965,886 6,474,769 $ 62,397,726 =========== ============= =========== ============= - ------------------------------------------------------------------------------------------------------------------------------------ Class C: Sold 523,531 $ 5,887,218 -- $ -- Dividends and distributions reinvested 8,456 94,181 -- -- Redeemed (17,823) (198,771) -- -- ----------- ------------- ----------- ------------ Net increase 514,164 $ 5,782,628 -- $ -- =========== ============= =========== =============
1. For the year ended June 30, 1996 for Class A and Class B shares and for the period from November 1, 1995 (inception of offering) to June 30, 1996 for Class C shares. 18 Oppenheimer Equity Income Fund ================================================================================ 3. Unrealized Gains and Losses On Investments At June 30, 1996, net unrealized appreciation on investments of $468,135,267 was composed of gross appreciation of $484,273,537, and gross depreciation of $16,138,270. ================================================================================ 4. Management Fees and Other Transactions With Affiliates Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee of 0.75% on the first $100 million of average annual net assets with a reduction of 0.05% on each $100 million thereafter, to 0.50% on net assets in excess of $500 million. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions) exceed 1.5% of the first $30 million of average annual net assets of the Fund, plus 1% of average annual net assets in excess of $30 million. For the year ended June 30, 1996, commissions (sales charges paid by investors) on sales of Class A shares totaled $4,966,513, of which $1,546,454 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B and Class C shares totaled $2,939,846 and $55,998, of which $227,772 and $1,807, respectively, was paid to an affiliated broker/dealer. During the year ended June 30, 1996, OFDI received contingent deferred sales charges of $360,582 and $1,547, respectively, upon redemption of Class B and Class C shares as reimbursement for sales commissions advanced by OFDI at the time of sale of such shares. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund, and for other registered investment companies. OFS's total costs of providing such services are allocated ratably to these companies. Under separate approved plans, each class may expend up to 0.25% of its net assets annually to compensate OFDI for costs incurred in connection with the personal service and maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other institutions. In addition, Class B and Class C shares are subject to an asset-based sales charge of 0.75% of net assets annually, to compensate OFDI for sales commissions paid from its own resources at the time of sale and associated financing costs. In the event of termination or discontinuance of the Class B or Class C plan, the Board of Trustees may allow the Fund to continue payment of the asset-based sales charge to OFDI for distribution expenses incurred on Class B or Class C shares sold prior to termination or discontinuance of the plan. At June 30, 1996, OFDI had incurred unreimbursed expenses of $7,770,045 for Class B and $92,125 for Class C. During the year ended June 30, 1996, OFDI paid $248,431 and $34,064, respectively, to an affiliated broker/dealer as compensation for Class A and Class B personal service and maintenance expenses, and retained $1,728,635 and $16,702, respectively, as compensation for Class B and Class C sales commissions and service fee advances, as well as financing costs. ================================================================================ 5. Illiquid and Restricted Securities At June 30, 1996, investments in securities included issues that are illiquid or restricted. The securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed from time to time) in illiquid or restricted securities. The aggregate value of these securities subject to this limitation at June 30, 1996 was $7,621,250, which represents 0.32% of the Fund's net assets. Information concerning these securities is as follows:
Valuation Per Unit Security Acquisition Date Cost Per Unit as of June 30, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Case Equipment Corp., Cum. Cv., Series A 6/30/94 $50.09 $117.25
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. 19 Oppenheimer Equity Income Fund Independent Auditors' Report ================================================================================ The Board of Trustees and Shareholders of Oppenheimer Equity Income Fund: We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Oppenheimer Equity Income Fund as of June 30, 1996, the related statement of operations for the year then ended, the statements of changes in net assets for the years ended June 30, 1996 and 1995, and the financial highlights for the period July 1, 1991 to June 30, 1996. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at June 30, 1996 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Oppenheimer Equity Income Fund at June 30, 1996, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Denver, Colorado July 22, 1996 20 Oppenheimer Equity Income Fund Federal Income Tax Information (Unaudited) ================================================================================ In early 1997, shareholders will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 1996. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Distributions of $.3645, $.3428 and $.3612 per share, for Class A, Class B, and Class C respectively, were paid on December 26, 1995, of which $.1437 was designated as a "capital gain distribution" for federal income tax purposes. Whether received in stock or cash, the capital gain distribution should be treated by shareholders as a gain from the sale of capital assets held for more than one year (long-term capital gains). Dividends paid by the Fund during the fiscal year ended June 30, 1996 which are not designated as capital gain distributions should be multiplied by 46.09% to arrive at the net amount eligible for the corporate dividend-received deduction. The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. 21 Oppenheimer Equity Income Fund Oppenheimer Equity Income Fund ================================================================================ Officers and Trustees James C. Swain, Chairman and Chief Executive Officer Bridget A. Macaskill, Trustee and President Robert G. Avis, Trustee William A. Baker, Trustee Charles Conrad, Jr., Trustee Jon S. Fossel, Trustee Sam Freedman, Trustee Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee Robert M. Kirchner, Trustee Ned M. Steel, Trustee George C. Bowen, Vice President, Treasurer and Assistant Secretary Andrew J. Donohue, Vice President and Secretary John P. Doney, Vice President Robert J. Bishop, Assistant Treasurer Scott T. Farrar, Assistant Treasurer Robert G. Zack, Assistant Secretary ================================================================================ Investment Advisor OppenheimerFunds, Inc. ================================================================================ Distributor OppenheimerFunds Distributor, Inc. ================================================================================ Transfer and Shareholder Servicing Agent OppenheimerFunds Services ================================================================================ Custodian of Portfolio Securities The Bank of New York ================================================================================ Independent Auditors Deloitte & Touche LLP ================================================================================ Legal Counsel Myer, Swanson, Adams & Wolf, P.C. This is a copy of a report to shareholders of Oppenheimer Equity Income Fund. This report must be preceded by a Prospectus of Oppenheimer Equity Income Fund. For material information concerning the Fund, see the Prospectus. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, and are not insured by the FDIC or any other agency, and involve investment risks, including possible loss of the principal amount invested. 22 Oppenheimer Equity Income Fund OppenheimerFunds Family ================================================================================ OppenheimerFunds offers over 50 funds designed to fit virtually every investment goal. Whether you're investing for retirement, your children's education or tax-free income, we have the funds to help you seek your objective. When you invest with OppenheimerFunds, you can feel comfortable knowing that you are investing with a respected financial institution with over 35 years of experience in helping people just like you reach their financial goals. And you're investing with a leader in global, growth stock and flexible fixed-income investments--with over 3 million shareholder accounts and more than $50 billion under OppenheimerFunds' management and that of our affiliates. At OppenheimerFunds we don't charge a fee to exchange shares. And you can exchange shares easily by mail or by telephone.(1) For more information on Oppenheimer funds, please contact your financial advisor or call us at 1-800-525-7048 for a prospectus. You may also write us at the address shown on the back cover. As always, please read the prospectus carefully before you invest. ================================================================================ Stock Funds Global Emerging Growth Fund Growth Fund Enterprise Fund(2) Global Fund International Growth Fund Quest Global Value Fund Discovery Fund Disciplined Value Fund Quest Small Cap Value Fund Oppenheimer Fund Gold & Special Minerals Fund Value Stock Fund Target Fund Quest Value Fund ================================================================================ Stock & Bond Funds Main Street Income & Growth Fund Equity Income Fund Quest Opportunity Value Fund Disciplined Allocation Fund Total Return Fund Asset Allocation Fund Quest Growth & Income Value Fund Strategic Income & Growth Fund Global Growth & Income Fund Bond Fund for Growth ================================================================================ Bond Funds International Bond Fund Bond Fund High Yield Fund U.S. Government Trust Champion Income Fund Limited-Term Government Fund Strategic Income Fund ================================================================================ Tax-Exempt Funds California Tax-Exempt Fund(3) Insured Tax-Exempt Fund Florida Tax-Exempt Fund(3) Intermediate Tax-Exempt Fund New Jersey Tax-Exempt Fund(3) New York Tax-Exempt Fund(3) Rochester Division Pennsylvania Tax-Exempt Fund(3) Rochester Fund Municipals Tax-Free Bond Fund Limited Term New York Municipal Fund ================================================================================ Money Market Funds(4) Money Market Fund Cash Reserves ================================================================================ LifeSpan Growth Fund Income Fund Balanced Fund 1. Exchange privileges are subject to change or termination. Shares may be exchanged only for shares of the same class of eligible funds. 2. Effective 4/1/96, the Fund is closed to new investors. 3. Available only to investors in certain states. 4. An investment in money market funds is neither insured nor guaranteed by the U.S. government and there can be no assurance that a money market fund will be able to maintain a stable net asset value of $1.00 per share. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two World Trade Center, New York, NY 10048-0203. (C) Copyright 1996 OppenheimerFunds, Inc. All rights reserved. 23 Oppenheimer Equity Income Fund [BACK COVER] Information General Information Monday-Friday 8:30 a.m.-9 p.m. ET Saturday 10 a.m.-2 p.m. ET 1-800-525-7048 Telephone Transactions Monday-Friday 8:30 a.m.-8 p.m. ET 1-800-852-8457 PhoneLink 24 hours a day, automated information and transactions 1-800-533-3310 Telecommunications Device for the Deaf (TDD) Monday-Friday 8:30 a.m.-8 p.m. ET 1-800-843-4461 OppenheimerFunds Information Hotline 24 hours a day, timely and insightful messages on the economy and issues that affect your investments 1-800-835-3104 RA0300.001.0696 August 31, 1996 [Picture of Jennifer Leonard] [Caption] Jennifer Leonard, Customer Service Representative OppenheimerFunds Services "How may I help you?" As an Oppenheimer fund shareholder, you have some special privileges. Whether it's automatic investment plans, informative newsletters and hotlines, or ready account access, you can benefit from services designed to make investing simple. And when you need help, our Customer Service Representatives are only a toll-free phone call away. They can provide information about your account and handle administrative requests. You can reach them at our General Information number. When you want to make a transaction, you can do it easily by calling our toll-free Telephone Transactions number. And, by enrolling in AccountLink, a convenient service that "links" your Oppenheimer funds accounts and your bank checking or savings account, you can use the Telephone Transactions number to make investments. For added convenience, you can get automated information with OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week. PhoneLink gives you access to a variety of fund, account, and market information. Of course, you can always speak with a Customer Service Representative during the General Information hours shown at the left. You can count on us whenever you need assistance. That's why the International Customer Service Association, an independent, nonprofit organization made up of over 3,200 customer service management professionals from around the country, honored the Oppenheimer funds' transfer agent, OppenheimerFunds Services, with their Award of Excellence in 1993. So call us today--we're here to help. [Oppenheimer Logo (R)] OppenheimerFunds Distributor, Inc. P.O. Box 5270 Denver, CO 80217-5270 - --------------------------------------------- Bulk Rate U.S. Postage PAID Permit No. 130 Torrington, CT - --------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----