-----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, UwB1DOqPwHR/XHTrX107Q5PrAWl6yn3STG/SRv01/Sn9EXuDblvB2AeKtcYMSqyB HrfZRpMQQY6fYr8S1anrYw== 0000950133-99-000032.txt : 19990108 0000950133-99-000032.hdr.sgml : 19990108 ACCESSION NUMBER: 0000950133-99-000032 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER MULTI SECTOR INCOME TRUST CENTRAL INDEX KEY: 0000829801 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133448960 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05473 FILM NUMBER: 99501880 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER STREET 2: STE 3400 CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123230200 MAIL ADDRESS: STREET 1: TWO WORLD TRADE CTR STREET 2: STE 3400 CITY: NEW YORK STATE: NY ZIP: 10048 N-30D 1 OPPENHEIMER MULTI-SECTOR INCOME TRUST 1 1998 ANNUAL REPORT OPPENHEIMER MULTI-SECTOR INCOME TRUST OCTOBER 31, 1998 [OPPENHEIMERFUNDS LOGO] THE RIGHT WAY TO INVEST 2 DEAR SHAREHOLDER: During one of the most challenging and volatile periods in the history of the fixed income markets, Oppenheimer Multi-Sector Income Trust's (the Trust) average annual total return at market value was 0.17%, and its dividend return was 8.75% for the fiscal year ended October 31, 1998.1 Clearly, these results are weaker than we would like. Nevertheless, we believe that the Trust's disciplined strategy of sector diversification enabled us to help cushion the impact of market volatility and limit some of the risks of investing during exceptionally difficult times. The Trust faced unique challenges and opportunities in three of its main investment sectors: international, corporate and U.S. government. The challenges stemmed from widespread economic difficulties in emerging markets, which eventually affected developed markets as well. The trouble surfaced in Asia more than a year ago, when an economic slowdown forced many Asian countries to devalue their currencies. As a result, Asian companies that had borrowed heavily to finance speculative business development incurred severe losses in foreign exchange markets. When investors attempted to take their money out of the region, securities prices plunged. INVESTMENT BREAKDOWN: OPPENHEIMER MULTI-SECTOR INCOME TRUST AS OF 10/31/98:(2) [PIE CHART]
Corporate 35.5% International 24.7 U.S. Government 20.5 Mortgage-Backed 10.1 Money Market 7.4 Convertible 1.8
The global fixed income markets, especially among emerging countries, were hardest hit by these events. While these markets generally offer the Trust its greatest opportunities for high current income and capital appreciation, they are also among the world's most volatile. In October 1997, as Asian markets and currencies declined sharply, we sold many of our holdings in the region in an attempt to preserve the Trust's capital. Although our actions caused us to suffer some initial losses when these markets began to recover with unexpected speed, we sought to take advantage of the opportunity, staking out significant fixed income positions in the emerging markets of Latin America, Asia and Eastern Europe at the end of November and in early December. From December 1997 through the end of April 1998, emerging markets were among the best performing fixed income classes for the Trust. However, in May 1998, deepening political and economic uncertainty caused Russian markets to fall sharply. These events heightened investors' concerns over the health of other emerging economies throughout the world. Latin American markets and currencies came under selling pressure as investors turned to the relative safety of the United Because of ongoing market volatility, the Trust's performance may be subject to substantial short-term changes. For updates on the Trust's performance, please contact your financial advisor, call us at 1-800-525-7048 or visit our website, www.oppenheimerfunds.com. 1. Total return is based on changes in net asset value per share from 10/31/97 to 10/31/98, without deducting any sales charges or brokerage costs. Returns would have been lower if sales charges were deducted. Dividend return is determined by annualizing the October 1998 dividend of $0.067 and dividing by the closing market price on the New York Stock Exchange of $9.19 per share on 10/23/98 (payment date). Past performance does not guarantee future results. 2. Portfolio composition is subject to change. Chart is based on total investments at market value. 3 States. By the time emerging markets began to decline, we had worked to trim the Trust's exposure to the international sector. However, this decline proved deeper and more sustained than we anticipated. In August 1998, the decline culminated in the worst month in the history of the emerging markets, resulting in significant losses for the Trust. At the same time, the market for high yield domestic corporate bonds also suffered in the wake of the Asian crisis. Although the underlying U.S. economy remained strong, with low inflation and low unemployment, profits declined among multi-national companies because of weakening foreign demand. As profit growth slowed, corporate stock and bond markets fell sharply in the United States. As a result, from March 1998 through the end of the period, the Trust's high yield investments yielded flat or negative returns every month. We helped limit our losses in the corporate sector by focusing our holdings in telecommunications bonds, which remained one of the strongest performing areas in the high yield market. At the same time, with the exception of energy, we generally avoided investments in companies that produce basic materials, such as chemicals, paper and metals, all of which underperformed the market. We correctly foresaw that the recent economic crisis in Asia would lead to excess production capacity and weak pricing in these industries. We remained committed to the energy industry in the belief that oil and natural gas represent tangible assets that we believe are likely to retain their value over time. However, an unusually warm winter, together with inaction on the part of the OPEC nations and slack global demand, caused the Trust to suffer losses in these investments as well. Partially offsetting the Trust's losses in the international and corporate sectors were our investments in U.S. government securities. With low inflation, low unemployment and relatively high rates of consumer spending, the U.S. economy remained a bastion of strength in a time of global economic uncertainty. Investors throughout the world searching for safe, high-quality securities turned to long-term U.S. Treasury instruments for shelter. As a result, long-term Treasuries performed quite well during the second half of the year. We sought to take advantage of the opportunity by shifting some of the Trust's assets from cash and mortgage-backed securities into Treasuries. We also acted to lengthen the portfolio's average duration. Duration is a measure of a bond's sensitivity to changes in interest rates. The longer a portfolio's average duration, the higher the potential return investors may receive when interest rates fall. In anticipation of continued low inflation, we extended the portfolio's duration throughout the period, which enabled us to benefit from falling interest rates and from the exceptional performance of longer-term Treasuries. It is impossible to predict exactly when the global economy will recover from the effects of the current downturn. However, by placing each asset class in which the Trust invests under the management of its own sector specialist, we remain focused on our goals of returning high income to investors while working to minimize the risks of each sector in which we invest. We believe our disciplined strategy of sector diversification continues to make Oppenheimer Multi-Sector Income Trust part of The Right Way to Invest. Sincerely, /s/ BRIDGET A. MACASKILL - -------------------------------- Bridget A. Macaskill President Oppenheimer Multi-Sector Income Trust November 20, 1998 4 STATEMENT OF INVESTMENTS October 31, 1998 Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 --------------- ------------ U.S. GOVERNMENT SECTOR -- 20.7% U.S. Treasury Bonds, 11.875%, 11/15/03.................................. $25,000,000 $33,218,775 U.S. Treasury Nts.: 4.50%, 9/30/00........................................................ 15,000,000 15,079,695 5.625%, 5/15/08(2).................................................... 10,000,000 10,775,010 ----------- Total U.S. Government Sector (Cost $59,397,884) 59,073,480 ----------- Shares -------------- CONVERTIBLE SECTOR -- 1.9% PREFERRED STOCKS -- 1.7% CGA Group Ltd., Preferred, Series A(3)(4)............................... 32,000 800,000 Concentric Network Corp., 13.50% Preferred, Series B(4)(5).............. 206 155,015 Crown American Realty Trust, 11% Cum., Series A, Non-Vtg................ 4,000 199,000 Dobson Communications Corp., 12.25% Sr. Exchangeable(3)(4).............. 545 489,137 e.spire Communications, Inc., 12.75% Jr. Redeemable Preferred(3)(4)..... 441 336,262 Eagle-Picher Holdings, Inc., Cum. Exchangeable, Series B, 3/1/08, Non-Vtg.(3)(5)........................................................ 4,000 215,000 EchoStar Communications Corp., 12.125% Sr. Redeemable Exchangeable, Series B, Non-Vtg.(4)................................... 95 90,962 Intermedia Communications, Inc., 13.50% Exchangeable, Series B(4)....... 718 800,570 Nebco Evans Holdings, Inc., 11.25% Cum. Exchangeable(4)................. 2,638 132,560 Nextel Communications, Inc., 11.125% Exchangeable, Series E(4).......... 328 285,360 NEXTLINK Communications, Inc., 14% Cum. Exchangeable, Vtg.(4)........... 7,986 405,290 Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable, Non-Vtg.(3)(4)........................................................ 20 170,500 SD Warren Co., 14% Cum. Exchangeable, Series B, Non-Vtg.(5)............. 12,000 565,500 Spanish Broadcasting Systems, Inc., 14.25% Cum. Exchangeable, Non-Vtg.(3)(4)........................................................ 200 194,500 Viatel, Inc., 10% Cv., Series A(3)(4)................................... 290 17,473 ----------- 4,857,129 ----------- Units -------------- RIGHTS, WARRANTS AND CERTIFICATES -- 0.2% American Telecasting, Inc. Wts., Exp. 6/99(3)........................... 4,750 47 Ames Department Stores, Inc., Litigation Trust(3)....................... 128,889 1,289 Becker Gaming, Inc. Wts., Exp. 11/00(3)................................. 25,000 6,250 CellNet Data Systems, Inc. Wts., Exp. 10/07(6).......................... 559 1,887 CGA Group Ltd. Wts., Exp. 12/49(3)...................................... 32,000 9,600 Clearnet Communications, Inc. Wts., Exp. 9/05........................... 330 621 Concentric Network Corp. Wts., Exp. 12/07(3)............................ 600 60,000 Covad Communications Group, Inc. Wts., Exp. 3/08(3)..................... 320 3,200
3 5 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ RIGHTS, WARRANTS AND CERTIFICATES (CONTINUED) e.spire Communications, Inc. Wts., Exp. 11/05........................... 700 $ 58,360 FirstWorld Communications, Inc. Wts., Exp. 4/08(3)...................... 700 7,000 Foamex LP/JPS Automotive Corp. Wts., Exp. 7/99(3)....................... 1,000 20,000 Globix Corp.Wts., Exp. 5/05............................................. 600 6,000 Gothic Energy Corp. Wts., Exp. 1/03(6).................................. 9,509 95 Gothic Energy Corp. Wts., Exp. 9/04(3).................................. 10,150 11,419 ICG Communications, Inc. Wts., Exp. 9/05(3)............................. 4,125 61,543 In-Flight Phone Corp. Wts., Exp. 8/02................................... 900 -- KMC Telecom Holdings, Inc. Wts., Exp. 4/08(3)........................... 920 2,990 Millenium Seacarriers, Inc. Wts., Exp. 7/05(6).......................... 700 4,375 Orbital Imaging Corp. Wts., Exp. 3/05(3)................................ 240 9,630 Orion Network Systems, Inc. Wts., Exp. 1/07(3).......................... 975 12,188 Price Communications Corp. Wts., Exp. 8/07(3)........................... 4,300 129,000 Protection One, Inc. Wts., Exp. 6/05(3)................................. 6,400 64,000 Teletrac, Inc. Wts., Exp. 8/07(3)....................................... 125 1 WAM!NET, Inc. Wts., Exp. 3/05(3)........................................ 1,500 12,000 Wireless One, Inc. Wts., Exp. 10/00(3).................................. 1,500 15 ----------- 481,510 ----------- Total Convertible Sector (Cost $5,429,341) 5,338,639 ----------- Shares -------------- CORPORATE SECTOR -- 35.7% COMMON STOCKS -- 0.0% Capital Gaming International, Inc.(5)................................... 18 -- Intermedia Communications, Inc.(5)...................................... 757 14,005 Optel, Inc.(5).......................................................... 815 8 ----------- 14,013 ----------- Face Amount(1) -------------- CORPORATE BONDS AND NOTES -- 32.7% Aerospace -- 2.1% America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05.................... $1,000,000 987,500 Amtran, Inc., 10.50% Sr. Nts., 8/1/04................................... 850,000 839,375 Atlas Air, Inc., 9.25% Sr. Nts., 4/15/08(6)............................. 675,000 602,437 BE Aerospace, Inc., 9.50% Sr. Sub. Nts., 11/1/08(3)..................... 900,000 918,000 Constellation Finance LLC, 9.80% Airline Receivable Asset-Backed Nts., Series 1997-1, 1/1/01(3)........................... 500,000 485,000
4 6 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Aerospace (Continued) Decrane Aircraft Holdings, Inc., Units (each unit consists of $1,000 principal amount of 12% sr. sub. nts., 9/30/08 and one warrant to purchase 1.55 shares of common stock)(6)(7)............ $ 800,000 $ 780,000 Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts., Series 1997-A, Cl. B, 6/15/04(3)...................................... 455,778 492,743 Trans World Airlines, Inc., 11.50% Sr. Sec. Nts., 12/15/04.............. 1,000,000 860,000 ----------- 5,965,055 ----------- Chemicals -- 0.7% ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B, 12/1/07.............. 300,000 291,000 ICO, Inc., 10.375% Sr. Nts., 6/1/07..................................... 475,000 441,750 Laroche Industries, Inc., 9.50% Sr. Sub. Nts., Series B, 9/15/07........ 500,000 432,500 Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07............. 200,000 151,000 Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts., Series B, 8/1/07...................................................... 600,000 570,000 ----------- 1,886,250 ----------- Consumer Durables -- 0.1% Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts., Series B, 11/15/07.................................................... 400,000 358,000 ----------- Consumer Non-Durables -- 1.2% AKI Holdings, Inc., 10.50% Sr. Nts., 7/1/08(6).......................... 510,000 471,750 American Pad & Paper Co., 13% Sr. Sub. Nts., Series B, 11/15/05......... 340,000 164,900 Bell Sports, Inc., 11% Sr. Sub. Nts., 8/15/08(6)........................ 400,000 378,000 Consoltex Group, Inc., 11% Sr. Sub. Nts., Series B, 10/1/03............. 550,000 559,625 Globe Manufacturing, Inc., 10% Sr. Sub. Nts., 8/1/08(6)................. 400,000 314,000 Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts., 5/1/08........... 360,000 347,400 Revlon Consumer Products Corp., 8.625% Sr. Unsec. Sub. Nts., 2/1/08................................................................ 800,000 726,000 Revlon Worldwide Corp., Zero Coupon Sr. Sec. Disc. Nts., Series B, 9.73%, 3/15/01(8)........................................... 360,000 216,000 Styling Technology Corp., 10.875% Sr. Sub. Nts., 7/1/08(6).............. 195,000 182,325 ----------- 3,360,000 ----------- Energy -- 1.9% Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07..................... 155,000 123,225 Chesapeake Energy Corp., 9.625% Sr. Unsec. Nts., Series B, 5/1/05....... 510,000 436,050 Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts., 11/15/07..... 845,000 722,475 Dailey International, Inc., 9.50% Sr. Unsec. Nts., Series B, 2/15/08.... 400,000 182,000 Denbury Management, Inc., 9% Sr. Sub. Nts., 3/1/08...................... 400,000 336,000
5 7 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Energy (Continued) Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B, 5/1/05(6)..... $250,000 $ 163,750 Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/15/08....... 380,000 286,900 National Energy Group, Inc., 10.75% Sr. Nts., Series D, 11/1/06(9)...... 180,000 72,900 P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., 5/15/08(6)............... 700,000 696,500 Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs., 2/1/06............. 500,000 457,500 Pogo Producing Co., 8.75% Sr. Sub. Nts., 5/15/07........................ 790,000 754,450 Statia Terminals International/Statia Terminals (Canada), Inc., 11.75% First Mtg. Nts., Series B, 11/15/03............................ 200,000 199,000 Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07........................ 700,000 693,000 Universal Compression Holdings, Inc., 0%/9.875% Sr. Disc. Nts., 2/15/08(6)(10)........................................................ 700,000 399,000 ----------- 5,522,750 ----------- Financial -- 0.5% CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts., 6/1/06.... 300,000 288,000 Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts., Series B, 4/1/08...................................................... 800,000 644,000 Veritas Capital Trust, 10% Nts., 1/1/28................................. 525,000 492,187 ----------- 1,424,187 ----------- Food & Drug -- 0.3% Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B, 7/31/07............ 750,000 690,000 Pathmark Stores, Inc., 0%/10.75% Jr. Sub. Deferred Coupon Nts., 11/1/03(10)........................................................... 400,000 294,000 ----------- 984,000 ----------- Food/Tobacco -- 0.7% Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B, 7/1/08............... 200,000 207,000 Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B, 12/15/07(10)... 500,000 287,500 International Home Foods, Inc., 10.375% Sr. Sub. Nts., 11/1/06.......... 500,000 530,000 Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B, 2/1/05............. 650,000 594,750 Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts., 3/15/10.................... 100,000 98,250 SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts., 2/15/08............ 400,000 391,000 ----------- 2,108,500 ----------- Forest Products/Containers -- 0.6% Ball Corp.: 7.75% Sr. Nts., 8/1/06(6)................................. 300,000 310,500 8.25% Sr. Sub. Nts., 8/1/08(6)........................................ 400,000 416,500 Four M Corp., 12% Sr. Sec. Nts., Series B, 6/1/06....................... 300,000 226,500
6 8 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Forest Products/Containers (Continued) Riverwood International Corp., 10.625% Sr. Unsec. Nts., 8/1/07.......... $ 450,000 $ 420,750 U.S. Can Corp., 10.125% Sr. Sub. Nts., Series B, 10/15/06............... 250,000 251,250 ----------- 1,625,500 ----------- Gaming/Leisure -- 2.2% AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts., 3/15/08(10)................ 150,000 70,875 Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts., 3/15/08........................ 400,000 352,000 Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/95(9)... 5,500 -- Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A, 11/15/00(3)(9)........................................................ 200,000 13,000 Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07......................... 435,000 408,900 Empress Entertainment, Inc., 8.125% Sr. Sub. Nts., 7/1/06(6)............ 60,000 59,550 Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts., 4/1/05...................... 550,000 541,750 Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07..................... 1,000,000 975,000 Mohegan Tribal Gaming Authority (Connecticut), 13.50% Sr. Sec. Nts., Series B, 11/15/02.............................................. 900,000 1,120,500 Outboard Marine Corp., 10.75% Sr. Nts., 6/1/08(6)....................... 240,000 222,600 Premier Parks, Inc.: 0%/10% Sr. Disc. Nts., 4/1/08(10)..................................... 500,000 302,500 9.25% Sr. Nts., 4/1/06................................................ 300,000 302,250 Rio Hotel & Casino, Inc., 9.50% Sr. Sub. Nts., 4/15/07.................. 300,000 327,000 Showboat Marina Casino Partnership/Showboat Marina Finance Corp., 13.50% First Mtg. Nts., Series B, 3/15/03...................... 1,000,000 1,135,000 Six Flags Entertainment Corp., 8.875% Sr. Nts., 4/1/06.................. 440,000 445,500 ----------- 6,276,425 ----------- Healthcare -- 0.8% Fresenius Medical Care Capital Trust II, 7.875% Nts., 2/1/08............ 400,000 377,000 ICN Pharmaceutical, Inc., 8.75% Sr. Nts., 11/15/08(6)................... 415,000 404,625 Integrated Health Services, Inc.: 9.50% Sr. Sub. Nts., 9/15/07.......................................... 455,000 420,875 10.25% Sr. Sub. Nts., 4/30/06......................................... 15,000 14,025 Magellan Health Services, Inc., 9% Sr. Sub. Nts., 2/15/08(6)............ 250,000 208,125 Oxford Health Plans, Inc., 11% Sr. Nts., 5/15/05(6)..................... 600,000 489,000 Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07................. 375,000 279,375 Tenet Healthcare Corp., 8.125% Sr. Sub. Nts., 12/1/08(6)................ 250,000 255,000 ----------- 2,448,025 -----------
7 9 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Housing -- 0.5% Engle Homes, Inc., 9.25% Sr. Unsec. Nts., Series C, 2/1/08.............. $400,000 $ 377,000 Nortek, Inc.: 9.125% Sr. Nts., Series B, 9/1/07..................................... 420,000 411,600 9.25% Sr. Nts., Series B, 3/15/07..................................... 600,000 597,000 ----------- 1,385,600 ----------- Information Technology -- 1.0% Covad Communications Group, Inc., 0%/13.50% Sr. Disc. Nts., 3/15/08(10)........................................................... 320,000 107,200 Details, Inc., 10% Sr. Sub. Nts., Series B, 11/15/05.................... 600,000 555,000 Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07.............................. 600,000 544,500 Unisys Corp., 11.75% Sr. Nts., 10/15/04................................. 500,000 564,375 WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B, 3/1/05(10).... 500,000 237,500 Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07........................... 800,000 740,000 ----------- 2,748,575 ----------- Manufacturing -- 2.0% Axia, Inc. (New), 10.75% Sr. Sub. Nts., 7/15/08(6)...................... 150,000 141,750 Burke Industries, Inc., 10% Sr. Sub. Nts., 8/15/07...................... 700,000 656,250 Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts., 3/1/08...... 350,000 313,250 Grove Worldwide LLC, 9.25% Sr. Sub. Nts., 5/1/08(6)..................... 315,000 269,325 Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07...... 950,000 871,625 Insilco Corp., 10.25% Sr. Sub. Nts., 8/15/07............................ 800,000 812,000 International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05.. 700,000 714,000 Moll Industries, Inc., 10.50% Sr. Sub. Nts., 7/1/08(6).................. 280,000 263,200 Polymer Group, Inc., 8.75% Sr. Sub. Nts., 3/1/08........................ 500,000 462,500 Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts., Series B, 6/15/07..................................................... 500,000 457,500 Terex Corp., 8.875% Sr. Unsec. Sub. Nts., 4/1/08........................ 210,000 192,150 Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03(3)................... 525,000 518,437 ----------- 5,671,987 ----------- Media/Entertainment: Broadcasting -- 1.8% Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07........ 900,000 895,500 CBS Radio, Inc., 11.375% Unsec. Sub. Debs., 1/15/09(4).................. 617,000 731,145 Chancellor Media Corp.: 8.75% Sr. Unsec. Sub. Nts., Series B, 6/15/07......................... 700,000 693,000 9% Sr. Sub. Nts., 10/1/08(3).......................................... 500,000 505,000 10.50% Sr. Sub. Nts., Series B, 1/15/07............................... 735,000 804,825 Jacor Communications Co., 8% Sr. Sub. Nts., 2/15/10..................... 400,000 414,000
8 10 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Media/Entertainment: Broadcasting (Continued) Radio One, Inc., 7% Sr. Sub. Nts., Series B, 5/15/04(11)................ $ 700,000 $ 647,500 Spanish Broadcasting Systems, Inc., 11% Sr. Nts., 3/15/04............... 475,000 486,875 ----------- 5,177,845 ----------- Media/Entertainment: Cable/Wireless Video -- 2.5% Adelphia Communications Corp.: 8.125% Sr. Nts., 7/15/03(6)........................................... 250,000 248,750 8.375% Sr. Nts., Series B, 2/1/08..................................... 100,000 100,000 9.25% Sr. Nts., 10/1/02............................................... 435,000 449,138 9.875% Sr. Nts., Series B, 3/1/07..................................... 565,000 608,788 CSC Holdings, Inc.: 9.875% Sr. Sub. Debs., 4/1/23......................................... 1,000,000 1,075,000 9.875% Sr. Sub. Nts., 5/15/06......................................... 1,000,000 1,080,000 EchoStar DBS Corp., 12.50% Sr. Sec. Nts., 7/1/02........................ 800,000 834,000 EchoStar Satellite Broadcasting Corp., 0%/13.125% Sr. Sec. Disc. Nts., 3/15/04(10)............................................... 1,000,000 875,000 Falcon Holding Group LP, 8.375% Sr. Unsec. Debs., Series B, 4/15/10............................................................... 1,000,000 995,000 Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts., Series B, 11/1/03(12)................................................. 250,000 266,250 Optel, Inc., 13% Sr. Nts., Series B, 2/15/05............................ 480,000 468,000 United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts., Series B, 2/15/08(10)................................................. 600,000 285,000 ----------- 7,284,926 ----------- Media/Entertainment: Diversified Media -- 0.7% Hollinger International Publishing, Inc., 9.25% Sr. Unsec. Sub. Nts., 2/1/06.......................................................... 250,000 261,875 Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07................. 475,000 429,875 Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07.................... 875,000 896,875 SFX Entertainment, Inc., 9.125% Sr. Unsec. Sub. Nts., Series B, 2/1/08...................................................... 600,000 562,500 ----------- 2,151,125 ----------- Media/Entertainment: Telecommunications -- 4.2% Amazon.Com, Inc., 0%/10% Sr. Unsec. Disc. Nts., 5/1/08(10).............. 1,000,000 550,000 Concentric Network Corp., 12.75% Sr. Unsec. Nts., 12/15/07.............. 495,000 438,075 e.spire Communications, Inc., 13.75% Sr. Nts., 7/15/07.................. 205,000 208,075 Exodus Communications, Inc., 11.25% Sr. Nts., 7/1/08(6)................. 365,000 327,588 FaciliCom International, Inc., 10.50% Sr. Nts., Series B, 1/15/08....... 205,000 162,975
9 11 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Media/Entertainment: Telecommunications (Continued) FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts., 4/15/08(3)(10)........................................................ $ 700,000 $ 206,500 Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts., 2/15/08(10)........................................................... 590,000 295,000 Global Crossing Holdings Ltd., 9.625% Sr. Nts., 5/15/08(6).............. 100,000 97,250 Globix Corp., 13% Sr. Unsec. Nts., 5/1/05(3)............................ 600,000 462,000 ICG Holdings, Inc., 0%/13.50% Sr. Disc. Nts., 9/15/05(10)............... 405,000 305,775 ICG Services, Inc., 0%/10% Sr. Unsec. Disc. Nts., 2/15/08(10)........... 800,000 385,000 Intermedia Communications, Inc.: 8.50% Sr. Nts., Series B, 1/15/08..................................... 500,000 475,000 8.60% Sr. Unsec. Nts., Series B, 6/1/08............................... 360,000 342,900 8.875% Sr. Nts., 11/1/07.............................................. 265,000 255,725 ITC Deltacom, Inc.: 8.875% Sr. Nts., 3/1/08............................................... 500,000 485,000 11% Sr. Nts., 6/1/07.................................................. 250,000 268,125 KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec. Disc. Nts., 2/15/08(10)........................................................... 920,000 427,800 Level 3 Communications, Inc., 9.125% Sr. Unsec. Nts., 5/1/08............ 600,000 567,000 Long Distance International, Inc., Units (each unit consists of $1,000 principal amount of 12.25% sr. nts., 4/15/08 and one warrant to purchase 15.0875 shares of common stock)(6)(7)............. 400,000 338,000 NEXTLINK Communications, Inc.: 0%/9.45% Sr. Unsec. Disc. Nts., 4/15/08(10)........................... 750,000 397,500 9% Sr. Nts., 3/15/08.................................................. 250,000 228,750 9.625% Sr. Nts., 10/1/07.............................................. 500,000 465,000 NorthEast Optic Network, Inc., 12.75% Sr. Nts., 8/15/08................. 500,000 442,500 PSINet, Inc., 10% Sr. Unsec. Nts., Series B, 2/15/05.................... 1,300,000 1,264,250 Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(10).......................................................... 350,000 276,500 Time Warner Telecom LLC, 9.75% Sr. Nts., 7/15/08........................ 900,000 911,250 US Xchange LLC, 15% Sr. Nts., 7/1/08(6)................................. 400,000 377,000 Verio, Inc.: 10.375% Sr. Unsec. Nts., 4/1/05....................................... 645,000 615,975 13.50% Sr. Unsec. Nts., 6/15/04....................................... 165,000 179,850 Viatel, Inc.: 0%/12.50% Sr. Unsec. Disc. Nts., 4/15/08(10).......................... 385,000 190,575 11.25% Sr. Sec. Nts., 4/15/08......................................... 195,000 172,575 ------------ 12,119,513 ------------
10 12 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Media/Entertainment: Wireless Communications -- 2.2% Arch Communications, Inc., 12.75% Sr. Nts., 7/1/07(6)................... $ 100,000 $ 85,500 CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts., 10/1/07(10).......... 709,000 216,245 Crown Castle International Corp., 0%/10.625% Sr. Unsec. Disc. Nts., 11/15/07(10).......................................................... 800,000 468,000 ICO Global Communications (Holdings) Ltd., Units (each unit consists of $1,000 principal amount of 15% sr. nts., 8/1/05 and one warrant to buy 19.85 shares of common stock)(7)................... 400,000 250,000 Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts., 6/1/06(10)............................................................ 205,000 124,025 Nextel Communications, Inc., 0%/9.75% Sr. Disc. Nts., 10/31/07(10)...... 860,000 481,600 Omnipoint Corp., 11.625% Sr. Nts., Series A, 8/15/06(13)................ 1,250,000 812,500 ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts., 8/15/04............................................................... 175,000 156,625 Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(10)...... 1,275,000 758,625 Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts., 3/15/08(10)...... 800,000 372,000 Price Communications Cellular Holdings, Inc., 11.25% Sr. Nts., 8/15/08(4)............................................................ 200,000 173,000 Price Communications Wireless, Inc.: 9.125% Sr. Sec. Nts., 12/15/06(6)..................................... 250,000 246,250 11.75% Sr. Sub. Nts., 7/15/07......................................... 100,000 101,500 Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08........... 700,000 663,250 SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts., 3/1/08(10)...... 1,000,000 455,000 Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts., 7/15/08(6)(10)....... 600,000 237,000 Sprint Spectrum LP/Sprint Spectrum Finance Corp., 11% Sr. Nts., 8/15/06............................................................... 500,000 567,500 ---------- 6,168,620 ---------- Metals/Minerals -- 1.1% AK Steel Corp., 9.125% Sr. Nts., 12/15/06............................... 400,000 415,000 Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01.................... 250,000 268,750 Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts., 5/15/08(6).............. 800,000 772,000 Keystone Consolidated Industries, Inc., 9.625% Sr. Sec. Nts., 8/1/07.... 900,000 832,500 Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts., 7/15/08(6)(10)...... 1,200,000 402,000 Metallurg, Inc., 11% Sr. Nts., 12/1/07.................................. 365,000 323,025 ---------- 3,013,275 ---------- Retail -- 0.9% Boyds Collection Ltd., 9% Sr. Sub. Nts., 5/15/08(6)..................... 500,000 477,500 Eye Care Centers of America, Inc., 9.125% Sr. Sub. Nts., 5/1/08(6)...... 500,000 412,500 Finlay Enterprises, Inc., 9% Debs., 5/1/08.............................. 500,000 380,000 Finlay Fine Jewelry Corp., 8.375% Sr. Nts., 5/1/08...................... 300,000 247,500
11 13 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Retail (Continued) Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts., 6/1/08(6).......... $ 400,000 $ 374,000 Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07...................... 775,000 755,625 ------------ 2,647,125 ------------ Service -- 1.6% Allied Waste Industries, Inc., 0%/11.30% Sr. Disc. Nts., 6/1/07(10)..... 500,000 375,000 Borg-Warner Security Corp., 9.625% Sr. Sub. Nts., 3/15/07............... 700,000 761,250 Coinstar, Inc., 0%/13% Sr. Disc. Nts., 10/1/06(10)...................... 500,000 356,250 Comforce Operating, Inc., 12% Sr. Nts., Series B, 12/1/07............... 200,000 193,500 Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts., 2/1/08.. 1,000,000 967,500 Great Lakes Dredge & Dock Corp., 11.25% Sr. Sub. Nts., 8/15/08(6)....... 445,000 431,650 Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09......... 250,000 241,875 Newcor, Inc., 9.875% Sr. Unsec. Sub. Nts., Series B, 3/1/08............. 500,000 422,500 Protection One Alarm Monitoring, Inc., 13.625% Sr. Sub. Disc. Nts., 6/30/05............................................................... 655,000 749,975 ------------ 4,499,500 ------------ Transportation -- 2.4% Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B, 7/15/07..... 800,000 726,000 Coach USA, Inc., 9.375% Sr. Sub. Nts., Series B, 7/1/07................. 195,000 195,975 Collins & Aikman Products Co., 11.50% Sr. Unsec. Sub. Nts., 4/15/06............................................................... 700,000 696,500 HDA Parts System, Inc., 12% Sr. Sub. Nts., 8/1/05(6).................... 300,000 241,500 Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07............. 775,000 736,250 Millenium Seacarriers, Inc., Units (each unit consists of $1,000 principal amount of 12% first priority ship mtg. nts., 7/15/05 and one warrant to purchase five shares of common stock)(6)(7)................ 700,000 591,500 Navigator Gas Transport plc: 10.50% First Priority Ship Mtg. Nts., 6/30/07(6)...................... 1,250,000 1,193,750 Units (each unit consists of $1,000 principal amount of 12% second priority ship mtg. nts., 6/30/07 and 7.66 warrants)(6)(7)................................................ 100,000 98,500 Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts., 6/15/07.......... 600,000 555,000 Sea Containers Ltd., 7.875% Sr. Nts., 2/15/08........................... 500,000 472,500 Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc. Nts., Series B, 12/15/03(10).......................................... 1,500,000 1,286,250 ------------ 6,793,725 ------------
12 14 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ Utility -- 0.7% Calpine Corp., 10.50% Sr. Nts., 5/15/06................................. $ 565,000 $ 613,025 El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E, 5/1/11...... 570,000 649,800 ESI Tractebel Acquisition Corp., 7.99% Bonds, 12/30/11(6)............... 500,000 466,903 Niagara Mohawk Power Corp., 7.75% Sr. Unsec. Nts., Series G, 10/1/08............................................................... 250,000 262,667 ----------- 1,992,395 ----------- 93,612,903 ----------- STRUCTURED INSTRUMENTS -- 3.0% Bank of America NT & SA (London Branch), Goldman Sachs Commodity Index Excess Return Linked Nts., 5.50%, 1/5/00.............. 500,000 355,950 Bear Stearns High Yield Composite Index Linked Nts., 9%, 2/5/99......... 3,000,000 2,650,200 Commerzbank International SA, Energy Linked Nts., 5.156%, 7/1/99(12)............................................................ 500,000 389,050 Goldman Sachs Group LP, High Yield Index Nts., 8%, 3/4/99............... 3,000,000 2,799,300 Shoshone Partners Loan Trust Sr. Nts., 6.97%, 4/28/02 (representing a basket of reference loans and a total return swap between Chase Manhattan Bank and the Trust)(3)(12)............................ 2,500,000 2,316,889 ----------- 8,511,389 ----------- Total Corporate Sector (Cost $110,888,566) 102,138,305 ----------- INTERNATIONAL SECTOR -- 24.8% CORPORATE BONDS AND NOTES -- 3.9% Algoma Steel, Inc., 12.375% First Mtg. Nts., 7/15/05.................... 215,000 153,725 Bakrie Investindo, Zero Coupon Promissory Nts., 3/16/99(3)(9)IDR........ 3,160,000,000 103,268 COLT Telecom Group plc: 0%/12% Sr. Unsec. Disc. Nts., 12/15/06(10)............................ 100,000 78,000 Units (each unit consists of $1,000 principal amount of 0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase 7.8 ordinary shares)(7)(10)......................................... 900,000 715,500 Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts., 12/15/05(10).......................................................... 1,600,000 1,208,000 Diamond Holdings plc, 9.125% Sr. Nts., 2/1/08(3)........................ 200,000 186,500 Imax Corp., 10% Sr. Nts., 3/1/01........................................ 1,000,000 1,035,000 International Utility Structures, Inc., 10.75% Sr. Sub. Nts., 2/1/08.... 200,000 167,000 Intrawest Corp., 9.75% Sr. Nts., 8/15/08................................ 250,000 249,375 NTL, Inc.: 0%/12.375% Sr. Nts., 10/1/08(6)(10)(14)............................... 5,000,000 2,775,250 10% Sr. Nts., Series B, 2/15/07....................................... 550,000 530,750
13 15 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 -------------- ------------ CORPORATE BONDS AND NOTES (CONTINUED) Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08(6).................... $ 700,000 $ 493,500 Orange plc, 8% Sr. Nts., 8/1/08......................................... 800,000 784,000 Pacific & Atlantic Holdings, Inc., 11.50% First Preferred Ship Mtg. Nts., 5/30/08(6)................................................... 300,000 232,500 PT Polysindo Eka Perkasa: 24% Nts., 6/19/03IDR.................................................. 1,314,400,000 20,618 Zero Coupon Promissory Nts., 3/16/99(3)(9)IDR......................... 3,000,000,000 47,059 RSL Communications plc, 9.125% Sr. Unsec. Nts., 3/1/08.................. 500,000 425,000 Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts., 11/15/07(3)........................................................... 565,000 546,637 TeleWest Communications plc: 0%/11% Sr. Disc. Debs., 10/1/07(10)................................... 500,000 400,000 11.25% Sr. Nts., 11/1/08(6)........................................... 965,000 1,008,425 ------------ 11,160,107 ------------ FOREIGN GOVERNMENT OBLIGATIONS -- 20.1% Argentina -- 1.3% Argentina (Republic of) Sr. Unsec. Unsub. Bonds, 11%, 10/9/06........... 3,200,000 3,168,000 Banco Hipotecario Nacional (Argentina) Medium-Term Unsec. Nts., Series 3, 10.625%, 8/7/06....................................... 700,000 640,500 ------------ 3,808,500 ------------ Australia -- 0.3% Australia (Government of) Bonds, Series 904, 9%, 9/15/04AUD............. 1,175,000 892,140 ------------ Brazil -- 0.9% Brazil (Federal Republic of) Bonds, Series RG, 6.188%, 4/15/12(12)...... 820,000 403,850 Brazil (Federal Republic of) Debt Conversion Bonds, 6.188%, 4/15/12(12)........................................................... 4,215,000 2,075,887 ------------ 2,479,737 ------------ Bulgaria -- 1.0% Bulgaria (Republic of) Disc. Bonds, Tranche A, 6.688%, 7/28/24(12)...... 3,891,000 2,733,427 ------------ Canada -- 0.2% Canada (Government of) Bonds, 10.25%, 12/1/98CAD........................ 760,000 495,737 ------------ Denmark -- 0.4% Denmark (Kingdom of) Bonds: 7%, 12/15/04DKK....................................................... 3,470,000 626,565 8%, 5/15/03DKK........................................................ 2,855,000 522,826 ------------ 1,149,391 ------------
14 16 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 --------------- ------------ FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED) Ecuador -- 0.4% Ecuador (Republic of) Debs., 6.625%, 2/27/15(12)........................ $ 1,154,293 $ 500,675 Ecuador (Republic of) Past Due Interest Bonds, 6.625%, 2/27/15(12)...... 1,556,032 674,929 ------------ 1,175,604 ------------ France -- 0.6% France (Government of) Bonds, Obligations Assimilables du Tresor, 5.50%, 4/25/29(FRF)........................................ 9,080,000 1,704,734 ------------ Germany -- 5.2% Germany (Republic of) Bonds, 6.25%, 4/26/06DEM.......................... 705,000 484,210 Germany (Republic of) Treasury Bills, Zero Coupon, 7.87%, 1/15/99(8)(DEM)....................................................... 24,000,000 14,397,302 ------------ 14,881,512 ------------ Great Britain -- 1.3% United Kingdom Treasury Bonds, 6.75%, 11/26/04GBP....................... 880,000 1,607,848 United Kingdom Treasury Nts., 8%, 6/10/03(GBP).......................... 1,190,000 2,231,246 ------------ 3,839,094 ------------ Italy -- 0.8% Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali, 8.50%, 1/1/04(ITL).................................................... 2,925,000,000 2,151,839 ------------ Ivory Coast -- 0.7% Ivory Coast (Government of) Past Due Interest Bonds, 2%, 3/29/18(6)(12)........................................................ 7,011,250 2,120,903 ------------ Jordan -- 0.6% Hashemite (Kingdom of Jordan) Bonds, Series DEF, 5%, 12/23/23(11).......................................................... 3,125,000 1,664,062 ------------ Korea, Republic of (South) -- 0.7% Korea (Republic of) Bonds, 8.875%, 4/15/08.............................. 2,100,000 1,913,518 ------------ Mexico -- 1.1% United Mexican States Bonds, 11.50%, 5/15/26............................ 3,015,000 3,112,988 ------------ Nigeria -- 0.6% Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20.......... 1,750,000 1,100,313 Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10........................................................ 1,256,782 673,427 ------------ 1,773,740 ------------
15 17 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 --------------- ------------ FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED) Norway -- 0.1% Norway (Government of) Bonds, 9.50%, 10/31/02(NOK)...................... 2,655,000 $ 414,099 ------------ Panama -- 0.5% Panama (Government of) Bonds, 8.875%, 9/30/27........................... 545,000 492,544 Panama (Government of) Past Due Interest Debs., 6.688%, 7/17/16(12)........................................................... 1,318,325 985,448 ------------ 1,477,992 ------------ Peru -- 1.0% Peru (Republic of) Front-Loaded Interest Reduction Bonds, 3.25%, 3/7/17(11)..................................................... 5,580,000 2,845,800 ------------ Philippines -- 0.2% Philippines (Republic of) Bonds, 8.75%, 10/7/16......................... 710,000 602,613 ------------ Poland -- 0.6% Poland (Republic of) Par Bonds, 3%, 10/27/24(11)........................ 2,725,000 1,804,461 ------------ Russia -- 0.2% Russia (Government of) Debs.: 6.719%, 12/15/15(12).................................................. 1,258,480 128,994 Series 19 yr., 6.625%, 12/15/15(12)................................... 1,623,039 166,362 Russia (Government of) Principal Loan Debs., Series 24 yr., 6.625%, 12/15/20(12).................................................. 2,100,000 166,031 ------------ 461,387 ------------ Spain -- 1.0% Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado: 6%, 1/31/29ESP........................................................ 273,900,000 2,079,204 10%, 2/28/05ESP....................................................... 73,410,000 686,367 ------------ 2,765,571 ------------ Venezuela -- 0.4% Venezuela (Republic of) Front-Loaded Interest Reduction Bonds, Series A, 6.125%, 3/31/07(12)......................................... 1,821,425 1,057,565 ------------ 57,326,414 ------------ LOAN PARTICIPATIONS -- 0.7% Algeria (Republic of) Reprofiled Debt Loan Participation Nts.: Tranche 1, 6.375%, 9/4/06(12)......................................... 1,065,272 508,668 Tranche A, 7.188%, 3/4/00(12)......................................... 532,636 450,078
16 18 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 --------------- ------------ LOAN PARTICIPATIONS (CONTINUED) Morocco (Kingdom of) Loan Participation Agreement: Tranche A, 6.563%, 1/1/09(3)(12)...................................... $ 187,000 $ 140,717 Tranche B, 6.563%, 1/1/04(3)(12)...................................... 647,058 524,117 Trinidad & Tobago Loan Participation Agreement, Tranche B, 1.497%, 9/30/00(3)(12)JPY............................................. 59,999,999 424,796 ------------ 2,048,376 ------------ MORTGAGE-BACKED OBLIGATIONS -- 0.1% Nykredit AS, 8% Cv. Bonds, 10/1/26DKK................................... 2,778,000 453,722 ------------ Units -------------- RIGHTS, WARRANTS AND CERTIFICATES -- 0.0% Australis Holdings PTY Ltd./Australia Media Ltd. Wts., Exp. 5/00(3)..... 80 -- Microcell Telecommunications, Inc. Wts., Exp. 6/06(3)................... 2,800 50,750 ------------ 50,750 ------------ Total International Sector (Cost $78,976,545) 71,039,369 ------------ MORTGAGE-BACKED SECTOR -- 10.2% Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:.. Face Amount(1) -------------- Series 1996-D3, Cl. A5, 8.33%, 10/13/26(3)(12)........................ $ 500,000 507,656 Series 1996-MD6, Cl. A5, 6.955%, 11/13/26(12)......................... 800,000 817,125 BKB Commercial Mortgage Trust, Commercial Mtg. Obligations, Series 1997-C1, Cl. C, 7.45%, 10/25/00(3)............................. 250,000 249,844 Capital Lease Funding Securitization LP, Interest-Only Stripped Mtg.-Backed Security, Series 1997-CTL1, 0.549%, 6/22/24(3)(15)........ 10,938,078 450,649 Commercial Mortgage Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 0.98%, 12/25/20(3)(15)....................................................... 12,416,600 256,092 CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates, Series 1997-C1, Cl. E, 7.50%, 3/1/11(3)................. 710,000 708,891 Federal Home Loan Mortgage Corp.: Certificates of Participation, 12%, 5/1/10-6/1/15..................... 1,395,518 1,594,303 Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates, Series 1343, Cl. LA, 8%, 8/15/22........ 1,000,000 1,095,940 Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates, Series 2054, Cl. TE, 6.25%, 4/15/24................... 534,000 542,678 Interest-Only Stripped Mtg.-Backed Security, Series 197, Cl. IO, 15.225%, 4/1/28(15)......................................... 4,934,053 1,147,938 Interest-Only Stripped Mtg.-Backed Security, Series 199, Cl. IO, 6.50%, 8/1/28(15)........................................... 5,656,280 1,236,428
17 19 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 --------------- ------------ MORTGAGE-BACKED SECTOR (CONTINUED) Federal National Mortgage Assn.: 7.50%, 6/1/10......................................................... $1,095,379 $1,124,933 11%, 7/1/16........................................................... 614,453 703,549 Federal National Mortgage Assn., Gtd. Mtg. Pass-Through Certificates, 13%, 6/1/15............................................. 792,198 927,610 Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates: Trust 1992-162, Cl. C, 7%, 10/25/21................................. 5,400,000 5,656,500 Trust 1995-4, Cl. PC, 8%, 5/25/25................................... 664,690 723,262 Trust 1997-25, Cl. B, 7%, 12/18/22.................................. 340,000 349,561 Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security: Trust 277, Cl. 1, 20.156%, 4/1/27(16)............................... 174,943 156,465 Trust 294, Cl. 1, 5.536%, 2/1/28(16)................................ 1,428,879 1,231,069 First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1, 8.131%, 7/25/06(3)(12)................ 800,000 805,750 First Union-Lehman Brothers Commercial Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security, Series 1997-C1, 1.31%, 4/18/27(15).................................................... 4,688,333 311,060 General Motors Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security, Series 1997-C1, Cl. X, 2.08%, 7/15/27(15)....... 3,489,616 314,066 Government National Mortgage Assn.: 6%, 7/20/27........................................................... 632,303 640,403 7%, 1/15/28-3/15/28................................................... 973,446 996,713 11%, 10/20/19......................................................... 403,778 459,550 12%, 11/20/13-9/20/15................................................. 451,661 505,105 Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through Certificates, Series 1996-C1, Cl. D, 7.42%, 4/25/28................... 800,000 843,922 Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-C1, Cl. D-1, 7.436%, 2/15/28(3)(12)......... 1,000,000 1,061,250 NationsCommercial Corp., NB Commercial Mtg. Pass-Through Certificates, Series-DMC: Cl. B, 8.562%, 8/12/11(3)........................................... 400,000 411,625 Cl. C, 8.921%, 8/12/11(3)........................................... 400,000 410,438 Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates, Series 1, Cl. D, 7.683%, 12/21/26(3).................... 500,000 508,906
18 20 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust
Market Value Face Amount(1) See Note 1 --------------- ------------ MORTGAGE-BACKED SECTOR (CONTINUED) Salomon Brothers Mortgage Securities VII, Series 1996-B, Cl. 1, 7.132%, 4/25/26(3)............................................. $ 1,311,201 $ 963,733 Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%, 3/25/22(3)...... 250,000 256,563 Structured Asset Securities Corp.: Commercial Mtg. Pass-Through Certificates, Series 1997-LLI, Cl. E, 7.30%, 4/12/12................................................. 500,000 489,844 Multiclass Pass-Through Certificates, Series 1996-C3, Cl. D, 8%, 6/25/30(3)................................................. 650,000 659,953 ------------- Total Mortgage-Backed Sector (Cost $28,132,410) 29,119,374 ------------- MONEY MARKET SECTOR -- 7.4% Repurchase agreement with PaineWebber, Inc., 5.35%, dated 10/30/98, to be repurchased at $21,259,474 on 11/2/98, collateralized by U.S. Treasury Nts., 5.625%-6.625%, 5/31/99-2/15/03, with a value of $21,728,009 (Cost $21,250,000)........................................ 21,250,000 21,250,000 ------------- TOTAL INVESTMENTS, AT VALUE (COST $304,074,746)......................... 100.7% 287,959,167 LIABILITIES IN EXCESS OF OTHER ASSETS................................... (0.7) (2,052,230) ----- ------------- NET ASSETS.............................................................. 100.0% $285,906,937 ===== =============
19 21 STATEMENT OF INVESTMENTS (Continued) Oppenheimer Multi-Sector Income Trust 1. Face amount is reported in U.S. Dollars, except for those denoted in the following currencies: AUD - Australian Dollar GBP - British Pound Sterling CAD - Canadian Dollar IDR - Indonesian Rupiah DEM - German Mark ITL - Italian Lira DKK - Danish Krone JPY - Japanese Yen ESP - Spanish Peseta NOK - Norwegian Krone FRF - French Franc
2. Securities with an aggregate market value of $10,775,010 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to Financial Statements. 3. Identifies issues considered to be illiquid or restricted -- See Note 8 of Notes to Financial Statements. 4. Interest or dividend is paid-in-kind. 5. Non-income producing security. 6. 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 $21,084,013 or 7.37% of the Trust's net assets as of October 31, 1998. 7. 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 underlying principal of the notes. 8. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 9. Non-income producing -- issuer is in default. 10. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date. 11. Represents the current interest rate for an increasing rate security. 12. Represents the current interest rate for a variable rate security. 13. A sufficient amount of securities has been designated to cover outstanding forward foreign currency exchange contracts. See Note 5 of Notes to Financial Statements. 14. When-issued security to be delivered and settled after October 31, 1998. 15. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. 16. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows. See accompanying Notes to Financial Statements. 20 22 STATEMENT OF ASSETS AND LIABILITIES October 31, 1998 Oppenheimer Multi-Sector Income Trust
ASSETS Investments, at value (cost $304,074,746)--see accompanying statement........................................... $287,959,167 Cash............................................................................................................ 20,506 Receivables and other assets: Interest...................................................................................................... 5,679,681 Investments sold.............................................................................................. 4,833,962 Closed forward foreign currency exchange contracts............................................................ 96,781 Other......................................................................................................... 16,905 ------------- Total assets................................................................................................ 298,607,002 ------------- LIABILITIES Unrealized depreciation on forward foreign currency exchange contracts -- Note 5................................ 130,021 Payables and other liabilities: Investments purchased (including $2,775,250 purchased on a when-issued basis) -- Note 1............................................................................................ 11,565,530 Closed forward foreign currency exchange contracts............................................................ 534,294 Trustees' fees -- Note 1...................................................................................... 172,482 Management and administrative fees............................................................................ 118,020 Daily variation on futures contracts -- Note 6................................................................ 89,127 Shareholder reports........................................................................................... 55,629 Custodian fees................................................................................................ 6,782 Transfer agent and accounting services fees................................................................... 2,215 Other......................................................................................................... 25,965 ------------- Total liabilities........................................................................................... 12,700,065 ------------- NET ASSETS...................................................................................................... $285,906,937 ============= COMPOSITION OF NET ASSETS Par value of shares of beneficial interest...................................................................... $ 291,161 Additional paid-in capital...................................................................................... 312,140,847 Undistributed net investment income............................................................................. 169,342 Accumulated net realized loss on investments and foreign currency transactions.................................. (10,400,329) Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies............................................................................. (16,294,084) ------------- NET ASSETS -- applicable to 29,116,068 shares of beneficial interest outstanding................................ $285,906,937 ============= NET ASSET VALUE PER SHARE....................................................................................... $9.82 =====
See accompanying Notes to Financial Statements. 21 23 STATEMENT OF OPERATIONS For the Year Ended October 31, 1998 Oppenheimer Multi-Sector Income Trust
INVESTMENT INCOME Interest (net of foreign withholding taxes of $411)............................................................. $ 25,603,479 Dividends....................................................................................................... 494,062 ------------ Total income.................................................................................................. 26,097,541 ------------ EXPENSES Management fees -- Note 4....................................................................................... 1,980,152 Administrative fees -- Note 4................................................................................... 604,427 Shareholder reports............................................................................................. 192,299 Trustees' fees and expenses -- Note 1........................................................................... 79,370 Transfer and shareholder servicing agent fees -- Note 4......................................................... 54,062 Legal, auditing and other professional fees..................................................................... 39,202 Custodian fees and expenses..................................................................................... 36,101 Registration and filing fees.................................................................................... 30,258 Accounting service fees -- Note 4............................................................................... 24,000 Insurance expenses.............................................................................................. 11,460 Other........................................................................................................... 16,816 ------------ Total expenses................................................................................................ 3,068,147 ------------ NET INVESTMENT INCOME........................................................................................... 23,029,394 ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments (including premiums on options exercised)......................................................... (1,967,924) Closing of futures contracts.................................................................................. (530,310) Closing and expiration of option contracts written -- Note 7.................................................. 119,030 Foreign currency transactions................................................................................. 425,153 ------------ Net realized loss........................................................................................... (1,954,051) ------------ Net change in unrealized appreciation or depreciation on: Investments................................................................................................... (19,491,964) Translation of assets and liabilities denominated in foreign currencies....................................... (539,630) ------------ Net change.................................................................................................. (20,031,594) ------------ Net realized and unrealized loss................................................................................ (21,985,645) ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................................ $ 1,043,749 ============
See accompanying Notes to Financial Statements. 22 24 STATEMENT OF CHANGES IN NET ASSETS Oppenheimer Multi-Sector Income Trust
Year Ended October 31, 1998 1997 ------------ ------------ OPERATIONS Net investment income........................................................... $ 23,029,394 $ 26,006,984 Net realized gain (loss)........................................................ (1,954,051) 6,185,833 Net change in unrealized appreciation or depreciation........................... (20,031,594) (3,663,440) ------------ ------------ Net increase in net assets resulting from operations.......................... 1,043,749 28,529,377 ------------ ------------ DIVIDENDS TO SHAREHOLDERS Dividends from net investment income............................................ (22,561,595) (25,738,551) Tax return of capital .......................................................... (1,547,363) -- ------------ ------------ NET ASSETS Total increase (decrease)....................................................... (23,065,209) 2,790,826 Beginning of period............................................................. 308,972,146 306,181,320 ------------ ------------ End of period [including undistributed (overdistributed) net investment income of $169,342 and ($249,479), respectively].............................. $285,906,937 $308,972,146 ============ ============
See accompanying Notes to Financial Statements. 23 25 FINANCIAL HIGHLIGHTS Oppenheimer Multi-Sector Income Trust
Year Ended October 31, ------------------------------------------------------------------------- 1998 1997 1996 1995 1994 -------- ------- ------- ------- ------- PER SHARE OPERATING DATA Net asset value, beginning of period................. $10.61 $10.52 $10.14 $10.17 $10.96 ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income ............................. .79 .89 .91 .94 1.00 Net realized and unrealized gain (loss)............ (.75) .08 .37 (.04) (.82) ------ ------ ------ ------ ------ Total income from investment operations.......... .04 .97 1.28 .90 .18 ------ ------ ------ ------ ------ Dividends to shareholders: Dividends from net investment income............... (.78) (.88) (.90) (.91) (.84) Tax return of capital.............................. (.05) -- -- (.02) (.13) ------ ------ ------ ------ ------ Total dividends to shareholders.................. (.83) (.88) (.90) (.93) (.97) ------ ------ ------ ------ ------ Net asset value, end of period....................... $9.82 $10.61 $10.52 $10.14 $10.17 ====== ====== ====== ====== ====== Market value, end of period.......................... $9.38 $10.13 $ 9.88 $10.00 $ 9.50 ====== ====== ====== ====== ====== TOTAL RETURN, AT MARKET VALUE(1)..................... 0.17% 11.40% 7.85% 15.62% (7.46)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in thousands)............. $285,907 $308,972 $306,181 $295,128 $295,658 Average net assets (in thousands).................... $304,773 $308,712 $298,496 $288,884 $306,686 Ratios to average net assets: Net investment income.............................. 7.56% 8.42% 8.87% 9.51% 9.17% Expenses........................................... 1.01% 0.99% 1.04% 1.05% 1.02% Portfolio turnover rate(2)........................... 401.5% 258.9% 225.4% 240.1% 187.6%
(1) Assumes a hypothetical purchase at the current market price on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and a sale at the current market price on the last business day of the period. Total return does not reflect sales charges or brokerage commissions. (2) 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 and mortgage dollar-rolls) for the period ended October 31, 1998 were $1,174,378,376 and $1,196,177,680, respectively. Prior to the period ended October 31, 1996, purchases and sales of investment securities included mortgage dollar-rolls. See accompanying Notes to Financial Statements. 24 26 NOTES TO FINANCIAL STATEMENTS Oppenheimer Multi-Sector Income Trust 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer Multi-Sector Income Trust (the Trust) is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Trust's investment objective is to seek high current income consistent with preservation of capital. The Trust's investment advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of significant accounting policies consistently followed by the Trust. Investment Valuation -- Portfolio securities are valued at the close of the New York Stock Exchange on the last day of each week in which the New York Stock Exchange is open. 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 the approved portfolio pricing service are valued using dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is reliable and that the quotes reflect current market value, or are valued under consistently applied procedures established by the Board of Trustees to determine fair value in good faith. Short-term "money market type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Forward foreign currency exchange contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued based upon the last sale price on the principal exchange on which the option is traded or, in the absence of any transactions that day, the value is based upon the last sale price on the prior trading date if it is within the spread between the closing bid and asked prices. If the last sale price is outside the spread, the closing bid is used. Structured Notes -- The Trust invests in foreign currency-linked structured notes whereby the market value and redemption price are linked to foreign currency exchange rates. The structured notes may be leveraged, which increases the notes' volatility relative to the face of the security. Fluctuations in values of the securities are recorded as unrealized gains and losses in the accompanying financial statements. During the year ended October 31, 1998, the market value of these securities comprised an average of 7% of the Trust's net assets, and resulted in realized and unrealized losses of $5,521,850. Securities Purchased on a When-Issued Basis -- Delivery and payment for securities that have been purchased by the Trust on a forward commitment or when-issued basis can take place a month or more after the transaction date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Trust maintains, in a segregated account with its custodian, assets with a market value equal to the amount of its purchase commitments. The purchase of securities on a when-issued or forward commitment basis may increase the volatility of the Trust's net asset value to the extent the Trust makes such purchases while remaining substantially fully invested. As of October 31, 1998, the Trust had entered into outstanding when-issued or forward commitments of $2,775,250. 25 27 NOTES TO FINANCIAL STATEMENTS (Continued) Oppenheimer Multi-Sector Income Trust 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Securities Purchased on a When-Issued Basis (continued) In connection with its ability to purchase securities on a when-issued or forward commitment basis, the Trust may enter into mortgage dollar-rolls in which the Trust sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The Trust records each dollar-roll as a sale and a new purchase transaction. Security Credit Risk -- The Trust invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower-yielding, higher-rated fixed income securities. The Trust may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of October 31, 1998, securities with an aggregate market value of $236,227, representing 0.08% of the Trust's net assets, were in default. Foreign Currency Translation -- The accounting records of the Trust 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 Trust's Statement of Operations. Repurchase Agreements -- The Trust 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 Trust may be delayed or limited. Federal Taxes -- The Trust 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. As of October 31, 1998, the Trust had available for federal income tax purposes an unused capital loss carryover of approximately $9,493,000, which expires between 2003 to 2006. Trustees' Fees and Expenses -- The Trust has adopted a nonfunded retirement plan for the Trust's independent trustees. Benefits are based on years of service and fees paid to each trustee during the years of service. During the year ended October 31, 1998, a provision of $33,369 was made for the Trust's projected benefit obligations and payments of $7,543 were made to retired trustees, resulting in an accumulated liability of $168,599 as of October 31, 1998. The Board of Trustees has adopted a deferred compensation plan for independent Trustees that enables a Trustee to elect to defer receipt of all or a portion of annual fees they are entitled to receive from the Trust. Under the plan, the compensation deferred by a Trustee is periodi- 26 28 NOTES TO FINANCIAL STATEMENTS (Continued) Oppenheimer Multi-Sector Income Trust cally adjusted as though an equivalent amount had been invested in shares of one or more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under the plan will be determined based upon the performance of the selected funds. Deferral of Trustees' fees under the plan will not materially affect the Trust's assets, liabilities or net income per share. Distributions to Shareholders -- The Trust intends to declare and pay dividends from net investment income monthly. Distributions from net realized gains on investments, if any, will be made at least once each year. 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 paydown gains and losses and 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 Trust. The Trust 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 October 31, 1998, amounts have been reclassified to reflect a decrease in additional paid-in capital of $1,547,363, a decrease in overdistributed net investment income of $1,498,385, and a decrease in accumulated net realized loss on investments of $48,978. 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 Trust has authorized an unlimited number of $.01 par value shares of beneficial interest. There were no transactions in shares of beneficial interest for the years ended October 31, 1998 and 1997. 3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS As of October 31, 1998, net unrealized depreciation on investments of $16,115,579 was composed of gross appreciation of $4,250,501, and gross depreciation of $20,366,080. 27 29 NOTES TO FINANCIAL STATEMENTS (Continued) Oppenheimer Multi-Sector Income Trust 4. MANAGEMENT AND ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH AFFILIATES Management fees paid to the Manager were in accordance with the investment advisory agreement with the Trust which provides for an annual fee of 0.65% on the Trust's average annual net assets. Mitchell Hutchins Asset Management Inc. serves as the Trust's Administrator. The Trust pays the Administrator an annual fee of 0.20% of the Trust's average annual net assets. The Manager acts as the accounting agent for the Trust at an annual fee of $24,000, plus out-of-pocket costs and expenses reasonably incurred. Shareholder Financial Services, Inc. (SFSI), a wholly-owned subsidiary of the Manager, is the transfer agent and registrar for the Trust. Fees paid to SFSI are based on the number of accounts and the number of shareholder transactions, plus out-of-pocket costs and expenses. 5. FORWARD CONTRACTS A forward foreign currency exchange contract (forward contract) is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Trust uses forward contracts to seek to manage foreign currency risks. They may also be used to tactically shift portfolio currency risk. The Trust generally enters into forward contracts as a hedge upon the purchase or sale of a security denominated in a foreign currency. In addition, the Trust may enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio positions. Forward contracts are valued based on the closing prices of the forward currency contract rates in the London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. The Trust will realize a gain or loss upon the closing or settlement of the forward transaction. Securities held in segregated accounts to cover net exposure on outstanding forward contracts are noted in the Statement of Investments where applicable. Unrealized appreciation or depreciation on forward contracts is reported in the Statement of Assets and Liabilities. Realized gains and losses are reported with all other foreign currency gains and losses in the Trust's Statement of Operations. Risks include the potential inability of the counterparty to meet the terms of the contract and unanticipated movements in the value of a foreign currency relative to the U.S. dollar. As of October 31, 1998, the Trust had outstanding forward contracts as follows:
Valuation Contract As of Expiration Amount October 31, Unrealized Contract Description Date (000s) 1998 Depreciation -------------------------------------------------------------------------------------------------------------------------------- Contracts to Sell ----------------- Canadian Dollar............................................. 12/16/98 760 CAD $492,742 $ 3,461 Japanese Yen................................................ 12/16/98 47,750 JPY 412,485 44,866 New Zealand Dollar.......................................... 12/16/98 1,670 NZD 885,457 63,149 Norwegian Krone............................................. 12/16/98 2,970 NOK 405,105 7,755 Swedish Krona............................................... 12/16/98 3,370 SEK 432,130 10,790 -------- $130,021 ========
28 30 NOTES TO FINANCIAL STATEMENTS (Continued) Oppenheimer Multi-Sector Income Trust 6. FUTURES CONTRACTS The Trust may buy and sell interest rate futures contracts in order to gain exposure to or protect against changes in interest rates. The Trust may also buy or write put or call options on these futures contracts. The Trust generally sells futures contracts to hedge against increases in interest rates and the resulting negative effect on the value of fixed rate portfolio securities. The Trust may also purchase futures contracts to gain exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed income securities. Upon entering into a futures contract, the Trust is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Trust each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Trust recognizes a realized gain or loss when the contract is closed or expires. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of October 31, 1998, the Trust had outstanding futures contracts as follows:
Valuation As of Expiration Number of October 31, Unrealized Contract Description Date Contracts 1998 Depreciation -------------------------------------------------------------------------------------------------------------------------------- Contracts to Purchase --------------------- U.S. Treasury Bonds, 20 yr. ...................................... 12/98 101 $13,019,531 $44,469 =======
7. OPTION ACTIVITY The Trust may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Trust generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Trust receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Trust will realize a gain or loss upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to 29 31 NOTES TO FINANCIAL STATEMENTS (Continued) Oppenheimer Multi-Sector Income Trust 7. OPTION ACTIVITY (CONTINUED) call, expiration date, exercise price, premium received and market value are detailed in a footnote to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Trust gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Trust may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Trust pays a premium whether or not the option is exercised. The Trust also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended October 31, 1998 was as follows:
Call Options ------------------------------------------------------ Number of Options Amount of Premiums ------------------ ------------------ Options outstanding as of October 31, 1997.......................... 720 $ 82,320 Options written .................................................... 2,285 225,866 Options closed or expired........................................... (1,995) (279,136) Options exercised................................................... (1,010) (29,050) ------ --------- Options outstanding as of October 31, 1998 ......................... -- $ -- ====== ========= Put Options ----------------------------------------------------- Number of Options Amount of Premiums ----------------- ------------------ Options outstanding as of October 31, 1997 ......................... 705 $ 63,450 Options written .................................................... 22,352,800 559,073 Options closed or expired........................................... (1,143,505) (620,867) Options exercised................................................... (21,210,000) (1,656) ----------- --------- Options outstanding as of October 31, 1998 ......................... -- $ -- =========== =========
30 32 NOTES TO FINANCIAL STATEMENTS (Continued) Oppenheimer Multi-Sector Income Trust 8. ILLIQUID AND RESTRICTED SECURITIES As of October 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 Trust 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 as of October 31, 1998 was $17,825,807, which represents 6.23% of the Trust's net assets, of which $828,850 is considered restricted. Information concerning restricted securities is as follows:
Valuation Per Acquisition Cost Unit as of Security Date Per Unit October 31, 1998 -------------------------------------------------------------------------------------------------------------------------------- Bonds ----- Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A, 11/15/00........... 11/18/93 87.50% 6.50% Stocks and Warrants ------------------- Becker Gaming, Inc. Wts., Exp. 11/00............................................ 11/18/93 $ 2.00 $ .25 CGA Group Ltd., Preferred, Series A............................................. 6/17/97 25.00 25.00 CGA Group Ltd. Wts. Exp. 12/49.................................................. 6/17/97 -- .30
31 33 INDEPENDENT AUDITORS' REPORT Oppenheimer Multi-Sector Income Trust The Board of Trustees and Shareholders of Oppenheimer Multi-Sector Income Trust: We have audited the accompanying statements of investments and assets and liabilities of Oppenheimer Multi-Sector Income Trust as of October 31, 1998 and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Trust'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 as of October 31, 1998 by correspondence with the custodian and brokers; and where confirmations 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, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer Multi-Sector Income Trust as of October 31, 1998 the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Denver, Colorado November 20, 1998 32 34 FEDERAL INCOME TAX INFORMATION (Unaudited) Oppenheimer Multi-Sector Income Trust In early 1999 shareholders will receive information regarding all dividends and distributions paid to them by the Trust during calendar year 1998. Regulations of the U.S. Treasury Department require the Trust to report this information to the Internal Revenue Service. Dividends paid by the Trust during the fiscal year ended October 31, 1998 which are not designated as capital gain distributions should be multiplied by 2.14% 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 Trust 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. 33 35 OPPENHEIMER MULTI-SECTOR INCOME TRUST GENERAL INFORMATION CONCERNING THE TRUST Oppenheimer Multi-Sector Income Trust (the Trust) is a closed-end diversified management investment company with a primary investment objective of seeking high current income consistent with preservation of capital. The Trust's secondary investment objective is capital appreciation. In seeking its objectives, the Trust may invest any percentage of its assets in at least three of the following seven fixed-income sectors: U.S. Government, Corporate, International, Asset-Backed, Municipal, Convertible and Money Market. Current income, preservation of capital and, secondarily, possible capital appreciation may be considerations in the allocation of assets among such sectors. The Trust can invest in a number of different kinds of "derivative investments" and can also engage in certain special investment techniques, including repurchase transactions, when-issued and delayed delivery transactions and hedging. The Trust is not required to invest in any of these types of securities at all times. The investment advisor to the Trust is OppenheimerFunds, Inc. (the Manager). The Portfolio Managers of the Trust are Robert E. Patterson, Thomas P. Reedy, Ashwin K. Vasan, Carol E. Wolf and Arthur J. Zimmer and who also serve as Vice Presidents of the Trust and of the Manager, and are officers of certain mutual funds managed by the Manager (Oppenheimer funds). Messrs. Reedy and Vasan have been the persons principally responsible for the day-to-day management of the Trust's portfolio since June 1993. Prior to that Mr. Reedy served as a securities analyst for the Manager and Mr. Vasan served as a securities analyst for Citibank, N.A. Year 2000 Risks -- Because many computer software systems in use today cannot distinguish the year 2000 from the year 1900, the markets for securities in which the Trust invests could be detrimentally affected by computer failures beginning January 1, 2000. Failure of computer systems used for securities trading could result in settlement and liquidity problems for the Trust and other investors. That failure could have a negative impact on handling securities trades, pricing and accounting services. Data processing errors by government issuers of securities could result in economic uncertainties, and those issuers may incur substantial costs in attempting to prevent or fix such errors, all of which could have a negative effect on the Trust's investments and returns. The Manager and the Transfer Agent have been working on necessary changes to their computer systems to deal with the year 2000 and expect that their systems will be adapted in time for that event, although there cannot be assurance of success. Additionally, the services they provide depend on the interaction of their computer systems with those of brokers, information services, the Trust's Custodian and other parties. Therefore, any failure of the computer systems of those parties to deal with the year 2000 may also have a negative effect on the services they provide to the Trust. The extent of that risk cannot be ascertained at this time. 34 36 OPPENHEIMER MULTI-SECTOR INCOME TRUST General Information Concerning the Trust (Continued) Dividend Reinvestment and Cash Purchase Plan -- Pursuant to the Trust's Dividend Reinvestment and Cash Purchase Plan (the Plan), as to shares of the Trust (Shares) not registered in nominee name, all dividends and capital gains distributions (Distributions) declared by the Trust will be automatically reinvested in additional full and fractional Shares unless a shareholder elects to receive cash. If Shares are registered in nominee name, the shareholder should consult the nominee if the shareholder desires to participate in the Plan. Shareholders that participate in the Plan (Participants) may, at their option, make additional cash investments in Shares, semi-annually in amounts of at least $100, through payment to Shareholder Financial Services, Inc., the agent for the Plan (the Agent), accompanied by a service fee of $0.75. Depending upon the circumstances hereinafter described, Plan Shares will be acquired by the Agent for the Participant's account through receipt of newly issued Shares or the purchase of outstanding Shares on the open market. If the market price of Shares on the relevant date (normally the payment date) equals or exceeds their net asset value, the Agent will ask the Trust for payment of the Distribution in additional Shares at the greater of the Trust's net asset value determined as of the date of purchase or 95% of the then-current market price. If the market price is lower than net asset value, the Distribution will be paid in cash, which the Agent will use to buy Shares on The New York Stock Exchange (the NYSE), or otherwise on the open market to the extent available. If the market price exceeds the net asset value before the Agent has completed its purchases, the average purchase price per Share paid by the Agent may exceed the net asset value, resulting in fewer Shares being acquired than if the Distribution had been paid in Shares issued by the Trust. Participants may elect to withdraw from the Plan at any time and thereby receive cash in lieu of Shares by sending appropriate written instructions to the Agent. Elections received by the Agent will be effective only if received more than ten days prior to the record date for any Distribution; otherwise, such termination will be effective shortly after the investment of such Distribution with respect to any subsequent Distribution. Upon withdrawal from or termination of the Plan, all Shares acquired under the Plan will remain in the Participant's account unless otherwise requested. For full Shares, the Participant may either: (1) receive without charge a share certificate for such Shares; or (2) request the Agent (after receipt by the Agent of signature guaranteed instructions by all registered owners) to sell the Shares acquired under the Plan and remit the proceeds less any brokerage commissions and a $2.50 service fee. Fractional Shares may either remain in the Participant's account or be reduced to cash by the Agent at the current market price with the proceeds remitted to the Participant. Shareholders who have previously withdrawn from the Plan may rejoin at any time by sending written instructions signed by all registered owners to the Agent. There is no direct charge for participation in the Plan; all fees of the Agent are paid by the Trust. There are no brokerage charges for Shares issued directly by the Trust. However, each Participant will pay a pro rata share of brokerage commissions incurred with respect to open market purchases of Shares to be issued under the Plan. Participants will receive tax information annually for their personal records and to assist in federal income tax return preparation. The automatic reinvestment of Distributions does not relieve Participants of any income tax that may be payable on Distributions. 35 37 OPPENHEIMER MULTI-SECTOR INCOME TRUST General Information Concerning the Trust (Continued) The Plan may be terminated or amended at any time upon 30 days' prior written notice to Participants which, with respect to a Plan termination, must precede the record date of any Distribution by the Trust. Additional information concerning the Plan may be obtained by shareholders holding Shares registered directly in their names by writing the Agent, Shareholder Financial Services, Inc., P.O. Box 173673, Denver, CO 80217-3673 or by calling 1-800-647-7374. Shareholders holding Shares in nominee name should contact their brokerage firm or other nominee for more information. Shareholder Information -- The Shares are traded on the NYSE. Daily market prices for the Trust's shares are published in the New York Stock Exchange Composite Transaction section of newspapers under the designation "OppenMlti." The Trust's NYSE trading symbol is OMS. Weekly net asset value (NAV) and market price information about the Trust is published each Monday in The Wall Street Journal and each Sunday in The New York Times and each Saturday in Barron's, and other newspapers in a table called "Closed-End Bond Funds. 36 38 (This page has been intentionally left blank.) 39 (This page has been intentionally left blank.) 40 OPPENHEIMER MULTI-SECTOR INCOME TRUST Officers and Trustees Leon Levy, Chairman of the Board of Trustees Donald W. Spiro, Vice Chairman of the Board of Trustees Bridget A. Macaskill, Trustee and President Robert G. Galli, Trustee Benjamin Lipstein, Trustee Elizabeth B. Moynihan, Trustee Kenneth A. Randall, Trustee Edward V. Regan, Trustee Russell S. Reynolds, Jr., Trustee Pauline Trigere, Trustee Clayton K. Yeutter, Trustee Robert E. Patterson, Vice President Thomas P. Reedy, Vice President Ashwin K. Vasan, Vice President Carol E. Wolf, Vice President Arthur J. Zimmer, Vice President George C. Bowen, Treasurer Robert J. Bishop, Assistant Treasurer Scott T. Farrar, Assistant Treasurer Andrew J. Donohue, Secretary Robert G. Zack, Assistant Secretary Investment Advisor OppenheimerFunds, Inc. Administrator Mitchell Hutchins Asset Management Inc. Transfer Agent and Registrar Shareholder Financial Services, Inc. Custodian of Portfolio Securities The Bank of New York Independent Auditors KPMG Peat Marwick LLP Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein This is a copy of a report to shareholders of Oppenheimer Multi-Sector Income Trust. It does not offer for sale or solicit orders to buy any securities. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that periodically the Trust may purchase its shares of beneficial interest in the open market at prevailing market prices. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. RA0680.001.1098 @ Printed on recycled paper -----END PRIVACY-ENHANCED MESSAGE-----