-----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, QRZJOZWrRz/s8TwQtrY9Erm+hk6rtf6YZvazNtr8iP/ggQzzOwhaztGHLJOLU34c jFLI326iuy6ui+i1uksXnA== 0001005477-98-003008.txt : 19981105 0001005477-98-003008.hdr.sgml : 19981105 ACCESSION NUMBER: 0001005477-98-003008 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER EQUITY INCOME FUND 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: 98737809 BUSINESS ADDRESS: STREET 1: 6803 SOUTH TUCSON WAY CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3036713200 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER EQUITY INCOME FUND INC DATE OF NAME CHANGE: 19920703 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 N-30D 1 FORM N-30D ----------------------------- Annual Report August 31, 1998 ----------------------------- OPPENHEIMER Equity Income Fund [GRAPHIC OMITTED] [LOGO] OppenheimerFunds(R) THE RIGHT WAY TO INVEST Report highlights - -------------------------------------------------------------------------------- Contents 3 President's Letter 4 An Interview with Your Fund's Manager 9 Fund Performance 13 Financial Statements 35 Independent Auditors' Report 36 Federal Income Tax Information 37 Shareholder Meeting 38 Officers and Trustees 40 Information and Services o The Fund continued to provide competitive performance relative to its peers in the income category for Class A shares, ranking in the top half of funds as measured by Lipper Analytical Services for the one-year period ended September 30, 1998.(1) o The Fund took profits in certain financial services and retailing stocks whenever they became highly valued. o Heightened volatility began to hit the U.S. stock market in mid-1998 when the Asian crisis constrained economic growth and corporate earnings. - ------------------------------ Avg Annual Total Returns - ------------------------------ For the 1-Year Period Ended 8/31/98 Class A Without With Sales Chg.(2) Sales Chg.(3) - ------------------------------ 6.17% 0.06% - ------------------------------ Class B Without With Sales Chg.(2) Sales Chg.(3) - ------------------------------ 5.32% 0.45% - ------------------------------ Class C Without With Sales Chg.(2) Sales Chg.(3) - ------------------------------ 5.30% 4.33% - ------------------------------ 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. Because of ongoing market volatility, the Fund's performance may be subject to substantial short-term changes. For updates on the Fund's performance, please contact your financial advisor, call us at 1-800-525-7048 or visit our website, www.oppenheimerfunds.com. 1. Source: Lipper Analytical Services, Inc., 9/30/98. Based on the comparisons between changes in net asset value without considering sales charges, with dividends and capital gains distributions of the Fund's Class A shares reinvested. The Fund's Class A shares were ranked 27 out of 80 (1-year), 1 out of 22 (5-year) and 4 out of 12 (10-year) among income funds for the period ended 9/30/98. 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. 3. Class A returns include the current maximum initial sales charge of 5.75%. Class B returns include the applicable contingent deferred sales charge of 5%. Class C returns include the contingent deferred sales charge of 1%. An explanation of the different performance calculations is in the Fund's prospectus. Class B and C shares are subject to a 0.75% annual asset-based sales charge. 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 The performance of the financial markets over the past several months could be viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding the stock market's continued ascent to new record highs overshadowed the favorable economic environment that existed for bonds: low inflation and declining interest rates. However, since that time, stocks have declined sharply amid heightened volatility. Yet, the bond market remains poised to benefit from the same positive economic conditions that existed earlier in the year. Why have stocks faltered lately? The financial crises in Asia and Russia have negatively affected the earnings of some large U.S. corporations and have contributed to a slow-down in U.S. economic growth. Although slower economic growth has been negative for stocks, it should not adversely impact bonds. That's because slower economic growth generally means fewer inflationary pressures and less likelihood that interest rates will rise. What should you do during this period of relative uncertainty? If you have well-defined long-term financial goals and an investment strategy designed to achieve them, we encourage you to stay the course. However, if you feel your financial plan is out-of-date or incomplete, now is the time to make improvements. The best way to cope with short-term volatility is to adhere to a long-term plan that contains proven strategies, such as diversification among various financial markets, geographic regions, investment styles and individual securities. A long-term plan will give you the focus and perspective you need to put short-term volatility in its proper context. As longstanding advocates of financial planning, we have been encouraged by our shareholders' rational responses to the latest market events. Many of you tell us that you have a long-term strategy in place, which includes diversifying your investment portfolio among a number of different asset classes in accordance with your tolerance for risk. At OppenheimerFunds, our portfolio management teams include seasoned professionals who have encountered extreme market volatility in the past, giving them the perspective required to address risks and take advantage of opportunities in turbulent markets. In our view, having a well-defined set of financial goals, a disciplined long-term strategy and the help of experienced investment professionals are all fundamental parts of The Right Way to Invest. Sincerely, /s/ James C. Swain /s/ Bridget A. Macaskill James C. Swain Bridget A. Macaskill September 22, 1998 3 Oppenheimer Equity Income Fund An interview with your Fund's manager - -------------------------------------------------------------------------------- "The U.S. stock market appears to have experienced a shift in investor sentiment." How did the Fund perform during the 12-month period ended August 31, 1998? We're pleased that Oppenheimer Equity Income Fund provided competitive returns while helping to manage risks amid heightened market volatility. The Fund continued to provide competitive performance relative to its peers in the income category for Class A shares, ranking in the top half of funds as measured by Lipper Analytical Services for the one-year period ended September 30, 1998.(1) Why has the stock market become increasingly volatile in recent months? The U.S. stock market appears to have experienced a shift in investor sentiment. For the past several years, the stock market's rise has been fueled by investors' preference for large, well-established companies providing consistent earnings growth. As long as these companies' earnings continued to grow in line with analysts' expectations, investors believed that they would be rewarded. Valuations--a stock's price relative to the company's earnings--seemed to become a secondary consideration. As a result, over the past few years, many large companies' stocks sold at unusually high valuations. 4 Oppenheimer Equity Income Fund [PHOTO] Portfolio Management Team (l to r) John Doney (Portfolio Manager) Bruce Bartlett During the past several months, however, investors have been reacting to signs that a slower economy may negatively affect large companies' earnings growth. They appeared to be paying greater attention to valuations, and some have been selling stocks that they consider too expensive relative to lower earnings expectations. Why is the growth rate of corporate earnings slowing down? The financial crisis in Asia, which began late last year, has reduced demand for U.S. exports and has made Asian imports more competitive in the United States. As a result, many large companies and the U.S. economy are growing more slowly. How has the bond market reacted to a slowing economy? In general, the bond market has responded well to the slowing economy. Long-term interest rates have declined over the past year, largely because of low inflation. Investors holding longer term bonds earned competitive rates of interest and received modest levels of capital appreciation. 1. Source: Lipper Analytical Services, Inc., 9/30/98. Based on the comparisons between changes in net asset value without considering sales charges, with dividends and capital gains distributions of the Fund's Class A shares reinvested. The Fund's Class A shares were ranked 27 out of 80 (1-year), 1 out of 22 (5-year) and 4 out of 12 (10-year) among income funds for the period ended 9/30/98. 5 Oppenheimer Equity Income Fund An interview with your Fund's manager - -------------------------------------------------------------------------------- How have you managed the Fund in this environment? We've maintained a relatively defensive posture in the stock market, and lately we've been more aggressive in the bond market. We took profits in some of our financial services and retail stocks because they became more highly valued since we purchased them. We added the proceeds of those sales to the Fund's cash reserves. Around mid-year 1998, we used some of our cash to increase our holdings of long-term zero-coupon U.S. Treasury bonds.These bonds pay no cash interest, but are offered at deep discounts to their face values. When interest rates decline, zero-coupon bonds tend to appreciate more than conventional bonds. What types of companies provided the most attractive opportunities over the past year? Because we considered the stock market generally overvalued, we didn't find many industries that represented particularly attractive buying opportunities. However, there were certain sectors of the market that we had invested in when valuations were much lower. As their stock prices rose during the period, these areas enhanced the performance of the Fund. Industries in this group included financial services companies, such as banks, specialty retailers, and later in the year, telecommunications firms and electric utilities. We bought selected companies within these industries at attractive valuations, and we remain optimistic that we will be rewarded for our patience. Other industries that met our value-oriented investment criteria lagged the broader stock market over the past year. These include energy companies and producers of commodities such as chemicals, paper and steel. 6 Oppenheimer Equity Income Fund - ------------------------------------- Avg Annual Total Returns - ------------------------------------- For the Periods Ended 9/30/98(2) Class A 1 year 5 year 10 year - ------------------------------------- (0.73)% 13.03% 12.22% - ------------------------------------- Class B Since 1 year 5 year Inception - ------------------------------------- (0.29)% 13.19% 13.28% - ------------------------------------- Class C Since 1 year 5 year Inception - ------------------------------------- 3.54% N/A 17.34% - ------------------------------------- What companies contributed most to the Fund's positive performance? We had a number of winners over the past year. For example, we established a position in a chain of discount retail stores in early 1997 when its stock price was low because of management problems. Since then, the company has benefited from a restructuring of operations and a new management team. At the same time, the healthy U.S. economy gave the business' customers more disposable income. Another winning stock was American General Corp., a well-established life insurance business. It also sells annuities to teachers and operates a finance company. Since we bought its stock about two-and-a-half years ago, American General has acquired other life insurance and annuity companies. Earnings accelerated over the past six months, and the stock price has risen as a result. In the financial services industry, Chase Manhattan Bank Corp. has been an outstanding performer. Its stock was attractively valued late last year because of expectations that the Asian crisis would lead to loan losses. When those losses did not materialize, earnings improved and Chase's stock price rose. 2. 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. Class C shares have an inception date of 11/1/95. An explanation of the different performance calculations is in the Fund's prospectus. Class B and C shares are subject to a 0.75% annual asset-based sales charge. 7 Oppenheimer Equity Income Fund What are your expectations for the next six months? We're more optimistic about bonds than we are about stocks. That's because a slower economy should benefit bonds but constrain corporate earnings. While over the long term we remain confident about the stock market, we believe that in the short term we will not see returns like those of the past three years. Therefore, we intend to maintain the Fund's defensive posture, keeping cash reserves at relatively high levels until more attractive value-oriented investment opportunities arise. In addition, we currently plan to maintain our current exposure to the bond market in anticipation of potentially lower interest rates. In our view, this strategy should enable shareholders to participate in most of the market's gains while providing protection in case of unexpectedly severe declines. Especially when markets become volatile, managing risks is an essential part of The Right Way to Invest. Asset Breakdown(3) [The following table was depicted as a pie chart in the printed materials.] Stocks 56.9% Bonds/Notes 21.7 Cash Equivalents 21.4 Top 10 Stock Holdings(3) - -------------------------------------------------------------- First Union Corp. 2.7% - -------------------------------------------------------------- Chase Manhattan Corp. 2.3 - -------------------------------------------------------------- Philip Morris Cos., Inc. 2.3 - -------------------------------------------------------------- BankAmerica Corp. 1.9 - -------------------------------------------------------------- Citicorp 1.6 - -------------------------------------------------------------- RJR Nabisco Holdings Corp. 1.3 - -------------------------------------------------------------- American General Corp. 1.2 - -------------------------------------------------------------- American Express Co. 1.1 - -------------------------------------------------------------- Allstate Corp. 1.0 - -------------------------------------------------------------- Mellon Bank Corp. 1.0 - -------------------------------------------------------------- 3. Portfolio is subject to change. Percentages are as of August 31, 1998, and are based on total market value of investments. 8 Oppenheimer Equity Income Fund Fund performance - -------------------------------------------------------------------------------- How Has the Fund Performed? Below is a discussion by the Manager of the Fund's performance during its fiscal year ended August 31, 1998, followed by a graphical comparison of the Fund's performance to an appropriate broad-based market index. o Management's Discussion of Performance. During the fiscal year ended August 31, 1998, Oppenheimer Equity Income Fund's performance was affected by a number of factors, including the strong performance of the U.S. stock and bond markets for most of the period. The Fund's investments in financial services companies and retailers enhanced the Fund's performance, as did appreciation of its holdings of zero-coupon bonds. However, during the last few months of the fiscal year-end, investors were reacting to increasing global tensions, as well as signs of a slower domestic economy, which negatively impacted earnings growth. The bond market's overall good performance helped the Fund maintain a constant dividend for its Class A shares. The Fund's policy of seeking to maintain a steady dividend for its Class A shares did not materially affect portfolio management strategies during its last fiscal year. The Fund's portfolio holdings, allocations and strategies are subject to change. o Comparing the Fund's Performance to the Market. The graphs that follow show the performance of a hypothetical $10,000 investment in Class A, Class B and Class C shares of the Fund held until August 31, 1998. In the case of Class A shares, performance is measured over a ten-year period, and in the case of Class B shares, performance is measured from the inception of the class on August 17, 1993. In the case of Class C shares, performance is measured from the inception of the class on November 1, 1995. The graphs assume that all dividends and capital gains distributions were reinvested in additional shares. The graphs reflect the deduction of the 5.75% maximum initial sales charge on Class A shares and the applicable contingent deferred sales charge for Class B and Class C shares. The Fund's performance is compared to the performance of the Standard & Poor's (S&P) 500 Index. The S&P 500 Index is a broad-based index of equity securities widely regarded as a general measurement of the performance of the U.S. equity securities market. Index performance reflects the reinvestment of dividends but does not consider the effect of capital gains or transaction costs, and none of the data in the graphs shows the effect of taxes. The Fund's performance reflects the effects of Fund business and operating expenses. While index comparisons may be useful to provide a benchmark for the Fund's performance, it must be noted that the Fund's investments are not limited to the securities in the S&P 500 Index, which does not include debt securities. 9 Oppenheimer Equity Income Fund Fund performance - -------------------------------------------------------------------------------- Class A Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Equity Income Fund (Class A) and S&P 500 [The following table was originally a line graph in the printed materials.] Oppenheimer Equity Income Fund Cls A S&P 500 ----------------- ------- 6.30.87 9425 10000 6.30.88 9618 9307 6.30.89 10897 11217 6.30.90 11885 13061 6.30.91 12323 14024 6.30.92 13587 15902 6.30.93 15865 18066 6.30.94 15968 18319 6.30.95 18469 23087 6.30.96 21907 29086 8.31.96(1) 21849 28389 8.31.97 29144 39921 8.31.98 30941 43156 Average Annual Total Return of Class A Shares of the Fund at 8/31/98(2) 1 Year 0.06% 5 Year 12.15% 10 Year 12.01% Class B Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Equity Income Fund (Class B) and S&P 500 [The following table was originally a line graph in the printed materials.] Oppenheimer Equity Income Fund Cls B S&P 500 ----------------- ------- 8.17.93 10000 10000 6.30.94 9765 9810 6.30.95 11216 12363 6.30.96 13188 15575 8.31.96(1) 13141 15202 8.31.97 17369 21378 8.31.98 18192 23110 Average Annual Total Return of Class B Shares of the Fund at 8/31/98(3) 1 Year 0.45% 5 Year 12.30% Life 12.61% 10 Oppenheimer Equity Income Fund Class C Shares Comparison of Change in Value of $10,000 Hypothetical Investments in: Oppenheimer Equity Income Fund (Class C) and S&P 500 [The following table was originally a line graph in the printed materials.] Oppenheimer Equity Income Fund Cls C S&P 500 ----------------- ------- 11.1.95 10000 10000 6.30.96 11050 11713 8.31.96(1) 11001 11432 8.31.97 14554 16077 8.31.98 15327 17379 Average Annual Total Return of Class C Shares of the Fund at 8/31/98(4) 1 Year 4.33% Life 16.27% The returns and the ending account values in the graphs show change in share value and include reinvestment of all dividends and capital gains distributions. The performance information in the graphs for S&P 500 Index for Class B begins on 8/31/93 and for Class C begins on 10/31/95. 1. The Fund changed its fiscal year end from 6/30 to 8/31. 2. The average annual total returns are shown net of the applicable 5.75% maximum initial sales charge. 3. Class B shares of the Fund were first publicly offered on 8/17/93. The average annual total returns are shown net of the applicable 5% and 1% contingent deferred sales charge for the 1-year period and the life of the class, respectively. The ending account value in the graph is net of the applicable 1% contingent deferred sales charge. 4. Class C shares of the Fund were first publicly offered on 11/1/95. The 1-year return is shown net of the applicable 1% contingent deferred sales charge. Past performance is not predictive of future performance. Graphs are not drawn to same scale. 11 Oppenheimer Equity Income Fund Financials - -------------------------------------------------------------------------------- 12 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments August 31, 1998 - -------------------------------------------------------------------------------- Market Value Shares See Note 1 ================================================================================ Common Stocks--49.7% - -------------------------------------------------------------------------------- Basic Materials--2.3% - -------------------------------------------------------------------------------- Chemicals--0.9% Betzdearborn, Inc. 200,000 $ 12,300,000 - -------------------------------------------------------------------------------- Dexter Corp. 500,000 12,375,000 - -------------------------------------------------------------------------------- Lyondell Chemical Co. 396,160 8,542,200 -------------- 33,217,200 - -------------------------------------------------------------------------------- Metals--0.2% Reynolds Metals Co. 131,200 6,289,400 - -------------------------------------------------------------------------------- Paper--1.2% Sonoco Products Co. 660,000 16,912,500 - -------------------------------------------------------------------------------- Stone Container Corp.(1) 259,740 2,711,036 - -------------------------------------------------------------------------------- Union Camp Corp. 200,000 7,412,500 - -------------------------------------------------------------------------------- Westvaco Corp. 375,000 7,875,000 - -------------------------------------------------------------------------------- Weyerhaeuser Co. 250,000 9,390,625 -------------- 44,301,661 - -------------------------------------------------------------------------------- Consumer Cyclicals--2.6% - -------------------------------------------------------------------------------- Autos & Housing--0.6% Ford Motor Co. 100,000 4,400,000 - -------------------------------------------------------------------------------- Snap-On, Inc. 675,000 17,718,750 -------------- 22,118,750 - -------------------------------------------------------------------------------- Media--0.9% Dun & Bradstreet Corp. (New) 900,000 21,150,000 - -------------------------------------------------------------------------------- Hollinger International, Inc. 736,000 10,304,000 - -------------------------------------------------------------------------------- R.H. Donnelley Corp. 160,000 2,110,000 -------------- 33,564,000 - -------------------------------------------------------------------------------- Retail: General--1.1% Family Dollar Stores, Inc. 1,400,000 17,762,500 - -------------------------------------------------------------------------------- Penney (J.C.) Co., Inc. 183,300 9,084,806 - -------------------------------------------------------------------------------- Sears Roebuck & Co. 300,000 13,631,250 -------------- 40,478,556 13 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares See Note 1 - -------------------------------------------------------------------------------- Consumer Non-Cyclicals--8.6% - -------------------------------------------------------------------------------- Food--0.8% SUPERVALU, Inc. 1,400,000 $ 28,437,500 - -------------------------------------------------------------------------------- Healthcare/Drugs--2.3% American Home Products Corp. 300,000 15,037,500 - -------------------------------------------------------------------------------- Bristol-Myers Squibb Co. 300,000 29,362,500 - -------------------------------------------------------------------------------- Merck & Co., Inc. 250,000 28,984,375 - -------------------------------------------------------------------------------- Pharmacia & Upjohn, Inc. 250,000 10,390,625 -------------- 83,775,000 - -------------------------------------------------------------------------------- Healthcare/Supplies & Services--0.8% Hillenbrand Industries, Inc. 300,000 16,068,750 - -------------------------------------------------------------------------------- United States Surgical Corp. 300,000 11,981,250 -------------- 28,050,000 - -------------------------------------------------------------------------------- Household Goods--0.8% Fort James Corp. 644,420 18,768,733 - -------------------------------------------------------------------------------- Newell Co. 200,000 9,550,000 -------------- 28,318,733 - -------------------------------------------------------------------------------- Tobacco--3.9% Philip Morris Cos., Inc. 2,000,000 83,125,000 - -------------------------------------------------------------------------------- RJR Nabisco Holdings Corp. 2,200,000 47,712,500 - -------------------------------------------------------------------------------- UST, Inc. 400,000 10,450,000 -------------- 141,287,500 - -------------------------------------------------------------------------------- Energy--2.1% - -------------------------------------------------------------------------------- Oil-Integrated--2.1% Enron Corp. 425,000 17,982,813 - -------------------------------------------------------------------------------- Mobil Corp. 100,000 6,912,500 - -------------------------------------------------------------------------------- Occidental Petroleum Corp. 878,734 16,256,579 - -------------------------------------------------------------------------------- Phillips Petroleum Co. 200,000 8,162,500 - -------------------------------------------------------------------------------- Royal Dutch Petroleum Co., NY Shares 100,000 3,975,000 - -------------------------------------------------------------------------------- Ultramar Diamond Shamrock Corp. 400,000 9,250,000 - -------------------------------------------------------------------------------- Unocal Corp. 200,000 6,262,500 - -------------------------------------------------------------------------------- USX-Marathon Group 300,000 7,800,000 -------------- 76,601,892 14 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Market Value Shares See Note 1 - -------------------------------------------------------------------------------- Financial--26.8% - -------------------------------------------------------------------------------- Banks--19.1% Banc One Corp. 800,000 $ 30,400,000 - -------------------------------------------------------------------------------- Bank of New York Co., Inc. (The) 1,300,000 31,443,750 - -------------------------------------------------------------------------------- BankAmerica Corp. 1,100,000 70,468,750 - -------------------------------------------------------------------------------- BankBoston Corp. 850,000 30,334,375 - -------------------------------------------------------------------------------- Bankers Trust Corp. 100,000 7,431,250 - -------------------------------------------------------------------------------- Chase Manhattan Corp. (New) 1,600,000 84,800,000 - -------------------------------------------------------------------------------- Citicorp 525,000 56,765,625 - -------------------------------------------------------------------------------- Crestar Financial Corp. 550,000 27,775,000 - -------------------------------------------------------------------------------- First Chicago NBD Corp. 550,000 34,856,250 - -------------------------------------------------------------------------------- First Union Corp. 2,000,000 97,000,000 - -------------------------------------------------------------------------------- Fleet Financial Group, Inc. 350,000 22,946,875 - -------------------------------------------------------------------------------- Greenpoint Financial Corp. 450,000 11,334,375 - -------------------------------------------------------------------------------- KeyCorp 750,000 19,125,000 - -------------------------------------------------------------------------------- Mellon Bank Corp. 700,000 36,400,000 - -------------------------------------------------------------------------------- National City Corp. 425,000 24,968,750 - -------------------------------------------------------------------------------- NationsBank Corp. 475,000 27,075,000 - -------------------------------------------------------------------------------- PNC Bank Corp. 301,600 12,968,800 - -------------------------------------------------------------------------------- Sovereign Bancorp, Inc. 262,216 3,195,758 - -------------------------------------------------------------------------------- Summit Bancorp 700,000 23,887,500 - -------------------------------------------------------------------------------- Union Planters Corp. 387,440 15,594,460 - -------------------------------------------------------------------------------- Washington Mutual, Inc. 750,000 24,000,000 -------------- 692,771,518 - -------------------------------------------------------------------------------- Diversified Financial--3.0% American Express Co. 500,000 39,000,000 - -------------------------------------------------------------------------------- Anthracite Capital, Inc. 600,000 5,812,500 - -------------------------------------------------------------------------------- Associates First Capital Corp., Cl. A 78,625 4,648,703 - -------------------------------------------------------------------------------- Capital One Financial Corp. 300,000 26,250,000 - -------------------------------------------------------------------------------- Household International, Inc. 766,650 28,318,134 - -------------------------------------------------------------------------------- Imperial Credit Commercial Mortgage Investment Corp 500,000 4,500,000 -------------- 108,529,337 - -------------------------------------------------------------------------------- Insurance--4.2% Allstate Corp. 1,000,000 37,500,000 - -------------------------------------------------------------------------------- American General Corp. 700,000 44,975,000 - -------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. 300,000 13,425,000 - -------------------------------------------------------------------------------- IPC Holdings Ltd. 359,500 8,942,563 - -------------------------------------------------------------------------------- Reliance Group Holdings, Inc. 2,141,500 27,036,438 - -------------------------------------------------------------------------------- St. Paul Cos., Inc. 700,000 21,393,750 -------------- 153,272,751 15 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments (Continued) - -------------------------------------------------------------------------------- Market Value Shares See Note 1 - -------------------------------------------------------------------------------- Real Estate Investment Trusts--0.5% FBR Asset Investment Corp.(2)(3) 500,000 $ 7,250,000 - -------------------------------------------------------------------------------- Horizon Group Properties, Inc.(1) 30,000 105,000 - -------------------------------------------------------------------------------- Prime Retail, Inc. 600,000 5,625,000 - -------------------------------------------------------------------------------- Wilshire Real Estate Investment Trust, Inc. 330,000 4,455,000 -------------- 17,435,000 - -------------------------------------------------------------------------------- Industrial--2.0% - -------------------------------------------------------------------------------- Electrical Equipment--0.5% AMP, Inc. 500,000 17,843,750 - -------------------------------------------------------------------------------- Industrial Services--0.6% - -------------------------------------------------------------------------------- Browning-Ferris Industries, Inc. 225,000 7,312,500 - -------------------------------------------------------------------------------- H&R Block, Inc. 400,000 15,650,000 -------------- 22,962,500 - -------------------------------------------------------------------------------- Manufacturing--0.9% Cooper Industries, Inc. 163,333 6,951,861 - -------------------------------------------------------------------------------- Pall Corp. 400,000 8,200,000 - -------------------------------------------------------------------------------- Tenneco, Inc. (New) 500,000 15,843,750 -------------- 30,995,611 - -------------------------------------------------------------------------------- Utilities--5.3% - -------------------------------------------------------------------------------- Electric Utilities--3.7% Allegheny Energy, Inc. 300,000 7,987,500 - -------------------------------------------------------------------------------- Central & South West Corp. 500,000 13,062,500 - -------------------------------------------------------------------------------- FirstEnergy Corp. 400,000 11,550,000 - -------------------------------------------------------------------------------- Florida Progress Corp. 500,000 21,093,750 - -------------------------------------------------------------------------------- Illinova Corp. 700,000 18,068,750 - -------------------------------------------------------------------------------- New Century Energies, Inc. 200,000 9,225,000 - -------------------------------------------------------------------------------- Potomac Electric Power Co. 400,000 9,800,000 - -------------------------------------------------------------------------------- SCANA Corp. 300,000 9,206,250 - -------------------------------------------------------------------------------- Texas Utilities Co. 500,000 21,250,000 - -------------------------------------------------------------------------------- Unicom Corp. 300,000 10,687,500 -------------- 131,931,250 - -------------------------------------------------------------------------------- Telephone Utilities--1.6% GTE Corp. 550,000 27,500,000 - -------------------------------------------------------------------------------- Portugal Telecom SA, Sponsored ADR 75,700 3,146,281 - -------------------------------------------------------------------------------- SBC Communications, Inc. 700,000 26,600,000 - -------------------------------------------------------------------------------- 57,246,281 -------------- Total Common Stocks (Cost $1,176,067,467) 1,799,428,190 16 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Market Value Shares See Note 1 ======================================================================================================== Preferred Stocks--4.4% - -------------------------------------------------------------------------------------------------------- American Heritage Life Investment Corp., 8.50% Cv. Preferred 35,000 $ 2,047,500 - -------------------------------------------------------------------------------------------------------- Armco, Inc., $3.625 Cv. Cum 200,000 8,550,000 - -------------------------------------------------------------------------------------------------------- Banco Commercial Portuguese International Bank Ltd., 8% Cv. Preferred Stock, Series A 165,400 16,540,000 - -------------------------------------------------------------------------------------------------------- California Federal Preferred Capital Corp., 9.125% Non-Cum Exchangeable Preferred, Series A, Non-Vtg 55,000 1,454,063 - -------------------------------------------------------------------------------------------------------- Chiquita Brands International, Inc., $3.75 Cv., Series B 180,000 8,730,000 - -------------------------------------------------------------------------------------------------------- Dollar General Corp., 8.50% Cv. Preferred Stock 451,800 14,457,600 - -------------------------------------------------------------------------------------------------------- Elsag Bailey Financing Trust, 5.50% Cv. Trust Originated Preferred Securities(4) 250,000 10,187,500 - -------------------------------------------------------------------------------------------------------- Fresenius Medical Care Capital Trust III, 9% Gtd. Nts., 12/1/06(2) 1,600,000 1,608,000 - -------------------------------------------------------------------------------------------------------- Golden State Bancorp, 8.75% Cv. Preferred Stock, Series A 162,500 8,287,500 - -------------------------------------------------------------------------------------------------------- IXC Communications, Inc., 7.25% Cv. Cum. Jr. Preferred, Non-Vtg.(4)(5) 53,723 5,969,968 - -------------------------------------------------------------------------------------------------------- Kaufman & Broad Home Corp., 8.25% Cv. Preferred Redeemable Increased Dividend Equity Securities 1,450,000 11,146,875 - -------------------------------------------------------------------------------------------------------- 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)(6) 590,000 16,003,750 - -------------------------------------------------------------------------------------------------------- Newell Financial Trust I, 5.25% Cv. Preferred Stock(1)(4) 244,000 13,999,500 - -------------------------------------------------------------------------------------------------------- PLC Capital Trust II, 6.50% Cv. Cum. Preferred Redeemable Income Dividend Enhanced Securities 56,500 3,121,625 - -------------------------------------------------------------------------------------------------------- St. George Bank, ADR $1.35 Cv. Structured Yield Product Exchangeable for Common Stock of St. George Bank, ADR(1)(2) 96,000 4,416,000 - -------------------------------------------------------------------------------------------------------- Texas Utilities Co., 9.25% Cv. Preferred Redeemable Increased Dividend Equity Securities 176,500 9,277,281 - -------------------------------------------------------------------------------------------------------- Trans World Airlines, Inc., $4.625 Cv. Cum. Preferred Stock(1)(4) 200,000 11,100,000 - -------------------------------------------------------------------------------------------------------- Union Pacific Capital Trust, 6.25% Cum. Term Income Deferrable Equity Securities, Non-Vtg.(1) 131,400 5,863,725 - -------------------------------------------------------------------------------------------------------- WBK Trust, 6% Structured Yield Product Exchangeable for Stock of WestPac Bank Corp., 11/15/00 205,000 5,125,000 -------------- Total Preferred Stocks (Cost $156,437,127) 157,885,887
17 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Market Value Shares See Note 1 ================================================================================================= Other Securities--3.1% - ------------------------------------------------------------------------------------------------- American General Delaware LLC, $3.00 Cv. Monthly Income Preferred Securities, Series A 75,000 $ 6,150,000 - ------------------------------------------------------------------------------------------------- Corning Delaware LP, 6% Cv. Monthly Income Preferred Securities 150,000 7,200,000 - ------------------------------------------------------------------------------------------------- Enron Corp., 6.25% Cv. Automatic Common Exchangeable Securities, Redeemable into Enron Oil & Gas Co. Common Stock 270,000 3,864,375 - ------------------------------------------------------------------------------------------------- Houston Industries, Inc., 7% Automatic Common Exchange Securities, Exchangeable for Time Warner, Inc. Common Stock, 7/1/00 175,800 12,569,700 - ------------------------------------------------------------------------------------------------- MCN Energy Group, Inc., 8% Cv. Preferred Redeemable Increased Dividend Equity Securities 50,000 1,787,500 - ------------------------------------------------------------------------------------------------- MCN Energy Group, Inc., 8.75% Cv. Preferred Redeemable Increased Dividend Equity Securities 135,000 2,438,437 - ------------------------------------------------------------------------------------------------- MediaOne Group, Inc., 7.625% Cv. Debt Exchangeable for Common Stock 415,000 17,793,125 - ------------------------------------------------------------------------------------------------- Merrill Lynch & Co., Inc., 6% Cv. Structured Yield Product Exchangeable for Common Stock of Cox Communications, Inc., 6/1/99 300,000 10,650,000 - ------------------------------------------------------------------------------------------------- Owens Corning Capital LLC, 6.50% Cv. Monthly Income Preferred Securities, Non-Vtg.(4) 200,000 10,325,000 - ------------------------------------------------------------------------------------------------- Premier Parks, Inc., 7.50% Cum. Cv. Premium Income Equity Securities, Non-Vtg 499,000 19,710,500 - ------------------------------------------------------------------------------------------------- Salomon Smith Barney Holdings, Inc., 7.625% Cv. Preferred, Debt Exchangeable for Common Stock of Financial Security Assurance Holdings Ltd., 5/15/99 460,000 18,917,500 -------------- Total Other Securities (Cost $95,619,625) 111,406,137 Face Amount(7) ================================================================================================= U.S. Government Obligations--14.6% - ------------------------------------------------------------------------------------------------- U.S. Treasury Bonds, STRIPS, 6.94%, 5/15/21(8) $700,000,000 200,649,400 - ------------------------------------------------------------------------------------------------- U.S. Treasury Bonds, STRIPS, 7.20%, 8/15/08(8) 150,000,000 89,549,850 - ------------------------------------------------------------------------------------------------- U.S. Treasury Bonds, STRIPS, 7.20%, 8/15/20(8) 800,000,000 238,468,800 -------------- Total U.S. Government Obligations (Cost $391,442,076) 528,668,050 ================================================================================================= Foreign Government Obligations--1.5% - ------------------------------------------------------------------------------------------------- Argentina (Republic of) Bonds, Series L, 6.625%, 3/31/05(9) 6,175,000 4,191,281 - ------------------------------------------------------------------------------------------------- Canada (Government of) Bonds, 7.50%, 9/1/00CAD 19,460,000 12,845,331 - ------------------------------------------------------------------------------------------------- Fideicomiso Petacalco Trust Nts., 10.16%, 12/23/09(4) 9,000,000 6,907,500 - ------------------------------------------------------------------------------------------------- Hashemite (Kingdom of Jordan) Disc. Bonds, 6.45%, 12/23/23(9) 1,250,000 903,125 - ------------------------------------------------------------------------------------------------- New South Wales State Bank Bonds, 9.25%, 2/18/03AUD 9,900,000 6,249,442 - ------------------------------------------------------------------------------------------------- Queensland Treasury Corp. Exchangeable Gtd. Nts., 8%, 8/14/01AUD 33,650,000 20,242,885 - ------------------------------------------------------------------------------------------------- South Africa (Republic of) Bonds, Series 153, 13%, 8/31/10ZAR 27,500,000 2,930,555 - ------------------------------------------------------------------------------------------------- South Australia (Government of) Bonds, 9%, 9/23/02AUD 3,000,000 1,869,092 -------------- Total Foreign Government Obligations (Cost $69,521,544) 56,139,211
18 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Face Market Value Amount(7) See Note 1 ================================================================================================== Non-Convertible Corporate Bonds and Notes--2.9% - -------------------------------------------------------------------------------------------------- AK Steel Corp., 9.125% Sr. Nts., 12/15/06 $3,000,000 $ 3,007,500 - -------------------------------------------------------------------------------------------------- Auburn Hills Trust, 11.74% Gtd. Exchangeable Certificates, 5/1/20(9) 5,000,000 8,279,665 - -------------------------------------------------------------------------------------------------- Bank Plus Corp., 12% Sr. Nts., 7/18/07 2,500,000 2,787,500 - -------------------------------------------------------------------------------------------------- California Energy, Inc., 10.25% Sr. Disc. Nts., 1/15/04 4,350,000 4,632,750 - -------------------------------------------------------------------------------------------------- Calpine Corp., 8.75% Sr. Nts., 7/15/07 875,000 879,375 - -------------------------------------------------------------------------------------------------- Chesapeake Energy Corp., 9.125% Sr. Unsec. Nts., 4/15/06 2,400,000 1,956,000 - -------------------------------------------------------------------------------------------------- Comcast Corp., 10.25% Sr. Sub. Debs., 10/15/01 6,000,000 6,330,000 - -------------------------------------------------------------------------------------------------- Cott Corp., 9.375% Sr. Nts., 7/1/05 6,350,000 6,318,250 - -------------------------------------------------------------------------------------------------- CSC Holdings, Inc., 9.875% Sr. Sub. Debs., 4/1/23 2,000,000 2,130,000 - -------------------------------------------------------------------------------------------------- El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 6,000,000 6,630,000 - -------------------------------------------------------------------------------------------------- Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., Series B, 6/15/06(2) 5,000,000 4,950,000 - -------------------------------------------------------------------------------------------------- First Nationwide Holdings, Inc., 10.625% Sr. Sub. Nts., 10/1/03 6,190,000 6,793,525 - -------------------------------------------------------------------------------------------------- Fleming Cos., Inc., 10.625% Gtd. Sr. Nts., 12/15/01 3,000,000 3,045,000 - -------------------------------------------------------------------------------------------------- Hollinger International Publishing, Inc., 9.25% Gtd. Sr Sub. Nts., 2/1/06 5,000,000 5,025,000 - -------------------------------------------------------------------------------------------------- Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 3,000,000 2,857,500 - -------------------------------------------------------------------------------------------------- Lenfest Communications, Inc., 8.375% Sr. Unsec. Nts., 11/1/05 6,000,000 6,270,000 - -------------------------------------------------------------------------------------------------- Nortek, Inc., 9.125% Sr. Nts., Series B, 9/1/07 2,000,000 1,870,000 - -------------------------------------------------------------------------------------------------- Reliance Group Holdings, Inc., 9.75% Sr. Sub. Debs., 11/15/03(2) 9,000,000 9,292,500 - -------------------------------------------------------------------------------------------------- Tenet Healthcare Corp., 8.625% Sr. Sub. Nts., 1/15/07 2,000,000 1,985,000 - -------------------------------------------------------------------------------------------------- Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(2) 1,984,872 1,421,665 - -------------------------------------------------------------------------------------------------- Viacom International, Inc., 10.25% Sr. Sub. Nts., 9/15/01 12,000,000 13,204,968 - -------------------------------------------------------------------------------------------------- WorldCom, Inc., 9.375% Sr. Nts., 1/15/04(2) 3,343,000 3,678,597 -------------- Total Non-Convertible Corporate Bonds and Notes (Cost $96,917,070) 103,344,795 ================================================================================================== Convertible Corporate Bonds and Notes--2.3% - -------------------------------------------------------------------------------------------------- ALZA Corp., 5% Cv. Sub. Debs., 5/1/06 10,000,000 11,800,000 - -------------------------------------------------------------------------------------------------- Apple Computer, Inc., 6% Cv. Sub. Nts., 6/1/01 10,500,000 12,862,500 - -------------------------------------------------------------------------------------------------- Cirrus Logic, Inc., 6% Cv. Sub. Nts., 12/15/03(4) 11,000,000 7,493,750 - -------------------------------------------------------------------------------------------------- Inco Ltd., 5.75% Cv. Debs., 7/1/04 9,700,000 8,245,000 - -------------------------------------------------------------------------------------------------- Inco Ltd., 7.75% Cv. Debs., 3/15/16 9,800,000 8,807,750 - -------------------------------------------------------------------------------------------------- Integrated Device Technology, Inc., 5.50% Cv. Sub. Nts., 6/1/02 7,000,000 5,372,500 - -------------------------------------------------------------------------------------------------- Mutual Risk Management Ltd., Zero Coupon Exchangeable Sub. Debs., 5.25%, 10/30/15(4)(8) 19,500,000 12,918,750 - -------------------------------------------------------------------------------------------------- Oryx Energy Co., 7.50% Cv. Sub. Debs., 5/15/14 7,000,000 6,746,250 - -------------------------------------------------------------------------------------------------- VLSI Technology, Inc., 8.25% Cv. Sub. Nts., 10/1/05 10,100,000 9,405,625 -------------- Total Convertible Corporate Bonds and Notes (Cost $77,954,401) 83,652,125
19 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Investments (Continued) - --------------------------------------------------------------------------------
Face Market Value Amount(7) See Note 1 ====================================================================================================== Structured Instruments--0.4% - ------------------------------------------------------------------------------------------------------ Shoshone Partners Loan Trust Sr. Nts., 5/31/02 (representing a basket of reference loans and a total return swap between Chase Manhattan Bank and the Trust)(2)(10) $ 7,681,000 $ 7,681,000 - ------------------------------------------------------------------------------------------------------ Shoshone Partners Loan Trust Sr. Nts., 7.44%, 4/28/02 (representing a basket of reference loans and a total return swap between Chase Manhattan Bank and the Trust)(2)(9) 7,319,000 7,484,168 -------------- Total Structured Instruments (Cost $15,485,088) 15,165,168 ====================================================================================================== Short-Term Notes--14.5%(11) - ------------------------------------------------------------------------------------------------------ American Express Credit Corp., 5.50%, 10/2/98 50,000,000 49,763,194 - ------------------------------------------------------------------------------------------------------ American Express Credit Corp., 5.51%, 9/23/98 50,000,000 49,831,639 - ------------------------------------------------------------------------------------------------------ Baxter International, Inc., 5.55%, 9/3/98 30,000,000 29,990,750 - ------------------------------------------------------------------------------------------------------ Baxter International, Inc., 5.56%, 9/8/98 30,000,000 29,967,567 - ------------------------------------------------------------------------------------------------------ CIESCO, LP, 5.52%, 10/5/98 50,000,000 49,739,333 - ------------------------------------------------------------------------------------------------------ CIT Group Holdings, Inc., 5.53%, 9/2/98 50,000,000 49,992,319 - ------------------------------------------------------------------------------------------------------ Countrywide Home Loans, 5.54%, 9/28/98 25,000,000 24,895,938 - ------------------------------------------------------------------------------------------------------ Countrywide Home Loans, 5.58%, 9/2/98 26,000,000 25,995,970 - ------------------------------------------------------------------------------------------------------ First Data Corp., 5.52%, 9/22/98 40,000,000 39,871,200 - ------------------------------------------------------------------------------------------------------ First Data Corp., 5.52%, 9/8/98 50,000,000 49,946,333 - ------------------------------------------------------------------------------------------------------ General Electric Capital Corp., 5.53%, 9/24/98 50,000,000 49,823,347 - ------------------------------------------------------------------------------------------------------ Norwest Corp., 5.51%, 10/8/98 50,000,000 49,716,847 - ------------------------------------------------------------------------------------------------------ Prudential Funding Corp., 5.52%, 9/14/98 25,000,000 24,950,167 -------------- Total Short-Term Notes (Cost $524,484,604) 524,484,604 ====================================================================================================== Repurchase Agreements--7.0% - ------------------------------------------------------------------------------------------------------ Repurchase agreement with First Chicago Capital Markets, 5.75%, dated 8/31/98, to be repurchased at $253,340,458 on 9/1/98, collateralized by U.S. Treasury Bonds, 7.625%-13.125%, 5/15/01-11/15/22, with a value of $244,798,746, and U.S. Treasury Nts., 5.50%-6.50%, 1/31/03-10/15/06,with a value of $14,033,919 (Cost $253,300,000) 253,300,000 253,300,000 - ------------------------------------------------------------------------------------------------------ Total Investments, at Value (Cost $2,857,229,002) 100.4% 3,633,474,167 - ------------------------------------------------------------------------------------------------------ Liabilities in Excess of Other Assets (0.4) (14,232,174) ----------- -------------- Net Assets 100.0% $3,619,241,993 =========== ==============
20 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. Non-income producing security. 2. Identifies issues considered to be illiquid or restricted--See Note 5 of Notes to Financial Statements. 3. 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, 1998. The aggregate fair value of securities of affiliated companies held by the Fund as of August 31, 1998, amounts to $7,250,000. Transactions during the period in which the issuer was an affiliate are as follows:
Shares Shares August 31, Gross Gross August 31, Dividend 1997 Additions Reductions 1998 Income - ------------------------------------------------------------------------------------ FBR Asset Investment Corp. -- 500,000 -- 500,000 $275,000
4. 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 $78,901,968 or 2.18% of the Fund's net assets as of August 31, 1998. 5. Interest or dividend is paid-in-kind. 6. 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. 7. Face amount is reported in U.S. Dollars, except for those denoted in the following currencies: AUD--Australian Dollar CAD--Canadian Dollar ZAR--South African Rand 8. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 9. Represents the current interest rate for a variable rate security. 10. When-issued security to be delivered and settled after August 31,1998. 11. 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. See accompanying Notes to Financial Statements. 21 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Assets and Liabilities August 31, 1998 - -------------------------------------------------------------------------------- ================================================================================ Assets Investments, at value--see accompanying statement: Unaffiliated companies (cost $2,847,229,002) $3,626,224,167 Affiliated companies (cost $10,000,000) 7,250,000 - -------------------------------------------------------------------------------- Receivables: Interest and dividends 10,201,018 Shares of beneficial interest sold 5,021,164 - -------------------------------------------------------------------------------- Other 102,998 -------------- Total assets 3,648,799,347 ================================================================================ Liabilities Bank overdraft 2,683,739 - -------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased 17,811,783 Shares of beneficial interest redeemed 6,450,657 Distribution and service plan fees 1,338,174 Transfer and shareholder servicing agent fees 586,335 Shareholder reports 425,446 Custodian fees 60,267 Other 200,953 -------------- Total liabilities 29,557,354 ================================================================================ Net Assets $3,619,241,993 ============== ================================================================================ Composition of Net Assets Paid-in capital $2,618,657,524 - -------------------------------------------------------------------------------- Undistributed net investment income 24,389,841 - -------------------------------------------------------------------------------- Accumulated net realized gain on investment transactions 200,032,683 - -------------------------------------------------------------------------------- Net unrealized appreciation on investments 776,161,945 -------------- Net assets $3,619,241,993 ============== 22 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 $2,889,472,020 and 210,161,974 shares of beneficial interest outstanding) $13.75 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $14.59 - -------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $634,775,074 and 46,558,894 shares of beneficial interest outstanding) $13.63 - -------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $94,994,899 and 6,969,876 shares of beneficial interest outstanding) $13.63 See accompanying Notes to Financial Statements. 23 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statement of Operations For the Year Ended August 31, 1998 - -------------------------------------------------------------------------------- ======================================================================================= Investment Income Interest $ 88,135,493 - --------------------------------------------------------------------------------------- Dividends: Unaffiliated companies (net of foreign withholding taxes of $144,403) 69,819,505 Affiliated companies 275,000 ------------- Total income 158,229,998 ======================================================================================= Expenses Management fees--Note 4 19,364,160 - --------------------------------------------------------------------------------------- Distribution and service plan fees--Note 4: Class A 6,047,155 Class B 5,744,260 Class C 769,244 - --------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees--Note 4 3,984,343 - --------------------------------------------------------------------------------------- Shareholder reports 885,703 - --------------------------------------------------------------------------------------- Registration and filing fees 277,086 - --------------------------------------------------------------------------------------- Custodian fees and expenses 147,571 - --------------------------------------------------------------------------------------- Legal, auditing and other professional fees 82,493 - --------------------------------------------------------------------------------------- Trustees' fees and expenses 70,611 - --------------------------------------------------------------------------------------- Insurance expenses 29,675 - --------------------------------------------------------------------------------------- Other 60,430 ------------- Total expenses 37,462,731 ======================================================================================= Net Investment Income 120,767,267 ======================================================================================= Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Investments 235,576,019 Foreign currency transactions (3,519,103) ------------- Net realized gain 232,056,916 - --------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation on: Investments (168,879,300) Translation of assets and liabilities denominated in foreign currencies (7,659,603) ------------- Net change (176,538,903) ------------- Net realized and unrealized gain 55,518,013 ======================================================================================= Net Increase in Net Assets Resulting from Operations $ 176,285,280 =============
See accompanying Notes to Financial Statements. 24 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Year Ended August 31, 1998 1997 =========================================================================================== Operations Net investment income $ 120,767,267 $ 108,795,712 - ----------------------------------------------------------------------------------------- Net realized gain 232,056,916 156,172,442 - ----------------------------------------------------------------------------------------- Net change in unrealized appreciation or depreciation (176,538,903) 524,310,151 -------------- -------------- Net increase in net assets resulting from operations 176,285,280 789,278,305 ========================================================================================= Dividends and Distributions to Shareholders Dividends from net investment income: Class A (99,500,973) (90,387,132) Class B (13,977,579) (9,876,167) Class C (1,859,540) (666,754) - ----------------------------------------------------------------------------------------- Distributions from net realized gain: Class A (154,035,012) (74,843,781) Class B (26,561,696) (9,970,652) Class C (3,223,836) (386,132) ========================================================================================= Beneficial Interest Transactions Net increase in net assets resulting from beneficial interest transactions--Note 2: Class A 253,723,804 85,811,376 Class B 234,393,363 99,076,120 Class C 52,477,300 36,069,145 ========================================================================================= Net Assets Total increase 417,721,111 824,104,328 - ----------------------------------------------------------------------------------------- Beginning of period 3,201,520,882 2,377,416,554 -------------- -------------- End of period (including undistributed net investment income of $24,389,841 and $18,883,337, respectively) $3,619,241,993 $3,201,520,882 ============== ==============
See accompanying Notes to Financial Statements. 25 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Financial Highlights - --------------------------------------------------------------------------------
Class A ---------------------------------------------------- Year Ended August 31, Year Ended June 30, 1998 1997 1996(2) 1996 1995 ================================================================================================== Per Share Operating Data Net asset value, beginning of period $14.12 $11.36 $11.39 $10.25 $9.44 - -------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .50 .47 .09 .50 .50 Net realized and unrealized gain (loss) .41 3.17 (.12) 1.36 .92 ------ ------ ------ ------ ------ Total income (loss) from investment operations .91 3.64 (.03) 1.86 1.42 - -------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.49) (.48) -- (.48) (.48) Dividends in excess of net investment income -- -- -- -- -- Distributions from net realized gain (.79) (.40) -- (.24) (.13) Distributions in excess of net realized gain -- -- -- -- -- ------ ------ ------ ------ ------ Total dividends and distributions to shareholders (1.28) (.88) -- (.72) (.61) - -------------------------------------------------------------------------------------------------- Net asset value, end of period $13.75 $14.12 $11.36 $11.39 $10.25 ====== ====== ====== ====== ====== ================================================================================================== Total Return, at Net Asset Value(4) 6.17% 33.39% (0.26)% 18.61% 15.66% ================================================================================================== Ratios/Supplemental Data Net assets, end of period (in millions) $2,889 $2,722 $2,110 $2,141 $1,893 - -------------------------------------------------------------------------------------------------- Average net assets (in millions) $3,072 $2,446 $2,109 $2,054 $1,798 - -------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 3.47% 3.97% 3.28%(5) 4.51% 5.15% Expenses 0.87% 0.88% 0.94%(5) 0.89% 0.96% - -------------------------------------------------------------------------------------------------- Portfolio turnover rate(6) 18.1% 23.7% 13.5% 42.9% 45.7%
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. 26 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Class B ----------------------------------------------------------- Year Ended August 31, Year Ended June 30, 1994 1998 1997 1996(2) 1996 1995 1994(3) ==================================================================================================================== Per Share Operating Data Net asset value, beginning of period $10.01 $14.01 $11.29 $11.33 $10.21 $9.40 $10.22 - -------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .47 .39 .37 .07 .41 .43 .36 Net realized and unrealized gain (loss) (.39) .40 3.13 (.11) 1.35 .91 (.58) ------ ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations .08 .79 3.50 (.04) 1.76 1.34 (.22) - -------------------------------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.47) (.38) (.38) -- (.40) (.40) (.42) Dividends in excess of net investment income (.01) -- -- -- -- -- (.01) Distributions from net realized gain (.12) (.79) (.40) -- (.24) (.13) (.12) Distributions in excess of net realized gain (.05) -- -- -- -- -- (.05) ------ ------ ------ ------ ------ ------ ------ Total dividends and distributions to shareholders (.65) (1.17) (.78) -- (.64) (.53) (.60) - -------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.44 $13.63 $14.01 $11.29 $11.33 $10.21 $9.40 ====== ====== ====== ====== ====== ====== ====== ==================================================================================================================== Total Return, at Net Asset Value(4) 0.65% 5.32% 32.17% (0.35)% 17.58% 14.87% (2.35)% ==================================================================================================================== Ratios/Supplemental Data Net assets, end of period (in millions) $1,773 $635 $431 $260 $252 $161 $88 - -------------------------------------------------------------------------------------------------------------------- Average net assets (in millions) $1,832 $575 $344 $255 $208 $122 $47 - -------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 4.72% 2.68% 3.16% 2.48%(5) 3.68% 4.34% 3.99%(5) Expenses 0.90% 1.67% 1.69% 1.76%(5) 1.72% 1.79% 1.82%(5) - -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate(6) 30.4% 18.1% 23.7% 13.5% 42.9% 45.7% 30.4%
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, 1998 were $572,000,878 and $670,953,766, respectively. 27 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Financial Highlights (Continued) - --------------------------------------------------------------------------------
Class C --------------------------------------- Period Ended Year Ended August 31, June 30, 1998 1997 1996(2) 1996(1) ============================================================================================ Per Share Operating Data Net asset value, beginning of period $14.02 $11.30 $11.35 $10.76 - -------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .39 .40 .07 .28 Net realized and unrealized gain (loss) .40 3.12 (.12) .88 ------ ------ ------ ------ Total income (loss) from investment operations .79 3.52 (.05) 1.16 - -------------------------------------------------------------------------------------------- Dividends and distributions to shareholders: Dividends from net investment income (.39) (.40) -- (.33) Dividends in excess of net investment income -- -- -- -- Distributions from net realized gain (.79) (.40) -- (.24) Distributions in excess of net realized gain -- -- -- -- ------ ------ ------ ------ Total dividends and distribution to shareholders (1.18) (.80) -- (.57) - -------------------------------------------------------------------------------------------- Net asset value, end of period $13.63 $14.02 $11.30 $11.35 ====== ====== ====== ====== ============================================================================================ Total Return, at Net Asset Value(4) 5.30% 32.31% (0.44)% 10.50% ============================================================================================ Ratios/Supplemental Data Net assets, end of period (in millions) $95 $48 $7 $6 - -------------------------------------------------------------------------------------------- Average net assets (in millions) $77 $25 $7 $3 - -------------------------------------------------------------------------------------------- Ratios to average net assets: Net investment income 2.68% 3.15% 2.55%(5) 3.53%(5) Expenses 1.67% 1.69% 1.79%(5) 1.81%(5) - -------------------------------------------------------------------------------------------- Portfolio turnover rate(6) 18.1% 23.7% 13.5% 42.9%
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. 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, 1998 were $572,000,878 and $670,953,766, respectively. See accompanying Notes to Financial Statements. 28 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. Its secondary objective is to conserve principal while providing an opportunity for capital appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge. Class B and Class C shares may be subject to a contingent deferred sales charge. All classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution and/or service plan, expenses directly attributable to 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. - -------------------------------------------------------------------------------- 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. 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. 29 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies (continued) 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, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income or excise tax provision is required. - -------------------------------------------------------------------------------- Distributions to Shareholders. Dividends and distributions to shareholders are recorded on the ex-dividend date. - -------------------------------------------------------------------------------- Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of the distributions made during the year from net investment income or net realized gains may differ from 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. The Fund adjusts 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 year ended August 31, 1998, amounts have been reclassified to reflect an increase in undistributed net investment income of $77,329, a decrease in paid-in capital of $1,648,429, and an increase in accumulated realized gain on investments of $1,571,100. 30 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ Other. Investment transactions are accounted for on the date the investments are purchased or sold (trade date) and dividend income is recorded on the ex-dividend date. Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Dividends-in-kind are recognized as income on the ex-dividend date at the current market value of the underlying security. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made periodically. 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, 1998 Year Ended August 31, 1997 -------------------------- -------------------------- Shares Amount Shares Amount - ------------------------------------------------------------------------------------ Class A: Sold 28,301,749 $425,894,349 22,312,307 $286,390,507 Dividends and distributions reinvested 16,366,250 238,084,133 12,636,963 155,744,291 Redeemed (27,270,231) (410,254,678) (27,925,816) (356,323,422) ----------- ------------ ----------- ------------ Net increase 17,397,768 $253,723,804 7,023,454 $85,811,376 =========== ============ =========== ============ - ------------------------------------------------------------------------------------ Class B: Sold 17,875,704 $267,182,429 9,869,512 $126,478,575 Dividends and distributions reinvested 2,649,899 38,263,417 1,509,887 18,517,384 Redeemed (4,755,561) (71,052,483) (3,589,063) (45,919,839) ----------- ------------ ----------- ------------ Net increase 15,770,042 $234,393,363 7,790,336 $99,076,120 =========== ============ =========== ============ - ------------------------------------------------------------------------------------ Class C: Sold 4,117,941 $61,626,191 3,032,244 $39,122,283 Dividends and distributions reinvested 342,326 4,949,150 81,260 1,020,485 Redeemed (941,057) (14,098,041) (315,866) (4,073,623) ----------- ------------ ----------- ------------ Net increase 3,519,210 $52,477,300 2,797,638 $36,069,145 =========== ============ =========== ============
31 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 3. Unrealized Gains and Losses on Investments At August 31, 1998, net unrealized appreciation on investments of $776,245,165 was composed of gross appreciation of $890,740,506, and gross depreciation of $114,495,341. ================================================================================ 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 annual 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 average annual net assets in excess of $500 million. For the year ended August 31, 1998, commissions (sales charges paid by investors) on sales of Class A shares totaled $8,057,145, of which $2,429,799 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 $8,780,583 and $551,784, respectively, of which $779,103 and $37,137, respectively, was paid to an affiliated broker/dealer. During the year ended August 31, 1998, OFDI received contingent deferred sales charges of $631,183 and $23,959, respectively, upon redemption of Class B and Class C shares as reimbursement for sales commissions advanced by OFDI at the time of sale of such shares. OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund and for other Oppenheimer funds. OFS's total costs of providing such services are allocated ratably to these funds. 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 year ended August 31, 1998, OFDI paid $436,769 to an affiliated broker/dealer as reimbursement for Class A personal service and maintenance expenses. 32 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ 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. Each fee is 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, 1998, OFDI paid $85,448 to an affiliated broker/dealer as reimbursement for Class B personal service and maintenance expenses and retained $4,717,686 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, 1998, OFDI had incurred excess distribution and servicing costs of $15,529,526 for Class B. The Fund has adopted a Distribution and Service Plan for Class C shares to compensate OFDI for its 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. Each fee is 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, 1998, OFDI paid $4,936 to an affiliated broker/dealer as compensation for Class C personal service and maintenance expenses and retained $535,009 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, 1998, OFDI had incurred excess distribution and servicing costs of $1,178,202 for Class C. 33 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Notes to Financial Statements (Continued) - -------------------------------------------------------------------------------- ================================================================================ 5. Illiquid and Restricted Securities At August 31, 1998, 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, 1998, was $47,781,930, which represents 1.32% of the Fund's net assets. ================================================================================ 6. Bank Borrowings The Fund may borrow from a bank for temporary or emergency purposes including, without limitation, funding of shareholder redemptions provided asset coverage for borrowings exceeds 300%. The Fund has entered into an agreement which enables it to participate with other Oppenheimer funds in an unsecured line of credit with a bank, which permits borrowings up to $400 million, collectively. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the average unutilized amount of the credit facility at a rate of 0.0575% per annum. The Fund had no borrowings outstanding during the year ended August 31, 1998. 34 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, 1998, the related statement of operations for the year then ended, the statements of changes in net assets for the two-year period then ended, and the financial highlights for the period July 1, 1993, to August 31, 1998. 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, 1998, by correspondence with the custodian and brokers; and 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, 1998, 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, 1998 35 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Federal Income Tax Information (Unaudited) - -------------------------------------------------------------------------------- ================================================================================ In early 1999, shareholders will receive information regarding all dividends and distributions paid to them by the Fund during calendar year 1998. Regulations of the U.S. Treasury Department require the Fund to report this information to the Internal Revenue Service. Distributions of $0.9265, $0.8930 and $0.8941 per share were paid to Class A, Class B and Class C shareholders, respectively, on December 18, 1997, of which, for each class of shares, $0.1950 was designated as a capital gain distribution in the "28% Rate Group" and $0.5043 was designated as a capital gain distribution in the "20% Rate Group" 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. Dividends paid by the Fund during the year ended August 31, 1998, which are not designated as capital gain distributions should be multiplied by 44.61% to arrive at the net amount eligible for the corporate dividend-received deduction. The foregoing information is presented to assist shareholders in reporting distributions received from the Fund to the Internal Revenue Service. Because of the complexity of the federal regulations which may affect your individual tax return and the many variations in state and local tax regulations, we recommend that you consult your tax advisor for specific guidance. 36 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- Shareholder Meeting (Unaudited) ================================================================================ On April 16, 1998, a shareholder meeting was held at which the twelve 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, 1997, was ratified (Proposal No. 1) and the Investment Advisory Agreement between the Fund and OppenheimerFunds, Inc. was approved (Proposal No. 2) as described in the Fund's proxy statement for that meeting. The following is a report of the votes cast:
Broker Nominee/Proposal For Against Withheld/Abstain Non-Votes Total - ----------------------------------------------------------------------------------------------------- Trustees Robert G. Avis 144,602,008.738 1,507,792.502 2,733,380 146,109,801.240 William A. Baker 144,498,255.459 1,611,545.781 2,733,380 146,109,801.240 George C. Bowen 144,509,513.983 1,600,287.257 2,733,380 146,109,801.240 Charles Conrad, Jr. 144,501,200.166 1,608,601.074 2,733,380 146,109,801.240 Jon S. Fossel 144,556,611.936 1,553,189.304 2,733,380 146,109,801.240 Sam Freedman 144,445,620.426 1,664,180.814 2,733,380 146,109,801.240 Raymond J. Kalinowski 144,552,873.688 1,556,927.552 2,733,380 146,109,801.240 C. Howard Kast 144,392,562.770 1,717,238.470 2,733,380 146,109,801.240 Robert M. Kirchner 144,549,116.329 1,560,684.911 2,733,380 146,109,801.240 Bridget A. Macaskill 144,500,968.474 1,608,832.766 2,733,380 146,109,801.240 Ned M. Steel 144,484,816.936 1,624,984.304 2,733,380 146,109,801.240 James C. Swain 144,484,816.936 1,624,984.304 2,733,380 146,109,801.240 Proposal No. 1 144,000,109.956 1,015,501.302 1,144,556.400 2,733,380 146,160,167.658 Proposal No. 2 120,203,177.270 3,475,207.964 2,698,258.731 22,623,782 126,376,643.965
37 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, Trustee, Vice President, Treasurer and Assistant Secretary Andrew J. Donohue, Vice President and Secretary John P. Doney, Vice President Robert J. Bishop, Assistant Treasurer Scott T. Farrar, Assistant Treasurer Robert G. Zack, Assistant Secretary ================================================================================ Investment Advisor OppenheimerFunds, Inc. ================================================================================ Distributor OppenheimerFunds Distributor, Inc. ================================================================================ Transfer and Shareholder 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. 38 Oppenheimer Equity Income Fund - -------------------------------------------------------------------------------- OppenheimerFunds Family - -------------------------------------------------------------------------------- =============================================================================================== Real Asset Funds - ----------------------------------------------------------------------------------------------- Real Asset Fund Gold & Special Minerals Fund =============================================================================================== Global Stock Funds - ----------------------------------------------------------------------------------------------- Developing Markets Fund International Growth Fund Quest Global Value Fund International Small Global Fund Global Growth & Income Fund Company Fund =============================================================================================== Stock Funds - ----------------------------------------------------------------------------------------------- Enterprise Fund MidCap Fund Growth Fund Discovery Fund Capital Appreciation Fund Disciplined Value Fund Quest Small Cap Value Fund Quest Capital Value Fund Quest Value Fund =============================================================================================== Stock & Bond Funds - ----------------------------------------------------------------------------------------------- Main Street Income & Total Return Fund Disciplined Allocation Fund Growth Fund Quest Balanced Multiple Strategies Fund Quest Opportunity Value Fund(1) Convertible Securities Fund(2) Value Fund Equity Income Fund =============================================================================================== Taxable Bond Funds - ----------------------------------------------------------------------------------------------- International Bond Fund Champion Income Fund U.S. Government Trust World Bond Fund Strategic Income Fund Limited-Term Government Fund High Yield Fund Bond Fund =============================================================================================== Municipal Bond 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
1. On 5/18/98, the Fund's name was changed from "Quest Growth & Income Value Fund." 2. On 4/28/98, the Fund's name was changed from "Bond Fund for Growth." 3. Available only to investors in certain states. 4. An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although these funds may seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two World Trade Center, New York, NY 10048-0203. (C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved. 39 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 or by visiting our website. 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 or website 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. Online transactions now available - -------------------------- 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-8pm 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(R) Distributor, Inc. RA0300.001.0898 October 30, 1998 -----END PRIVACY-ENHANCED MESSAGE-----