-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CPSheWXbyHrtm9Dhx6nCD8kha8KnfAe6kLq856nL5pz0daAK8oCLrPvmWuTMQfuM U3l+JoH0TE9NpxJ73jmIlQ== 0000950146-95-000083.txt : 19950613 0000950146-95-000083.hdr.sgml : 19950613 ACCESSION NUMBER: 0000950146-95-000083 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950308 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: 95519252 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 EQUITY INCOME FUND ANNUAL REPORT Oppenheimer Equity Income Fund Semiannual Report December 31, 1994 "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) News "Since mid-1992, the Fund has hovered in the equity-income group's top half. An attractively high yield and a low risk score adds to its appeal." --Morningstar Mutual Funds 12/23/94 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 the fixed income and other dividend-paying securities in the Fund's portfolio, 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 is reduced. And to maintain performance while offsetting risks in this year's volatile markets, your managers have increased the holdings of quality stocks over their previous level. Performance Total return at net asset value for the 6-month period ended 12/31/94 was 0.67% for Class A shares and 0.28% for Class B shares.1 The financial markets had a difficult year and, like many mutual funds, your Fund felt the effects. While difficult years are hard to accept, they're an inevitable part of investing. That's why keeping a long-term perspective is crucial to getting the most from your investment and helping you through short-term market fluctuations. Your Fund's average annual total returns at maximum offering price for Class A shares for the 1-, 5-, and 10-year periods ended 12/31/94 and since inception of the Class on 12/1/70 were -8.38%, 5.39%, 11.26% and 14.08%, respectively. For Class B shares, average annual total returns for the 1-year period ended 12/31/94 and since inception of the Class on 8/17/93 were -8.18% and -4.14%, respectively.2 Outlook "Investment expectations have shifted over the past year from low interest rates and low inflation to higher rates and somewhat higher inflation; from an emphasis on growth to an emphasis on earnings; and from low volatility to higher volatility. In this environment, we've positioned the portfolio somewhat more defensively, with an emphasis on income and earnings stability." John Doney, Portfolio Manager December 31, 1994 1. Based on the change in net asset value per share from 6/30/94 to 12/31/94, without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. 2. Average annual total returns for Class A shares are based on a hypothetical investment held until 12/31/94, after deducting the current maximum initial sales charge of 5.75%. A contingent deferred sales charge of 5% (1-year) and 4% (since inception) is deducted for Class B shares. The Fund's maximum sales charge rate 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 A and Class B shares were first publicly offered on 12/1/70 and 8/17/93, respectively. All figures assume reinvestment of dividends and capital gains distributions. Past performance is not indicative of future results. Investment and principal value on an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. 2 Oppenheimer Equity Income Fund Dear OppenheimerFunds Shareholder, The past year has been a difficult period for the stock market, one marked above all by one of the most aggressive series of moves to raise interest rates in the U.S. Federal Reserve's history. As interest rates moved up, bond prices fell and the stock market followed, while investors looked everywhere for answers to questions about directions in inflation, interest rates, and the economy. These questions all concerned one basic issue: Is the bull market in stocks coming to an end? In our view, it is not. While we are not expecting major gains in stock prices in the very near term, we believe that the uncertainties which held the market back in 1994 will recede in 1995 as the fundamental positives in the economy are recognized. The most important of these positives is our belief that the Fed's attempt to preempt possible inflation, while temporarily disconcerting, will likely have its desired effect in 1995. We believe that the economy will begin to slow, and although short-term rates may move up modestly from their present levels, long-term interest ratesthe ones that most affect securities pricesshould stabilize in their current range. Long-term rates may even begin to decline as overblown concerns about inflation abate. Those concerns are, in fact, already fading. While the prices of some commodities have risen over the past year and U.S. manufacturing capacity utilization and employment rose to their highest levels in years, in today's globally competitive environment, price increases are difficult to pass on to either consumers or businesses. The inflation rateas measured by the Consumer Price Index continues to run at less than 3% a year, and there's nothing on the horizon to suggest to us that it will increase substantially anytime soon. Even at their current levels, interest rates remain low relative to recent periods, and in our view, pose no real threat to most companies' earnings or cash flows. During the most recent recession, many businesses learned to operate much more efficiently and took advantage of the extended decline in interest rates to work down their debt loads and strengthen their financial positions. As a result, corporate profits have soared despite higher interest rates. And we believe that business earnings should grow even more as economies in Europe and elsewhere emerge from their recessions, stimulating demand for U.S. companies' goods and services. As profits rise, we expect stocks to become more valuable. Finally, the changing political landscape reflected in results of the mid-term election bodes well for the stock market over time. In addition to limiting the expectation that Congress will pass potentially inflationary government spending proposals, the realignment in Washington has raised the possibility of tax relief in the form of an expanded deduction for individual retirement savings or possibly a reduction in the capital gains tax rate. What specific action, if any, Congress will take on these proposals remains to be seen. But any action to reduce the federal deficit, cut spending, and reduce taxes should be good news for the stock market overall. In light of all these factors, we remain bullish on stocks. As we have noted in previous reports, we're expecting moderate gains in the short-term, in line with increasing corporate earnings. Over time, however, we expect stocks to perform well in both the U.S. and foreign markets. Your portfolio manager discusses the outlook for your Fund on the following pages. We appreciate your confidence, and we look forward to helping you continue to reach your investment goals. James C. Swain Jon S. Fossel January 23, 1995 James C. Swain Chairman Oppenheimer Equity Income Fund Jon S. Fossel President Oppenheimer Equity Income Fund 3 Oppenheimer Equity Income Fund Q + A An interview with your Fund's manager. The past year was a difficult period for the stock market. How did this affect the Fund's performance? It was tough to make money last year in either the stock market or the bond market, and the income-oriented investments on which Oppenheimer Equity Income Fund focuses faced special challenges as interest rates rose. Instead of looking for big returns, the key to performance in 1994 was to avoid mistakes. We recognized that early on and positioned the Fund's portfolio conservatively. As a result, we held our ground relatively well in some of the most difficult markets we've seen in decades. What adjustments did you make to the Fund's holdings over the past year? On the stock side, we shifted our investments somewhat from stocks in basic industries, whose performance tends to depend on trends in interest rates and the economy, and toward growth stocks that we regard as less volatile and expect to provide above average dividend yields. How did your equity strategy translate into specific purchases and sales? We took profits in a number of companies in basic industries whose prices had appreciated early in the year, such as General Motors, Ford, Chrysler, Deere, and Imperial Chemical, as well as some financial services stocks, whose profit margins may be squeezed if interest rates rise further in 1995. We invested the proceeds from our sales in companies like 3M and Anheuser-Busch.1 These companies have dependable sales and earnings, and they are offering attractive yields. How did your conservative strategy impact the Fund's performance? 1. The Fund's portfolio is subject to change. 4 Oppenheimer Equity Income Fund In addition to stocks and bonds, the Fund has a sizable position in convertible securities. What advantages do convertibles offer today? As interest rates have risen, convertibles have become extremely attractive. We've added several issues, including Corning, Inc. and Case Equipment. At current price levels, convertibles offer attractive yields, which help insulate the portfolio from price volatility. They also offer significant down side protection. The names we own are all financially sound companies that offer significant upside potential. If these companies perform the way we think they will over the next few years, then we'll realize substantial capital appreciation when the securities are converted into common stock. On balance, it appears you didn't significantly change the Fund's portfolio. That's right. We did some fine-tuning and we are somewhat more defensively positioned than we were six months to a year ago, but we didn't make any sweeping changes, mainly because we didn't need to. We saw higher rates coming for some time, and had gradually been positioning the Fund for this environment. What's your outlook for the Fund? In the near term, meaning over the next few months, we're not expecting the markets to move significantly. There's still a lot of uncertainty that needs to be sorted out before we see any major upward moves. Looking out longer, however, to mid-1995 and beyond, our view is very constructive. We believe that inflation today is under control, interest rates have largely stabilized, and the economy is growing at a sustainable pace. As investors recognize those positives, we think that in 1995 earnings will replace interest rates as the force driving stock prices, and that Oppenheimer Equity Income Fund is well positioned to benefit as the market resumes its advance. Facing page Top left: John Doney, Portfolio Manager Top right: The equity trading desk Bottom: Mark Binning, Securities Coordinator, consults with Lawrence Apolito, VP Equity Trading This page Top: John Doney Bottom: Robert Doll, Executive VP and Director of Equity Investments, with his assistant, Pat Andrzejewski A We held our ground relatively well in 1994's difficult markets. 5 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- Statement of Investments December 31, 1994 (Unaudited) --------------------------------------------------------------------------------------------------- Face Market Value Amount(1) See Note 1 =================================================================================================================================== Repurchase Agreements--10.1% - ----------------------------------------------------------------------------------------------------------------------------------- Repurchase agreement with First Chicago Capital Markets, 6%, dated 12/30/94, to be repurchased at $184,623,000 on 1/3/95, collateralized by U.S. Treasury Nts., 3.875%--8.875%, 5/31/95--8/31/05, with a value of $175,457,371 and U.S. Treasury Bonds, 10.75%--14.25%, 2/15/02--8/15/05, with a value of $12,889,185 (Cost $184,500,000) $184,500,000 $184,500,000 =================================================================================================================================== U.S. Government Obligations--14.2% - ----------------------------------------------------------------------------------------------------------------------------------- Treasury--14.2% U.S. Treasury Nts.: 7.50%, 12/31/96 146,500,000 145,996,317 7.625%, 5/31/96 100,000,000 100,187,500 7.875%, 6/30/96 14,200,000 14,275,429 ------------ Total U.S. Government Obligations (Cost $263,056,384) 260,459,246 =================================================================================================================================== Foreign Government Obligations--8.3% - ----------------------------------------------------------------------------------------------------------------------------------- Argentina (Republic of): Bonds, Bonos de Consolidacion de Deudas: Series I, 5.625%, 4/1/01(2) (4) ARA 4,363,391 2,795,071 Series I, 3.17%, 4/1/01(2) (4) ARA 8,921,972 3,791,167 Series I, 5.625%, 4/1/07(2) 2,908,927 1,299,319 Past Due Interest Bonds, 6.50%, 3/31/05(2) 2,500,000 1,598,438 --------------------------------------------------------------------------------------------------- Banco Nacional de Comercio Exterior SNC International Finance BV: Bonds, 9.875%, 6/24/96 23,150,000 22,339,750 Gtd. Matador Bonds, 8%, 8/5/03 2,000,000 1,550,000 --------------------------------------------------------------------------------------------------- Banco Nacional de Obras y Servicios Publicos S.A. Notes, 10.75%, 8/16/96 6,000,000 5,940,000 --------------------------------------------------------------------------------------------------- Bonos de la Tesoreria de la Federacion, 0%, 1/12/95 7,500,000 7,446,222 --------------------------------------------------------------------------------------------------- Brazil (Federal Republic of) Interest Due and Unpaid Bonds, 6.063%, 1/1/01(2) 4,900,000 4,093,031 --------------------------------------------------------------------------------------------------- Canada (Government of) Bonds, Series H62, 9.25%, 10/1/96 CAD 55,800,000 40,174,675 --------------------------------------------------------------------------------------------------- Nafin Securities, Ltd., 6%, 12/19/96 2,000,000 1,815,000 --------------------------------------------------------------------------------------------------- New South Wales State Bank Bonds, 9.25%, 2/3/18 AUD 9,900,000 7,213,463 --------------------------------------------------------------------------------------------------- Ontario Hydro (Province of) Canada Gtd. Debs., 10.875%, 1/8/96 CAD 16,000,000 11,670,475 --------------------------------------------------------------------------------------------------- Quebec, Canada (Province of) Debs., 10.25%, 4/7/98 CAD 10,000,000 7,323,454 --------------------------------------------------------------------------------------------------- Queensland Treasury Corp. Gtd. Nts., 8%, 8/14/01 AUD 33,650,000 23,215,337 --------------------------------------------------------------------------------------------------- South Australia (Government of) Bonds, 9%, 9/2/23 AUD 3,000,000 2,152,448 --------------------------------------------------------------------------------------------------- Spain (Kingdom of): Bonds, 11.45%, 8/30/98 ESP 750,000,000 5,659,042 Gtd. Bonds, Bonos y Obligacion del Estado, 12.25%, 3/25/00 ESP 250,000,000 1,926,327 ------------ Total Foreign Government Obligations (Cost $173,533,774) 152,003,219
6 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- Face Market Value Amount(1) See Note 1 =================================================================================================================================== Non-Convertible Corporate Bonds and Notes--3.8% - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--1.4% - ----------------------------------------------------------------------------------------------------------------------------------- Construction Supplies and Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(3) $ 2,500,000 $ 2,162,500 Development--0.1% - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Goods and WestPoint Stevens, Inc., 8.75% Sr. Nts., 12/15/01 6,000,000 5,565,000 Services--0.3% - ----------------------------------------------------------------------------------------------------------------------------------- Entertainment--0.7% Viacom International, Inc., 10.25% Sr. Sub. Nts., 9/15/01 12,000,000 12,360,000 - ----------------------------------------------------------------------------------------------------------------------------------- Media--0.3% Comcast Corp., 10.25% Sr. Sub. Debs., 10/15/01 6,000,000 5,925,000 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Non-Cyclicals--0.2% - ----------------------------------------------------------------------------------------------------------------------------------- Healthcare--0.2% American Medical International, Inc., 11% Sr. Nts., 10/15/00 4,000,000 4,170,000 - ----------------------------------------------------------------------------------------------------------------------------------- Energy--0.9% Coastal Corp., 11.75% Sr. Debs., 6/15/06 8,946,000 9,549,855 --------------------------------------------------------------------------------------------------- Rowan Cos., Inc., 11.875% Sr. Nts., 12/1/01 7,000,000 7,315,000 ----------- 16,864,855 - ----------------------------------------------------------------------------------------------------------------------------------- Financial--0.2% Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 4,250,000 3,771,875 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial--0.7% - ----------------------------------------------------------------------------------------------------------------------------------- General Industrial--0.7% Imo Industries, Inc., 12.25% Sr. Sub. Debs., 8/15/97 9,684,000 9,671,895 --------------------------------------------------------------------------------------------------- MagneTek, Inc., 10.75% Sr. Sub. Debs., 11/15/98 3,000,000 3,007,500 ----------- 12,679,395 - ----------------------------------------------------------------------------------------------------------------------------------- Technology--0.4% - ----------------------------------------------------------------------------------------------------------------------------------- Cable Television--0.4% Auburn Hills Trust, 12.375% Gtd. Exch. Certificates, 5/1/20(2) 5,000,000 6,518,420 ----------- Total Non-Convertible Corporate Bonds and Notes (Cost $67,183,160) 70,017,045 =================================================================================================================================== Convertible Corporate Bonds and Notes--9.4% - ----------------------------------------------------------------------------------------------------------------------------------- Basic Materials--2.3% - ----------------------------------------------------------------------------------------------------------------------------------- Chemicals--0.3% IMC Global, Inc., 6.25% Cv. Sub. Debs., 12/1/01 5,500,000 5,005,000 - ----------------------------------------------------------------------------------------------------------------------------------- Metals--1.6% Freeport-McMoRan, Inc., 6.55% Cv. Sub. Nts., 1/15/01 10,120,000 9,183,900 --------------------------------------------------------------------------------------------------- Inco, Ltd.: 5.75% Cv. Debs., 7/1/04 9,700,000 10,718,500 7.75% Cv. Debs., 3/15/16 9,800,000 9,640,750 ----------- 29,543,150 - ----------------------------------------------------------------------------------------------------------------------------------- Paper and Forest Stone Container Corp., 8.875% Cv. Sr. Sub. Nts., 7/15/00(3) 5,000,000 8,525,000 Products--0.4% - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--1.5% - ----------------------------------------------------------------------------------------------------------------------------------- Media--1.0% Thomas Nelson, Inc., 5.75% Cv. Nts., 11/30/99(3) 5,000,000 5,900,000 --------------------------------------------------------------------------------------------------- Time Warner, Inc.: 0% Cv. Liq. Yld. Opt. Nts., 12/17/12 30,000,000 9,187,500 8.75% Cv. Sub. Debs., 1/10/15 3,179,000 2,996,208 ----------- 18,083,708
7 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- Statement of Investments (Unaudited) (Continued) --------------------------------------------------------------------------------------------------- Face Market Value Amount(1) See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate Development--0.2% U.S. Home Corp., 4.875% Cv. Sub. Debs., 11/1/05 $ 4,350,000 $ 2,794,875 - ----------------------------------------------------------------------------------------------------------------------------------- Retail--0.3% Carter Hawley Hale Stores, Inc., 6.25% Sr. Sub. Nts., 12/31/00 7,800,000 6,162,000 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Non-Cyclicals--1.1% - ----------------------------------------------------------------------------------------------------------------------------------- Healthcare--0.4% ICN Pharmaceuticals, Inc., 8.50% Cv. Sub. Debs., 11/15/99 7,500,000 7,181,250 - ----------------------------------------------------------------------------------------------------------------------------------- Food--0.7% Kroger Co. (The), 6.375% Cv. Jr. Sub. Nts., 12/1/99 10,000,000 13,200,000 - ----------------------------------------------------------------------------------------------------------------------------------- Energy--0.6% Box Energy Corp., 8.25% Cv. Sub. Nts., 12/1/02 5,000,000 5,225,000 --------------------------------------------------------------------------------------------------- Oryx Energy Co., 7.50% Cv. Sub. Debs., 5/15/14 7,000,000 4,865,000 ----------- 10,090,000 - ----------------------------------------------------------------------------------------------------------------------------------- Financial--2.5% Banco de Galicia y Buenos Aires SA, 7% Cv. Negotiable Obligation Bonds, 8/1/02 10,000,000 7,800,000 --------------------------------------------------------------------------------------------------- Banco Nacional de Mexico SA, 7% Exch. Sub. Debs., 12/15/99(3) 15,000,000 11,850,000 --------------------------------------------------------------------------------------------------- Bank of Boston Corp., 7.75% Cv. Sub. Debs., 6/15/11 9,500,000 10,640,000 --------------------------------------------------------------------------------------------------- Bank of New York Co., Inc. (The), 7.50% Cv. Sub. Debs., 8/15/01 7,750,000 11,789,687 --------------------------------------------------------------------------------------------------- Lend Lease Finance International Ltd., 4.75% Cv. Gtd. Bonds, 6/1/03(3) 4,000,000 4,215,000 ----------- 46,294,687 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial--1.2% - ----------------------------------------------------------------------------------------------------------------------------------- Transportation--1.2% AMR Corp., 6.125% Cv. Sub. Debs., 11/1/24 17,500,000 14,087,500 --------------------------------------------------------------------------------------------------- Delta Airlines, Inc., 3.23% Cv. Sub. Nts., 6/15/03 11,000,000 7,672,500 ----------- 21,760,000 - ----------------------------------------------------------------------------------------------------------------------------------- Technology--0.2% Intelcom Group, Inc., 7% Cv. Sub. Nts., 10/30/98(3) (4) 5,350,000 4,303,331 ----------- Total Convertible Corporate Bonds and Notes (Cost $173,864,108) 172,943,001 Shares =================================================================================================================================== Common Stocks--41.6% - ----------------------------------------------------------------------------------------------------------------------------------- Basic Materials--3.2% - ----------------------------------------------------------------------------------------------------------------------------------- Aluminum--0.3% Reynolds Metals Co. 100,000 4,900,000 - ----------------------------------------------------------------------------------------------------------------------------------- Chemicals--1.2% Du Pont (E.I.) De Nemours & Co. 200,000 11,250,000 --------------------------------------------------------------------------------------------------- Lyondell Petrochemical Co. 420,600 10,883,025 ----------- 22,133,025 - ----------------------------------------------------------------------------------------------------------------------------------- Gold--0.1% Cyprus Amax Minerals Co. 100,000 2,612,500 - ----------------------------------------------------------------------------------------------------------------------------------- Paper and Forest Union Camp Corp. 200,000 9,425,000 Products--1.6% --------------------------------------------------------------------------------------------------- Westvaco Corp. 250,000 9,812,500 --------------------------------------------------------------------------------------------------- Weyerhaeuser Co. 250,000 9,375,000 ----------- 28,612,500
8 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--3.1% - ----------------------------------------------------------------------------------------------------------------------------------- Automobiles--1.1% General Motors Corp. 475,000 $ 20,068,750 - ----------------------------------------------------------------------------------------------------------------------------------- Household Furnishings Maytag Corp. 400,000 6,000,000 And Appliances--0.3% - ----------------------------------------------------------------------------------------------------------------------------------- Publishing--0.5% Dun & Bradstreet Corp. (The) 151,000 8,305,000 - ----------------------------------------------------------------------------------------------------------------------------------- Retail Stores: General Kmart Corp. 696,000 9,048,000 Merchandise Chains--1.2% --------------------------------------------------------------------------------------------------- Sears, Roebuck and Co. 300,000 13,800,000 ----------- 22,848,000 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Non-Cyclicals--3.4% - ----------------------------------------------------------------------------------------------------------------------------------- Beverages: Alcoholic--0.6% Anheuser-Busch Cos., Inc. 200,000 10,175,000 - ----------------------------------------------------------------------------------------------------------------------------------- Healthcare: Diversified--0.6% Johnson & Johnson 200,000 10,950,000 - ----------------------------------------------------------------------------------------------------------------------------------- Tobacco--2.2% Philip Morris Cos., Inc. 600,000 34,500,000 --------------------------------------------------------------------------------------------------- RJR Nabisco Holdings Corp. 1,200,000 6,600,000 ----------- 41,100,000 - ----------------------------------------------------------------------------------------------------------------------------------- Energy--4.2% - ----------------------------------------------------------------------------------------------------------------------------------- Oil Well Services and Baker Hughes, Inc. 389,000 7,099,250 Equipment--0.9% --------------------------------------------------------------------------------------------------- Halliburton Co. 300,000 9,937,500 ----------- 17,036,750 - ----------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated Domestic--0.5% Phillips Petroleum Co. 300,000 9,825,000 - ----------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated Mobil Corp. 176,500 14,870,125 International--2.8% --------------------------------------------------------------------------------------------------- Royal Dutch Petroleum Co. 201,500 21,661,250 --------------------------------------------------------------------------------------------------- Texaco, Inc. 251,500 15,058,563 ----------- 51,589,938 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial--2.6% - ----------------------------------------------------------------------------------------------------------------------------------- Conglomerates--1.2% Tenneco, Inc. 500,000 21,250,000 - ----------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment--0.8% AMP, Inc. 200,000 14,550,000 - ----------------------------------------------------------------------------------------------------------------------------------- Transportation: Ryder Systems, Inc. 500,000 11,000,000 Miscellaneous--0.6% - ----------------------------------------------------------------------------------------------------------------------------------- Financial--17.6% - ----------------------------------------------------------------------------------------------------------------------------------- Financial Services: American Express Co. 700,000 20,650,000 Miscellaneous--1.8% --------------------------------------------------------------------------------------------------- Bear Stearns Cos., Inc. (The) 400,000 6,150,002 --------------------------------------------------------------------------------------------------- Dean Witter, Discover & Co. 156,124 5,288,701 ----------- 32,088,703
9 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- Statement of Investments (Unaudited) (Continued) --------------------------------------------------------------------------------------------------- Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance Brokers--0.7% Marsh & McLennan Cos., Inc. 151,500 $ 12,006,375 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance: Multi-Line--0.3% Allstate Corp. 230,000 5,433,750 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance: Property General Re Corp. 101,000 12,498,750 And Casualty--2.3% --------------------------------------------------------------------------------------------------- Reliance Group Holdings, Inc. 2,000,000 10,250,000 --------------------------------------------------------------------------------------------------- SAFECO Corp. 200,000 10,400,000 --------------------------------------------------------------------------------------------------- St. Paul Cos., Inc. (The) 200,000 8,950,000 ------------ 42,098,750 - ----------------------------------------------------------------------------------------------------------------------------------- Major Banks: Regional--9.8% Banc One Corp. 700,000 17,762,500 --------------------------------------------------------------------------------------------------- BankAmerica Corp. 600,000 23,700,000 --------------------------------------------------------------------------------------------------- Crestar Financial Corp. 275,000 10,346,875 --------------------------------------------------------------------------------------------------- First Bank System, Inc. 300,000 9,975,000 --------------------------------------------------------------------------------------------------- First Fidelity Bancorporation 450,000 20,193,750 --------------------------------------------------------------------------------------------------- First Union Corp. 300,000 12,412,500 --------------------------------------------------------------------------------------------------- Fleet Financial Group, Inc. 400,000 13,000,000 --------------------------------------------------------------------------------------------------- KeyCorp 400,000 10,000,000 --------------------------------------------------------------------------------------------------- Magna Group, Inc. 400,000 7,000,000 --------------------------------------------------------------------------------------------------- Mellon Bank Corp. 525,000 16,078,125 --------------------------------------------------------------------------------------------------- National City Corp. 700,000 18,112,500 --------------------------------------------------------------------------------------------------- Signet Banking Corp. 400,000 11,450,000 --------------------------------------------------------------------------------------------------- U.S. Bancorp, Inc. 400,000 9,050,000 ------------ 179,081,250 - ----------------------------------------------------------------------------------------------------------------------------------- Money Center Banks--2.7% Chase Manhattan Corp. 700,000 24,062,500 --------------------------------------------------------------------------------------------------- Chemical Banking Corp. 700,000 25,112,500 ------------ 49,175,000 - ----------------------------------------------------------------------------------------------------------------------------------- Technology--3.2% - ----------------------------------------------------------------------------------------------------------------------------------- Aerospace/Defense--1.2% Goodrich (B.F.) Co. (The) 200,000 8,675,000 --------------------------------------------------------------------------------------------------- United Technologies Corp. 200,000 12,575,000 ------------ 21,250,000 - ----------------------------------------------------------------------------------------------------------------------------------- Electronics: Tektronix, Inc. 400,000 13,700,000 Instrumentation--0.7% - ----------------------------------------------------------------------------------------------------------------------------------- Office Equipment and Minnesota Mining & Manufacturing Co. 200,000 10,675,000 Supplies--1.3% --------------------------------------------------------------------------------------------------- Moore Corp. Ltd. 700,000 13,212,500 ------------ 23,887,500
10 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Utilities--4.3% - ----------------------------------------------------------------------------------------------------------------------------------- Electric Companies--3.6% American Electric Power Co., Inc. 454,000 $ 14,925,250 --------------------------------------------------------------------------------------------------- Houston Industries, Inc. 378,500 13,484,061 --------------------------------------------------------------------------------------------------- Public Service Co. of Colorado 200,000 5,875,000 --------------------------------------------------------------------------------------------------- Public Service Enterprise Group, Inc. 604,000 16,006,000 --------------------------------------------------------------------------------------------------- Texas Utilities Co. 504,000 16,128,000 ------------ 66,418,311 - ----------------------------------------------------------------------------------------------------------------------------------- Telephone--0.7% BCE, Inc. 403,900 12,975,288 ------------ Total Common Stocks (Cost $713,753,704) 761,071,390 =================================================================================================================================== Preferred Stocks--19.6% - ----------------------------------------------------------------------------------------------------------------------------------- Alumax, Inc., $4.00 Cv., Series A 50,000 6,037,500 --------------------------------------------------------------------------------------------------- American Express Co., Debt Exchangeable for Common Stock of First Data Corp., 6.25%, 10/15/96 557,000 23,742,125 --------------------------------------------------------------------------------------------------- Armco, Inc., $3.625 Cum. Cv. 200,000 10,000,000 --------------------------------------------------------------------------------------------------- Atlantic Richfield Co., 9% Exchangeable Notes for Common Stock of Lyondell Petrochemical Co., 9/15/97 400,000 10,450,000 --------------------------------------------------------------------------------------------------- Boise Cascade Corp., $1.58 Cum. Cv., Series G 460,000 10,982,500 --------------------------------------------------------------------------------------------------- Bowater, 7% Preferred Redeemable Increased Dividend Equity Securities, Series B, $6.58 Cv., 1/1/98 95,000 2,339,375 --------------------------------------------------------------------------------------------------- Case Equipment Corp., Cum. Cv., Series A(3) 130,000 7,800,000 --------------------------------------------------------------------------------------------------- Chrysler Financial Corp., $4.625 Cv. Depositary Shares, Series A(3) 75,000 10,260,937 --------------------------------------------------------------------------------------------------- Citicorp, Cv. Depositary Shares, Series 13 200,000 23,100,000 --------------------------------------------------------------------------------------------------- Citicorp, Preferred Equity Redemption Cumulative Stock, $1.217 Cv. Depositary Shares, Series 15, 11/30/95 540,000 10,327,500 --------------------------------------------------------------------------------------------------- Cooper Industries, Inc., $1.60 Cv. Exch. 297,000 6,088,500 --------------------------------------------------------------------------------------------------- Corning Delaware LP, 6% Cv. Monthly Income Preferred Securities 150,000 7,012,500 --------------------------------------------------------------------------------------------------- Compania de Inversiones en Telecomunicaciones SA, Provisionally Redeemable Income Debt Exchangeable for Stock, 7%, 3/3/98(3) 165,000 8,332,500 --------------------------------------------------------------------------------------------------- Cyprus Amax Minerals Co., $4.00 Cv., Series A 150,000 8,756,250 --------------------------------------------------------------------------------------------------- Delta Airlines, Inc., $3.50 Cv. Depositary Shares, Series C 182,000 7,962,500 --------------------------------------------------------------------------------------------------- First Chicago Corp., $2.875 Cum Cv. Depositary Shares, Series B 135,000 6,446,250 --------------------------------------------------------------------------------------------------- Ford Motor Co., $4.20 Cum. Cv., Series A 125,000 11,500,000 --------------------------------------------------------------------------------------------------- Freeport-McMoRan, Inc., $4.375 Cv. Exch.(3) 200,000 9,500,000 --------------------------------------------------------------------------------------------------- James River Corp. of Virginia, Dividend Enhanced Convertible Stock, 9% Cv. Exch. Depositary Shares, Series P 700,000 14,175,000 --------------------------------------------------------------------------------------------------- LCI International, Inc., $1.25 Cv. 40,000 1,390,000 --------------------------------------------------------------------------------------------------- Noble Drilling Corp., $1.50 Cv. Exch. 122,000 2,562,000 --------------------------------------------------------------------------------------------------- Occidental Petroleum Corp., $3.00 Cum. Cv. Canadian Occidental Petroleum Ltd.-Indexed 281,000 13,417,750 --------------------------------------------------------------------------------------------------- Occidental Petroleum Corp., $3.875 Cum. Cv.(3) 400,000 19,500,000
11 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- Statement of Investments (Unaudited) (Continued) --------------------------------------------------------------------------------------------------- Market Value Shares See Note 1 - ----------------------------------------------------------------------------------------------------------------------------------- Preferred Stocks Parker & Parsley Capital LLC., 6.25% Cum. Cv. Guaranteed Monthly Income (continued) Preferred Shares(3) 112,000 $ 5,068,000 --------------------------------------------------------------------------------------------------- Reynolds Metals Co., 7% Preferred Redeemable Increased Dividend Equity Securities, $3.31 Cv., 12/31/97 160,000 7,740,000 --------------------------------------------------------------------------------------------------- RJR Nabisco Holdings Corp., $6.50 Cv., Series C 3,115,000 18,690,000 --------------------------------------------------------------------------------------------------- Salomon, Inc., 5.25% Hewlett-Packard Co. Common Equity-Linked Securities, 1/1/97 100,000 8,700,000 --------------------------------------------------------------------------------------------------- Santa Fe Energy Resources, Inc., Dividend Enhanced Convertible Stock, $.732 Cv. Exch., Series A 805,000 6,943,125 --------------------------------------------------------------------------------------------------- Sears, Roebuck and Co., Preferred Equity Redeemable for Common Stock, $3.75 Exch., Series A, Cv., 4/1/95 275,000 15,296,875 --------------------------------------------------------------------------------------------------- Transco Energy Co., $3.50 Cum. Cv., Series E(3) 147,000 6,688,500 --------------------------------------------------------------------------------------------------- UAL Corp., $6.25 Cv., Series A(3) 175,000 14,535,938 --------------------------------------------------------------------------------------------------- U.S. Surgical Corp., Dividend Enhanced Convertible Stock, $2.20 550,000 12,650,000 --------------------------------------------------------------------------------------------------- Valero Energy Corp., Cv. 200,000 8,400,000 --------------------------------------------------------------------------------------------------- Washington Mutual Savings Bank, $6.00 Cv., Series D 96,800 7,671,400 --------------------------------------------------------------------------------------------------- Westinghouse Electric Corp., Participating Equity Preferred Shares, $12.125 Cv., Series C(3) 1,100,000 14,712,500 ------------ Total Preferred Stocks (Cost $334,560,286) 358,779,525 Face Amount(1) =================================================================================================================================== Structured Instruments--0.5% Structured Product Asset Return Certificates, 9.40%, Series 94-2, 9/1/97(Cost $9,142,857)(3) $9,142,857 8,401,499 - ----------------------------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $1,919,594,273) 107.50% 1,968,174,925 - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (7.5) (137,734,642) -------- ------------- Net Assets 100.00% $1,830,440,283 ======== ============== 1. Face amount is reported in local currency. Foreign currency abbreviations are as follows: ARA--Argentine Austral CAD--Canadian Dollar ESP--Spanish Peseta 2. Represents the current interest rate for a variable rate security. 3. Restricted security--See Note 5 of Notes to Financial Statements. 4. Interest or dividend is paid in kind. See accompanying Notes to Financial Statements.
12 Oppenheimer Equity Income Fund ------------------------------------------------------------------------------------------------- Statement of Assets and Liabilities December 31, 1994 (Unaudited) ------------------------------------------------------------------------------------------------- ================================================================================================================================= Assets Investments, at value (including repurchase agreements of $184,500,000) (cost $1,919,594,273)--see accompanying statement $1,968,174,925 ------------------------------------------------------------------------------------------------- Receivables: Investments sold 147,700,389 Interest and dividends 15,721,491 Shares of beneficial interest sold 1,651,608 ------------------------------------------------------------------------------------------------- Other 137,591 -------------- Total assets 2,133,386,004 ================================================================================================================================= Liabilities Bank overdraft 232,083 ------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 295,136,139 Shares of beneficial interest redeemed 5,185,177 Distribution and service plan fees--Note 4 862,767 Other 1,529,555 -------------- Total liabilities 302,945,721 ================================================================================================================================= Net Assets $1,830,440,283 ============== ================================================================================================================================= Composition of Paid-in capital $1,761,542,836 Net Assets ------------------------------------------------------------------------------------------------- Undistributed (overdistributed) net investment income (1,159,310) ------------------------------------------------------------------------------------------------- Accumulated net realized gain (loss) from investment transactions 21,488,182 ------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies 48,568,575 -------------- Net assets $1,830,440,283 ============== ================================================================================================================================= Net Asset Value Class A Shares: Per Share Net asset value and redemption price per share (based on net assets of $1,713,603,845 and 187,583,169 shares of beneficial interest outstanding) $9.14 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $9.70 ------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price and offering price per share (based on net assets of $116,836,438 and 12,841,765 shares of beneficial interest outstanding) $9.10 See accompanying Notes to Financial Statements.
13 Oppenheimer Equity Income Fund ------------------------------------------------------------------------------------------------- Statement of Operations For the Six Months Ended December 31, 1994 (Unaudited) ------------------------------------------------------------------------------------------------- ================================================================================================================================= Investment Income Interest (net of withholding taxes of $199,491) $28,179,209 ------------------------------------------------------------------------------------------------- Dividends (net of withholding taxes of $39,882) 29,540,368 ----------- Total income 57,719,577 ================================================================================================================================= Expenses Management fees--Note 4 5,132,512 ------------------------------------------------------------------------------------------------- Distribution and service plan fees: Class A--Note 4 1,624,731 Class B--Note 4 536,833 ------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees--Note 4 813,341 ------------------------------------------------------------------------------------------------- Shareholder reports 290,324 ------------------------------------------------------------------------------------------------- Custodian fees and expenses 195,030 ------------------------------------------------------------------------------------------------- Legal and auditing fees 110,128 ------------------------------------------------------------------------------------------------- Registration and filing fees: Class A 30,743 Class B 12,287 ------------------------------------------------------------------------------------------------- Trustees' fees and expenses 37,981 ------------------------------------------------------------------------------------------------- Other 241,721 ----------- Total expenses 9,025,631 ================================================================================================================================= Net Investment Income (Loss) 48,693,946 ================================================================================================================================= Realized and Unrealized Net realized gain (loss) on: Gain (Loss) on Investments Investments 21,708,372 And Foreign Currency Foreign currency transactions 1,741,790 Transactions ----------- Net realized gain (loss) 23,450,162 ------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments (58,092,627) Translation of assets and liabilities denominated in foreign currencies (1,588,460) ----------- Net change (59,681,087) ----------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (36,230,925) ================================================================================================================================= Net Increase (Decrease) in Net Assets Resulting From Operations $12,463,021 =========== See accompanying Notes to Financial Statements.
14 Oppenheimer Equity Income Fund
--------------------------------------------------------------------------------------------------- Statements of Changes in Net Assets --------------------------------------------------------------------------------------------------- Six Months Ended December 31, Year Ended 1994 June 30, (Unaudited) 1994 =================================================================================================================================== Operations Net investment income (loss) $ 48,693,946 $ 88,048,979 --------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments and foreign currency transactions 23,450,162 23,085,323 --------------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on investments and translation of assets and liabilities denominated in foreign currencies (59,681,087) (101,601,423) -------------- -------------- Net increase (decrease) in net assets resulting from operations 12,463,021 9,532,879 =================================================================================================================================== Equalization Net change -- 546,821 =================================================================================================================================== Dividends and Dividends from net investment income: Distributions to Class A ($.48 and $.47 per share, respectively) (44,094,449) (85,741,017) Shareholders Class B ($.408 and $.416 per share, respectively) (2,377,677) (2,115,733) --------------------------------------------------------------------------------------------------- Dividends in excess of net investment income: Class A ($.01 per share) -- (1,829,618) Class B ($.01 per share) -- (45,147) --------------------------------------------------------------------------------------------------- Distributions from net realized gain on investments and foreign currency transactions: Class A ($.1272 and $.1221 per share, respectively) (23,242,601) (22,569,711) Class B ($.1272 and $.1221 per share, respectively) (1,584,280) (515,610) --------------------------------------------------------------------------------------------------- Distributions in excess of gain on investments and foreign currency transactions: Class A ($.05 per share) -- (8,593,810) Class B ($.05 per share) -- (196,327) =================================================================================================================================== Beneficial Interest Net increase (decrease) in net assets resulting from Class A Transactions beneficial interest transactions--Note 2 (5,031,453) 88,576,248 --------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from Class B beneficial interest transactions--Note 2 33,513,072 93,399,883 =================================================================================================================================== Net Assets Total increase (decrease) (30,354,367) 70,448,858 --------------------------------------------------------------------------------------------------- Beginning of period 1,860,794,650 1,790,345,792 -------------- -------------- End of period (including overdistributed net investment income of $1,159,310 and $3,381,130, respectively) $1,830,440,283 $1,860,794,650 ============== ============== See accompanying Notes to Financial Statements.
15 Oppenheimer Equity Income Fund
---------------------------------------------------------------------------------------- Financial Highlights ---------------------------------------------------------------------------------------- Class A Class B ---------------------------------------------------------------------------------------- Six Months Six Months Ended Ended Period December 31, December 31, Ended 1994 Year Ended June 30, 1994 June 30, (Unaudited) 1994 1993 1992 1991 1990 (Unaudited) 1994(1) ============================================================================================================================== Per Share Operating Data: Net asset value, beginning of period $9.44 $10.01 $9.15 $8.86 $9.18 $9.11 $9.40 $10.22 - ------------------------------------------------------------------------------------------------------------------------------ Income from investment operations: Net investment income .49 .47 .50 .50 .48 .48 .42 .36 Net realized and unrealized gain (loss) on investments and foreign currency transactions (.18) (.39) .99 .39 (.17) .33 (.19) (.58) ---------- ---------- ---------- ---------- ---------- ---------- -------- ------- Total income from investment operations .31 .08 1.49 .89 .31 .81 .23 (.22) - ------------------------------------------------------------------------------------------------------------------------------ Dividends and distributions to shareholders: Dividends from net investment income (.48) (.47) (.48) (.48) (.48) (.50) (.41) (.42) Dividends in excess of net investment income -- (.01) -- -- -- -- -- (.01) Distributions from net realized gain on investments and foreign currency transactions (.13) (.12) (.15) (.12) (.15) (.24) (.12) (.12) Distributions in excess of gain on investments and foreign currency transactions -- (.05) -- -- -- -- -- (.05) ---------- ---------- ---------- ---------- ---------- ---------- -------- ------- Total dividends and distributions to shareholders (.61) (.65) (.63) (.60) (.63) (.74) (.53) (.60) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $9.14 $9.44 $10.01 $9.15 $8.86 $9.18 $9.10 $9.40 ========== ========== ========== ========== ========== ========== ======== ======= ============================================================================================================================== Total Return, at Net Asset Value(2) .67% .65% 16.76% 10.26% 3.68% 9.07% .28% (2.35)% ============================================================================================================================== Ratios/Supplemental Data: Net assets, end of period (in thousands) $1,713,604 $1,772,944 $1,790,346 $1,555,924 $1,393,303 $1,329,830 $116,836 $87,850 - ------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $1,779,665 $1,831,606 $1,657,692 $1,525,599 $1,323,858 $1,179,704 $106,647 $47,414 - ------------------------------------------------------------------------------------------------------------------------------ Number of shares outstanding at end of period (in thousands) 187,583 187,841 178,819 170,117 157,239 144,921 12,842 9,341 - ------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: Net investment income 5.28%(3) 4.72% 5.12% 5.33% 5.31% 5.10% 4.46%(3) 3.99%(3) Expenses .92%(3) .90% .79% .82% .79% .79% 1.78%(3) 1.82%(3) - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate(4) 26.30% 30.40% 59.00% 37.00% 64.00% 122.00% 26.30% 30.40% 1. For the period from August 17, 1993 (inception of offering) to June 30, 1994. 2. Assumes a hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. 3. Annualized. 4. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the six months ended December 31, 1994 were $618,420,510 and $469,158,476, respectively.
See accompanying Notes to Financial Statements. 16 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Unaudited) - -------------------------------------------------------------------------------- ================================================================================ 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 advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class B shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution and/or service plan, expenses directly attributable to a particular class and exclusive voting rights with respect to matters affecting a single class. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York time) 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 debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Forward contracts are valued at the closing price on the London foreign exchange market on a daily basis. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid or asked price closest to the last reported sale price is used. - -------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. The Fund generally enters into forward contracts as a hedge, upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio positions. A forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. Risks may arise from the potential inability of the counterparty to meet the terms of the contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. 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 result 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. 17 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Unaudited) (Continued) - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies (continued) Code applicable to regulated investment companies and to distribute all of its taxable income, Federal Income Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income tax provision is required. - -------------------------------------------------------------------------------- Equalization. Prior to September 24, 1993, the Fund followed the accounting practice of equalization, by which a portion of the proceeds from sales and costs of redemptions of Fund shares equivalent on a per share basis to the amount of undistributed net investment income were credited or charged to undistributed income. The cumulative effect of the change in accounting practice resulted in a reclassification of $32,950,419 from undistributed income to paid-in capital. - -------------------------------------------------------------------------------- Distributions to Shareholders. Dividends and distributions to shareholders are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Change in Accounting Classification of Distributions to Shareholders. The character of the distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gain (loss) was recorded by the Fund. Effective July 1, 1993, the Fund adopted Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the Fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, amounts have been reclassified to reflect a decrease in paid-in capital of $7,105,629, an increase in undistributed net investment income of $1,278,320, and an increase in accumulated net realized gain on investments of $5,827,309. - -------------------------------------------------------------------------------- Other. Investment transactions are accounted for on the date the investments are purchased or sold (trade date) and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made on the ex-date. ================================================================================ 2. Shares of 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:
Six Months Ended December 31, 1994 Year Ended June 30, 1994(1) --------------------------- --------------------------- Shares Amount Shares Amount ----------------------------------------------------------------------------------------------------- Class A: Sold 9,296,925 $110,374,953 26,551,307 $264,515,469 Dividends and distributions reinvested 6,809,832 41,990,886 11,168,493 110,189,163 Redeemed (16,364,509) (157,397,292) (28,698,217) (286,128,384) ---------- ------------ ---------- ------------ Net increase (decrease) (257,752) $ (5,031,453) 9,021,583 $ 88,576,248 ========== ============ ========== ============ ----------------------------------------------------------------------------------------------------- Class B: Sold 3,899,797 $ 37,394,429 9,581,829 $ 95,687,102 Dividends and distributions reinvested 393,445 3,619,816 266,194 2,603,845 Redeemed (792,375) (7,501,173) (507,125) (4,891,064) ---------- ------------ ---------- ------------ Net increase 3,500,867 $ 33,513,072 9,340,898 $ 93,399,883 ========== ============ ========== ============ 1. For the year ended June 30, 1994 for Class A shares and for the period from August 17, 1993 (inception of offering) to June 30, 1994 for Class B shares.
18 Oppenheimer Equity Income Fund ------------------------------------------------ ------------------------------------------------ =============================================================================== 3. Unrealized Gains and Losses on Investments At December 31, 1994, net unrealized appreciation on investments of $48,580,652 was composed of gross appreciation of $145,891,972, and gross depreciation of $97,311,320. =============================================================================== 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 an annual fee of .75% on the first $100 million of net assets with a reduction of .05% on each $100 million thereafter, to .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 six months ended December 31, 1994, commissions (sales charges paid by investors) on sales of Class A shares totaled $2,361,086, of which $735,751 was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. During the six months ended December 31, 1994, OFDI received contingent deferred sales charges of $95,137 upon redemption of Class B shares, as reimbursement for sales commissions advanced by OFDI at the time of sale of such shares. Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total costs of providing such services are allocated ratably to these companies. Under separate approved plans, each class may expend up to .25% of its net assets annually to reimburse OFDI for costs incurred in connection with the personal service and maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other institutions. In addition, Class B shares are subject to an asset-based sales charge of .75% of net assets annually, to reimburse OFDI for sales commissions paid from its own resources at the time of sale and associated financing costs. In the event of termination or discontinuance of the Class B plan, the Board of Trustees may allow the Fund to continue payment of the asset-based sales charge to OFDI for distribution expenses incurred on Class B shares sold prior to termination or discontinuance of the plan. During the six months ended December 31, 1994, OFDI paid $100,265 and $1,980, respectively, to an affiliated broker/dealer as reimbursement for Class A and Class B personal service and maintenance expenses and retained $516,052 as reimbursement for Class B sales commissions and service fee advances, as well as financing costs. ================================================================================ 5. Restricted Securities The Fund owns securities purchased in private placement transactions, without registration under the Securities Act of 1933 (the Act). The securities are valued under methods approved by the Board of Trustees as reflecting fair value. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase) in restricted and illiquid securities, excluding securities eligible for resale pursuant to Rule 144A of the Act that are determined to be liquid by the Board of Trustees or by the Manager under Board-approved guidelines. Restricted and illiquid securities, excluding securities eligible for resale pursuant to Rule 144A of the Act, amount to $10,203,331, or .56% of the Fund's net assets, at December 31, 1994. Illiquid and/or restricted securities, including those restricted securities that are transferable under Rule 144A of the Act are listed below.
Valuation Per Unit as of Security Acquisition Date Cost Per Unit Dec. 31, 1994 ----------------------------------------------------------------------------------------------------- Banco Nacional de Mexico SA, 7% Exch. Sub. Debs., 12/15/99(1) 12/1/92 $100.00 $ 79.00 ----------------------------------------------------------------------------------------------------- Case Equipment Corp., Cum. Cv., Series A Preferred Stock(1) 6/30/94 $ 50.09 $ 60.00 ----------------------------------------------------------------------------------------------------- Chrysler Financial Corp., $4.625 Cv. Depositary Shares, Series A Preferred Stock(1) 2/12/92 $ 50.00 $136.81 ----------------------------------------------------------------------------------------------------- Compania de Inversiones en Telecommunicaciones SA, Provisionally Redeemable Income Debt Exchangeable for Stock, 7%, 3/3/98(1) 2/24/94 $ 72.00 $ 50.50 ----------------------------------------------------------------------------------------------------- Freeport-McMoRan, Inc., $4.375 Cv. Exch. Preferred Stock(1) 2/26/92 $ 45.63 $ 47.50 -----------------------------------------------------------------------------------------------------
19 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Unaudited) (Continued) - -------------------------------------------------------------------------------- ================================================================================ 5. Restricted Securities (continued)
Valuation Per Unit as of Security Acquisition Date Cost Per Unit Dec. 31, 1994 ----------------------------------------------------------------------------------------------------- Intelcom Group, Inc., 7% Cv. Sub. Nts., 10/30/98 10/26/93--10/28/94 $ 99.04 $ 80.44 ----------------------------------------------------------------------------------------------------- Lend Lease Finance International Ltd., 4.75% Cv. Gtd. Bonds, 6/1/03(1) 6/10/93 $100.00 $105.38 ----------------------------------------------------------------------------------------------------- Occidental Petroleum Corp., $3.875 Cum. Cv. Preferred Stock(1) 2/10/93 $ 50.00 $ 48.75 ----------------------------------------------------------------------------------------------------- Parker & Parsley Capital LLC., 6.25% Cum. Cv. Guaranteed Monthly Income Preferred Shares(1) 3/22/94 $ 50.00 $ 45.25 ----------------------------------------------------------------------------------------------------- Stone Container Corp., 8.875% Cv. Sr. Sub. Nts., 7/15/00(1) 6/24/93 $ 99.36 $170.50 ----------------------------------------------------------------------------------------------------- Structured Product Asset Return Certificates, 9.40%, Series 94-2, 9/1/97(1) 9/7/94 $100.00 $ 91.89 ----------------------------------------------------------------------------------------------------- Thomas Nelson, Inc., 5.75% Cv. Nts., 11/30/99 11/11/92 $100.00 $118.00 ----------------------------------------------------------------------------------------------------- Transco Energy Co., $3.50 Cum. Cv. Series E Preferred Stock(1) 10/27/93 $ 50.00 $ 45.50 ----------------------------------------------------------------------------------------------------- Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(1) 11/12/93 $100.00 $ 86.50 ----------------------------------------------------------------------------------------------------- UAL Corp., $6.25 Cv., Series A Preferred Stock(1) 2/5/93--2/25/93 $ 99.55 $ 83.06 ----------------------------------------------------------------------------------------------------- Westinghouse Electric Corp., Participating Equity Preferred Shares, $12.125 Cv., Series C(1) 3/22/94--8/23/94 $ 14.28 $ 13.38 1. Transferable under Rule 144A of the Act.
20 Oppenheimer Equity Income Fund ----------------------------------------------------------------------------------------------------- Oppenheimer Equity Income Fund ----------------------------------------------------------------------------------------------------- =================================================================================================================================== Officers and Trustees James C. Swain, Chairman and Chief Executive Officer Robert G. Avis, Trustee William A. Baker, Trustee Charles Conrad, Jr., Trustee Jon S. Fossel, Trustee and President Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee Robert M. Kirchner, Trustee Ned M. Steel, Trustee Andrew J. Donohue, Vice President John P. Doney, Vice President George C. Bowen, Vice President, Secretary and Treasurer Robert J. Bishop, Assistant Treasurer Scott Farrar, Assistant Treasurer Robert G. Zack, Assistant Secretary =================================================================================================================================== Investment Advisor Oppenheimer Management Corporation =================================================================================================================================== Distributor Oppenheimer Funds Distributor, Inc. =================================================================================================================================== Transfer and Shareholder Oppenheimer Shareholder Services Servicing Agent =================================================================================================================================== Custodian of The Bank of New York Portfolio Securities =================================================================================================================================== Independent Auditors Deloitte & Touche LLP =================================================================================================================================== Legal Counsel Myer, Swanson, Adams & Wolf, P.C. The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors. This is a copy of a report to shareholders of Oppenheimer Equity Income Fund. This report must be preceded or accompanied by a Prospectus of Oppenheimer Equity Income Fund. For material information concerning the Fund, see the Prospectus.
21 Oppenheimer Equity Income Fund OppenheimerFunds Family OppenheimerFunds offers over 35 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 30 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 1.8 million shareholder accounts and more than $29 billion under Oppenheimer's management and that of our affiliates. As an OppenheimerFunds shareholder, you can easily exchange shares of eligible funds of the same class by mail or by telephone for a small administrative fee.1 For more information on OppenheimerFunds, 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 Discovery Fund Global Fund Global Emerging Growth Fund(2) Oppenheimer Fund Time Fund Value Stock Fund Target Fund Gold & Special Minerals Fund Growth Fund(3) Stock & Bond Funds Main Street Income & Growth Fund Equity Income Fund Total Return Fund Asset Allocation Fund Global Growth & Income Fund Bond Funds High Yield Fund Strategic Short-Term Income Fund Champion High Yield Fund Investment Grade Bond Fund Strategic Income & Growth Fund Mortgage Income Fund Strategic Income Fund U.S. Government Trust Strategic Diversified Income Fund Limited-Term Government Fund Strategic Investment Grade Bond Fund Tax-Exempt Funds New York Tax-Exempt Fund(4) New Jersey Tax-Exempt Fund(4) California Tax-Exempt Fund(4) Tax-Free Bond Fund Pennsylvania Tax-Exempt Fund(4) Insured Tax-Exempt Bond Fund Florida Tax-Exempt Fund(4) Intermediate Tax-Exempt Bond Fund Money Market Funds Money Market Fund Cash Reserves 1. The fee is waived for PhoneLink exchanges between existing accounts. Exchange privileges are subject to change or termination. 2. Formerly Oppenheimer Global Bio-Tech Fund and Oppenheimer Global Environment Fund. 3. Formerly Special Fund. 4. Available only to residents of those states. OppenheimerFunds are distributed by Oppenheimer Funds Distributor, Inc., Two World Trade Center, New York, NY 10048-0203. (C)Copyright 1995 Oppenheimer Management Corporation. All rights reserved.
22 Oppenheimer Equity Income Fund "How may I help you?" As an OppenheimerFunds shareholder, some special privileges are available to you. Whether it's automatic investment plans, informative newsletters and hotlines, or ready account access, you can benefit from services designed to make investing simple. And when you need help, our Customer Service Representatives are only a toll-free phone call away. They can provide information about your account and handle administrative requests. You can reach them at our General Information number. When you want to make a transaction, you can do it easily by calling our toll-free Telephone Transactions number. And, by enrolling in AccountLink, a convenient service that "links" your OppenheimerFunds accounts and your bank checking or savings account, you can use the Telephone Transactions number to make investments. For added convenience, you can get automated information with OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week. PhoneLink gives you access to a variety of fund, account, and market information. It also gives you the ability to make transactions using your touch-tone phone. Of course, you can always speak with a Customer Service Representative during business hours. You can count on us whenever you need assistance. That's why the International Customer Service Association, an independent, non-profit organization made up of over 3,200 customer service management professionals from around the country, honored the OppenheimerFunds' transfer agent, Oppenheimer Shareholder Services, with their Award of Excellence in 1993. So call us today--we're here to help. Information General Information Monday-Friday 8:30 a.m.-8 p.m. ET Saturday 10 a.m.-2 p.m. ET 1-800-525-7048 Telephone Transactions Monday-Friday 8:30 a.m.-8 p.m. ET 1-800-852-8457 Jennifer Leonard, Customer Service Representative Oppenheimer Shareholder Services 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 RS0330.001.0295 (LOGO)Oppenheimer Funds(R) Oppenheimer Funds Distributor, Inc. P.O. Box 5270 Denver, CO 80217-5270 Bulk Rate U.S. Postage PAID Permit No. 469 Denver, CO -----END PRIVACY-ENHANCED MESSAGE-----