-----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, OSJQ1+4+w8UFgncxZmhiYEyKX7YwvbAnmYftuVC1Lm9Dnv1fGiUaPEnv2tSAphxA WxL6lUFgeZqnMaaOdpM8XQ== 0001005477-97-002446.txt : 19971110 0001005477-97-002446.hdr.sgml : 19971110 ACCESSION NUMBER: 0001005477-97-002446 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971107 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: SEC FILE NUMBER: 811-01512 FILM NUMBER: 97709986 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 FORM N-30D ----------------------------- Annual Report August 31, 1997 ----------------------------- OPPENHEIMER Equity Income Fund [GRAPHIC OMITTED] [LOGO] OppenheimerFunds(SM) THE RIGHT WAY TO INVEST Contents 3 President's Letter 4 Fund Performance 6 An Interview with the Fund's Manager 10 Statement of Investments 18 Statement of Assets & Liabilities 20 Statement of Operations 21 Statements of Changes in Net Assets 22 Financial Highlights 24 Notes to Financial Statements 31 Independent Auditors' Report 32 Federal Income Tax Information 33 Shareholder Meeting 34 Officers & Trustees 36 Information & Services Report highlights - -------------------------------------------------------------------------------- o Top Quartile Lipper: The Fund's Class A shares ranked in the top quartile of income funds for the 1-year (1 out of 53), 5-year (2 out of 14), and 10-year (2 out of 9) periods ended August 31, 1997, respectively, according to Lipper Analytical Services.(1) o Banking and insurance holdings were the main drivers to the Fund's performance. o Our equity investments emphasize companies with reliable earnings and lower-than-average valuations. - ------------------------------- Total Returns - ------------------------------- For the Period Ended 8/31/97(2) Class A 1 year - ------------------------------- 33.39% - ------------------------------- Class B 1 year - ------------------------------- 32.17% - ------------------------------- Class C 1 year - ------------------------------- 32.31% - ------------------------------- Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. In reviewing performance and rankings, please remember that 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. 1. Source: Lipper Analytical Services, Inc., 8/31/97. Based on the comparisons between changes in net asset value without considering sales charges, and with dividends and capital gains distributions of the Fund's Class A shares reinvested. The Fund's Class A shares were ranked 1 of 53 (one-year), 2 of 14 (five-year) and 2 of 9 (10-year) among income funds for the periods ended 8/31/97. Past performance does not guarantee future results. 2. Includes changes in net asset value per share without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. 2 Oppenheimer Equity Income Fund Dear shareholder, - -------------------------------------------------------------------------------- [PHOTO] James C. Swain Chairman Oppenheimer Equity Income Fund [PHOTO] Bridget A. Macaskill President Oppenheimer Equity Income Fund We would like to welcome you to the premier issue of our newly redesigned shareholder reports. As you can see, we've changed the format to allow easier access to the information you need to monitor your investments. Some notable additions are "at-a-glance" report highlights and charts that let you quickly assess how your Fund has performed. On the following pages, your portfolio team discuss their current investment thinking, your Fund's strategies, and performance. Before these commentaries, we'd like to share a few global observations. As we consider the world's financial markets over the past six months, some global trends emerge. For example, inflation has hit its lowest level in three decades worldwide, which has helped spur many bullish financial markets. The United States has been a beneficiary of this low-inflation environment, as well as of a strong dollar, robust corporate earnings and a healthy economy. However, many financial analysts are now concerned that the United States has reached a point in the business cycle where earnings could decline because companies are unable to further reduce costs. On the other hand, a wave of corporate restructuring throughout Europe has resulted in some exciting changes and opportunities. Because a similar restructuring took place in the United States ten years ago, European companies have been able to enjoy the benefit of hindsight by following our footsteps. Latin America, too, has begun to shift its economies more toward the U.S. capitalist model and has reported positive earnings growth along the way. With major changes occurring in today's economies around the globe, it's more important than ever to maintain a diversified portfolio across different countries and market sectors. Now is the time to speak to your financial adviser to ensure that your assets are allocated properly, so you have the opportunity to benefit from investments in both domestic and international funds. It's important to remember that investing abroad can involve greater risk and expenses--including political and economic uncertainties--and should be undertaken with a long- term approach in mind. To keep in touch with our views on the markets, visit our website, www.oppenheimerfunds.com, where you can access your account information and fund performance data, 24 hours a day. The site also features prospectuses, timely market updates and insightful commentaries. Our new shareholder reports and presence on the Internet are just two examples of our commitment to keeping you well informed. Thank you for your confidence in OppenheimerFunds, The Right Way to Invest. 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 September 22, 1997 3 Oppenheimer Equity Income Fund Performance update - -------------------------------------------------------------------------------- Oppenheimer Equity Income Fund has performed very well during the past year, following a successful track record for several years now. In fact, according to Lipper Analytical Services, the Fund's Class A shares ranked in the top quartile of income funds for the 1-year (1 out of 53), 5-year (2 out of 14), and 10-year (2 out of 9) periods, respectively.(2) - --------------------------------- Avg Annual Total Returns - --------------------------------- For the Period Ended 9/30/97(1) Class A 1 year 5 year 10 year - --------------------------------- 27.61% 15.65% 11.31% - --------------------------------- Class B Since 1 year 5 year Inception - --------------------------------- 29.39% N/A 15.34% - --------------------------------- Class C Since 1 year 5 year Inception - --------------------------------- 33.34% N/A 24.66% - --------------------------------- [GRAPHIC OMITTED] [The following table was represented as a mountain chart in the printed materials] Growth of $10,000 Over ten years (without sales charge)(3)
Oppenheimer Equity Income Fund Class A Shares S&P 500 Index Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 87 -- -- $10,000.00 $ 8,741.06 -- -- $10,000.00 $ 7,747.48 88 $ 9,264.42 $ 9,750.37 $ 9,704.88 $ 9,966.76 $ 8,188.61 $ 8,734.01 $ 8,763.63 $ 9,034.21 89 $10,476.06 $11,047.59 $11,824.22 $11,816.48 $ 9,674.71 $10,528.73 $11,656.30 $11,896.78 90 $11,803.70 $12,049.09 $11,314.79 $11,655.06 $11,538.90 $12,264.75 $10,579.18 $11,527.46 91 $12,631.39 $12,492.46 $13,169.42 $13,667.75 $13,201.92 $13,171.63 $13,875.99 $15,039.38 92 $13,461.45 $13,774.67 $14,106.39 $14,632.98 $14,659.55 $14,938.25 $15,409.16 $16,184.99 93 $15,636.97 $16,083.96 $16,663.37 $16,764.77 $16,891.80 $16,974.05 $17,412.63 $17,816.35 94 $16,139.00 $16,188.72 $16,875.12 $16,297.33 $17,140.73 $17,212.87 $18,054.55 $18,051.71 95 $17,459.91 $18,724.24 $20,150.72 $20,847.21 $19,809.32 $21,700.46 $23,424.82 $24,835.16 96 $21,801.95 $22,209.44 $22,874.44 $25,029.65 $26,168.20 $27,342.53 $28,187.59 $30,537.29 97 $26,474.48 $28,354.04 $30,992.03 -- $31,356.01 $36,830.12 $39,589.84 --
1. Total returns include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. Class A returns include 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 prior to 10/18/91, so actual performance may have been lower. Class B returns include the applicable contingent deferred sales charge of 5% (1-year) and 2% (since inception on 8/17/93). Class C returns include the contingent deferred sales charge of 1% for the 1-year return and have been available since 11/1/95. An explanation of the different performance calculations is in the Fund's prospectus. Class B and C shares are subject to an annual 0.75% asset-based sales charge. 2. Source: Lipper Analytical Services, Inc., 8/31/97. Based on the comparisons between changes in net asset value without considering sales charges, and with dividends and capital gains distributions of the Fund's Class A shares reinvested. The Fund's Class A shares were ranked 1 of 53 (1-year), 2 of 14 (5-year) and 2 of 9 (10-year) among income funds for the period ended 8/31/97. Past performance does not guarantee future results. 4 Oppenheimer Equity Income Fund Portfolio review - -------------------------------------------------------------------------------- Oppenheimer Equity Income Fund is for investors looking for income and growth from a fund seeking to preserve principal. Sector Weightings(4) [GRAPHIC OMITTED] Financial 55.4% Consumer Non-Cyclical 13.3 Utility 8.6 Consumer Cyclical 6.3 Industrial 5.9 Energy 5.4 Basic Materials 5.1 What We Look For o Quality stocks to maintain performance in choppy markets. o Stocks that pay substantial dividends, along with fixed-income securities that generate income. o Convertible securities to increase upside potential, but with income to help protect against the downside. Top 10 Stock Holdings (Percentage of net assets) ............................................................... Chase Manhattan Corp. 5.6% Washington Mutual Bank 2.8% ............................................................... BankAmerica Corp. 4.4 Allstate Corp. 2.4 ............................................................... Philip Morris Cos. 4.4 First Chicago Corp. 2.4 ............................................................... First Union Corp. 4.3 RJR Nabisco 2.4 ............................................................... Citicorp 4.3 BankBoston Corp. 2.4 ............................................................... 3. Results of a hypothetical $10,000 investment in Class A shares on September 30, 1987. The S&P 500 is a broad-based unmanaged stock index including daily reinvestment of dividends, and cannot be purchased directly by investors. Past performance does not guarantee future results. 4. Portfolio is subject to change. Percentages are as of August 31, 1997 and are based on total market value of stock holdings. 5 Oppenheimer Equity Income Fund An interview with your Fund's manager - -------------------------------------------------------------------------------- How did the Fund perform? Oppenheimer Equity Income Fund's Class A shares had an annualized total rate of return, before sales charges, of 33.39% for the one-year period ended August 31, 1997.(1) In comparison, the Standard & Poor's 500 Index(2) was up 37.96% for the same period. Considering that only about half of the Fund was exposed to the volatility of common stocks, we believe our performance was quite strong. The rest of the Fund was invested in a variety of fixed-income securities as well as convertible bonds and convertible preferred stock. What sectors of the stock market contributed the most to performance? As for industries, the bank stocks were by far the Fund's largest industry holding, comprising on average 25% of the Fund's net assets during the period ended August 31, 1997. Rather than focusing on particular industries, we buy stocks that appear to be attractively priced, and in our opinion, banks have been attractive over the past three years. One of the themes in the banking industry is consolidation. Chase Manhattan Corp., the largest holding in the portfolio at the end of the period, completed a very successful merger with Chemical Bank, allowing them to cut costs substantially. Because of the merged company's strong earnings, the stock keeps doing well. "We have moderate expectations for the stock market over the next 12 months." 1. Includes changes in net asset value per share without deducting any sales charges. Such performance would have been lower if sales charges were taken into account. Past performance does not guarantee future results. 2. The S&P 500 is a broad-based unmanaged stock index including daily reinvestment of dividends, and cannot be purchased directly by investors. 6 Oppenheimer Equity Income Fund [PHOTO] Portfolio Manager John Doney Even now, the stock appears, in our opinion, inexpensively priced. Another strong bank in the portfolio was BankAmerica Corp., which benefited from a strengthening California economy. Besides banks, what other industries have worked out well? The insurance industry has also been pretty good over the past year. Allstate Corp., widely regarded as one of the most prominent property/casualty insurers in the country, has produced strong returns for the Fund. In recent years, Allstate has increased its market position in the insurance industry. After Hurricane Andrew in 1992, a number of competitors left the business, so the industry became less competitive. As a result, the remaining property/casualty insurers were more profitable. Meanwhile, Allstate has cut costs and boosted profits. Why do you own convertible securities, zero coupon Treasuries and foreign bonds? Compared to dividend-paying stocks, investors typically get a higher income return from convertible bonds, as well as participating in some of the common stocks' appreciation. A second benefit of convertibles is that investors are protected to some degree from the downside risk of investing in equity securities. That is, the convertible generally will not fall the same percentage as the underlying common stock, under most conditions. 7 Oppenheimer Equity Income Fund An interview with your Fund's manager "We buy stocks that appear to be attractively priced . . ." About 13% of the portfolio was invested in long-term zero coupon Treasury securities during the period. Zero coupon bonds pay no cash interest and, as a result, they sell at a steep discount to maturity value. Because the ultimate cash payoff on zero coupon bonds occurs at maturity, zero coupon bond prices tend to be more volatile than regular Treasury bonds with their semiannual interest payments. If interest rates go down, then zero coupon bonds generally perform better than regular Treasury bonds, but if interest rates rise, then zero coupon bonds generally underperform regular Treasury bonds. We usually buy foreign government bonds for income, where yields can be as high as 10% to 20%. We believe the credit risk for bonds issued by certain foreign governments in which the Fund invests is acceptable. However, as with all international investments, there are political and economic uncertainties, as well as currency and credit risk where the bonds are not denominated in dollars. What is your outlook over the next several months? Our current strategy is based upon our belief that we will experience a slow economy and falling interest rates. Given that the market has done so well, we have more moderate expectations for the stock market over the next six to twelve months. In such an environment, we have positioned the portfolio more defensively than the market as a whole. First, we tend to buy stocks that pay dividends. 8 Oppenheimer Equity Income Fund In addition to buying dividend-paying stocks and convertible bonds, we are buying the stocks of companies with earnings we believe are more dependable. As a result, we would expect that these stocks may perform well in a sluggish economy. For example, we continue to believe that banks still represent excellent value. We are optimistic that bank earnings could continue to rise over the next few years, even in a slow economy. Some investors may believe that if interest rates go up, bank earnings go down because lending volume declines. But we believe that may not necessarily be true anymore because some banks are able to generate fees from money management, trust services and a growing number of activities unrelated to lending. Investors should understand that the market is vulnerable to disappointment. The current level of stock prices is based on an economy with moderate growth and little inflation. As a result, our expectations are more moderate over the next few years. ". . . and it just so happens that many banks have been attractive over the past three years." 9 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments August 31, 1997 - --------------------------------------------------------------------------------
Market Value Shares See Note 1 =============================================================================================================== Common Stocks--56.1% - --------------------------------------------------------------------------------------------------------------- Basic Materials--2.9% - --------------------------------------------------------------------------------------------------------------- Chemicals--0.8% Dexter Corp. 400,000 $ 15,200,000 - --------------------------------------------------------------------------------------------------------------- Dow Chemical Co. 100,000 8,850,000 -------------- 24,050,000 - --------------------------------------------------------------------------------------------------------------- Metals--0.3% Reynolds Metals Co. 131,200 9,274,200 - --------------------------------------------------------------------------------------------------------------- Paper--1.8% Sonoco Products Co. 600,000 19,537,500 - --------------------------------------------------------------------------------------------------------------- Union Camp Corp. 200,000 11,862,500 - --------------------------------------------------------------------------------------------------------------- Westvaco Corp. 375,000 12,703,125 - --------------------------------------------------------------------------------------------------------------- Weyerhaeuser Co. 250,000 14,437,500 -------------- 58,540,625 - --------------------------------------------------------------------------------------------------------------- Consumer Cyclicals--3.5% - --------------------------------------------------------------------------------------------------------------- Autos & Housing--1.9% Ford Motor Co. 300,000 12,900,000 - --------------------------------------------------------------------------------------------------------------- General Motors Corp. 200,000 12,550,000 - --------------------------------------------------------------------------------------------------------------- Prime Retail, Inc.(5) 592,200 8,549,887 - --------------------------------------------------------------------------------------------------------------- Snap-On, Inc. 675,000 28,350,000 -------------- 62,349,887 - --------------------------------------------------------------------------------------------------------------- Retail: General--1.6% Family Dollar Stores, Inc. 700,000 14,875,000 - --------------------------------------------------------------------------------------------------------------- Penney (J.C.) Co., Inc. 300,000 18,000,000 - --------------------------------------------------------------------------------------------------------------- Sears Roebuck & Co. 300,000 17,025,000 -------------- 49,900,000 - --------------------------------------------------------------------------------------------------------------- Consumer Non-Cyclicals--7.5% - --------------------------------------------------------------------------------------------------------------- Food--0.9% SUPERVALU, Inc. 700,000 27,475,000 - --------------------------------------------------------------------------------------------------------------- Healthcare/Drugs--2.0% American Home Products Corp. 200,000 14,400,000 - --------------------------------------------------------------------------------------------------------------- Bristol-Myers Squibb Co. 400,000 30,400,000 - --------------------------------------------------------------------------------------------------------------- Merck & Co., Inc. 200,000 18,362,500 -------------- 63,162,500 - --------------------------------------------------------------------------------------------------------------- Healthcare/Supplies & Services--0.5% United States Surgical Corp. 476,500 15,694,719 - --------------------------------------------------------------------------------------------------------------- Tobacco--4.1% Philip Morris Cos., Inc. 1,800,000 78,525,000 - --------------------------------------------------------------------------------------------------------------- RJR Nabisco Holdings Corp. 1,213,000 42,227,562 - --------------------------------------------------------------------------------------------------------------- UST, Inc. 400,000 11,550,000 -------------- 132,302,562
10 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Market Value Shares See Note 1 - --------------------------------------------------------------------------------------------------------------- Energy--3.0% - --------------------------------------------------------------------------------------------------------------- Oil-Integrated--3.0% Elf Aquitaine SA, Sponsored ADR 100,000 $ 5,575,000 - --------------------------------------------------------------------------------------------------------------- Mobil Corp. 200,000 14,550,000 - --------------------------------------------------------------------------------------------------------------- Occidental Petroleum Corp. 400,000 9,375,000 - --------------------------------------------------------------------------------------------------------------- Phillips Petroleum Co. 300,000 14,268,750 - --------------------------------------------------------------------------------------------------------------- Royal Dutch Petroleum Co., NY Shares(5) 300,000 15,225,000 - --------------------------------------------------------------------------------------------------------------- Ultramar Diamond Shamrock Corp. 400,000 13,050,000 - --------------------------------------------------------------------------------------------------------------- Unocal Corp. 200,000 7,812,500 - --------------------------------------------------------------------------------------------------------------- USX-Marathon Group 500,000 16,281,250 -------------- 96,137,500 - --------------------------------------------------------------------------------------------------------------- Financial--31.1% - --------------------------------------------------------------------------------------------------------------- Banks--24.9% Banc One Corp. 770,000 41,291,250 - --------------------------------------------------------------------------------------------------------------- Bank of New York Co., Inc. (The) 700,000 31,237,500 - --------------------------------------------------------------------------------------------------------------- BankAmerica Corp. 1,200,000 78,975,000 - --------------------------------------------------------------------------------------------------------------- BankBoston Corp. 505,636 42,030,993 - --------------------------------------------------------------------------------------------------------------- Bankers Trust New York Corp. 100,000 10,375,000 - --------------------------------------------------------------------------------------------------------------- Chase Manhattan Corp. (New) 900,000 100,068,750 - --------------------------------------------------------------------------------------------------------------- Citicorp 600,000 76,575,000 - --------------------------------------------------------------------------------------------------------------- Commonwealth Bank, ADR(1) 305,333 7,116,549 - --------------------------------------------------------------------------------------------------------------- Crestar Financial Corp. 550,000 24,578,125 - --------------------------------------------------------------------------------------------------------------- First Chicago NBD Corp. 600,000 43,050,000 - --------------------------------------------------------------------------------------------------------------- First Union Corp. 1,600,000 76,900,000 - --------------------------------------------------------------------------------------------------------------- Fleet Financial Group, Inc. 400,000 25,775,000 - --------------------------------------------------------------------------------------------------------------- Greenpoint Financial Corp. 300,000 18,468,750 - --------------------------------------------------------------------------------------------------------------- KeyCorp 400,000 24,250,000 - --------------------------------------------------------------------------------------------------------------- Magna Group, Inc. 400,000 14,525,000 - --------------------------------------------------------------------------------------------------------------- Mellon Bank Corp. 800,000 38,500,000 - --------------------------------------------------------------------------------------------------------------- National City Corp. 500,000 28,250,000 - --------------------------------------------------------------------------------------------------------------- PNC Bank Corp. 301,600 13,044,200 - --------------------------------------------------------------------------------------------------------------- Signet Banking Corp. 400,000 20,725,000 - --------------------------------------------------------------------------------------------------------------- Summit Bancorp 500,000 29,687,500 - --------------------------------------------------------------------------------------------------------------- Washington Mutual, Inc. 840,000 50,295,000 -------------- 795,718,617 - --------------------------------------------------------------------------------------------------------------- Diversified Financial--2.5% American Express Co. 500,000 38,875,000 - --------------------------------------------------------------------------------------------------------------- American General Corp. 600,000 28,912,500 - --------------------------------------------------------------------------------------------------------------- Capital One Financial Corp. 300,000 11,550,000 -------------- 79,337,500
11 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares See Note 1 - --------------------------------------------------------------------------------------------------------------- Insurance--3.7% Allstate Corp. 600,000 $ 43,837,500 - --------------------------------------------------------------------------------------------------------------- American States Financial Corp. 550,000 25,746,875 - --------------------------------------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. 150,000 11,962,500 - --------------------------------------------------------------------------------------------------------------- IPC Holdings Ltd. 419,000 12,308,125 - --------------------------------------------------------------------------------------------------------------- Reliance Group Holdings, Inc. 2,141,500 26,233,375 -------------- 120,088,375 - --------------------------------------------------------------------------------------------------------------- Industrial--3.3% - --------------------------------------------------------------------------------------------------------------- Electrical Equipment--0.8% AMP, Inc. 500,000 25,000,000 - --------------------------------------------------------------------------------------------------------------- Industrial Services--0.4% H & R Block, Inc. 300,000 11,775,000 - --------------------------------------------------------------------------------------------------------------- Manufacturing--2.1% Cooper Industries, Inc. 163,333 8,707,691 - --------------------------------------------------------------------------------------------------------------- Minnesota Mining & Manufacturing Co. 300,000 26,962,500 - --------------------------------------------------------------------------------------------------------------- Tenneco, Inc. 365,300 17,739,881 - --------------------------------------------------------------------------------------------------------------- United Technologies Corp. 200,000 15,612,500 -------------- 69,022,572 - --------------------------------------------------------------------------------------------------------------- Utilities--4.8% - --------------------------------------------------------------------------------------------------------------- Electric Utilities--2.9% Allegheny Power System, Inc. 300,000 8,718,750 - --------------------------------------------------------------------------------------------------------------- Central & South West Corp. 500,000 10,343,750 - --------------------------------------------------------------------------------------------------------------- DTE Energy Co. 300,000 8,887,500 - --------------------------------------------------------------------------------------------------------------- Entergy Corp. 550,000 13,646,875 - --------------------------------------------------------------------------------------------------------------- Florida Progress Corp. 500,000 16,093,750 - --------------------------------------------------------------------------------------------------------------- New Century Energies, Inc.(2) 200,000 8,075,000 - --------------------------------------------------------------------------------------------------------------- Ohio Edison Co. 400,000 8,800,000 - --------------------------------------------------------------------------------------------------------------- Potomac Electric Power Co. 400,000 9,075,000 - --------------------------------------------------------------------------------------------------------------- Texas Utilities Co. 300,000 10,462,500 -------------- 94,103,125 - --------------------------------------------------------------------------------------------------------------- Gas Utilities--0.2% Pacific Enterprises 150,000 4,940,625 - --------------------------------------------------------------------------------------------------------------- Telephone Utilities--1.7% GTE Corp. 550,000 24,509,375 - --------------------------------------------------------------------------------------------------------------- Portugal Telecom SA, Sponsored ADR 410,000 15,067,500 - --------------------------------------------------------------------------------------------------------------- SBC Communications, Inc. 300,000 16,312,500 - --------------------------------------------------------------------------------------------------------------- 55,889,375 -------------- Total Common Stocks (Cost $951,298,010) 1,794,762,182
12 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Market Value Shares See Note 1 =============================================================================================================== Preferred Stocks--3.7% - --------------------------------------------------------------------------------------------------------------- American Heritage Life Investment Corp., 8.50% Cv. Preferred(2) 35,000 $ 2,082,500 - --------------------------------------------------------------------------------------------------------------- Armco, Inc., $3.625 Cv. Cum. 200,000 10,025,000 - --------------------------------------------------------------------------------------------------------------- Banco Commercial Portuguese International Bank Ltd., 8% Cv. Preferred Stock, Series A 396,000 27,423,000 - --------------------------------------------------------------------------------------------------------------- California Federal Preferred Capital Corp., 9.125% Non-Cum. Exchangeable Preferred, Series A, Non-Vtg. 55,000 1,443,750 - --------------------------------------------------------------------------------------------------------------- Chiquita Brands International, Inc. $3.75 Cv., Series B 180,000 10,282,500 - --------------------------------------------------------------------------------------------------------------- Fresenius Medical Care Trust, 9% Preferred Securities 1,600,000 1,660,000 - --------------------------------------------------------------------------------------------------------------- Golden State Bancorp., 8.75% Cv. Preferred Stock, Series A 175,000 12,250,000 - --------------------------------------------------------------------------------------------------------------- IXC Communications, Inc., 7.25% Cv. Cum., Non-Vtg.(1)(3) 50,906 6,566,874 - --------------------------------------------------------------------------------------------------------------- MCN Energy Group, Inc., 8% Cv. Preferred Redeemable Increased Dividend Equity Securities 50,000 2,668,750 - --------------------------------------------------------------------------------------------------------------- National Australia Bank Ltd., ExCaps (each ExCap consists of $25 principal amount of 7.875% Perpetual Capital Security and a purchase contract entitling the holder to exchange ExCaps for ordinary shares of the Bank)(4) 590,000 16,851,875 - --------------------------------------------------------------------------------------------------------------- Occidental Petroleum Corp., $3.875 Cv. Cum.(1) 400,000 22,350,000 - --------------------------------------------------------------------------------------------------------------- Sovereign Bancorp, Inc., 6.25% Cv., Series B 36,500 3,440,125 -------------- Total Preferred Stocks (Cost $96,024,664) 117,044,374 =============================================================================================================== Other Securities--5.8% - --------------------------------------------------------------------------------------------------------------- Allstate Corp., $2.30 Debt Exchangeable for Common Stock of PMI Group, Inc. 111,000 5,397,375 - --------------------------------------------------------------------------------------------------------------- American General Delaware, LLC, $3.00 Cv. Monthly Income Preferred Securities, Series A 75,000 4,860,937 - --------------------------------------------------------------------------------------------------------------- Atlantic Richfield Co., 9% Exchangeable Nts. for Common Stock of Lyondell Petrochemical Co., 9/15/97 400,000 9,500,000 - --------------------------------------------------------------------------------------------------------------- Browning-Ferris Industries, Inc., 7.25% Cv. Automatic Common Stock Exchangeable Securities 225,000 7,439,062 - --------------------------------------------------------------------------------------------------------------- Corning Delaware LP, 6% Cv. Monthly Income Preferred Securities 150,000 12,450,000 - --------------------------------------------------------------------------------------------------------------- Elsag Bailey Financing Trust, 5.50% Cv. Trust Originated Preferred Securities(1) 250,000 11,437,500 - --------------------------------------------------------------------------------------------------------------- Enron Corp., 6.25% Cv. Automatic Common Exchangeable Securities, Redeemable into Enron Oil & Gas Co. Common Stock 270,000 6,193,125 - --------------------------------------------------------------------------------------------------------------- Hollinger International, Inc., 9.75% Cv. Preferred Redeemable Increased Dividend Equity Securities, 8/1/00 800,000 9,550,000 - --------------------------------------------------------------------------------------------------------------- Houston Industries, Inc., 7% Automatic Common Exchange Securities, Exchangeable for Time Warner, Inc. Common Stock, 7/1/00 175,800 8,921,850 - --------------------------------------------------------------------------------------------------------------- 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 26,687,500 - --------------------------------------------------------------------------------------------------------------- MCN Energy Group, Inc., 8.75% Cv. Preferred Redeemable Increased Dividend Equity Securities 135,000 3,872,813
13 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares See Note 1 =============================================================================================================== Other Securities (continued) - --------------------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc., 6% Cv. Structured Yield Product Exchangeable for Common Stock of Cox Communications, Inc., 6/1/99 500,000 $ 12,375,000 - --------------------------------------------------------------------------------------------------------------- Owens Corning Capital LLC, 6.50% Cv. Monthly Income Preferred Securities, Non.Vtg.(1) 200,000 11,175,000 - --------------------------------------------------------------------------------------------------------------- Salomon, Inc., 7.625% Cv. Preferred, Debt Exchangeable for Common Stock of Financial Security Assurance Holdings Ltd. 460,000 16,215,000 - --------------------------------------------------------------------------------------------------------------- SBC Communications, Inc., 7.75% Debt Exchangeable for Common Stock 500,000 22,000,000 - --------------------------------------------------------------------------------------------------------------- U S West, Inc., 7.625% Cv. Debt Exchangeable for Common Stock of Enhance Financial Services Group, Inc. 415,000 17,689,375 -------------- Total Other Securities (Cost $144,917,500) 185,764,537 Units =============================================================================================================== Rights, Warrants and Certificates--0.0% - --------------------------------------------------------------------------------------------------------------- Venezuela Oil Linked Wts., Exp. 4/20 (Cost $0) 7,140 -- Face Amount(5) =============================================================================================================== U.S. Government Obligations--13.3% - --------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds, STRIPS, Zero Coupon: 6.941%, 5/15/21(6) $900,000,000 182,860,977 7.201%, 8/15/08(6) 150,000,000 73,691,986 7.221%, 8/15/20(6) 800,000,000 170,948,731 -------------- Total U.S. Government Obligations (Cost $404,708,154) 427,501,694 =============================================================================================================== Foreign Government Obligations--3.3% - --------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Past Due Interest Bonds, Series L, 6.75%, 3/31/05(7) 6,305,000 6,009,453 - --------------------------------------------------------------------------------------------------------------- Bonos de la Tesoreria de la Federacion, Zero Coupon: 22.50%, 5/7/98(6)(MXP) 121,441,670 13,540,973 28.213%, 9/4/97(6)(MXP) 48,667,190 6,240,314 - --------------------------------------------------------------------------------------------------------------- Canada (Government of) Bonds, 7.50%, 9/1/00(CAD) 19,460,000 14,971,559 - --------------------------------------------------------------------------------------------------------------- Fideicomiso Petacalco Trust Nts., 10.16%, 12/23/09(8) 9,000,000 9,399,375 - --------------------------------------------------------------------------------------------------------------- Hashemite (Kingdom of) Jordan Disc. Bonds, 6.75%, 12/23/23(7) 1,250,000 1,040,625 - --------------------------------------------------------------------------------------------------------------- New South Wales State Bank Bonds, 9.25%, 2/18/03(AUD) 9,900,000 8,127,780 - --------------------------------------------------------------------------------------------------------------- Peru (Republic of) Past Due Interest Bonds, 4%, 3/7/17(7) 350,000 229,688 - --------------------------------------------------------------------------------------------------------------- Poland (Republic of) Bonds, 16%, 10/12/98(PLZ) 14,450,000 3,834,170 - --------------------------------------------------------------------------------------------------------------- Quebec, Canada (Province of) Debs., 10.25%, 4/7/98(CAD) 10,000,000 7,479,526 - --------------------------------------------------------------------------------------------------------------- Queensland Treasury Corp. Exchangeable Gtd. Nts., 8%, 8/14/01(AUD) 33,650,000 26,564,286 - --------------------------------------------------------------------------------------------------------------- South Africa (Republic of) Bonds: Series 150, 12%, 2/28/05(ZAR) 15,100,000 2,895,434 12.50%, 1/15/02ZAR 12,460,000 2,517,536
14 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Face Market Value Amount(5) See Note 1 =============================================================================================================== Foreign Government Obligations (continued) - --------------------------------------------------------------------------------------------------------------- South Australia (Government of) Bonds, 9%, 9/23/02(AUD) 3,000,000 $ 2,430,033 - --------------------------------------------------------------------------------------------------------------- Venezuela (Republic of) Disc. Bonds, Series W-A, 6.812%, 3/31/20(7) 1,000,000 906,250 -------------- Total Foreign Government Obligations (Cost $104,002,025) 106,187,002 =============================================================================================================== Non-Convertible Corporate Bonds and Notes--4.9% - --------------------------------------------------------------------------------------------------------------- AK Steel Corp., 9.125% Sr. Nts., 12/15/06 3,000,000 3,168,750 - --------------------------------------------------------------------------------------------------------------- Auburn Hills Trust, 12% Gtd. Exchangeable Certificates, 5/1/20(7) 5,000,000 7,640,280 - --------------------------------------------------------------------------------------------------------------- Bank Plus Corp., 12% Sr. Nts., 7/18/07 2,500,000 2,762,500 - --------------------------------------------------------------------------------------------------------------- Brooks Fiber Properties, Inc., 0%/11.875% Sr. Disc. Nts., 11/1/06(9) 2,800,000 1,960,000 - --------------------------------------------------------------------------------------------------------------- CalEnergy, Inc., 9.50% Sr. Nts., 9/15/06 1,180,000 1,265,550 - --------------------------------------------------------------------------------------------------------------- California Energy, Inc., 10.25% Sr. Disc. Nts., 1/15/04 4,350,000 4,687,125 - --------------------------------------------------------------------------------------------------------------- Calpine Corp., 9.25% Sr. Nts., 2/1/04 820,000 835,375 - --------------------------------------------------------------------------------------------------------------- Chesapeake Energy Corp., 9.125% Sr. Nts., 4/15/06 4,000,000 3,970,000 - --------------------------------------------------------------------------------------------------------------- Comcast Corp., 10.25% Sr. Sub. Debs., 10/15/01 6,000,000 6,675,000 - --------------------------------------------------------------------------------------------------------------- Cott Corp., 9.375% Sr. Nts., 7/1/05 6,350,000 6,635,750 - --------------------------------------------------------------------------------------------------------------- El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 6,000,000 6,540,000 - --------------------------------------------------------------------------------------------------------------- Falcon Drilling Co., Inc., 8.875% Sr. Nts., Series B, 3/15/03 5,850,000 6,171,750 - --------------------------------------------------------------------------------------------------------------- Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., Series B, 6/15/06 5,000,000 5,200,000 - --------------------------------------------------------------------------------------------------------------- First Nationwide Holdings, Inc., 10.625% Sr. Sub. Nts., 10/1/03 6,190,000 6,809,000 - --------------------------------------------------------------------------------------------------------------- Heritage Media Corp., 8.75% Sr. Sub. Nts., 2/15/06 4,500,000 4,792,500 - --------------------------------------------------------------------------------------------------------------- HMC Acquisition Properties, Inc., 9% Sr. Nts., Series B, 12/15/07 3,000,000 3,060,000 - --------------------------------------------------------------------------------------------------------------- HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B, 5/15/05 7,000,000 7,315,000 - --------------------------------------------------------------------------------------------------------------- Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts., 2/1/06 5,000,000 5,200,000 - --------------------------------------------------------------------------------------------------------------- Lenfest Communications, Inc., 8.375% Sr. Unsec. Nts., 11/1/05 6,000,000 5,910,000 - --------------------------------------------------------------------------------------------------------------- Magellan Health Services, Inc., 11.25% Sr. Sub. Nts., Series A, 4/15/04 7,095,000 7,910,925 - --------------------------------------------------------------------------------------------------------------- Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts., 8/1/03(9) 3,750,000 3,672,637 - --------------------------------------------------------------------------------------------------------------- Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03 9,000,000 9,461,250 - --------------------------------------------------------------------------------------------------------------- Rowan Cos., Inc., 11.875% Sr. Nts., 12/1/01 5,302,000 5,606,865 - --------------------------------------------------------------------------------------------------------------- Sun Media Corp., 9.50% Sr. Sub. Nts., 2/15/07 800,000 828,000 - --------------------------------------------------------------------------------------------------------------- Tenet Healthcare Corp.: 10.125% Sr. Sub. Nts., 3/1/05 5,000,000 5,500,000 8.625% Sr. Sub. Nts., 1/15/07 2,000,000 2,062,500 - --------------------------------------------------------------------------------------------------------------- Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A,12/1/11(1) 2,463,957 2,143,643 - --------------------------------------------------------------------------------------------------------------- Viacom International, Inc., 10.25% Sr. Sub. Nts., 9/15/01 12,000,000 12,974,183 - --------------------------------------------------------------------------------------------------------------- WestPoint Stevens, Inc.: 8.75% Sr. Nts., 12/15/01 6,000,000 6,225,000 9.375% Sr. Sub. Debs., 12/15/05 2,000,000 2,095,000 - --------------------------------------------------------------------------------------------------------------- WorldCom, Inc., 9.375% Sr. Nts., 1/15/04 7,408,600 7,899,420 -------------- Total Non-Convertible Corporate Bonds and Notes (Cost $147,042,015) 156,978,003
15 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Face Market Value Amount(5) See Note 1 =============================================================================================================== Convertible Corporate Bonds and Notes--2.9% - --------------------------------------------------------------------------------------------------------------- ALZA Corp., 5% Cv. Sub. Debs., 5/1/06 $ 10,000,000 $ 10,187,500 - --------------------------------------------------------------------------------------------------------------- Apple Computer, Inc., 6% Cv. Sub. Nts., 6/1/01 10,500,000 10,644,375 - --------------------------------------------------------------------------------------------------------------- Box Energy Corp., 8.25% Cv. Sub. Nts., 12/1/02 5,000,000 5,000,000 - --------------------------------------------------------------------------------------------------------------- Inco Ltd.: 5.75% Cv. Debs., 7/1/04 9,700,000 11,045,875 7.75% Cv. Debs., 3/15/16 9,800,000 10,020,500 - --------------------------------------------------------------------------------------------------------------- Integrated Device Technology, Inc., 5.50% Cv. Sub. Nts., 6/1/02 7,000,000 6,107,500 - --------------------------------------------------------------------------------------------------------------- Mutual Risk Management Ltd., Zero Coupon Exchangeable Sub. Debs., 1.214%, 10/30/15(1)(6) 19,500,000 9,993,750 - --------------------------------------------------------------------------------------------------------------- Oryx Energy Co., 7.50% Cv. Sub. Debs., 5/15/14 7,000,000 7,105,000 - --------------------------------------------------------------------------------------------------------------- Platinum Technology, Inc., 6.75% Cv. Sub. Nts., 11/15/01 4,100,000 7,410,750 - --------------------------------------------------------------------------------------------------------------- Stone Container Corp., 8.875% Cv. Sr. Sub. Nts., 7/15/00 3,000,000 4,706,250 - --------------------------------------------------------------------------------------------------------------- VLSI Technology, Inc., 8.25% Cv. Sub. Nts., 10/1/05 11,800,000 12,154,000 -------------- Total Convertible Corporate Bonds and Notes (Cost $81,685,268) 94,375,500 =============================================================================================================== Structured Instruments--0.0% - --------------------------------------------------------------------------------------------------------------- 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, 5.83%, 9/1/97 and an interest rate swap between Credit Suisse Financial Products and the Trust] (Cost $571,429)(8) 571,428 571,028 =============================================================================================================== Short-Term Notes--4.7% - --------------------------------------------------------------------------------------------------------------- CIT Group Holdings, Inc., 5.50%, 9/3/97(10) 50,000,000 49,984,722 - --------------------------------------------------------------------------------------------------------------- General Electric Capital Corp., 5.50%, 9/17/97(10) 50,000,000 49,877,778 - --------------------------------------------------------------------------------------------------------------- Household Finance Corp., 5.52%, 9/3/97(10) 50,000,000 49,984,667 -------------- Total Short-Term Notes (Cost $149,847,167) 149,847,167 =============================================================================================================== Repurchase Agreements--5.5% - --------------------------------------------------------------------------------------------------------------- Repurchase agreement with J.P. Morgan Securities, Inc., 5.55%, dated 8/29/97, to be repurchased at $176,508,780 on 9/2/97, collateralized by U.S. Treasury Bonds, 7.25%-11.25%, 2/15/03-8/15/19, with a value of $168,306,516 and U.S. Treasury Nts., 5.875%, 10/31/98, with a value of $11,793,435 (Cost $176,400,000) 176,400,000 176,400,000 - --------------------------------------------------------------------------------------------------------------- Total Investments, at Value (Cost $2,256,496,231) 100.2% 3,209,431,487 - --------------------------------------------------------------------------------------------------------------- Liabilities in Excess of Other Assets (0.2) (7,910,605) ----------- -------------- Net Assets 100.0% $3,201,520,882 =========== ==============
16 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $70,783,316 or 2.21% of the Fund's net assets, at August 31, 1997. 2. Non-income producing security. 3. Interest or dividend is paid in kind. 4. Units may be comprised of several components, such as debt and equity and/or warrants to purchase equity at some point in the future. For units which represent debt securities, face amount disclosed represents total underlying principal. 5. Face amount is reported in U.S. Dollars, except for those denoted in the following currencies: AUD -- Australian Dollar PLZ -- Polish Zloty CAD -- Canadian Dollar ZAR -- South African Rand MXP -- Mexican Peso 6. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 7. Represents the current interest rate for a variable rate security. 8. Identifies issues considered to be illiquid or restricted--See Note 7 of Notes to Financial Statements. 9. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 10. Short-term notes are generally traded on a discount basis; the interest rate is the discount rate received by the Fund at the time of purchase. 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 August 31, 1997. There were no affiliate securities as of August 31, 1997. Transactions during the period in which the issuer was an affiliate are as follows:
Shares Shares August 31, Gross Gross August 31, Dividend 1996 Additions Reductions 1997 Income - -------------------------------------------------------------------------------------- Santa Fe Energy Resources, Inc., 8.25% Dividend Enhanced Convertible Stock 805,000 -- 805,000 -- $294,630
See accompanying Notes to Financial Statements. 17 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Assets and Liabilities August 31, 1997 - -------------------------------------------------------------------------------- ============================================================================================== Assets Investments, at value(cost $2,256,496,231)--see accompanying statement $3,209,431,487 - ---------------------------------------------------------------------------------------------- Unrealized appreciation on forward foreign currency exchange contracts--Note 5 45,571 - ---------------------------------------------------------------------------------------------- Receivables: Interest and dividends 14,210,143 Shares of beneficial interest sold 2,715,160 Investments sold 174,417 Closed forward foreign currency exchange contracts 57,986 - ---------------------------------------------------------------------------------------------- Other 70,430 -------------- Total assets 3,226,705,194 ============================================================================================== Liabilities Bank overdraft 2,706,156 - ---------------------------------------------------------------------------------------------- Unrealized depreciation on forward foreign currency exchange contracts--Note 5 176,042 - ---------------------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 11,390,355 Investments purchased 8,534,019 Distribution and service plan fees 1,099,067 Shareholder reports 610,790 Closed forward foreign currency exchange contracts 254,828 Transfer and shareholder servicing agent fees 188,668 Trustees' fees 7,410 Other 216,977 -------------- Total liabilities 25,184,312 ============================================================================================== Net Assets $3,201,520,882 ============== ============================================================================================== Composition of Net Assets Paid-in capital $2,079,711,486 - ---------------------------------------------------------------------------------------------- Undistributed net investment income 18,883,337 - ---------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 150,225,211 - ---------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 952,700,848 -------------- Net assets $3,201,520,882 ==============
18 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ============================================================================================== Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $2,721,671,770 and 192,764,206 shares of beneficial interest outstanding) $14.12 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $14.98 - ---------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $431,481,249 and 30,788,852 shares of beneficial interest outstanding) $14.01 - ---------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $48,367,863 and 3,450,666 shares of beneficial interest outstanding) $14.02
See accompanying Notes to Financial Statements 19 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended August 31, 1997 - -------------------------------------------------------------------------------- ============================================================================================== Investment Income Interest $ 76,575,702 - ---------------------------------------------------------------------------------------------- Dividends: Unaffiliated companies 59,769,436 Affiliated companies 294,630 -------------- Total income 136,639,768 ============================================================================================== Expenses Management fees--Note 4 14,800,449 - ---------------------------------------------------------------------------------------------- Distribution and service plan fees--Note 4: Class A 4,746,883 Class B 3,437,105 Class C 243,495 - ---------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees--Note 4 2,968,029 - ---------------------------------------------------------------------------------------------- Shareholder reports 1,207,169 - ---------------------------------------------------------------------------------------------- Custodian fees and expenses 183,023 - ---------------------------------------------------------------------------------------------- Legal and auditing fees 89,768 - ---------------------------------------------------------------------------------------------- Trustees' fees and expenses 81,511 - ---------------------------------------------------------------------------------------------- Other 86,624 -------------- Total expenses 27,844,056 ============================================================================================== Net Investment Income 108,795,712 ============================================================================================== Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 156,623,918 Closing and expiration of options written 18,500 Foreign currency transactions (469,976) -------------- Net realized gain 156,172,442 - ---------------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments 528,174,101 Translation of assets and liabilities denominated in foreign currencies (3,863,950) -------------- Net change 524,310,151 -------------- Net realized and unrealized gain 680,482,593 ============================================================================================== Net Increase in Net Assets Resulting from Operations $ 789,278,305 ==============
See accompanying Notes to Financial Statements. 20 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended Year Ended August 31, June 30, 1997 1996(1) 1996 ==================================================================================================================================== Operations Net investment income $ 108,795,712 $ 17,326,356 $ 100,321,496 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain 156,172,442 14,519,814 71,806,904 - ------------------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation or depreciation 524,310,151 (39,753,931) 206,616,780 --------------- --------------- ---------------- Net increase(decrease) in net assets resulting from operations 789,278,305 (7,907,761) 378,745,180 ==================================================================================================================================== Dividends and Distributions to Shareholders Dividends from net investment income: Class A (90,387,132) -- (88,933,508) Class B (9,876,167) -- (7,653,335) Class C (666,754) -- (81,369) - ------------------------------------------------------------------------------------------------------------------------------------ Distributions from net realized gain: Class A (74,843,781) -- (45,033,840) Class B (9,970,652) -- (4,472,521) Class C (386,132) -- (15,717) ==================================================================================================================================== Beneficial Interest Transactions Net increase (decrease) in net assets resulting from beneficial interest transactions--Note 2: Class A 85,811,376 (23,541,609) 35,013,412 Class B 99,076,120 8,288,875 70,965,886 Class C 36,069,145 1,564,603 5,782,628 ==================================================================================================================================== Net Assets Total increase (decrease) 824,104,328 (21,595,892) 344,316,816 - ------------------------------------------------------------------------------------------------------------------------------------ Beginning of period 2,377,416,554 2,399,012,446 2,054,695,630 --------------- --------------- ---------------- End of period(including undistributed net investment income of $18,883,337, $10,933,236 and $2,274,563, respectively) $ 3,201,520,882 $ 2,377,416,554 $ 2,399,012,446 =============== =============== ================
1. For the two months ended August 31, 1996. The Fund changed its fiscal year end from June 30 to August 31. See accompanying Notes to Financial Statements. 21 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Class A ---------------------------------------------------------------- Year Ended August 31, Year Ended June 30, 1997 1996(2) 1996 1995 1994 1993 ================================================================================================================= Per Share Operating Data: Net asset value, beginning of period $11.36 $11.39 $10.25 $9.44 $10.01 $9.15 - ----------------------------------------------------------------------------------------------------------------- Income (loss)from investment operations: Net investment income .47 .09 .50 .50 .47 .50 Net realized and unrealized gain (loss) 3.17 (.12) 1.36 .92 (.39) .99 ------- ------- ------- ------- ------- ------- Total income (loss) from investment operations 3.64 (.03) 1.86 1.42 .08 1.49 - ----------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.48) -- (.48) (.48) (.47) (.48) Dividends in excess of net investment income -- -- -- -- (.01) -- Distributions from net realized gain (.40) -- (.24) (.13) (.12) (.15) Distributions in excess of net realized gains -- -- -- -- (.05) -- ------- ------- ------- ------- ------- ------- Total dividends and distributions to shareholders (.88) -- (.72) (.61) (.65) (.63) - ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $14.12 $11.36 $11.39 $10.25 $9.44 $10.01 ====== ====== ====== ====== ===== ====== ================================================================================================================= Total Return, at Net Asset Value(4) 33.39% (0.26)% 18.61% 15.66% 0.65% 16.76% ================================================================================================================= Ratios/Supplemental Data: Net assets, end of period (in millions) $2,722 $2,110 $2,141 $1,893 $1,773 $1,790 - ----------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $2,446 $2,109 $2,054 $1,798 $1,832 $1,658 - ----------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 3.97% 3.28%(5) 4.51% 5.15% 4.72% 5.12% Expenses 0.88% 0.94%(5) 0.89% 0.96% 0.90% 0.79% - ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(6) 23.7% 13.5% 42.9% 45.7% 30.4% 59.0% Average brokerage commission rate(7) $0.0592 $0.0587 $0.0592 -- -- --
1. For the period from November 1, 1995 (inception of offering) to June 30, 1996. 2. For the two months ended August 31, 1996. The Fund changed its fiscal year end from June 30 to August 31. 3. For the period from August 17, 1993 (inception of offering) to June 30, 1994. 4. 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. 5. Annualized. 22 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Class B ----------------------------------------------------- Year Ended August 31, Year Ended June 30, 1997 1996(2) 1996 1995 1994(3) =========================================================================================================== Per Share Operating Data: Net asset value, beginning of period $11.29 $11.33 $10.21 $9.40 $10.22 - ----------------------------------------------------------------------------------------------------------- Income (loss)from investment operations: Net investment income .37 .07 .41 .43 .36 Net realized and unrealized gain (loss) 3.13 (.11) 1.35 .91 (.58) ------- ------- ------- ------- ------- Total income (loss) from investment operations 3.50 (.04) 1.76 1.34 (.22) - ----------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.38) -- (.40) (.40) (.42) Dividends in excess of net investment income -- -- -- -- (.01) Distributions from net realized gain (.40) -- (.24) (.13) (.12) Distributions in excess of net realized gains -- -- -- -- (.05) ------- ------- ------- ------- ------- Total dividends and distributions to shareholders (.78) -- (.64) (.53) (.60) - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $14.01 $11.29 $11.33 $10.21 $9.40 ====== ====== ====== ====== ===== =========================================================================================================== Total Return, at Net Asset Value(4) 32.17% (0.35)% 17.58% 14.87% (2.35)% =========================================================================================================== Ratios/Supplemental Data: Net assets, end of period (in millions) $431 $260 $252 $161 $88 - ----------------------------------------------------------------------------------------------------------- Average net assets (in millions) $344 $255 $208 $122 $47 - ----------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 3.16% 2.48%(5) 3.68% 4.34% 3.99%(5) Expenses 1.69% 1.76%(5) 1.72% 1.79% 1.82%(5) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate(6) 23.7% 13.5% 42.9% 45.7% 30.4% Average brokerage commission rate(7) $0.0592 $0.0587 $0.0592 -- -- Class C ------------------------------- Period Ended Year Ended August 31, June 30, 1997 1996(2) 1996(1) ================================================================================== Per Share Operating Data: Net asset value, beginning of period $11.30 $11.35 $10.76 - ---------------------------------------------------------------------------------- Income (loss)from investment operations: Net investment income .40 .07 .28 Net realized and unrealized gain (loss) 3.12 (.12) .88 ------- ------- ------- Total income (loss) from investment operations 3.52 (.05) 1.16 - ---------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.40) -- (.33) Dividends in excess of net investment income -- -- -- Distributions from net realized gain (.40) -- (.24) Distributions in excess of net realized gains -- -- -- ------- ------- ------- Total dividends and distributions to shareholders (.80) -- (.57) - ---------------------------------------------------------------------------------- Net asset value, end of period $14.02 $11.30 $11.35 ====== ====== ====== ================================================================================== Total Return, at Net Asset Value(4) 32.31% (0.44)% 10.50% ================================================================================== Ratios/Supplemental Data: Net assets, end of period (in millions) $48 $7 $6 - ---------------------------------------------------------------------------------- Average net assets (in millions) $25 $7 $3 - ---------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 3.15% 2.55%(5) 3.53%(5) Expenses 1.69% 1.79%(5) 1.81%(5) - ---------------------------------------------------------------------------------- Portfolio turnover rate(6) 23.7% 13.5% 42.9% Average brokerage commission rate(7) $0.0592 $0.0587 $0.0592
6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the period ended August 31, 1997 were $717,104,040 and $599,983,689, respectively. 7. 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. Generally, non-U.S. commissions are lower than U.S. commissions when expressed as cents per share but higher when expressed as a percentage of transactions because of the lower per-share prices of many non-U.S. securities. See accompanying Notes to Financial Statements. 23 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 adviser 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 that class and exclusive voting rights with respect to matters affecting that 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 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 an 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. Forward foreign currency exchange contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid 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 foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. 24 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ 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 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 its 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 fiscal year in which the income or realized gain was recorded by the Fund. During the year ended August 31, 1997, the Fund adjusted the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the period ended August 31, 1997, amounts have been reclassified to reflect an increase in undistributed net investment income of $84,443, a decrease in accumulated net realized gain on investments of $12,734, and a decrease in paid-in capital of $71,709. 25 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Significant Accounting Policies (continued) 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 August 31, 1997 Period Ended August 31, 1996(2) Year Ended June 30, 1996(1) -------------------------- ------------------------ -------------------------- Shares Amount Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------------- Class A: Sold 22,312,307 $ 286,390,507 3,550,795 $ 40,479,520 20,146,940 $ 223,283,409 Dividends and distributions reinvested 12,636,963 155,744,291 -- -- 11,433,753 125,568,723 Redeemed (27,925,816) (356,323,422) (5,703,125) (64,021,129) (28,310,542) (313,838,720) ---------- ------------- --------- ------------ ---------- ------------- Net increase(decrease) 7,023,454 $ 85,811,376 (2,152,330) $(23,541,609) 3,270,151 $ 35,013,412 ========== ============= ========= ============ ========== ============= Class B: Sold 9,869,512 $ 126,478,575 1,234,485 $ 13,913,799 8,424,677 $ 92,863,112 Dividends and distributions reinvested 1,509,887 18,517,384 -- -- 1,014,528 11,086,597 Redeemed (3,589,063) (45,919,839) (503,549) (5,624,924) (2,987,292) (32,983,823) ---------- ------------- --------- ------------ ---------- ------------- Net increase 7,790,336 $ 99,076,120 730,936 $ 8,288,875 6,451,913 $ 70,965,886 ========== ============= ========= ============ ========== ============= Class C: Sold 3,032,244 $ 39,122,283 153,840 $ 1,732,419 523,531 $ 5,887,218 Dividends and distributions reinvested 81,260 1,020,485 -- -- 8,456 94,181 Redeemed (315,866) (4,073,623) (14,976) (167,816) (17,823) (198,771) ---------- ------------- --------- ------------ ---------- ------------- Net increase 2,797,638 $ 36,069,145 138,864 $ 1,564,603 514,164 $ 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. 2. The Fund changed its fiscal year end from June 30 to August 31. 26 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ 3. Unrealized Gains and Losses on Investments At August 31, 1997, net unrealized appreciation on investments of $952,935,256 was composed of gross appreciation of $962,664,064, and gross depreciation of $9,728,808. ================================================================================ 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% of the first $100 million of average net assets, 0.70% of the next $100 million, 0.65% of the next $100 million, 0.60% of the next $100 million, 0.55% of the next $100 million, and 0.50% of 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 August 31, 1997, commissions (sales charges paid by investors) on sales of Class A shares totaled $5,179,851, of which $1,573,826 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 $4,076,061 and $367,675, respectively, of which $344,565 and $8,473, respectively, was paid to an affiliated broker/dealer. During the year ended August 31, 1997, OFDI received contingent deferred sales charges of $477,296 and $5,172 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. The Fund has adopted a Service Plan for Class A shares to reimburse OFDI for a portion of its costs incurred in connection with the personal service and maintenance of shareholder accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate that may not exceed 0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses the service fee to reimburse brokers, dealers, banks and other financial institutions quarterly for providing personal service and maintenance of accounts of their customers that hold Class A shares. During the period ended August 31, 1997, OFDI paid $317,169 to an affiliated broker/dealer as reimbursement for Class A personal service and maintenance expenses. The Fund has adopted a Distribution and Service Plan for Class B shares to reimburse OFDI for its services and costs in distributing Class B shares and servicing accounts. Under the Plan, the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class B shares. OFDI also receives a service fee of 0.25% per year to reimburse dealers for providing personal services for accounts that hold Class B shares. 27 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 4. Management Fees and Other Transactions with Affiliates (continued) Both fees are computed on the average annual net assets of Class B shares, determined as of the close of each regular business day. During the year ended August 31, 1997, OFDI paid $55,838 to an affiliated broker/dealer as reimbursement for Class B personal service and maintenance expenses and retained $2,803,497 as reimbursement for Class B sales commissions and service fee advances, as well as financing costs. If the Plan is terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to OFDI for distributing shares before the Plan was terminated. As of August 31, 1997, OFDI had incurred unreimbursed expenses of $9,440,081 for Class B. The Fund has adopted a Distribution and Service Plan for Class C shares to compensate OFDI for its services and costs in distributing Class C shares and servicing accounts. Under the Plan, the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class C shares. OFDI also receives a service fee of 0.25% per year to compensate dealers for providing personal services for accounts that hold Class C shares. Both fees are computed on the average annual net assets of Class C shares, determined as of the close of each regular business day. During the year ended August 31, 1997, OFDI retained $208,411 as compensation for Class C sales commissions and service fee advances, as well as financing costs. If the Plan is terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to OFDI for distributing shares before the Plan was terminated. As of August 31, 1997, OFDI had incurred unreimbursed expenses of $653,557 for Class C. ================================================================================ 5. Forward Contracts A forward foreign currency exchange contract (forward contract) is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund uses forward contracts to seek to manage foreign currency risks. They may also be used to tactically shift portfolio currency risk. The Fund gen erally enters into forward contracts as a hedge upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio positions. Forward contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. The Fund will realize a gain or loss upon the closing or settlement of the forward transaction. Securities held in segregated accounts to cover net exposure on outstanding forward contracts are noted in the Statement of Investments where applicable. Unrealized appreciation or depreciation on forward contracts is reported in the Statement of Assets and Liabilities. Realized gains and losses are reported with all other foreign currency gains and losses in the Fund's Statement of Operations. 28 Oppenheimer Equity Income Fund g - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ Risks include the potential inability of the counterparty to meet the terms of the contract and unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At August 31, 1997, the Fund had outstanding forward contracts to sell foreign currencies as follows:
Expiration Contract Valuation as of Unrealized Unrealized Contracts to Sell Date Amount (000s) August 31, 1997 Appreciation Depreciation - -------------------------------------------------------------------------------------------------- German Deutsche Mark (DEM) 9/15/97 7,700 DEM $ 4,258,383 $ -- $ 98,099 Mexican Peso (MXP) 9/29/97 4,330 MXP 549,735 -- 33 Mexican Peso (MXP) 10/2/97 149,511 MXP 18,956,844 45,571 -- South African Rand (ZAR) 9/25/97 25,419 ZAR 5,378,504 -- 77,910 ------- -------- $45,571 $176,042 ======= ========
================================================================================ 6. Option Activity The Fund may buy and sell put and call options, or write covered put and call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a footnote to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. 29 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 6. Option Activity (continued) Written option activity for the year ended August 31, 1997 was as follows: Call Options Put Options --------------------- -------------------- Number of Amount of Number of Amount of Options Premiums Options Premiums - -------------------------------------------------------------------------------- Options outstanding at August 31, 1996 -- $ -- -- $ -- Options written 1,850 29,600 1,850 55,500 Options closed or expired (1,850) (29,600) (1,850) (55,500) ------ -------- ------ -------- Options outstanding at August 31, 1997 -- $ -- -- $ -- ====== ======== ====== ======== ================================================================================ 7. Illiquid and Restricted Securities At August 31, 1997, investments in securities included issues that are illiquid or restricted. Restricted 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 be considered illiquid if it lacks a readily-available market or 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 periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limit. The aggregate value of illiquid or restricted securities subject to this limitation at August 31, 1997 was $9,970,403, which represents 0.31% of the Fund's net assets.
Acquisition Cost Valuation Per Unit Security Date Per Unit As of August 31, 1997 - ------------------------------------------------------------------------------------------------- CS First Boston Corp. Argentina Structured Product Asset Return Trust Certificates, 9.40%, 9/1/97 9/7/94 100.00% 99.93% Fideicomiso Petacalco Trust Nts., 10.16%, 12/23/09 4/16/97 99.93 104.44
30 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 August 31, 1997, the related statement of operations for the year then ended, the statements of changes net assets for the year then ended, for the two-months ended August 31, 1996 and the year ended June 30, 1996, and the financial highlights for the period July 1, 1992 to August 31, 1997. 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 August 31, 1997 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 August 31, 1997, 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 September 22, 1997 31 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Federal Income Tax Information (Unaudited) - -------------------------------------------------------------------------------- ================================================================================ In early 1998, shareholders will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 1997. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Distributions of $0.5226, $0.4953 and $0.4985 per share were paid to Class A, Class B and Class C shareholders, respectively, on December 20, 1996, of which, for each class of shares, $0.4026 was designated as a "capital gain distribution" for federal income tax purposes. Whether received in stock or in 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 year ended August 31, 1997 which are not designated as capital gain distributions should be multiplied by 45.40% 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 adviser for specific guidance. 32 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Shareholder Meeting (Unaudited) - -------------------------------------------------------------------------------- ================================================================================ On July 16, 1997, a shareholder meeting was held at which the eleven Trustees identified below were elected, the selection of Deloitte & Touche LLP as the independent certified public accountants and auditors of the Fund for the fiscal year beginning September 1, 1996 was ratified (Proposal No. 1), the proposed change to certain of the Fund's fundamental investment policies were approved (Proposal No. 2), the Investment Advisory Agreement between the Fund and OppenheimerFunds, Inc. was approved (Proposal No. 3), the Fund's Class B 12b-1 Distribution and Service Plan was approved by Class B shareholders (Proposal No. 4), and the Fund's Class C 12b-1 Distribution and Service Plan was approved by Class C shareholders (Proposal No. 5) as described in the Fund's proxy statement for that meeting. The following is a report of the votes cast:
Withheld/ Broker Nominee/Proposal For Against Abstain Non-Votes Total - --------------------------------------------------------------------------------------------------------------- Trustees Robert G. Avis 122,710,693.186 3,033,873.574 1,969,712 125,744,566.760 William A. Baker 121,262,782.406 4,481,784.354 1,969,712 125,744,566.760 Charles Conrad, Jr. 122,873,460.508 2,871,106.252 1,969,712 125,744,566.760 Jon S. Fossel 121,772,848.105 3,971,718.655 1,969,712 125,744,566.760 Sam Freedman 122,711,839.062 3,032,727.698 1,969,712 125,744,566.760 Raymond J. Kalinowski 121,893,986.740 3,850,580.020 1,969,712 125,744,566.760 C. Howard Kast 122,397,483.606 3,347,083.154 1,969,712 125,744,566.760 Robert M. Kirchner 121,705,189.387 4,039,377.373 1,969,712 125,744,566.760 Bridget A. Macaskill 122,699,426.391 3,045,140.369 1,969,712 125,744,566.760 Ned M. Steel 121,502,182.081 4,242,384.679 1,969,712 125,744,566.760 James C. Swain 122,679,080.441 3,065,486.319 1,969,712 125,744,566.760 Proposal No. 1 117,160,758.715 2,861,590.825 6,290,445.725 1,969,710 126,312,795.265 Proposal No. 2 94,830,125.636 7,765,180.357 8,832,185.668 13,209,161 111,427,491.661 Proposal No. 3 114,160,848.019 3,584,531.460 8,819,706.396 1,969,721 126,565,085.875 Proposal No. 4 15,332,103.823 552,803.651 1,096,180.209 262,526 16,981,087.683 Proposal No. 5 1,446,599.595 32,570.567 237,643.945 270,584 1,716,814.107
33 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 Adviser OppenheimerFunds, Inc. ================================================================================ Distributor OppenheimerFunds Distributor, Inc. ================================================================================ Transfer and Shareholder OppenheimerFunds 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. 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. 34 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- OppenheimerFunds Family - -------------------------------------------------------------------------------- ========================================================================================== Real Asset Funds - -------------------------------------------------------------------------------- Real Asset Fund Gold & Special Minerals Fund ========================================================================================== Stock Funds - ------------------------------------------------------------------------------------------ Developing Markets Fund Quest Small Cap Value Fund Global Fund Enterprise Fund Capital Appreciation Fund(1) Quest Global Value Fund International Growth Fund Quest Capital Value Fund Disciplined Value Fund Discovery Fund Growth Fund Quest Value Fund ========================================================================================== Stock & Bond Funds - ------------------------------------------------------------------------------------------ Main Street Income & Quest Growth & Income Disciplined Allocation Fund Growth Fund Value Fund Multiple Strategies Fund(2) Quest Opportunity Value Fund Global Growth & Income Fund Bond Fund for Growth Total Return Fund Equity Income Fund ========================================================================================== Bond Funds - ------------------------------------------------------------------------------------------ International Bond Fund Champion Income Fund U.S. Government Trust High Yield Fund Strategic Income Fund Limited-Term Government Fund Bond Fund ========================================================================================== Municipal Funds - ------------------------------------------------------------------------------------------ California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division: Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund ========================================================================================== Money Market Funds(4) - ------------------------------------------------------------------------------------------ Money Market Fund Cash Reserves ========================================================================================== LifeSpan - ------------------------------------------------------------------------------------------ Growth Fund Balanced Fund Income Fund
1. On 12/18/96, the Fund's name was changed from "Target Fund." 2. On 3/16/97, the Fund's name was changed from "Asset Allocation Fund." 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 1997 OppenheimerFunds, Inc. All rights reserved. 35 Oppenheimer Equity Income Fund Information and services - -------------------------------------------------------------------------------- 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, or visit us at our website at www.oppenheimerfunds.com--we're here to help. Internet 24-hr access to account information - ------------------------------- www.oppenheimerfunds.com - ------------------------------- General Information Mon-Fri 8:30am-9pm ET Sat 10am-4pm ET - ------------------------------- 1-800-525-7048 - ------------------------------- Account Transactions Mon-Fri 8:30am-9pm ET Sat 10am-4pm ET - ------------------------------- 1-800-852-8457 - ------------------------------- PhoneLink 24-hr automated information and automated transactions - ------------------------------- 1-800-533-3310 - ------------------------------- Telecommunication Device for the Deaf (TDD) Mon-Fri 8:30am-2pm 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 - ------------------------------- [LOGO] OppenheimerFunds(SM) Distributor, Inc. RA0300.001.0897 October 30, 1997 -----END PRIVACY-ENHANCED MESSAGE-----