As Filed with the Securities and Exchange
Commission on February 29, 1996.
Registration No. 811-5473
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 9 X
OPPENHEIMER MULTI-SECTOR INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center
Suite 3400
New York, New York 10048-0203
(Address of Principal Executive Offices)
212-323-0200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
(Name and Address of Agent for Service)
<PAGE>
FORM N-2
OPPENHEIMER MULTI-SECTOR INCOME TRUST
Cross Reference Sheet
Part A of
Form N-2
Item No. Prospectus Heading
- -------- ------------------
1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 General Description of the Registrant
9 Management
10 Capital Stock, Long-Term Debt, and Other Securities
11 *
12 *
13 See Item 15 of the Statement of Additional Information
Part B of
Form N-2
Item No. Heading In Statement of Additional Information
- -------- ----------------------------------------------
14 Cover Page
15 Table of Contents
16 *
17 See Item 8 of the Prospectus
18 Management
19 Control Persons and Principal Holders of Securities
20 See Item 9 of the Prospectus
21 Brokerage Allocation and Other Practices
22 See Item 10 of the Prospectus
23 Financial Statements
- ----------------
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER MULTI-SECTOR INCOME TRUST
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover.
Inapplicable.
Item 2. Inside Front and Outside Back Cover Page.
Inapplicable.
Item 3. Fee Table and Synopsis
Inapplicable.
Item 4. Financial Highlights.
Inapplicable.
Item 5. Plan of Distribution.
Inapplicable.
Item 6. Selling Shareholders.
Inapplicable.
Item 7. Use of Proceeds.
Inapplicable.
Item 8. General Information and History.
1. Oppenheimer Multi-Sector Income Trust (the "Fund" or
"Registrant") is a closed-end diversified management investment company
organized as a Massachusetts business trust on February 22, 1988.
2, 3, and 4. The Fund's primary investment objective is high
current income consistent with preservation of capital. Its secondary
objective is capital appreciation. In seeking those objectives, the
Fund will allocate its assets among seven sectors of the fixed-income
securities market to take advantage of opportunities anticipated by
OppenheimerFunds, Inc., the Fund's investment adviser (the "Adviser"),
to arise in particular sectors in various economic environments. The
Adviser's opinion as to such opportunities will be based on various
factors which may affect the levels of income which can be obtained
from the different sectors, such as (i) the effect of interest rate
changes, on a relative and absolute basis, on yields of securities in
the particular sectors, (ii) the effect of changes in tax laws and
other legislation affecting securities in the various sectors, (iii)
changes in the relative values of foreign currencies, and (iv)
perceived strengths of the abilities of issuers in the various sectors
to repay their obligations. The sectors in which the Fund invests are
not divided by industry but instead differ by type of security and
issuer and includes U.S. Government, Corporate, International, Asset-
Backed (including Mortgage-Backed), Municipal, Convertible and Money
Market sectors. The Adviser believes that investing the Fund's assets
in a portfolio comprised of three or more sectors, as opposed to
limiting investments to only one such sector, will enhance the Fund's
ability to achieve high current income consistent with preservation of
capital or seek capital appreciation. The range of yields of the
securities in each sector will differ from securities in the others
both on an absolute and a relative basis. It is not the intention of
the Fund to always allocate its assets to the sector with the highest
range of yields as this may not be consistent with preservation of
capital. The Adviser will, however, monitor changes in relative yields
of securities in the various sectors to formulate its decisions on
which sectors present attractive investment opportunities at a
particular time.
Historically, the markets for the sectors identified below on
pages 5 and 6 have tended to behave somewhat independently and have at
times moved in opposite directions. For example, U.S. Government
Securities (defined below) have generally been affected negatively by
concerns about inflation that might result from increased economic
activity. Corporate debt securities and convertible securities, on the
other hand, have generally benefited from increased economic activity
due to the resulting improvement in the credit quality of corporate
issuers which, in turn, has tended to cause a rise in the prices of
common stock underlying convertible securities. The converse has
generally been true during periods of economic decline. Similarly,
U.S. Government Securities may be negatively affected by a decline in
the value of the dollar against foreign currencies, while the non-
dollar denominated securities of foreign issuers held by U.S. investors
have generally benefited from such decline. Investments in short-term
money market securities tend to decline less in value than long-term
debt securities in periods of rising interest rates but do not rise as
much in periods of declining rates. At times the difference between
yields on municipal securities and taxable securities does not fully
reflect the tax advantage of municipal securities. At such times
investments in municipal securities tend to fare better in value than
taxable investments because the yield differential generally may be
expected to increase again to reflect the tax advantage.
The Adviser believes that when financial markets exhibit this lack
of correlation, an active allocation of investments among these seven
sectors may permit greater preservation of capital over the long term
than would be obtained by investing permanently in any one sector. To
the extent that active allocation of investments among market sectors
by the Adviser is successful in preserving or increasing capital, the
Fund's capacity to meet its primary objective of high current income
should be enhanced over the longer term. The Adviser also will utilize
certain other investment techniques, including options and futures,
intended to enhance income and reduce market risk.
The Fund may invest in securities in the Corporate Sector which
are in the lowest rating category of each of Standard & Poor's
Corporation ("Standard & Poor's") or Moody's Investors Service, Inc.
("Moody's"), or which are unrated. The description and characteristics
of the lowest rating category are discussed in the description of the
Corporate Sector. In all other sectors, the Fund will not invest in
securities rated lower than those considered investment grade, i.e.
"Baa" by Moody's or "BBB" by Standard & Poor's. See "Investment
Sectors in Which the Fund Invests" and Appendix B (Securities Ratings)
to the Prospectus. Unrated securities will be of comparable quality to
those that are rated, in the opinion of the Adviser. The seven sectors
of the fixed-income securities market in which the Fund may invest are:
- - The U.S. Government Sector, consisting of debt obligations of the
U.S. Government and its agencies and instrumentalities ("U.S.
Government Securities");
- - The Corporate Sector, consisting of non-convertible debt
obligations or preferred stock of U.S. corporate issuers and
participation interests in senior, fully-secured loans made
primarily to U.S. companies;
- - The International Sector, consisting of debt obligations (which
may be denominated in foreign currencies) of foreign governments
and their agencies and instrumentalities, certain supranational
entities and foreign and U.S. companies;
- - The Asset-Backed Sector, consisting of undivided fractional
interests in pools of consumer loans and participation interests
in pools of residential mortgage loans guaranteed by agencies or
instrumentalities of the U.S. Government;
- - The Municipal Sector, consisting of debt obligations of states,
territories or possessions of the United States and the District
of Columbia or their political subdivisions, agencies,
instrumentalities or authorities;
- - The Convertible Sector, consisting of debt obligations and
preferred stock of U.S. corporations which are convertible into
common stock; and
- - The Money Market Sector, consisting of U.S. dollar-denominated
debt obligations having a maturity of 397 days or less and issued
by the U.S. Government or its agencies, certain domestic banks or
corporations; or certain foreign governments, agencies or banks;
and repurchase agreements.
Current income, preservation of capital and, secondarily, possible
capital appreciation will be considerations in the allocation of assets
among the seven investment sectors described above. The Adviser
anticipates that at all times Fund assets will be spread among three or
more sectors. Securities in the first six sectors above have
maturities in excess of 397 days. All securities denominated in
foreign currencies will be considered as part of the International
Sector, regardless of maturity. The maximum assets that may be
allocated at any one time to specific sectors are: U.S. Government -
90%, Corporate and Money Market - 50%, all others - 25%. The Fund may
also invest in options and futures related to securities in each of the
sectors.
INVESTMENT SECTORS IN WHICH THE FUND INVESTS
The Fund's assets allocated to each of the sectors will be managed
in accordance with the investment policies described above.
The U.S. Government Sector
Assets in this sector will be invested in U.S. Government
Securities, which are obligations issued by or guaranteed by the United
States government or its agencies or instrumentalities. Certain of
these obligations, including U.S. Treasury notes and bonds, and Federal
Housing Administration debentures, are supported by the full faith and
credit of the United States. Certain other U.S. Government Securities,
issued or guaranteed by Federal agencies or government-sponsored
enterprises, are not supported by the full faith and credit of the
United States. These latter securities include obligations supported
by the right of the issuer to borrow from the U.S. Treasury, such as
obligations of Federal Home Loan Banks, and obligations supported by
the credit of the instrumentality, such as Federal National Mortgage
Association bonds. The Adviser will adjust the average maturity of the
investments held in this sector from time to time, depending on its
assessment of relative yields of securities of different maturities and
its expectations of future changes in interest rates. U.S. Government
Securities are considered among the most creditworthy of fixed-income
investments. Because of this, the yields available from U.S.
Government Securities are generally lower than the yields available
from corporate debt securities. Nevertheless, the values of U.S.
Government Securities (like those of fixed-income securities generally)
will change as interest rates fluctuate. See Appendix A hereto for a
description of obligations issued by certain U.S. Government agencies
or instrumentalities.
Zero Coupon Treasury Securities. The Fund may invest in "zero
coupon" Treasury securities which are (a) U.S. Treasury notes and bonds
which have been stripped of their unmatured interest coupons and
receipts or (b) certificates representing interests in such stripped
debt obligations and coupons. A zero coupon security pays no interest
to its holder during its life. Accordingly, such securities usually
trade at a deep discount from their face or par value and will be
subject to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities which
make current distribution of interest. Current Federal tax law
requires that a holder of a zero coupon security accrue a portion of
the discount at which the security was purchased as income each year
even though the holder receives no interest payment in cash on the
security during the year. The Fund will not invest more than 10% of
its assets at the time of purchase in zero coupon Treasury securities.
The Corporate Sector
Assets allocated to this sector will be invested in secured or
unsecured non-convertible preferred stock and corporate debt
obligations, such as bonds, debentures and notes. The Fund may also
acquire participation interests, as described below.
Ratings. Certain corporate fixed income securities in which the
Fund may invest may be unrated or in the lower rating categories of
recognized rating agencies, i.e., ratings of "Baa" or lower by Moody's
or "BBB" or lower by Standard & Poor's. Lower-rated securities will
involve greater volatility of price and risk of principal and income
(including the possibility of default or bankruptcy of the issuer of
such securities) than securities in the higher rating categories.
Although the Fund retains the right to invest in securities in the
lowest rating category (those rated "C" by Moody's or "C" and "D" by
Standard & Poor's), it will not invest more than 5% of its assets at
the time of purchase in such securities and will do so only if, in the
Adviser's opinion, the financial condition of the issuer or protection
afforded to the particular securities is stronger than otherwise
suggested by such ratings. No assurance can be given that the
Adviser's opinion as to these securities will be accurate. Therefore,
these securities should nevertheless be consider highly speculative.
Those rated "C" by Moody's generally lack characteristics of desirable
investment, are considered highly speculative and may be in default.
Securities rated "C" by Standard & Poor's are regarded as presenting
the highest degree of speculation with respect to the issuers capacity
to pay interest and repay principal in accordance with the terms of the
obligation. Those rated "D" are in default or are issued by companies
in bankruptcy. Such securities pay no current interest but may
present an appreciation opportunity if, in the opinion of the Adviser,
their current price does not reflect the reasonable possibility that
they may resume payment of interest or be exchanged as a part of a
corporate reorganization for securities that will pay interest.
Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan and
are acquired from banks or brokers that have made the loan or are
members of the lending syndicate. No more than 5% of the Fund's net
assets can be invested in participation interests of the same issuer.
The Manager has set certain creditworthiness standards for issuers of
loan participations, and monitors their creditworthiness. The value of
loan participation interests depends primarily upon the
creditworthiness of the borrower, and its ability to pay interest and
principal. Borrowers may have difficulty making payments. If the
borrower fails to make scheduled principal or interest payments, the
Fund could experience a decline in net asset value of its shares. Some
borrowers may have senior securities rated as low as "C" by Moody's or
"D" by Standard & Poor's, but may be deemed acceptable credit risks.
Participation interests are subject to the Fund's limitations on
investments in illiquid securities.
The International Sector
The assets allocated to this sector will be invested in debt
obligations (which may either be denominated in U.S. dollars or in non-
U.S. currencies), issued or guaranteed by foreign corporations, certain
supranational entities (described below), and foreign governments or
their agencies or instrumentalities, and in debt obligations issued by
U.S. corporations denominated in non-U.S. currencies. All such
securities are referred to as "foreign securities." At the time of
purchase, all foreign securities will be either securities rated "A" or
better by Moody's or Standard & Poor's or unrated securities which are
of comparable quality in the opinion of the Adviser. The Fund may
invest in any country where the Adviser believes there is a potential
to achieve the Fund's investment objectives.
The percentage of the Fund's assets that will be allocated to this
sector will vary on the relative yields of foreign and U.S. securities,
the economies of foreign countries, the condition of such countries'
financial markets, the interest rate climate of such countries and the
relationship of such countries' currencies to the U.S. dollar. These
factors are judged on the basis of fundamental economic criteria (e.g.,
relative inflation levels and trends, growth rate forecasts, balance of
payments status, and economic policies) as well as technical and
political data. The Fund's portfolio of foreign securities may include
those of a number of foreign countries or, depending upon market
conditions, those of a single country.
The obligations of foreign governmental entities, including
supranational entities, have various kinds of government support, and
may or may not be supported by the full faith and credit of a foreign
government. Supranational entities include international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions
and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the European
Coal and Steel Community, the Asian Development Bank and the Inter-
American Development Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable to repay
its borrowings. Each supranational entity's lending activities are
limited to a percentage of its total capital (including "callable
capital" contributed by members at the entity's call), reserves and net
income. There can be no assurance that foreign governments will be
willing or able to honor their commitments.
Investing in foreign securities involves considerations and
possible risks not typically associated with investing in securities in
the U.S. The values of foreign securities investments will be affected
by changes in currency rates or exchange control regulations or
currency blockage, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic
or monetary policy (in the U.S. or abroad) or changed circumstances in
dealings between nations. Costs will be incurred in connection with
conversions between various currencies. Foreign brokerage commissions
are generally higher than commissions in the U.S. and foreign
securities markets may be less liquid, more volatile and less subject
to governmental supervision than in the U.S. Investments in foreign
countries could be affected by other factors not generally thought to
be present in the U.S., including expropriation or nationalization,
confiscatory taxation, lack of uniform accounting and auditing
standards, and potential difficulties in enforcing contractual
obligations, and could be subject to extended settlement periods.
There may be less information publicly available about foreign issuers
than about U.S. issuers.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution. In addition,
although a portion of the Fund's investment income may be received or
realized in foreign currencies, the Fund will be required to compute
and distribute its income in U.S. dollars, and absorb the cost of
currency fluctuations. The Fund may engage in foreign currency
exchange transactions for hedging purposes to protect against changes
in future exchange rates.
The values of foreign investments and the investment income
derived from them may also be affected unfavorably by changes in
currency exchange control regulations. Although the Fund will invest
only in securities denominated in foreign currencies that at the time
of investment do not have government-imposed restrictions on conversion
into U.S. dollars, there can be no assurance against subsequent
imposition of currency controls. In addition, the values of foreign
fixed-income investments will fluctuate in response to changes in U.S.
and foreign interest rates.
Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to
those identified above for investments in foreign securities.
Securities issued by emerging market countries and by companies located
in those countries may be subject to extended settlement periods,
whereby the Fund might not receive principal and/or income on a timely
basis and its net asset value could be affected. There may be a lack
of liquidity for emerging market securities; interest rates and foreign
currency exchange rates may be more volatile; sovereign limitations on
foreign investments may be more likely to be imposed; there may be
significant balance of payment deficits; and their economies and
markets may respond in a more volatile manner to economic changes than
those of developed countries.
The Asset-Backed Sector
Asset-Backed Securities. The Fund may invest in securities that
represent undivided fractional interests in pools of consumer loans,
similar in structure to the mortgage-backed securities in which the
Fund may invest described below. Payments of principal and interest
are passed through to holders of asset-backed securities and are
typically supported by some form of credit enhancement, such as a
letter of credit, surety bond, limited guarantee by another entity or
having a priority to certain of the borrower's other obligations. The
degree of credit enhancement varies and generally applies, until
exhausted, to only a fraction of the asset-backed security's par value.
If the credit enhancement of any asset-backed security held by the Fund
has been exhausted, and if any required payments of principal and
interest are not made with respect to the underlying loans, the Fund
may then experience losses or delays in receiving payment and a
decrease in the value of the asset-backed security.
The value of asset-backed securities is affected by changes in the
market's perception of the asset backing the security, the
creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing any
credit enhancement, and is also affected if any credit enhancement is
exhausted. The risks of investing in asset-backed securities are
ultimately dependent upon payment of the underlying consumer loans by
the individuals, and the Fund would generally have no recourse to the
entity that originated the loans in the event of default by a borrower.
The underlying loans are subject to prepayments that shorten the
weighted average life of asset-backed securities and may lower their
return in the same manner as described below for prepayments of a pool
of mortgage loans underlying mortgage-backed securities.
Mortgage-Backed Securities and CMOs. The Fund's investments may
include securities which represent participation interests in pools of
residential mortgage loans which are guaranteed by agencies or
instrumentalities of the U.S. Government. Such securities differ from
conventional debt securities which provide for periodic payment of
interest in fixed or determinable amounts (usually semi-annually) with
principal payments at maturity or specified call dates. Mortgage-
backed securities provide monthly payments which are, in effect, a
"pass-through" of the monthly interest and principal payments
(including any prepayments) made by the individual borrowers on the
pooled mortgage loans.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans, which is
computed on the basis of the maturities of the underlying instruments.
The actual life of any particular pool will be shortened by unscheduled
or early payments of principal and interest. The occurrence of
prepayments is affected by a wide range of economic, demographic and
social factors and, accordingly, it is not possible to predict
accurately the average life of a particular pool. The yield on such
pools is usually computed by using the historical record of prepayments
for that pool, or in the case of newly-issued mortgages, the prepayment
history of similar pools. The actual prepayment experience of a pool
of mortgage loans may cause the yield realized by the Fund to differ
from the yield calculated on the basis of the expected average life of
the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will
most likely decline. When prevailing interest rates rise, the value of
a pass-through security may decrease as do other debt securities, but,
when prevailing interest rates decline, the value of pass-through
securities is not likely to rise on a comparable basis with other debt
securities because of the pre-payment feature of pass-through
securities. The Fund's reinvestment of scheduled principal payments
and unscheduled prepayments it receives may occur at higher or lower
rates than the original investment, thus affecting the yield of the
Fund. Monthly interest payments received by the Fund have a
compounding effect which may increase the yield to shareholders more
than debt obligations that pay interest semi-annually. Because of
those factors, mortgage-backed securities may be less effective than
Treasury bonds of similar maturity at maintaining yields during periods
of declining interest rates. Accelerated prepayments adversely affect
yields for pass-through securities purchased at a premium (i.e., a
price in excess of principal amount) and may involve additional risk of
loss of principal because the premium may not have been fully amortized
at the time the obligation is repaid. The opposite is true for pass-
through securities purchased at a discount. The Fund may purchase
mortgage-backed securities at a premium or at a discount.
The Fund will acquire only those mortgage-backed securities which
are issued or guaranteed by U.S. Government agencies or
instrumentalities. Some of those securities are backed by the full
faith and credit of the U.S. Treasury (e.g., direct pass-through
certificates of the Government National Mortgage Association); some are
supported by the right of the issuer to borrow from the U.S. Government
(e.g., obligations of Federal Home Loan Banks); and some are backed by
only the credit of the issuer itself (e.g., obligations of the Federal
National Mortgage Association). Such guarantees do not extend to the
value or yield of the mortgage-backed securities themselves or to the
value of the Fund's Shares.
The Fund may invest in collateralized mortgage obligations
("CMOs") which generally are obligations fully collateralized by a
portfolio of mortgages or mortgage-related securities. Payment of the
interest and principal generated by the pool of mortgages is passed
through to the holders as the payments are received by the issuer of
the CMO. CMOs may be issued in a variety of classes or series
("tranches") that have different maturities. The principal value of
certain CMO tranches may be more volatile than other types of mortgage-
related securities, because of the possibility that the principal value
of the CMO may be prepaid earlier than the maturity of the CMO as a
result of prepayments of the underlying mortgage loans by the
borrowers.
The Fund may invest in "stripped" mortgage-backed securities or
CMOs or other securities issued by agencies or instrumentalities of the
U.S. Government. Stripped mortgage-backed securities usually have two
classes. The classes receive different proportions of the interest and
principal distributions on the pool of mortgage assets that act as
collateral for the security. In certain cases, one class will receive
all of the interest payments (and is known as an "I/O"), while the
other class will receive all of the principal value on maturity (and is
known as a "P/O").
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the
underlying mortgages. Principal prepayments increase that sensitivity.
Stripped securities that pay "interest only" are therefore subject to
greater price volatility when interest rates change, and they have the
additional risk that if the underlying mortgages are prepaid, the Fund
will lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates fall,
and in times of rapidly falling interest rates, the Fund might receive
back less than its investment.
The value of "principal only" 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.
Stripped securities are generally purchased and sold by
institutional investors through investment banking firms. At present,
established trading markets have not yet developed for these
securities. Therefore, some stripped securities may be deemed
"illiquid." If the Fund holds illiquid stripped securities, the amount
it can hold will be subject to the Fund's investment limitations set
forth under "Direct Placements and Other Illiquid Securities."
The Fund may also enter into "forward roll" transactions with
banks or other buyers that provide for future delivery of the mortgage-
backed securities in which the Fund may invest. The Fund would be
required to deposit cash, U.S. Government securities or other high-
grade debt securities to its custodian bank in an amount equal to its
purchase payment obligation under the roll.
GNMA Certificates. Certificates of the Government National
Mortgage Association ("GNMA Certificates") are mortgage-backed
securities which evidence an undivided interest in a pool or pools of
mortgages. The GNMA Certificates that the Fund may purchase are of the
"modified pass-through" type, which entitle the holder to receive
timely payment of all interest and principal payments due on the
mortgage pool, net of fees paid to the "issuer" and GNMA, regardless of
whether the mortgagor actually makes the payment.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee
is backed by the full faith and credit of the U.S. Government. GNMA is
also empowered to borrow without limitation from the U.S. Treasury if
necessary to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be
substantially shorter than the original maturity of the mortgages
underlying the securities. Prepayments of principal by mortgagors and
mortgage foreclosures will usually result in the return of the greater
part of principal investment long before the maturity of the mortgages
in the pool. Foreclosures impose no risk to principal investment
because of the GNMA guarantee, except to the extent that the Fund has
purchased the certificates at a premium in the secondary market.
FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues two types
of mortgage pass-through securities ("FHLMC Certificates"): mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a
pro rata share of all interest and principal payments made and owed on
the underlying pool. FHLMC guarantees timely monthly payment of
interest on PCs and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The expected
average life of these securities is approximately ten years. The FHLMC
guarantee is not backed by the full faith and credit of the United
States.
FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages
insured by the FHA. FNMA issues guaranteed mortgage pass-through
certificates ("FNMA Certificates"). FNMA Certificates resemble GNMA
Certificates in that each FNMA Certificate represents a pro rata share
of all interest and principal payments made and owed on the underlying
pool. FNMA guarantees timely payment of interest and principal on FNMA
Certificates. The FNMA guarantee is not backed by the full faith and
credit of the United States.
The Municipal Sector
The assets of this sector will be invested in obligations issued
by or on behalf of states, territories or possessions of the United
States and the District of Columbia or their political subdivisions,
agencies, instrumentalities or authorities ("Municipal Bonds"). At the
time of purchase, all securities in this sector will be rated within
the four highest grades assigned by Moody's or Standard & Poor's ("Baa"
or better by Moody's or "BBB" or better by Standard & Poor's), or
unrated securities which are of comparable quality in the opinion of
the Adviser. Any income earned on Municipal Bonds which the Fund
distributes to shareholders would be treated as taxable income to such
shareholders.
The Fund does not expect to invest in Municipal Bonds for tax-
exempt income to distribute to shareholders, but to take advantage of
yield differentials with other debt securities, which may be reflected
in bond prices, and thus reflect potential for capital appreciation.
Because Municipal Bonds are generally exempt from Federal taxation they
normally yield much less than taxable fixed-income securities. At
times, however, the yield differential narrows from its normal range.
This can occur, for example, when the demand for U.S. Government
securities substantially increases in times of economic stress, when
investors seeking safety are willing to pay more for such securities
thereby reducing the yield. It also can occur when investors perceive
a threat to the continuation of the tax-exempt status of Municipal
Bonds through possible Congressional or State action. When this
happens, investors are not willing to pay as much for Municipal Bonds,
thereby reducing prices and increasing their yield compared to taxable
obligations. If such situations occur, investments in the Municipal
Sector may be more attractive than other sectors even though such
investments continue to offer lower yields than taxable securities
because if the yield differential returns to normal ranges, the value
of Municipal Bonds relative to taxable fixed-income securities will
have increased, i.e. depreciated less or appreciated more. Such an
investment would help the Fund achieve its objective of capital
preservation or capital appreciation. It would also help achieve its
objective of high income because the Fund's net asset value per Share
would be higher than it otherwise would have been, thereby permitting
it to earn additional income on those assets.
Municipal Bonds include debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range
of public facilities such as airports, highways, bridges, schools,
hospitals, housing, mass transportation, streets, and water and sewer
works. Other public purposes for which Municipal Bonds may be issued
include the refunding of outstanding obligations, obtaining funds for
general operating expenses and obtaining funds to lend to other public
institutions and facilities.
The two principal classifications of Municipal Bonds are (1)
"general obligation" and (2) "revenue" (or "special tax") bonds.
General obligation bonds are secured by the issuer's pledge of its full
faith, credit and unlimited taxing power for the payment of principal
and interest. Revenue or special tax bonds are payable only from the
revenues derived from a particular facility or class of facilities or
project or, in a few cases, from the proceeds of a special excise or
other tax but are not supported by the issuer's power to levy general
taxes. There are variations in the security of Municipal Bonds, both
within a particular classification and between classifications,
depending on numerous factors. The yields of Municipal Bonds depend
on, among other things, general money market conditions, general
conditions of the Municipal Bond market, size of a particular offering,
the maturity of the obligation and rating of the issue, and are
generally lower than those of taxable investments.
The Convertible Sector
Assets allocated to this sector will be invested in securities
(bonds, debentures, corporate notes, preferred stocks and units with
warrants attached) which are convertible into common stock. Common
stock received upon conversion may be retained in the Fund's portfolio
to permit orderly disposition or to establish a holding period to avoid
possible adverse Federal income tax consequences to the Fund or
shareholders.
Convertible securities can provide a potential for current income
through interest and dividend payments and at the same time provide an
opportunity for capital appreciation by virtue of their convertibility
into common stock. The rating requirements to which the Fund is
subject when investing in corporate fixed income securities and foreign
securities (see above) also apply to the Fund's investments in
domestic and foreign convertible securities, respectively.
Convertible securities rank senior to common stock in a
corporation's capital structure and, therefore, may entail less risk
than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value without
considering its conversion privilege) and its "conversion value" (the
security's worth if it were to be exchanged pursuant to its conversion
privilege for the underlying security at the market value of the
underlying security).
To the extent that a convertible security's investment value is
greater than its conversion value, its price will be primarily a
reflection of such investment value and its price will be likely to
increase when interest rates fall and decrease when interest rates rise
as with other fixed-income securities (the credit standing of the
issuer and other factors may also have an effect on the convertible
security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its
investment value and, in addition, will sell at some premium over its
conversion value, which represents the price investors are willing to
pay for the privilege of purchasing a fixed-income security with a
possibility of capital appreciation due to the conversion privilege.
At such times the price of the convertible security will tend to
fluctuate directly with the price of the underlying equity security.
Convertible securities may be purchased by the Fund at varying price
levels above their investment values and/or their conversion values in
keeping with the Fund's objectives.
The Money Market Sector
Assets in this sector will be invested in the following U.S.
dollar-denominated debt obligations maturing in 397 days or less:
(1) U.S. Government Securities: Obligations issued or guaranteed by
the U.S. Government or its agencies or instrumentalities.
(2) Bank Obligations: Certificates of deposit, bankers' acceptances,
loan participation agreements, time deposits, and letters of
credit if they are payable in the United States or London,
England, and are issued or guaranteed by a domestic or foreign
bank having total assets in excess of $1 billion.
(3) Commercial Paper: Obligations rated "A-1," "A-2" or "A-3" by
Standard & Poor's or Prime-1, Prime-2 or Prime-3 by Moody's or if
not rated, issued by a corporation having an existing debt
security rated "A" or better by Standard & Poor's or "A" or better
by Moody's.
(4) Corporate Obligations: Corporate debt obligations (including
master demand notes but not including commercial paper) if they
are issued by domestic corporations and are rated "A" or better by
Standard & Poor's or "A" or better by Moody's or unrated
securities which are of comparable quality in the opinion of the
Adviser.
(5) Other Obligations: Obligations of the type listed in (1) through
(4) above, but not satisfying the standards set forth therein, if
they are (a) subject to repurchase agreements or (b) guaranteed as
to principal and interest by a domestic or foreign bank having
total assets in excess of $1 billion, by a corporation whose
commercial paper may be purchased by the Fund, or by a foreign
government having an existing debt security rated "AA" or "Aa" or
better.
(6) Board-Approved Instruments: Other short-term investments of a
type which the Board determines presents minimal credit risks and
which are of "high quality" as determined by any major rating
service or, in the case of an instrument that is not rated, of
comparable quality as determined by the Board.
Bank time deposits may be non-negotiable until expiration and may
impose penalties for early withdrawal. Master demand notes are
corporate obligations which permit the investment of fluctuating
amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the borrower. They
permit daily changes in the amounts borrowed. The Fund has the right
to increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount, and the
borrower may prepay up to the full amount of the note without penalty.
These notes may or may not be backed by bank letters of credit.
Because these notes are direct lending arrangements between the lender
and borrower, it is not generally contemplated that they will be
traded, and there is no secondary market for them, although they are
redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The Fund has no
limitation on the type of issuer from whom these notes will be
purchased; however, in connection with such purchase and on an ongoing
basis, subject to policies established by the Board of Trustees, the
Adviser will consider the earning power, cash flow and other liquidity
ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made
demand simultaneously. Investments in bank time deposits and master
demand notes are subject to the investment limitation on securities
that are not readily marketable set forth under "Special Investment
Techniques -- Direct Placements and Other Illiquid Securities."
Because the Fund may invest in U.S. dollar-denominated securities of
foreign banks and foreign branches of U.S. banks, the Fund may be
subject to additional investment risks which may include future
political and economic developments of the country in which the bank is
located, possible imposition of withholding taxes on interest income
payable on the securities, possible seizure or nationalization of
foreign deposits, the possible establishment of exchange control
regulations or the adoption of other governmental restrictions that
might affect the payment of principal and interest on such securities.
Additionally, not all of the U.S. Federal and state banking laws and
regulations applicable to domestic banks relating to maintenance of
reserves, loan limits and promotion of financial soundness apply to
foreign branches of domestic banks, and none of them apply to foreign
banks.
SPECIAL INVESTMENT TECHNIQUES
In conjunction with the investments in the seven sectors described
above, the Fund may use the following special investment techniques.
Direct Placements and Other Illiquid Securities
The Fund may invest up to 20% of its assets in securities
purchased in direct placements which are subject to statutory or
contractual restrictions and delays on resale (restricted securities).
Such securities may generally be resold only in privately-negotiated
transactions with a limited number of purchasers or in a public
offering registered under the Securities Act of 1933 and are,
therefore, unlike securities which are traded in the open market and
can be expected to be sold immediately if the market demand is
adequate. If restricted securities are substantially comparable to
registered securities of the same issuer which are readily marketable,
the Fund may not purchase them unless they are offered at a discount
from the market price of the registered securities. No restricted
securities will be purchased unless the issuer has agreed to register
the securities at its expense within a specific time period. Adverse
conditions in the public securities market at certain times may
preclude a public offering of an issuer's unregistered securities.
There may be undesirable delays in selling restricted securities at
prices representing fair value.
The Fund may invest up to an additional 10% of its assets in
securities which, although not restricted, are not readily marketable.
Such securities may include bank time deposits, master demand notes
described in the Money Market Sector and certain puts and calls which
are traded in the over-the-counter markets.
Repurchase Agreements
Any of the securities permissible for purchase for one of its
sectors may be acquired by the Fund subject to repurchase agreements
with commercial banks with total assets in excess of $1 billion or
securities dealers with a net worth in excess of $50 million. In a
repurchase transaction, at the time the Fund acquires a security, it
simultaneously resells it to the vendor and must deliver that security
to the vendor on a specific future date. The repurchase price exceeds
the purchase price by an amount that reflects an agreed-upon interest
rate effective for the period during which the repurchase agreement is
in effect. The majority of these transactions run from day to day, and
delivery pursuant to the resale typically will occur within one to five
days of the purchase. the Fund will not enter into a repurchase
transaction of more than seven days. Repurchase agreements are
considered "loans" under the Investment Company Act of 1940 (the "1940
Act"), collateralized by the underlying security. The Fund's
repurchase agreements will require that at all times while the
repurchase agreement is in effect, the collateral's value must equal or
exceed the repurchase price to collateralize the loan fully. The
Adviser will monitor the collateral daily and, in the event its value
declines below the repurchase price, will immediately demand additional
collateral be deposited. If such demand is not met within one day, the
existing collateral will be sold. Additionally, the Adviser will
consider the creditworthiness of the vendor. If the vendor fails to
pay the agreed-upon resale price on the delivery date, the Fund's risks
in such event may include any decline in value of the collateral to an
amount which is less than 100% of the repurchase price, any costs of
disposing of such collateral, and loss from any delay in foreclosing on
the collateral. There is no limit on the amount of the Fund's assets
that may be subject to repurchase agreements.
When-Issued and Delayed Delivery Transactions
The Fund may purchase asset-backed securities, municipal bonds and
other debt securities on a "when-issued" basis, and may purchase or
sell such securities on a "delayed delivery" basis. "When-issued" or
"delayed delivery" refers to securities whose terms and indenture are
available and for which a market exists, but which are not available
for immediate delivery. Although the Fund will enter into such
transactions for the purpose of acquiring securities for its portfolio
for delivery pursuant to option contracts it has entered into, the Fund
may dispose of a commitment prior to settlement. The Fund does not
intend to make such purchases for speculative purposes. When such
transactions are negotiated, the price (which is generally expressed in
yield terms) is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date. During the
period between commitment by the Fund and settlement (generally between
two months and 120 days), no payment is made for the securities
purchased, and no interest accrues to the Fund from the transaction.
Such securities are subject to market fluctuations; the value at
delivery may be less than the purchase price. The Fund will maintain a
segregated account with its custodian, consisting of cash, short-term
U.S. Government Securities or other high-grade debt obligations at
least equal to the value of purchase commitments until payment is made.
Such securities may bear interest at a lower rate than longer term
securities. The commitment to purchase a security for which payment
will be made on a future date may be deemed a separate security and
involve a risk of loss if the value of the security declines prior to
the settlement date, which risk is in addition to the risk of decline
of the Fund's other assets.
Hedging
The Fund may use Interest Rate Futures; Bond Index Futures
(together with Interest Rate Futures, "Futures"); Forward Contracts
(defined below); and call and put options on debt securities, Futures,
bond indices and foreign currencies (all of the foregoing are referred
to as "Hedging Instruments"). Hedging Instruments may be used to
attempt to protect against possible declines in the market value of the
Fund's portfolio from downward trends in debt securities markets
(generally due to a rise in interest rates), to protect the Fund's
unrealized gains in the value of its debt securities which have
appreciated, to facilitate selling debt securities for investment
reasons, to establish a position in the debt securities markets as a
temporary substitute for purchasing particular debt securities, or to
reduce the risk of adverse currency fluctuations. The Fund's strategy
of hedging with Futures and options on Futures will be incidental to
the Fund's activities in the underlying cash market. Covered calls and
puts may also be written on debt securities to attempt to increase the
Fund's income. A call or put may be purchased only if, after such
purchase, the value of all call and put options held by the Fund would
not exceed 5% of the Fund's total assets. The Fund will not use
Futures and options on Futures for speculation. The hedging
instruments the Fund may use are described below. As of the date of
this Registration Statement, the Fund does not intend to enter into
Futures, Forward Contracts and options on Futures if after any such
purchase, the sum of margin deposits on Futures and premiums paid on
Futures options would exceed 5% of the value of the Fund's total
assets.
Interest Rate Futures and Bond Index Futures. The Fund may buy
and sell Futures. An Interest Rate Future obligates the seller to
deliver and the purchaser to take a specific type of debt security at a
specific future date for a fixed price. That obligation may be
satisfied by actual delivery of the debt security or by entering into
an offsetting contract. A bond index assigns relative values to the
bonds included in that index and is used as a basis for trading long-
term Bond Index Futures contracts. Bond Index Futures reflect the
price movements of bonds included in the index. They differ from
Interest Rate Futures in that settlement is made in cash rather than by
delivery; or settlement may be made by entering into an offsetting
contract.
Calls on Securities and Futures. The Fund may write (i.e., sell)
or purchase call options ("calls") on debt securities that were traded
on U.S. and foreign securities and over-the-counter markets. All such
calls written by the Fund must be "covered" while the call is
outstanding (i.e., the Fund must own the securities subject to the
call). Calls on Futures must be covered by deliverable securities or
by liquid assets segregated to satisfy the Futures contract. If a call
written by the Fund is exercised, the Fund foregoes any possible profit
from an increase in the market price of the underlying security over
the exercise price.
Puts on Securities and Futures. The Fund may purchase put options
("puts") which relate to debt securities (whether or not it holds such
securities in its portfolio) or Futures. It may also write puts on
debt securities or Futures if such puts are covered by segregated
liquid assets. The Fund will not write puts if, as a result, more than
50% of the Fund's assets would be required to be segregated liquid
assets. In writing puts, there is the risk that the Fund may be
required to buy the underlying security at a disadvantageous price.
Foreign Currency Options. The Fund may purchase and write puts
and calls on foreign currencies that are traded on a securities or
commodities exchange or quoted by major recognized dealers in such
options, for the purpose of protecting against declines in the dollar
value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a rise is anticipated in the
dollar value of a foreign currency in which securities to be acquired
are denominated, the increased cost of such securities may be partially
offset by purchasing calls or writing puts on that foreign currency.
If a decline in the dollar value of a foreign currency is anticipated,
the decline in value of portfolio securities denominated in that
currency may be partially offset by writing calls or purchasing puts on
that foreign currency. However, in the event of currency rate
fluctuations adverse to the Fund's position, it would either lose the
premium it paid and incur transaction costs, or purchase or sell the
foreign currency at a disadvantageous price.
Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific foreign currency at a
specific future date for a fixed price. The Fund may enter into a
Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency, or to protect against a
possible loss resulting from an adverse change in the relationship
between the U.S. dollar and a foreign currency. There is a risk that
use of Forward Contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a
foreign currency. Forward contracts include standardized foreign
currency futures contracts which are traded on exchanges and are
subject to procedures and regulations applicable to other Futures. The
Fund may also enter into a Forward Contract to sell a foreign currency
denominated in a currency other than that in which the underlying
security is denominated. This is done in the expectation that there is
a greater correlation between the foreign currency of the Forward
Contract and the foreign currency of the underlying investment than
between the U.S. dollar and the currency of the underlying investment.
This technique is referred to as "cross hedging". The success of cross
hedging is dependent on many factors, including the ability of the
Adviser to correctly identify and monitor the correlation between
foreign currencies and the U.S. dollar. To the extent that the
correlation is not identical, the Fund may experience losses or gains
on both the underlying security and the cross currency hedge.
The Fund will not speculate in foreign currency exchange
contracts. There is no limitation as to the percentage of the Fund's
assets that may be committed to foreign currency exchange contracts.
The Fund does not enter into such Forward Contracts or maintain a net
exposure in such contracts to the extent that the Fund would be
obligated to deliver an amount of foreign currency in excess of the
value of the Fund's assets denominated in that currency or enter into a
cross hedge unless it is denominated in a currency or currencies that
the Adviser believes will have price movements that tend to correlate
closely with the currency in which the investment being hedged is
denominated.
There are certain risks in writing calls. If a call written by
the Fund is exercised, the Fund foregoes any profit from any increase
in the market price above the call price of the underlying investment
on which the call was written. In addition, the Fund could experience
capital losses that might cause previously distributed short-term
capital gains to be re-characterized as non-taxable return of capital
to shareholders. In writing puts, there is the risk that the Fund may
be required to buy the underlying security at a disadvantageous price.
The principal risks relating to the use of Futures are: (a) possible
imperfect correlation between the prices of the Futures and the market
value of the debt securities in the Fund's portfolio; (b) possible lack
of a liquid secondary market for closing out a Futures position; (c)
the need for additional skills and techniques beyond those required for
normal portfolio management; and (d) losses on Futures resulting from
interest rate movements not anticipated by the Adviser.
Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation to
pay interest on a security. For example, they may swap a right to
receive floating rate payments for fixed rate payments. The Fund
enters into swaps only on securities it owns. The Fund may not enter
into swaps with respect to more than 25% of its total assets. Also,
the Fund will segregate liquid assets (such as cash or U.S. Government
securities or other appropriate high grade debt obligations) to cover
any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
Derivative Investments. The Fund can invest in a number of
different kinds of "derivative investments." In general, a "derivative
investment" is a specially designed investment whose performance is
linked to the performance of another investment or security, such as an
option, future, index or currency. In the broadest sense, derivative
investments include exchange-traded options and futures contracts. The
risks of investing in derivative investments include not only the
ability of the company issuing the instrument to pay the amount due on
the maturity of the instrument, but also the risk that the underlying
investment or security might not perform the way the Manager expected
it to perform. The performance of derivative investments may also be
influenced by interest rate changes in the U.S. and abroad. All of
this can mean that the Fund will realize less principal and/or income
than expected. Certain derivative investments held by the Fund may
trade in the over-the-counter market and may be illiquid.
Examples of derivative investments the Fund may invest in include,
among others, "index-linked" notes. These are debt securities of
companies that call for payment on maturity of the note in different
terms than the typical note where the borrower agrees to pay a fixed
sum on the maturity of the note. The payment on maturity of an index-
linked note depends on the performance of one or more market indices,
such as the S&P 500 Index. Further examples of derivative investments
the Fund may invest in include "debt exchangeable for common stock" of
an issuer or "equity-linked debt securities" of an issuer. At
maturity, the principal amount of the debt security is exchanged for
common stock of the issuer or is payable in an amount based on the
issuer's common stock price at the time of maturity. In either case
there is a risk that the amount payable at maturity will be less than
the principal amount of the debt.
Other examples of derivative investments the Fund may invest in
are currency-indexed securities. These are typically short-term or
intermediate-term debt securities whose maturity values or interest
rates are determined by reference to one or more specified foreign
currencies. Certain currency-indexed securities purchased by the Fund
may have a payout factor tied to a multiple of the movement of the U.S.
dollar (or the foreign currency in which the security is denominated)
against the movement in the U.S. dollar, the foreign currency, another
currency, or an index. Such securities may be subject to increased
principal risk and increased volatility than comparable securities
without a payout factor in excess of one, but the Manager believes the
increased yield justifies the increased risk.
Participation Interests. The Fund may acquire interests in loans
that are made to U.S. companies, foreign companies and foreign
governments (the "borrower"). They may be interests in, or assignments
of, the loan and are acquired from banks or brokers that have made the
loan or have become members of the lending syndicate. The Fund will
not invest, at the time of investment, more than 5% of its net assets
in participation interests of the same borrower. The Adviser has set
certain creditworthiness standards for borrowers, and monitors their
creditworthiness. The value of loan participation interests depends
primarily upon the creditworthiness of the borrower, and its ability to
pay interest and principal. Borrowers may have difficulty making
payments. If a borrower fails to make scheduled interest or principal
payments, the Fund could experience a decline in the net asset value of
its shares. Some borrowers may have senior securities rated as low as
"C" by Moody's or "D" by Standard & Poor's, but may be deemed
acceptable credit risks. Participation interests are subject to the
Fund's limitations on investments in illiquid securities.
Loans of Portfolio Securities
To attempt to increase its income, the Fund may lend its portfolio
securities if, after any loan, the value of the securities loaned does
not exceed 25% of the total value of its assets. Under applicable
regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value
of the loaned securities and must consist of cash, bank letters of
credit or U.S. Government Securities. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the
Fund if the demand meets the terms of the letter. Such terms and the
issuing bank must be satisfactory to the Fund. The Fund receives an
amount equal to the dividends or interest on loaned securities and also
receives one or more of (a) negotiated loan fees, (b) interest on
securities used as collateral, or (c) interest on short-term debt
securities purchased with such loan collateral; either type of interest
may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees. The terms of the Fund's
loans must meet certain tests under the Internal Revenue Code of 1986,
as amended (the "Internal Revenue Code" or the "Code"), and permit the
Fund to reacquire loaned securities on five days' notice or in time to
vote on any important matter. The Fund will make such loans only to
banks and securities dealers with whom it may enter into repurchase
transactions. If the borrower fails to return this loaned security the
Fund's risks include: (1) any costs in disposing of the collateral; (2)
loss from a decline in value of the collateral to an amount less than
100% of the securities loaned; (3) being unable to exercise its voting
or consent rights with respect to the security; and (4) any loss
arising from the Fund being unable to timely settle a sale of such
securities.
Borrowing
From time to time, the Fund may increase its ownership of
securities by borrowing up to 10% of the value of its net assets from
banks and investing the borrowed funds (on which the Fund will pay
interest), subject to compliance with the 300% asset coverage
requirement of the 1940 Act. Subject to those limits (which are
fundamental policies), the Fund may also borrow to finance repurchases
and/or tenders of its Shares and may also borrow for temporary purposes
in an amount not exceeding 5% of the value of the Fund's total assets.
Any investment gains made with the proceeds obtained from borrowings in
excess of interest paid on the borrowings will cause the net income per
share or the net asset value per share of the Fund's Shares to be
greater than would otherwise be the case. On the other hand, if the
investment performance of the securities purchased fails to cover their
cost (including any interest paid on the money borrowed) to the Fund,
then the net income per share or net asset value per share of the
Fund's Shares will be less than would otherwise have been the case.
This speculative factor is known as "leverage." Although such
borrowings would therefore involve additional risk to the Fund, the
Fund will only borrow if such additional risk of loss of principal is
considered by the Adviser to be appropriate in relation to the Fund's
primary investment objective of high current income consistent with
preservation of capital. The Adviser will make this determination by
examining both the market for securities in which the Fund invests and
interest rates in general to ascertain that the climate is sufficiently
stable to warrant borrowing.
Portfolio Turnover
Because the Fund will actively use trading to benefit from short-
term yield disparities among different issues of fixed-income
securities or otherwise to achieve its investment objective and
policies, the Fund may be subject to a greater degree of portfolio
turnover than might be expected from investment companies which invest
substantially all of their assets on a long-term basis. The Fund
cannot accurately predict its portfolio turnover rate, but it is
anticipated that its annual turnover rate generally will not exceed
400% (excluding turnover of securities having a maturity of one year or
less). The Adviser will monitor the Fund's tax status under the
Internal Revenue Code during periods in which the Fund's annual
turnover rate exceeds 100%. Higher portfolio turnover results in
increased Fund expenses, including brokerage commissions, dealer mark-
ups and other transaction costs on the sale of securities and on the
reinvestment in other securities. To the extent that increased
portfolio turnover results in sales of securities held less than three
months, the Fund's ability to qualify as a "regulated investment
company" under the Internal Revenue Code may be affected.
Defensive Strategies
There may be times when, in the Adviser's judgment, conditions in
the securities markets would make pursuing the Fund's primary
investment strategy inconsistent with the best interests of its
shareholders. At such times, the Fund may employ alternative
strategies primarily seeking to reduce fluctuations in the value of the
Fund's assets. In implementing these defensive strategies, the Fund
may invest all or any portion of its assets in nonconvertible high-
grade debt securities, or U.S. government and agency obligations. The
Fund may also hold a portion of its assets in cash or cash equivalents.
It is impossible to predict when, or for how long, alternative
strategies will be utilized.
Effects of Interest Rate Changes
During periods of falling interest rates, the values of
outstanding long term fixed-income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. The magnitude of these fluctuations will
generally be greater for securities with longer maturities. If the
Adviser's expectation of changes in interest rates or its evaluation of
the normal yield relationships in the fixed-income markets proves to be
incorrect, the Fund's income, net asset value and potential capital
gain may be decreased or its potential capital loss may be increased.
Although changes in the value of the Fund's portfolio securities
subsequent to their acquisition are reflected in the net asset value of
the Fund's Shares, such changes will not affect the income received by
the Fund from such securities. The dividends paid by the Fund will
increase or decrease in relation to the income received by the Fund
from its investments, which will in any case be reduced by the Fund's
expenses before being distributed to the Fund's shareholders.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions, which
together with its investment objectives, are fundamental policies
changeable only with the approval of the holders of a "majority" of the
Fund's outstanding voting securities, defined in the 1940 Act as the
affirmative vote of the lesser of (a) more than 50% of the outstanding
Shares of the Fund, or (b) 67% or more of the Shares present or
represented by proxy at a meeting if more than 50% of the Fund's
outstanding Shares are represented at the meeting in person or by
proxy. The percentage limitations set forth below, as well as those
described elsewhere, apply only at the time of investment and require
no action by the Fund as a result of subsequent changes in the value or
size of the Fund. Under these restrictions, the Fund will not:
1. As to 75% of its total assets, invest in securities of any one
issuer (other than the United States Government, its agencies or
instrumentalities) if after any such investment either (a) more
than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would then own more
than 10% of the voting securities of that issuer;
2. Concentrate investments to the extent of more than 25% of its
total assets in securities of issuers in the same industry;
provided that this limitation shall not apply with respect to
investments in U.S. Government Securities.
3. Make loans except through (a) the purchase of debt securities in
accordance with its investment objectives and policies; (b) the
lending of portfolio securities as described above; or (c) the
acquisition of securities subject to repurchase agreements;
4. Borrow money, except in conformity with the restrictions stated
above under "Borrowing."
5. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings or for the escrow
arrangements contemplated in connection with the use of Hedging
Instruments;
6. Participate on a joint or joint and several basis in any
securities trading account;
7. Invest in companies for the purpose of exercising control or
management thereof;
8. Make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an
equal amount of such securities or by virtue of ownership of other
securities has the right, without payment of any further
consideration, to obtain an equal amount of the securities sold
short ("short sales against the box"); short sales may be made to
defer realization of gain or loss for Federal income tax purposes;
9. Invest in (a) real estate, except that it may purchase and sell
securities of companies which deal in real estate or interests
therein; (b) commodities or commodity contracts (except that the
Fund may purchase and sell Hedging Instruments whether or not they
are considered to be a commodity or commodity contract); or (c)
interests in oil, gas or other mineral exploration or development
programs;
10. Act as an underwriter of securities, except insofar as the Fund
might be deemed to be an underwriter for purposes of the
Securities Act of 1933 in the resale of any securities held for
its own portfolio; or
11. Purchase securities on margin, except that the Fund may make
margin deposits in connection with any of the Hedging Instruments
it may use.
5. The shares of beneficial interest of the Fund, $.01 par value
per share (the "Shares"), are listed and traded on The New York Stock
Exchange (the "NYSE"). The following table sets forth for the Shares
for the periods indicated: (a) the per Share high sales price on the
NYSE, the net asset value per Share as of the last day of the week
immediately preceding such day and the premium or discount (expressed
as a percentage of net asset value) represented by the difference
between such high sales price and the corresponding net asset value and
(b) the per Share low sales price on the NYSE, the net asset value per
Share as of the last day of the week immediately preceding such day and
the premium or discount (expressed as a percentage of net asset value)
represented by the difference between such low sales price and the
corresponding net asset value.
<TABLE>
<CAPTION>
Market Price High;(1) Market Price Low; (1)
NAV and Premium/ NAV and Premium/
Quarter Ended (Discount) That Day (2) (Discount) That Day (2)
<S> <C> <C>
1/31/94 Market: $11.375 Market: $10.625
NAV: $11.18 NAV: $10.97
Premium/(Discount):1.74% Premium/(Discount):-3.14%
4/30/94 Market: $11.375 Market: $10.00
NAV: $11.18 NAV: $10.32
Premium/(Discount):1.74% Premium/(Discount):-3.10%
7/31/94 Market: $10.625 Market: $10.00
NAV: $10.40 NAV: $10.42
Premium/(Discount):2.16% Premium/(Discount):-4.03%
10/31/94 Market: $10.375 Market: $9.125
NAV: $10.30 NAV: $10.24
Premium/(Discount):0.73% Premium/(Discount):-10.89%
1/31/95 Market: $10.00 Market: $8.875
NAV: $10.06 NAV: $10.09
Premium/(Discount):0.60% Premium/(Discount):-12.04%
4/30/95 Market: $10.00 Market: $9.25
NAV: $9.67 NAV: $9.71
Premium/(Discount):3.41% Premium/(Discount):-4.74%
7/31/95 Market: $9.875 Market: $9.375
NAV: $10.11 NAV: $9.87
Premium/(Discount):-2.32% Premium/(Discount):-5.02%
10/31/95 Market: $10.00 Market: $9.375
NAV: $10.14 NAV: $10.03
Premium/(Discount):-1.38% Premium/(Discount):-6.53%
1/31/96 Market: $10.250 Market: $9.1875
NAV: $10.28 NAV: $10.14
Premium/(Discount):-0.29% Premium/(Discount):-9.39%
<FN>
_______________
1. As reported by the NYSE.
2. The Fund's computation of net asset value (NAV) is as of the close
of trading on the last day of the week immediately preceding the day
for which the high and low market price is reported and the premium or
discount (expressed as a percentage of net asset value) is calculated
based on the difference between the high or low market price and the
corresponding net asset value for that day, divided by the net asset
value.
</TABLE>
On February 2, 1996, the net asset value per share of the Fund was
$10.35, the closing sales price on the NYSE was $10.125, the discount
to net asset value $.225 (or 2.17% of market value). Since the Fund's
inception in 1988, the Fund's shares have from time to time traded for
an amount less than the Fund's net asset value.
The Board of Trustees of the Fund has determined that it may be in
the interests of Fund shareholders for the Fund to take action to
attempt to reduce or eliminate a market value discount from net asset
value. To that end, the Fund may, from time to time, either repurchase
Shares in the open market or, subject to conditions imposed from time
to time by the Board, make a tender offer for a portion of the Fund's
Shares at their net asset value per Share. Subject to the Fund's
fundamental policy with respect to borrowings, the Fund may incur debt
to finance repurchases and/or tenders. Interest on any such borrowings
will reduce the Fund's net income. In addition, the acquisition of
Shares by the Fund will decrease the total assets of the Fund and
therefore will have the effect of increasing the Fund's expense ratio.
If the Fund must liquidate portfolio securities to purchase Shares
tendered, the Fund may be required to sell portfolio securities for
other than investment purposes and may realize gains and losses. Gains
realized on securities held for less than three months may affect the
Fund's ability to retain its status as a regulated investment company
under the Internal Revenue Code.
In addition to open-market Share purchases and tender offers, the
Board could also seek shareholder approval to convert the Fund to an
open-end investment company if the Fund's Shares trade at a substantial
discount. If the Fund's Shares have traded on the NYSE at an average
discount from net asset value of more than 10%, determined on the basis
of the discount as of the end of the last trading day in each week
during the period of 12 calendar weeks ending October 31 in such year,
the Trustees will consider recommending to shareholders a proposal to
convert the Fund to an open-end company. If during a year in which the
Fund's Shares trade at the average discount stated, and for the period
described, in the preceding sentence the Fund also receives written
requests from the holders of 10% or more of the Fund's outstanding
Shares that a proposal to convert to an open end company be submitted
to the Fund's shareholders, within six months the Trustees will submit
a proposal to the Fund's shareholders, to the extent consistent with
the 1940 Act, to amend the Fund's Declaration of Trust to convert the
Fund from a closed-end to an open-end investment company. If the Fund
converted to an open-end investment company, it would be able
continuously to issue and offer its Shares for sale, and each Share of
the Fund could be tendered to the Fund for redemption at the option of
the shareholder, at a redemption price equal to the current net asset
value per Share. To meet such redemption request, the Fund could be
required to liquidate portfolio securities. It Shares would no longer
be listed on the NYSE. The Fund cannot predict whether any repurchase
of Shares made while the Fund is a closed-end investment company would
decrease the discount from net asset value at which the Shares trade.
To the extent that any such repurchase decreased the discount from net
asset value to an amount below 10% during the measurement period
described above, the Fund would not be required to submit to
shareholders a proposal to convert the Fund to an open-end investment
company.
Item 9. Management
1(a). The Fund is governed by a Board of Trustees, which is
responsible under Massachusetts law for protecting the interests of
shareholders. The Trustees meet periodically throughout the year to
oversee the Fund's activities, review its performance, and review the
actions of the Adviser. The Fund is required to hold annual
shareholder meetings for the election of trustees and the ratification
of its independent auditors. The Fund may also hold shareholder
meetings from time to time for other important matters, and
shareholders have the right to call a meeting to remove a Trustee or to
take other action described in the Fund's Declaration of Trust.
1(b). The Adviser, a Colorado corporation with its principal
offices at Two World Trade Center, New York, New York 10048-0203, acts
as investment manager for the Fund under an investment advisory
agreement (the "Advisory Agreement") under which it provides ongoing
investment advice and conducts the investment operations of the Fund,
including purchases and sales of its portfolio securities, under the
general supervision and control of the Trustees of the Fund. The
Adviser also acts as accounting agent for the Fund.
The Adviser has operated as an investment company adviser since
April 30, 1959. The Adviser (including a subsidiary) currently manages
investment companies with assets of more than $40 billion as of
December 31, 1995, and having more than 2.8 million shareholder
accounts. The Adviser is owned by Oppenheimer Acquisition Corp., a
holding company owned in part by senior management of the Adviser, and
ultimately controlled by Massachusetts Mutual Life Insurance Company, a
mutual life insurance company.
The Adviser provides office space and investment advisory services
for the Fund and pays all compensation of those Trustees and officers
of the Fund who are affiliated persons of the Adviser. Under the
Advisory Agreement, the Fund pays the Adviser an advisory fee computed
and paid weekly at an annual rate of .65 of 1% of the net assets of the
Fund at the end of that week. The Fund also pays the Adviser an annual
fee of $24,000, plus out-of-pocket costs and expenses reasonably
incurred, for performing limited accounting services for the Fund.
During the fiscal years ended October 31, 1993, 1994 and 1995, the Fund
paid management fees to the Adviser of $1,947,081, $1,995,015 and
$1,877,737, respectively. The Fund incurred approximately $42,926 in
expenses for the fiscal year ended October 31, 1995 for services
provided by Shareholder Financial Services, Inc., a subsidiary of the
Adviser that acts as transfer agent, shareholder servicing agent and
dividend paying agent for the Fund.
Under the Advisory Agreement, the Fund pays certain of its other
costs not paid by the Adviser, including (a) brokerage and commission
expenses, (b) Federal, state, local and foreign taxes, including issue
and transfer taxes, incurred by or levied on the Fund, (c) interest
charges on borrowings, (d) the organizational and offering expenses of
the Fund, whether or not advanced by the Adviser, (e) fees and expenses
of registering the Shares of the Fund under the appropriate Federal
securities laws and of qualifying Shares of the Fund under applicable
state securities laws, (f) fees and expenses of listing and maintaining
the listings of the Fund's Shares on any national securities exchange,
(g) expenses of printing and distributing reports to shareholders, (h)
costs of shareholder meetings and proxy solicitation, (i) charges and
expenses of the Fund's Administrator, custodian and Registrar, Transfer
and Dividend Disbursing Agent, (j) compensation of the Fund's Trustees
who are not interested persons of the Adviser, (k) legal and auditing
expenses, (l) the cost of certificates representing the Fund's Shares,
(m) costs of stationery and supplies, and (n) insurance premiums. The
Adviser has advanced certain of the Fund's organizational and offering
expenses, which were repaid by the Fund. There is no expense
limitation provision.
1(c). The Portfolio Managers of the Fund are Thomas Reedy, David
Rosenberg and Ashwin Vasan, who also serve as Vice Presidents of the
Fund and of the Adviser, and are officers of certain mutual funds
managed by the Adviser ("Oppenheimer funds"). Messrs. Reedy, Rosenberg
and Vasan have been the persons principally responsible for the day-to-
day management of the Trust's portfolio since June 1993, June 1994 and
June 1993, respectively. During the past five years, Mr. Reedy served
as a securities analyst for the Manager, and, prior to joining the
Manager, Mr. Rosenberg served as an officer and portfolio manager for
Delaware Investment Advisors and one of its mutual funds and Mr. Vasan
served as a securities analyst for Citibank, N.A.
1(d). The Administrator for the Fund is Mitchell Hutchins Asset
Management Inc. (the "Administrator"), a Delaware corporation with
principal offices at 1285 Avenue of the Americas, New York, New York
10019 and an affiliate of PaineWebber Incorporated.
Because of the services rendered to the Fund by the Administrator and
the Adviser, the Fund itself requires no employees other than its
officers, none of whom receives compensation from the Fund and all of
whom are employed by the Adviser or the Administrator. In connection
with its responsibilities as Administrator and in consideration of its
administrative fee, subject to the supervision of the Board of Trustees
the Administrator will: (i) prepare all quarterly, semi-annual and
annual reports required to be sent to Fund shareholders, and arrange
for the printing and dissemination of such reports to shareholders;
(ii) assemble and file all reports required to be filed by the Fund
with the Securities and Exchange Commission ("SEC") on Form N-SAR, or
such other form as the SEC may substitute for Form N-SAR; (iii) review
the provision of services by the Fund's independent accountants,
including but not limited to the examination by such accountants of
financial statements of the Fund and the review of the Fund's Federal,
state and local tax returns; and make such reports and recommendations
to the Board of Trustees concerning the performance of the independent
accountants as the Board reasonably requests or as it deems
appropriate; (iv) file with the appropriate authorities all required
Federal, state and local tax returns; (v) arrange for the dissemination
to shareholders of the Fund's proxy materials, and oversee the
tabulation of proxies by the Fund's transfer agent; (vi) negotiate the
terms and conditions under which custodian services will be provided to
the Fund and the fees to be paid by the Fund in connection therewith;
(vii) recommend an accounting agent (which may or may not be the Fund's
custodian or its affiliate) to the Board, which agent would be
responsible for computing the Fund's net asset value in accordance with
the Fund's registration statement under the 1940 Act and the Securities
Act of 1933, as amended; (vii) negotiate the terms and conditions under
which such accounting agent would compute the Fund's net asset value,
and the fees to be paid by the Fund in connection therewith; review the
provision of such accounting services to the Fund and make such reports
and recommendations to the Board concerning the provisions of such
services as the Board reasonably requests or the Administrator deems
appropriate; (ix) negotiate the terms and conditions under which the
transfer agency and dividend disbursing services will be provided to
the Fund, and the fees to be paid by the Fund in connection therewith;
review the provision of transfer agency and dividend disbursing
services to the Fund; and make such reports and recommendations to the
Board concerning the performance of the Fund's transfer and dividend
disbursing agent as the Board reasonably requests or the Administrator
deems appropriate; (x) establish the accounting policies of the Fund;
reconcile accounting issues which may arise with respect to the Fund's
operations; consult with the Fund's independent accountants, legal
counsel, custodian, accounting agent and transfer and dividend
disbursing agent as necessary in connection therewith; (xi) determine
the amounts available for distribution as dividends and distributions
to shareholders; prepare and arrange for the printing of dividend
notices to the shareholders; and provide the Fund's transfer and
dividend disbursing agent and custodian with such information as is
required for such parties to effect the payment of dividends and
distributions and to implement the Fund's dividend reinvestment plan;
(xii) review the Fund's bills and authorize payments of such bills by
the Fund's custodian; and (xiii) if requested by the Board, designate
one of its employees to serve as an officer of the Fund, and such
person shall not be compensated by the Fund for so serving.
For the services rendered to the Fund and related expenses borne
by the Administrator, the Fund pays the Administrator a fee, calculated
and paid weekly, at the annualized rate of .20% of the Fund's net
assets at the end of that week. During the fiscal years ended October
31, 1993, 1994 and 1995, the Fund paid administration fees to the
Administrator of $614,792, $613,851 and $577,765, respectively.
1(e). The Bank of New York, 48 Wall Street, New York, New York,
acts as the custodian (the "Custodian") for the Fund's assets held in
the United States. The Adviser and its affiliates have banking
relationships with the Custodian. The Adviser has represented to the
Fund that its banking relationships with the Custodian have been and
will continue to be unrelated to and unaffected by the relationship
between the Fund and the Custodian. It will be the practice of the
Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Adviser and its
affiliates. Rules adopted under the 1940 Act permit the Fund to
maintain its securities and cash in the custody of certain eligible
banks and securities depositories. Pursuant to those Rules, the Fund's
portfolio of securities and cash, when invested in foreign securities,
will be held in foreign banks and securities depositories approved by
the Trustees of the Fund in accordance with the rules of the Securities
and Exchange Commission.
Shareholder Financial Services, Inc. ("SFSI"), a subsidiary of the
Adviser, acts as primary transfer agent, shareholder servicing agent
and dividend paying agent for the Fund. Fees paid to SFSI are based on
the number of shareholder accounts and the number of shareholder
transactions, plus out-of-pocket costs and expenses. United Missouri
Trust Company of New York acts as co-transfer agent and co-registrar
with SFSI to provide such services as SFSI may request.
1(f). See 1(b) above.
1(g). Inapplicable.
2. Inapplicable.
3. None as of February 15, 1996.
Item 10. Capital Stock, Long-Term Debt, and Other Securities.
1. The Fund is authorized to issue an unlimited number of Shares of
beneficial interest, $.01 par value. The Fund's Shares have no
preemptive, conversion, exchange or redemption rights. Each Share has
equal voting, dividend, distribution and liquidation rights. All
Shares outstanding are, and, when issued, those offered hereby will be,
fully paid and nonassessable. Shareholders are entitled to one vote
per Share. All voting rights for the election of Trustees are
noncumulative, which means that the holders of more than 50% of the
Shares can elect 100% of the Trustees then nominated for election if
they choose to do so and, in such event, the holders of the remaining
Shares will not be able to elect any Trustees. Under the rules of the
NYSE applicable to listed companies, the Fund is required to hold an
annual meeting of shareholders in each year.
Under Massachusetts law, under certain circumstances shareholders
could be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for
actions or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Fund. The Declaration of Trust provides for
indemnification by the Fund for all losses and expenses of any
shareholder held personally liable for obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund
would be unable to meet its obligations. The likelihood of such
circumstances is remote.
Pursuant to the Trust's Dividend Reinvestment and Cash Purchase Plan
(the "Plan"), all dividends and capital gains distributions
("Distributions") declared by the Trust will be automatically
reinvested in additional full and fractional shares of the Trust
("Shares") unless (i) a shareholder elects to receive cash or (ii)
Shares are held in nominee name, in which event the nominee should be
consulted as to participation 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"), and a service fee of $.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.
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.
The Fund presently has provisions in its Declaration of Trust and By-
Laws (together, the "Charter Documents") which could have the effect of
limiting (i) the ability of other entities or persons to acquire
control of the Fund, (ii) the Fund's freedom to engage in certain
transactions or (iii) the ability of the Fund's Trustees or
shareholders to amend the Charter Documents or effect changes in the
Fund's management. Those provisions of the Charter Documents may be
regarded as "anti-takeover" provisions. Specifically, under the Fund's
Declaration of Trust, the affirmative vote of the holders of not less
than two thirds (66-2/3%) of the Fund's Shares outstanding and entitled
to vote is required to authorize the consolidation of the Fund with
another entity, a merger of the Fund with or into another entity
(except for certain mergers in which the Fund is the successor), a sale
or transfer of all or substantially all of the Fund's assets, the
dissolution of the Fund, the conversion of the Fund to an open-end
company, and any amendment of the Fund's Declaration of Trust that
would affect any of the other provisions requiring a two-thirds vote.
However, a "majority" shareholder vote, as defined in the Charter
Documents, shall be sufficient to approve any of the foregoing
transactions that have been recommended by two-thirds of the Trustees.
Notwithstanding the foregoing, if a corporation, person or entity is
directly, or indirectly through its affiliates, the beneficial owner of
more than 5% of the outstanding shares of the Fund, the affirmative
vote of 80% (which is higher than that required under the 1940 Act) of
the outstanding Shares of the Fund is required generally to authorize
any of the following transactions or to amend the provisions of the
Declaration of Trust relating to transactions involving: (i) a merger
or consolidation of the Fund with or into any such corporation or
entity, (ii) the issuance of any securities of the Fund to any such
corporation, person or entity for cash; (iii) the sale, lease or
exchange of all or any substantial part of the assets of the Fund to
any such corporation, entity or person (except assets having an
aggregate market value of less than $1,000,000); or (iv) the sale,
lease or exchange to the Fund, in exchange for securities of the Fund,
of any assets of any such corporation, entity or person (except assets
having an aggregate fair market value of less than $1,000,000). If
two-thirds of the Board of Trustees has approved a memorandum of
understanding with such beneficial owner, however, a majority
shareholder vote will be sufficient to approve the foregoing
transactions. Reference is made to the Charter Documents of the Fund,
on file with the Securities and Exchange Commission, for the full text
of these provisions.
2. Inapplicable.
3. Inapplicable.
4. The Fund qualified for treatment as, and elected to be, a
regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code for its taxable year ended October 31, 1995, and intends
to continue to qualify as a RIC for each subsequent taxable year.
However, the Fund reserves the right not to qualify under Subchapter M
as a RIC in any year or years.
For each taxable year that the Fund qualifies for treatment as a RIC,
the Fund (but not its shareholders) will not be required to pay Federal
income tax. Shareholders will normally have to pay Federal income
taxes, and any state income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions derived
from net investment income or short-term capital gains are taxable to
the shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional Shares or in
cash. Since the Fund's income is expected to be derived primarily from
interest rather than dividends, only a small portion, if any, of such
dividends and distributions is expected to be eligible for the Federal
dividends-received deduction available to corporations. The Fund does
not anticipate that any portion of its dividends or distributions will
qualify for pass-through treatment as "exempt-interest dividends" since
less than 50% of its assets is permitted to be invested in municipal
obligations.
Long-term or short-term capital gains may be generated by the sale of
portfolio securities and by transactions in options and futures
contracts. Distributions of long-term capital gains, if any, are
taxable to shareholders as long-term capital gains regardless of how
long a shareholder has held the Fund's shares and regardless of whether
the distribution is received in additional shares or in cash. For
Federal income tax purposes, if a capital gain distribution is received
with respect to Shares held for six months or less, any loss on a
subsequent sale or exchange of such Shares will be treated as long-term
capital loss to the extent of such long-term capital gain distribution.
Capital gains distributions are not eligible for the dividends-received
deduction.
Any dividend or capital gains distribution received by a shareholder
from an investment company will have the effect of reducing the net
asset value of the shareholder's stock in that company by the exact
amount of the dividend or capital gains distribution. Furthermore,
capital gains distributions and dividends are subject to Federal income
taxes. If the net asset value of the Shares should be reduced below a
shareholder's cost as a result of the payment of dividends or realized
long-term capital gains, such payment would be a return of the
shareholder's investment capital to the extent of such reduction below
the shareholder's cost, but nonetheless could be fully taxable.
The tax treatment of listed put and call options written or purchased
by the Fund on debt securities and of future contracts entered into by
the Fund will be governed by Section 1256 of the Internal Revenue Code.
Absent a tax election to the contrary, each such position held by the
Fund will be marked-to-market (i.e., treated as if it were closed out)
on the last business day of each taxable year of the Fund, and all gain
or loss associated with transactions in such positions will be treated
as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. Positions of the Fund which consist of at least one debt
security and at least one option or futures contract which
substantially diminishes the Fund's risk of loss with respect of such
debt security could be treated as "mixed straddles" which are subject
to the straddle rules of Section 1092 of the Code, the operation of
which may cause deferral of losses, adjustments in the holding periods
of debt securities and conversion of short-term capital losses into
long-term capital losses. Certain tax elections exist for mixed
straddles which reduce or eliminate the operation of the straddle
rules. Furthermore, as a regulated investment company, the Fund would
be subject to the requirement that less than 30% of its gross income be
derived from gains on the sale or other disposition of securities held
for less than three months. This requirement may limit the Fund's
ability to engage in options and futures transactions. The Fund will
monitor its transactions in options and futures contracts and may make
certain tax elections in order to mitigate the effect of these rules
and prevent disqualification of the Fund as a regulated investment
company under Subchapter M of the Code. Such tax election may result
in an increase in distribution of ordinary income (relative to long-
term capital gains) to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year even though the Fund
receives no interest payment in cash on the security during the year.
As an investment company, the Fund must pay out substantially all of
its net investment income each year. Accordingly, the Fund may be
required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received. Such distributions will be made from the cash assets of the
Fund or by liquidation of portfolio securities, if necessary. If a
distribution of cash necessitates the liquidation of portfolio
securities, the Adviser will select which securities to sell. The Fund
may realize a gain or loss from such sales. In the event the Fund
realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution than they would in the
absence of such transactions.
It is the Fund's present policy, which may be changed by the Board of
Trustees, to pay monthly dividends to shareholders from net investment
income of the Fund. The Fund intends to distribute all of its net
investment income on an annual basis. The Fund will distribute all of
its net realized long-term and short-term capital gains, if any, at
least once per year. The Fund may, but is not required to, make such
distributions on a more frequent basis to the extent permitted by
applicable law and regulations.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute a specified minimum percentage (currently 98%) of its
taxable investment income earned from January 1 through December 31 of
that year and 98% of its capital gains realized in the period from
November 1 of the prior year through October 31 of that year, or else
the Fund must pay an excise tax on amounts not distributed. While it
is presently anticipated that the Fund will meet those requirements,
the Fund's Board and the Adviser might determine in a particular year
it would be in the best interests of the Fund not to make such
distributions at the mandated level and to pay the excise tax which
would reduce the amount available for distributions to shareholders.
If the Fund pays a dividend in January which was declared in the
previous December to shareholders of record on a date in December, then
such dividend or distribution will be treated for tax purposes as being
paid in December and will be taxable to shareholders as if received in
December.
Under the Fund's Dividend Reinvestment Plan (the "Plan"), all of the
Fund's dividends and distributions to shareholders will be reinvested
in full and fractional Shares. With respect to distributions made in
Shares issued by the Fund pursuant to the Plan, the amount of the
distribution for tax purposes is the fair market value of the Shares
issued on the reinvestment date. In the case of Shares purchased on
the open market, a participating shareholder's tax basis in each Share
is its cost. In the case of Shares issued by the Fund, the
shareholder's tax basis in each Share received is its fair market value
on the reinvestment date.
Distributions of investment company taxable income to shareholders
who are nonresident alien individuals or foreign corporations will
generally be subject to a 30% United States withholding tax under
provisions of the Internal Revenue Code applicable to foreign
individuals and entities, unless a reduced rate of withholding or a
withholding exemption is provided under an applicable treaty.
Under Section 988 of the Code, foreign currency gain or loss with
respect to foreign currency-denominated debt instruments and other
foreign currency-denominated positions held or entered into by the Fund
will be ordinary income or loss. In addition, foreign currency gain or
loss realized with respect to certain foreign currency "hedging"
transactions will be treated as ordinary income or loss.
5. The following information is provided as of February 15, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Amount
Amount Held Outstanding
by Registrant Exclusive of
Amount or for its Amount Shown
Title of Class Authorized Account Under (3)
<S> <C> <C> <C>
Shares of Unlimited None 29,116,068
Beneficial
Interest, $.01
par value
</TABLE>
Item 11. Defaults and Arrears on Senior Securities.
Inapplicable.
Item 12. Legal Proceedings.
Inapplicable.
Item 13. Table of Contents of the Statement of Additional Information.
Reference is made to Item 15 of the Statement of Additional
Information.
<PAGE>
Oppenheimer Multi-Sector Income Trust
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 29, 1996
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 29, 1996. It should be
read together with the Prospectus, and the Registration Statement on
Form N-2, of which the Prospectus and this Statement of Additional
Information are a part, can be inspected and copied at public reference
facilities maintained by the Securities and Exchange Commission (the
"SEC") in Washington, D.C. and certain of its regional offices, and
copies of such materials can be obtained at prescribed rates from the
Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, Washington, D.C., 20549.
TABLE OF CONTENTS
Page
Investment Objective and Policies *
Management 35
Control Persons and Principal Holders of Securities 40
Investment Advisory and Other Services *
Brokerage Allocation and Other Practices 40
Tax Status *
Financial Statements 43
______________________
*See Prospectus
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page.
Reference is made to the preceding page.
Item 15. Table of Contents.
Reference is made to the preceding page and to Items 16 through 23
of the Statement of Additional Information set forth below.
Item 16. General Information and History.
Inapplicable.
Item 17. Investment Objective and Policies.
Reference is made to Item 8 of the Prospectus.
Item 18. Management.
1 and 2. The Fund's Trustees and officers and their principal
occupations and business affiliations during the past five years are
listed below. The address of each Trustee and officer is Two World
Trade Center, New York, New York 10048-0203, unless another address is
listed below. All of the Trustees are also trustees of Oppenheimer
Fund, Oppenheimer Global Fund, Oppenheimer Enterprise Fund, Oppenheimer
Growth Fund, Oppenheimer Target Fund, Oppenheimer Discovery Fund,
Oppenheimer Global Growth & Income Fund, Oppenheimer Global Emerging
Growth Fund, Oppenheimer International Bond Fund, Oppenheimer Tax-Free
Bond Fund, Oppenheimer New York Tax-Exempt Fund, Oppenheimer California
Tax-Exempt Fund, Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer
Asset Allocation Fund, Oppenheimer U.S. Government Trust and
Oppenheimer Multi-Government Trust (the "New York-based
OppenheimerFunds"). Messrs. Spiro, Bishop, Bowen, Donohue, Farrar and
Zack and Ms. Macaskill, respectively, hold the same offices with the
other New York-based Oppenheimer funds as with the Fund.
Leon Levy, Chairman of the Board of Trustees; Age: 70
31 West 52nd Street, New York, New York 10019
General Partner of Odyssey Partners, L.P. (investment partnership)
and Chairman of Avatar Holdings, Inc. (real estate development).
Bridget A. Macaskill, President and Trustee*; Age: 47
Two World Trade Center, New York, New York 10048-0203
President, Chief Executive Officer and a Director of the Adviser;
Chairman and a Director of SSI; President and a Director of OAC,
HarbourView, and of Oppenheimer Partnership Holdings, Inc., the
latter being a holding company subsidiary of the Manager; formerly an
Executive Vice President of the Manager.
Robert G. Galli, Trustee*; Age: 62
Vice Chairman of the Adviser and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Adviser's parent holding company;
formerly he held the following positions: a director of the Adviser
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Adviser, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of
the Adviser, an officer of other Oppenheimer funds and Executive Vice
President and General Counsel of the Adviser and the Distributor.
Benjamin Lipstein, Trustee; Age: 72
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; Director of Sussex Publishers,
Inc. (Publishers of Psychology Today and Mother Earth News) and of
Spy Magazine, L.P.
Elizabeth B. Moynihan, Trustee; Age: 66
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of
Art (Smithsonian Institution), the Institute of Fine Arts (New York
University), National Building Museum; a member of the Trustees
Council, Preservation League of New York State; a member of the Indo-
U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 68
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil and gas
producer), Enron-Dominion Cogen Corp. (cogeneration company), Kemper
Corporation (insurance and financial services company), Fidelity Life
Association (mutual life insurance company); formerly Chairman of the
Board of ICL, Inc. (information systems) and President and Chief
Executive Officer of the Conference Board, Inc. (international
economic and business research).
Edward V. Regan, Trustee; Age: 65
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; President of Jerome Levy Economics Institute; a member of the
U.S. Competitiveness Policy Council; a director or GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and a
trustee, New York State and Local Retirement Fund.
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Russell S. Reynolds, Jr., Trustee; Age: 64
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee; Age: 83
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions,
Graduate School of Business, Columbia University; Visiting Professor
of Finance, University of Hawaii; a director of The Korea Fund, Inc.
(closed-end investment company); a member of the Board of Advisors,
Olympus Private Placement Fund, L.P.; Professor Emeritus of Finance,
Adelphi University.
Donald W. Spiro, Trustee*; Age: 70
Chairman Emeritus and a director of the Adviser; formerly Chairman of
the Adviser and the Distributor.
Pauline Trigere, Trustee; Age: 83
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age: 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments,
Inc. (electronics) and The Vigoro Corporation (fertilizer
manufacturer); formerly (in descending chronological order)
Counsellor to the President (Bush) for Domestic Policy, Chairman of
the Republican National Committee, Secretary of the U.S. Department
of Agriculture, and U.S. Trade Representative.
Thomas P. Reedy, Vice President and Portfolio Manager; Age: 33
Vice President of the Adviser; an officer of other Oppenheimer funds;
formerly a Securities Analyst for the Manager.
David Rosenberg, Vice President and Portfolio Manager; Age: 37
Vice President of the Adviser; an officer of other Oppenheimer funds;
formerly an officer and Portfolio Manager for Delaware Investment
Advisors and for one of its mutual funds.
__________________________
* A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Ashwin Vasan, Vice President and Portfolio Manager; Age: 33
Vice President of the Adviser; an officer of other Oppenheimer funds;
formerly a Securities Analyst for the Adviser, prior to which he was
a Securities Analyst for Citibank, N.A.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Adviser and the
Distributor; an officer of other Oppenheimer funds; President and a
director of Centennial; formerly Senior Vice President and Associate
General Counsel of the Adviser and the Distributor, prior to which he
was a partner in Kraft & McManimon (a law firm), an officer of First
Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser), and
a director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age: 59
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Adviser; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 47
Senior Vice President and Associate General Counsel of the Adviser;
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Adviser/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Adviser, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm; and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Adviser/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Adviser, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
The Board of Trustees does not have an executive or investment
committee. The Trustees of the Fund have appointed a study committee
consisting of Messrs. Robbins (Chairman) and Lipstein and Mrs.
Moynihan, none of whom is an "interested person" of the Adviser or the
Fund. The study committee's function is to report to the Board on
matters that include (i) legal and regulatory developments, (ii)
periodic renewals of the Advisory Agreement, (iii) review of the
transfer agent and registrar agreement, (iv) review of the
administrative services provided by Mitchell Hutchins Asset Management,
Inc., (v) portfolio management, (vi) valuation of portfolio securities,
(vii) custodian relationships and use of foreign subcustodians, (viii)
code of ethics matters, policy on use of insider information, (ix)
consideration of tender offers and other repurchases of fund shares and
possible conversion to open-end status, and (x) indemnification and
insurance of the Fund's officers and trustees.
3. Inapplicable.
4. The officers of the Fund are affiliated with the Manager; they
and the Trustees of the Fund who are affiliated with the Adviser
(Messrs. Galli and Spiro and Ms. Macaskill; Ms. Macaskill is also an
officer) receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Ms. Macaskill and Messrs. Galli and Spiro) received the
total amounts shown below from all 18 of the New York-based Oppenheimer
funds (including the Fund) listed in the first paragraph of Item 18,
parts 1 and 2 (and from Oppenheimer Global Environment Fund,
Oppenheimer Time Fund and Oppenheimer Mortgage Income Fund, which
ceased operations) for services in the positions shown:
<TABLE>
<CAPTION>
Total Compensation From All
Name Position New York-based OppenheimerFunds1
<S> <C> <C>
Leon Levy Chairman and Trustee $141,000
Benjamin Lipstein Study Committee Member and $ 86,200
Trustee
Elizabeth B. Moynihan Study Committee Member and $ 86,200
Trustee
Kenneth A. Randall Audit Committee Member and $ 78,400
Trustee
Edward V. Regan Audit Committee Member and $ 68,800
Trustee
Russell S. Reynolds, Jr. Trustee $ 52,100
Sidney M. Robbins Study Committee Chairman, $122,100
Audit Committee Vice-Chairman
and Trustee
Pauline Trigere Trustee $ 52,100
Clayton K. Yeutter Trustee $ 52,100
<FN>
______________________
1 For the 1995 calendar year.
</TABLE>
The Fund has adopted a retirement plan that provides for payment
to a retired Trustee of up to 80% of the average compensation paid
during that Trustee's five years of service in which the highest
compensation was received. A Trustee must serve in that capacity for
any of the New York-based Oppenheimer funds for at least 15 years to be
eligible for the maximum payment. As of October 31, 1995, payments of
$2,026 have been made by the Fund under the plan. The total accrual by
all the New York-based Oppenheimer funds referred to in the preceding
paragraph for their collective projected benefit obligations under the
plan was $2,560,500 as of October 31, 1995.
Item 19. Control Persons and Principal Holders of Securities.
1. Inapplicable.
2. As of February 6, 1996, the only persons owning of record or
known by the Fund to own beneficially 5% or more of the outstanding
Shares were: (i) Cede & Co., c/o Depository Trust Co., 7 Hanover
Square, 22nd Floor Dividend Department, New York, New York 10004, a
nominee which owned of record 23,550,961.939 Shares (approximately 81%
of the Shares then outstanding).
3. As of February 15, 1996, the trustees and officers of the Fund as
a group owned less than 1% of the outstanding Shares.
Item 20. Investment Advisory and Other Services.
Reference is made to Item 9 of the Prospectus.
Item 21. Brokerage Allocation and Other Practices.
1 and 2. During the fiscal years ended October 31, 1993, 1994 and
1995, the Fund paid approximately $25,643, $16,685 and $48,614,
respectively, in brokerage commissions. The Fund will not effect
portfolio transactions through any broker (i) which is an affiliated
person of the Fund, (ii) which is an affiliated person of such
affiliated person or (iii) an affiliated person of which is an
affiliated person of the Fund or its Adviser. There is no principal
underwriter of shares of the Fund. As most purchases of portfolio
securities made by the Fund are principal transactions at net prices,
the Fund incurs little or no brokerage costs. The Fund deals directly
with the selling or purchasing principal or market maker without
incurring charges for the services of a broker on its behalf unless it
is determined that a better price or execution may be obtained by using
the services of a broker. Purchases of portfolio securities from
underwriters include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers include a spread between
the bid and asked price. Transactions in foreign securities markets
generally involve the payment of fixed brokerage commissions, which are
usually higher than those in the United States. The Fund seeks to
obtain prompt execution of orders at the most favorable net price.
3. The Advisory Agreement between the Fund and the Advisor (the
"Advisory Agreement") contains provisions relating to the selection of
brokers, dealers and futures commission merchants (collectively
referred to as "brokers") for the Fund's portfolio transactions. The
Adviser is authorized by the Advisory Agreement to employ brokers as
may, in its best judgment based on all relevant factors, implement the
policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Adviser need not seek
competitive bidding but is expected to minimize the commissions paid to
the extent consistent with the interests and policies of the Fund. The
Fund will not effect portfolio transactions through affiliates of the
Adviser.
Certain other investment companies advised by the Adviser and its
affiliates have investment objectives and policies similar to those of
the Fund. If possible, concurrent orders to purchase or sell the same
security by more than one of the accounts managed by the Adviser or its
affiliates are combined. The transactions effected pursuant to such
combined orders are averaged as to price and allocated in accordance
with the purchase or sale orders actually placed for each account. If
transactions on behalf of more than one fund during the same period
increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or
quantity. When the Fund engages in an option transaction, ordinarily
the same broker will be used for the purchase or sale of the option and
any transactions in the security to which the option relates.
Under the Advisory Agreement, if brokers are used for portfolio
transactions, the Adviser may select brokers for their execution and/or
research services, on which no dollar value can be placed. Information
received by the Adviser for those other accounts may or may not be
useful to the Fund. The commissions paid to such dealers may be higher
than another qualified dealer would have charged if a good faith
determination is made by the Adviser that the commission is reasonable
in relation to the services provided. Subject to applicable
regulations, sales of shares of the Fund and/or investment companies
advised by the Adviser or its affiliates may also be considered as a
factor in directing transactions to brokers, but only in conformity
with the price, execution and other considerations and practices
discussed above.
Such research, which may be provided by a broker through a third
party, includes information on particular companies and industries as
well as market, economic or institutional activity areas. It serves to
broaden the scope and supplement the research activities of the
Adviser, to make available additional views for consideration and
comparisons, and to enable the Adviser to obtain market information for
the valuation of securities held in the Fund's portfolio or being
considered for purchase.
4. During the fiscal years ended October 31, 1993, 1994 and 1995,
$12,852, $2,689 and $0 were paid to brokers as commissions in return
for research services.
5. Inapplicable.
Item 22. Tax Status.
Reference is made to Item 10 of the Prospectus.
Item 23. Financial Statements.
1. Statement of Investments
2. Statement of Assets and Liabilities
3. Statement of Operations
4. Statements of Changes in Net Assets
5. Financial Highlights
6. Notes to Financial Statements
7. Independent Auditors' Report
8. Independent Auditors' Consent
<PAGE>
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, 1995, 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 seven-year period then
ended and the period from March 24, 1988 (commencement of operations) to October
31, 1988. 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, 1995 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, 1995, 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 seven-year period then ended and the period from March
24, 1988 (commencement of operations) to October 31, 1988, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
November 21, 1995
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
U.S. GOVERNMENT SECTOR -- 11.2%
TREASURY -- 11.2%
U.S. Treasury Bonds:
8.125%, 8/15/19 (2).............................................. $ 7,893,000 $ 9,501,199
8.75%, 5/15/20................................................... 4,000,000 5,132,500
8.875%, 8/15/17.................................................. 8,020,000 10,313,213
U.S. Treasury Nts., 8%, 5/15/01.................................... 7,300,000 8,039,125
------------
Total U.S. Government Sector (Cost $30,938,107).................... 32,986,037
------------
</TABLE>
<TABLE>
<CAPTION>
Units
--------------
<S> <C> <C>
CONVERTIBLE SECTOR -- 1.1%
RIGHTS, WARRANTS AND CERTIFICATES -- 0.3%
American Telecasting, Inc. Wts., Exp. 6/99......................... 4,750 15,438
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series AG-7A.............. 40,300 403
Litigation Trust................................................. 128,889 1,289
Becker Gaming, Inc. Wts., Exp. 11/00 (3)........................... 25,000 25,000
Federated Department Stores, Inc. Wts.:
Cl. C, Exp. 12/99................................................ 26,963 182,000
Cl. D, Exp. 12/01................................................ 26,963 185,371
Foamex LP/JPS Automotive Corp. Wts., Exp. 7/99..................... 1,000 10,000
Gaylord Container Corp. Wts., Exp. 7/96............................ 50,625 363,867
OSI Specialties Corp. Wts., 4/99 (4)............................... 500 3,250
Purity Supreme, Inc. Wts., Exp. 8/97 (3)........................... 7,797 156
SD Warren Co. Wts., Exp. 12/06 (4)................................. 20,000 140,000
Terex Corp. Rts., Exp. 7/96 (4).................................... 186 9
------------
926,783
------------
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
-------------- ------------
<S> <C> <C>
PREFERRED STOCKS -- 0.8%
California Federal Bank, 10.625% Non-Cum., Series B................ 1,995 $ 215,460
First Nationwide Bank, 11.50% Non-Cum. ............................ 10,000 1,135,000
SD Warren Co., 14% Sr. Exchangeable Preferred Stock (4)............ 20,000 650,000
SDW Holdings Corp., Units (each unit consists of ten shares of sr.
exchangeable preferred stock and one cl. B warrant to purchase
one share of common stock) (4)(5)(6)............................. 1,875 543,750
------------
2,544,210
------------
Total Convertible Sector (Cost $2,732,855)......................... 3,470,993
------------
CORPORATE SECTOR -- 31.8%
COMMON STOCKS -- 0.4%
Capital Gaming International, Inc. (6)............................. 7,198 1,539
Gaylord Container Corp. (6)........................................ 20,000 152,500
Grand Union Co. (6)................................................ 40,000 430,000
Hollywood Casino Corp. (6)......................................... 40,000 245,000
Kash 'N Karry Food Stores, Inc. (6)................................ 10,000 220,000
Triangle Wire & Cable, Inc. (3)(6)................................. 84,444 168,888
------------
1,217,927
------------
</TABLE>
<TABLE>
<CAPTION>
Face
Amount(1)
--------------
<S> <C> <C>
CORPORATE BONDS AND NOTES -- 31.4%
BASIC INDUSTRY -- 3.9%
Chemicals -- 0.2%
NL Industries, Inc., 11.75% Sr. Sec. Nts., 10/15/03................ $ 500,000 532,500
------------
Metals/Mining -- 1.3%
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts., 9/1/03........ 1,000,000 1,072,850
Kaiser Aluminum & Chemical Corp., 9.875% Sr. Nts., 2/15/02......... 2,000,000 2,055,000
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05.......... 530,000 597,575
------------
3,725,425
------------
</TABLE>
4
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Paper -- 2.1%
Gaylord Container Corp., 11.50% Sr. Nts., 5/15/01.................. $ 500,000 $ 515,000
Repap Wisconsin, Inc.:
9.25% First Priority Sr. Sec. Nts., 2/1/02....................... 2,250,000 2,182,500
9.875% Second Priority Sr. Nts., 5/1/06.......................... 750,000 727,500
Riverwood International Corp., 11.25% Sr. Sub. Nts., 6/15/02....... 650,000 695,500
SD Warren Co., 12% Sr. Sub. Nts., 12/15/04......................... 1,150,000 1,282,250
Stone Container Corp., 10.75% First Mtg. Nts., 10/1/02............. 750,000 787,500
------------
6,190,250
------------
Steel -- 0.3%
WCI Steel, Inc., 10.50% Sr. Gtd. Nts., Series B, 3/1/02............ 1,000,000 962,500
------------
CONSUMER RELATED -- 8.4%
Consumer Products -- 0.9%
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 10.591%, 5/27/98 (14).................................. 1,250,000 998,438
Revlon Consumer Products Corp., 10.50% Sr. Sub. Nts.,
Series B, 2/15/03................................................ 500,000 516,875
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05 (4)................ 500,000 481,875
Selmer Co., Inc., 11% Sr. Sub. Nts., 5/15/05....................... 500,000 492,500
------------
2,489,688
------------
Food/Beverages/Tobacco -- 0.7%
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03............. 1,000,000 1,002,500
Di Giorgio Corp., 12% Sr. Nts., 2/15/03............................ 750,000 579,375
Specialty Foods Corp., 11.125% Sr. Nts., Series A, 10/1/02 (4)..... 500,000 477,500
------------
2,059,375
------------
Healthcare -- 2.0%
AmeriSource Corp., 11.25% Sr. Debs., 7/15/05 (7)................... 250,000 271,250
Charter Medical Corp., 11.25% Sr. Sub. Nts., 4/15/04............... 1,000,000 1,087,500
Quorum Health Group, Inc., 11.875% Sr. Sub. Nts., 12/15/02......... 1,500,000 1,650,000
Tenet Healthcare Corp., 10.125% Sr. Sub. Nts., 3/1/05.............. 1,500,000 1,623,750
Total Renal Care, Inc., Units (each unit consists of $1,000
principal amount of 0%/12% sr. sub. disc. nts., 8/15/04 and nine
shares of non-voting Cl. B common stock) (5)(8).................. 1,150,000 1,155,750
------------
5,788,250
------------
</TABLE>
5
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Hotel/Gaming -- 3.5%
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series A, 11/15/00
(3).............................................................. $ 550,000 $ 434,500
Aztar Corp., 13.75% Sr. Sub. Nts., 10/1/04......................... 500,000 542,500
Bally's Casino Holdings, Inc., Zero Coupon Sr. Disc. Nts., 10.901%,
6/15/98 (14)..................................................... 500,000 388,125
Bally's Park Place Funding, Inc., 9.25% Gtd. First Mtg. Nts.,
3/15/04.......................................................... 500,000 495,625
Boyd Gaming Corp., 10.75% Sr. Sub. Nts., 9/1/03.................... 750,000 793,125
Capital Gaming International, Inc. Promissory Nts. (6)............. 5,500 --
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A,
11/15/00 (3)(6).................................................. 200,000 178,000
Empress River Casino Finance Corp., 10.75% Gtd. Sr. Nts., 4/1/02... 1,250,000 1,262,500
HMH Properties, Inc., 9.50% Sr. Sec. Nts., 5/15/05 (4)............. 1,000,000 1,007,500
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts., 11/15/02
(4).............................................................. 500,000 526,250
Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05 (4)....... 1,500,000 1,470,000
Station Casinos, Inc., 9.625% Sr. Sub. Nts., 6/1/03................ 1,700,000 1,644,750
Trump Plaza Funding, Inc., 10.875% Gtd. Mtg. Nts., 6/15/01......... 850,000 799,000
Trump Taj Mahal Funding, Inc., 11.35% Debs., Series A, 11/15/99.... 1,000,000 859,685
------------
10,401,560
------------
Restaurants -- 0.5%
Carrols Corp., 11.50% Sr. Nts., 8/15/03............................ 500,000 500,000
Flagstar Corp., 10.75% Sr. Nts., 9/15/01........................... 500,000 466,250
Foodmaker, Inc., 9.25% Sr. Nts., 3/1/99............................ 500,000 463,750
------------
1,430,000
------------
Textile/Apparel -- 0.8%
Consoltex Group, Inc., 11% Gtd. Sr. Sub. Nts., Series B, 10/1/03... 1,000,000 945,000
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05........... 1,500,000 1,507,500
------------
2,452,500
------------
ENERGY -- 2.5%
Chesapeake Energy Corp., 10.50% Sr. Nts., 6/1/02................... 500,000 507,500
Crown Central Petroleum Corp., 10.875% Sr. Nts., 2/1/05............ 500,000 523,750
Ferrellgas LP/Ferrellgas Finance Corp., 10% Sr. Nts., 8/1/01....... 1,000,000 1,052,500
Giant Industries, Inc., 9.75% Sr. Sub. Nts., 11/15/03.............. 250,000 255,000
Kelley Oil & Gas Corp., 13.50% Sr. Nts., 6/15/99................... 850,000 726,750
OPI International, Inc., 12.875% Gtd. Sr. Nts., 7/15/02............ 1,000,000 1,137,500
</TABLE>
6
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
ENERGY (CONTINUED)
Petroleum Heat & Power Co., Inc.:
12.25% Sub. Debs., 2/1/05........................................ $ 750,000 $ 828,750
9.375% Sub. Debs., 2/1/06........................................ 400,000 380,000
Santa Fe Energy Resources, Inc., 11% Sr. Sub. Debs., 5/15/04....... 1,000,000 1,075,000
United Meridian Corp., 10.375% Sr. Sub. Nts., 10/15/05............. 700,000 719,250
------------
7,206,000
------------
FINANCIAL SERVICES -- 1.1%
Diversified Financial -- 0.6%
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98...................... 750,000 671,250
Olympic Financial Ltd., 13% Sr. Nts., 5/1/00....................... 1,000,000 1,095,000
------------
1,766,250
------------
Insurance -- 0.5%
American Life Holding Co., 11.25% Sr. Sub. Nts., 9/15/04........... 790,000 825,550
Chartwell Re Corp., 10.25% Sr. Nts., 3/1/04........................ 500,000 502,500
------------
1,328,050
------------
HOUSING RELATED -- 1.2%
Building Materials -- 0.9%
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03........................ 1,000,000 945,000
Southdown, Inc., 14% Sr. Sub. Nts., Series B, 10/15/01............. 1,500,000 1,657,500
------------
2,602,500
------------
Homebuilders/Real Estate -- 0.3%
NVR, Inc., 11% Gtd. Sr. Nts., 4/15/03.............................. 500,000 487,500
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Nts.,
4/1/02........................................................... 500,000 518,750
------------
1,006,250
------------
MANUFACTURING -- 1.5%
Aerospace/Electronics/Computers -- 0.5%
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01....................... 500,000 517,500
Unisys Corp., 13.50% Credit Sensitive Nts., 7/1/97 (9)............. 1,000,000 1,025,000
------------
1,542,500
------------
Automotive -- 1.0%
Aftermarket Technology Corp., 12% Sr. Sub. Nts., Series B,
8/1/04........................................................... 1,350,000 1,434,375
Foamex LP/JPS Automotive Corp., 0%/14% Sr. Disc. Nts.,
Series B, 7/1/04 (8)............................................. 1,000,000 562,500
JPS Automotive Products Corp., 11.125% Sr. Nts., 6/15/01........... 1,000,000 1,015,000
------------
3,011,875
------------
</TABLE>
7
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Capital Goods -- 0.0%
Farley, Inc., Zero Coupon Sub. Debs., 14.167%, 12/30/12 (14)....... $ 198,000 $ 19,107
------------
MEDIA -- 4.6%
Broadcasting -- 1.5%
New World Communications Group Holding Corp., Zero Coupon Sr. Disc.
Nts., Series B, 11.907%, 6/15/99 (14)............................ 1,250,000 843,750
Paxson Communications Corp., 11.625% Sr. Sub. Nts.,
10/1/02 (4)...................................................... 500,000 492,500
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05......... 1,600,000 1,652,000
Univision Television Group, Inc., 11.75% Sr. Sub. Nts., 1/15/01.... 1,300,000 1,417,000
------------
4,405,250
------------
Cable Television -- 2.5%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts.,
6/15/04 (8)...................................................... 1,022,000 666,855
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05.............. 300,000 302,250
Cablevision Industries Corp., 10.75% Sr. Nts., 1/30/02............. 500,000 545,625
Century Communications Corp., 9.50% Sr. Nts., 3/1/05............... 1,000,000 1,012,500
Comcast Corp., 10.625% Sr. Sub. Debs., 7/15/12..................... 500,000 550,000
Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13............. 800,000 844,000
Helicon Group LP/Helicon Capital Corp., 9% Sr. Sec. Nts., Series B,
11/1/03 (9)...................................................... 625,000 584,375
International CableTel, Inc., 0%/10.875% Sr. Deferred Coupon Nts.,
10/15/03 (8)..................................................... 1,000,000 682,500
Marcus Cable Operating Co. LP/Marcus Cable Capital Corp., 0%/13.50%
Gtd. Sr. Sub. Disc. Nts., Series II, 8/1/04 (8).................. 250,000 175,000
People's Choice TV Corp., Units (each unit consists of $1,000
principal amount of 0%/13.125% sr. disc. nts., 6/1/04 and one
warrant to purchase 1.427 shares of common stock) (5)(8)......... 250,000 139,375
PriCellular Wireless Corp., 0%/12.25% Sr. Sub. Disc. Nts., 10/1/03
(8).............................................................. 1,700,000 1,258,000
Wireless One, Inc., Units (each unit consists of $1,000 principal
amount of 13% sr. nts. and three warrants to purchase one share
of common stock at $11.55) (5)................................... 650,000 674,375
------------
7,434,855
------------
</TABLE>
8
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Diversified Media -- 0.5%
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts.,
8/1/03 (8)....................................................... $ 2,000,000 $ 1,605,000
------------
Publishing/Printing -- 0.1%
Bell & Howell Holdings Co., 0%/11.50% Sr. Disc. Debs.,
Series B, 3/1/05 (8)............................................. 500,000 315,000
------------
OTHER -- 0.6%
Environmental -- 0.1%
Envirotest Systems Corp., 9.125% Sr. Nts., 3/15/01................. 500,000 392,500
------------
Services -- 0.5%
Protection One Alarm Monitoring, Inc., Units (each unit consists of
ten $1,000 principal amount of 0%/13.625% sr. sub. disc. nts.,
6/30/95 and 32 warrants, each warrant entitles holder to purchase
1 share of Protection One, Inc. common stock) (4)(5)............. 2,000,000 1,430,000
------------
RETAIL -- 3.9%
Drug Stores -- 0.5%
Duane Reade, 12% Sr. Nts., Series B, 9/15/02....................... 750,000 691,875
Thrifty Payless, Inc., 11.75% Sr. Nts., 4/15/03.................... 750,000 798,750
------------
1,490,625
------------
Specialty Retailing -- 1.2%
Brylane LP/Brylane Capital Corp., 10% Sr. Sub. Nts.,
Series B, 9/1/03................................................. 1,000,000 932,500
Cole National Group, Inc., 11.25% Sr. Nts., 10/1/01................ 750,000 746,250
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03................ 850,000 837,250
United Stationers Supply Co., 12.75% Sr. Sub. Nts., 5/1/05 (4)..... 1,000,000 1,075,000
------------
3,591,000
------------
Supermarkets -- 2.2%
Grand Union Co., 12% Sr. Nts., 9/1/04.............................. 3,100,000 2,999,250
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03 (7)....... 899,600 884,569
Penn Traffic Co., 9.625% Sr. Sub. Nts., 4/15/05.................... 3,000,000 2,190,000
Ralph's Grocery Co., 10.45% Sr. Nts., 6/15/04...................... 500,000 503,750
------------
6,577,569
------------
</TABLE>
9
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
TRANSPORTATION -- 0.9%
Railroads -- 0.6%
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc.
Nts., Series B, 12/15/03 (8)..................................... $ 2,500,000 $ 1,637,500
------------
Shipping -- 0.3%
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts., 7/1/04.......... 900,000 922,500
------------
UTILITIES -- 2.8%
Electric Utilities -- 0.1%
DeepTech International, Inc., 12% Sr. Sec. Nts., 12/15/00.......... 300,000 264,750
------------
Telecommunications -- 2.7%
Cellular Communications International, Inc., Units (each unit
consists of $1,000 principal amount of zero coupon sr. disc.
nts., 8/15/00 and one warrant to purchase 1.126 shares of common
stock) (5)....................................................... 2,500,000 1,425,000
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03 (8).......... 2,000,000 1,560,000
Horizon Cellular Telephone LP/Horizon Finance Corp., 0%/11.375%
Sr. Sub. Disc. Nts., 10/1/00 (8)................................. 2,000,000 1,710,000
In-Flight Phone Corp., Units (each unit consists of $1,000
principal amount of 0%/14% sr. disc. nts., series A, 5/15/02 and
one warrant to purchase one share of common stock) (4)(5)(8)..... 900,000 360,000
IntelCom Group (USA), Inc. (ICG) and IntelCom Group, Inc., Units
(each unit consists of ten 0%/13.50% sr. disc. nts., 9/15/05 of
ICG and 33 warrants to purchase an equal number of common shares
of IntelCom at an exercise price equal to $12.51 per share)
(4)(5)(8)........................................................ 1,250,000 706,250
MFS Communications, Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04 (8).... 700,000 542,500
PriCellular Wireless Corp., 0%/14% Sr. Sub. Disc. Nts., 11/15/01
(8).............................................................. 2,000,000 1,700,000
------------
8,003,750
------------
Total Corporate Sector (Cost $92,473,078).......................... 93,802,806
------------
</TABLE>
10
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
INTERNATIONAL SECTOR -- 32.0%
FOREIGN CERTIFICATES OF DEPOSIT -- 5.4%
Bank Pacific CD, Zero Coupon, 17.947%, 3/5/96 (10)(14) (IDR)....... 1,000,000,000 $ 412,373
Citibank, 11.75% CD, 11/8/95 (10) (CLP)............................ 2,483,246,287 5,988,775
CS First Boston, Inc. CD,
15.75%, 6/11/96 (4)(10) (IDR).................................... 4,448,000,000 1,958,608
12.50%, 12/21/95 (4)(10) (ARA)................................... 1,500,000 1,500,191
Indonesia (Republic of) Bank Negara CD, Zero Coupon, 15.909%,
6/17/96 (10)(14) (IDR)........................................... 4,000,000,000 1,582,563
Thai Military Bank Ltd. CD:
11%, 11/30/95 (10) (THB)......................................... 75,000,000 2,980,919
11%, 12/15/95 (10) (THB)......................................... 20,000,000 794,912
10%, 1/31/96 (10) (THB).......................................... 20,000,000 794,671
------------
16,013,012
------------
FOREIGN CORPORATE BONDS AND NOTES -- 6.2%
BASIC INDUSTRY -- 0.9%
Paper -- 0.9%
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts., 10/1/05... 500,000 512,500
QUNO Corp., 9.125% Sr. Nts., 5/15/05............................... 1,500,000 1,507,500
Repap New Brunswick, Inc., 9.25% First Priority Sr. Sec. Nts.,
7/15/00 (9)...................................................... 600,000 600,000
------------
2,620,000
------------
CONSUMER RELATED -- 0.6%
Textile/Apparel -- 0.6%
PT Polysindo Eka Perkasa:
13% Sr. Nts., 6/15/01............................................ 1,000,000 1,045,000
Zero Coupon Promissory Nts., 17.899%, 10/23/96 (14) (IDR)........ 2,000,000,000 704,535
------------
1,749,535
------------
FINANCIAL SERVICES -- 2.7%
Banks & Thrifts -- 1.9%
Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97............................................ 500,000 475,000
11% Unsub. Unsec. Nts., 11/24/97................................. 1,800,000 1,710,000
Banco Ganadero SA, Zero Coupon:
Nts., 9.928%, 7/1/96 (4)(14)..................................... 1,000,000 938,636
Sr. Unsub. Unsec. Nts., 9.928%, 6/15/96 (4)(14).................. 500,000 471,338
</TABLE>
11
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Banks & Thrifts (Continued)
Banco Mexicano SA, 8% Sr. Unsub. Unsec. Exchangeable Medium-Term
Nts., 11/4/98.................................................... $ 1,000,000 $ 861,250
Morgan Stanley Group, 14.25% Indian Rupee Indexed Nts.,
6/26/96 (INR).................................................... 15,705,000 459,210
Rabobank Nederland, 11.05% Sr. Unsec. Debs., 12/12/97 (ITL)........ 1,175,000,000 742,598
------------
5,658,032
------------
Diversified Financial -- 0.8%
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98.................. 1,250,000 1,043,750
KfW International Finance, Inc., 11.625% Gtd. Nts., 11/27/98
(ITL)............................................................ 2,175,000,000 1,393,356
------------
2,437,106
------------
MEDIA -- 1.4%
Cable Television -- 1.1%
Bell Cablemedia PLC, 0%/11.95% Sr. Disc. Nts., 7/15/04 (8)......... 1,250,000 854,688
Diamond Cable Communications PLC, 0%/13.25% Sr. Disc. Nts., 9/30/04
(8).............................................................. 750,000 513,750
TeleWest Communications PLC, 0%/11% Sr. Disc. Debs., 10/1/07 (8)... 2,000,000 1,170,000
Videotron Holdings PLC, 0%/11% Sr. Disc. Nts., 8/15/05 (8)......... 1,000,000 596,250
------------
3,134,688
------------
Entertainment/Film -- 0.3%
Imax Corp., 7% Sr. Nts., 3/1/01 (11)............................... 1,000,000 967,500
------------
OTHER -- 0.6%
Services -- 0.6%
Acetex Corp., 9.75% Sr. Sec. Nts., 10/1/03 (4)..................... 1,750,000 1,802,500
------------
FOREIGN GOVERNMENT OBLIGATIONS -- 19.0%
Argentina -- 1.3%
Argentina (Republic of):
Medium-Term Nts., 8%, 8/9/97 (NLG)............................... 5,800,000 3,597,154
Sr. Unsec. Unsub. Bonds, 13.45%, 10/21/97 (ITL).................. 450,000,000 284,576
------------
3,881,730
------------
</TABLE>
12
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Australia -- 1.4%
First Australia National Mortgage Acceptance Corp. Ltd. Bonds,
Series 22, 11.40%, 12/15/01 (AUD)................................ 3,877,320 $ 3,173,724
South Australia Government Finance Gtd. Bonds,
12.50%, 10/15/00 (AUD)........................................... 1,150,000 1,016,120
------------
4,189,844
------------
Brazil -- 1.3%
Banco do Estado de Sao Paulo SA Nts., 9.25%, 10/4/96............... 1,000,000 960,000
Banco Estado Minas Gerais, 8.25%, 2/10/00.......................... 1,000,000 820,000
Brazil (Federal Republic of) Eligible Interest Bonds, 6.812%,
4/15/06 (9)...................................................... 3,000,000 1,995,000
------------
3,775,000
------------
Bulgaria -- 0.8%
Bulgaria (Republic of) Interest Arrears Bonds, 6.75%, 7/28/11
(9).............................................................. 5,500,000 2,440,625
------------
Costa Rica -- 0.4%
Central Bank of Costa Rica Principal Bonds, Series A, 6.25%,
5/21/10.......................................................... 1,900,000 1,111,500
------------
Ecuador -- 0.2%
Ecuador (Republic of) Disc. Bonds, 6.812%, 2/28/25 (9)............. 1,500,000 750,000
------------
Great Britain -- 1.2%
United Kingdom Treasury Nts., 12.50%, 11/21/05 (GBP)............... 1,800,000 3,597,315
------------
Ireland -- 0.3%
National Treasury Management Agency (Irish Government) Bonds, 9%,
7/15/01 (IEP).................................................... 575,000 993,529
------------
Jamaica -- 0.2%
Jamaica (Government of) 1990 Refinancing Agreement Nts., Tranche A,
6.75%, 10/16/00 (3)(9)........................................... 875,000 783,125
------------
Jordan -- 0.1%
Hashemite Kingdom of Jordan Par Bonds, 4%, 12/23/23 (11)........... 500,000 233,750
------------
</TABLE>
13
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Mexico -- 1.9%
Banco Nacional de Comercio Exterior SNC, Zero Coupon, 11.310%,
12/5/95 (4)(14).................................................. $ 1,500,000 $ 1,488,000
Banco Nacional de Obras y Servicios Publicos SA Nts., 10.75%,
8/16/96.......................................................... 500,000 504,375
United Mexican States:
Combined Facility 3, Loan Participation Agreement, Tranche A,
6.75%, 9/20/97 (3)(9).......................................... 413,723 287,020
Nacional Financiera SNC Nts., 13.60%, 4/2/98 (ESP)............... 100,000,000 803,681
Petroleos Mexicanos Gtd. Medium-Term Nts., 7.60%, 6/15/00........ 1,000,000 862,500
Petroleos Mexicanos Gtd. Sr. Unsec. Nts., 6.875%, 3/8/99 (9)..... 2,000,000 1,770,000
------------
5,715,576
------------
Morocco -- 1.5%
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 6.688%, 1/1/09 (9).................................... 6,000,000 3,626,250
Tranche B, 6.688%, 1/1/04 (9).................................... 1,000,000 676,250
------------
4,302,500
------------
New Zealand -- 1.6%
New Zealand (Republic of) Bonds, 10%, 7/15/97 (NZD)................ 6,800,000 4,669,442
------------
Norway -- 1.0%
Norwegian Government Gtd. Bonds, 9.50%, 10/31/02 (NOK)............. 15,700,000 2,905,074
------------
Panama -- 1.0%
Panama (Republic of) Debs., 7.25%, 5/10/02 (9)..................... 3,500,000 2,870,000
------------
Philippines -- 0.3%
Philippines (Republic of) Front-Loaded Interest Reduction Bonds,
Series B, 5%, 6/1/08 (11)........................................ 1,000,000 765,625
------------
Poland -- 0.6%
Poland (Republic of):
Disc. Bonds, 6.875%, 10/27/24 (9)................................ 2,000,000 1,532,500
Treasury Bills, Zero Coupon, 24.957%, 4/17/96 (14) (PLZ)......... 1,000,000 364,614
------------
1,897,114
------------
</TABLE>
14
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
Portugal -- 1.0%
Portugal (Republic of) Gtd. Bonds, Obrigicion do tes Medio Prazo,
11.875%, 2/23/00 (PTE)........................................... 410,000,000 $ 2,859,533
------------
Spain -- 2.0%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
12.25%, 3/25/00 (ESP)............................................ 683,000,000 5,904,248
------------
Sweden -- 0.9%
Sweden (Kingdom of) Bonds, Series 1028, 11%, 1/21/99 (SEK)......... 15,800,000 2,519,647
------------
</TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
------- ------ ---------
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED -- 0.1%
Brazil (Federal Republic of) Eligible Interest Bonds,
6.812%, 4/15/06, Put Opt...................................... Jan. 96 $64.75 3,000 44,100
Morocco (Kingdom of) Loan Participation Agreement, Tranche A,
6.688%, 1/1/09, Put Opt....................................... Jan. 96 60.25 6,000 161,610
-------------
205,710
-------------
</TABLE>
<TABLE>
<CAPTION>
Face
Amount(1)
--------------
<S> <C> <C>
STRUCTURED INSTRUMENTS -- 1.3%
Canadian Imperial Bank, 10% Certificate of Deposit British Pound
Sterling Maximum Rate Linked Nts., 11/8/96 (indexed to the
3-month GBP LIBOR, multiplied by 9) (3).......................... $ 750,000 762,300
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.,
13.471%, 12/14/95 (indexed to the Nota Do Tesouro Nacional, Zero
Coupon, 12/13/95) (14)........................................... 1,500,000 1,477,392
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.,
11.245%, 2/15/96 (indexed to the Nota Do Tesouro Nacional, Zero
Coupon, 2/15/96) (14)............................................ 1,500,000 1,452,954
------------
3,692,646
------------
Total International Sector (Cost $94,485,900)...................... 94,445,906
------------
MORTGAGE-BACKED OBLIGATIONS -- 23.0%
GOVERNMENT AGENCY -- 21.8%
FHLMC/FNMA/Sponsored -- 9.6%
Federal Home Loan Mortgage Corp.:
Certificates of Participation, 12%, 5/1/10-6/1/15................ 3,050,721 3,453,450
</TABLE>
15
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
-------------- ------------
<S> <C> <C>
FHLMC/FNMA/Sponsored (Continued)
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, 6.65%, 4/15/21..................... $ 4,700,000 $ 4,648,582
Gtd. Multiclass Mtg. Participation Certificates, 8%, 8/1/24........ 4,525,714 4,638,857
Federal National Mortgage Assn.:
11%, 7/1/16...................................................... 1,279,171 1,438,269
7.50%, 8/1/25.................................................... 3,179,759 3,212,543
Certificates of Participation, 13%, 6/1/15....................... 1,724,607 2,019,395
Interest-Only Stripped Mtg.-Backed Security, Trust 222, Cl. 2,
9.23%, 6/1/23 (12)............................................. 27,415,219 8,211,715
Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl. 2,
11.315%, 9/1/23 (12)........................................... 1,999,445 611,081
------------
28,233,892
------------
GNMA/Guaranteed -- 12.2%
Government National Mortgage Assn.:
12%, 11/20/13-9/20/15............................................ 941,201 1,070,024
6%, 11/15/25 (13)................................................ 8,500,000 8,515,938
7.50%, 8/15/25-9/15/25........................................... 12,228,164 12,362,654
8%, 5/15/24-9/15/24.............................................. 13,550,481 13,944,264
------------
35,892,880
------------
PRIVATE -- 1.2%
Commercial -- 1.2%
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1992-CHF, Cl. E, 8.25%, 12/25/20.......................... 3,735,857 3,594,011
------------
Total Mortgage-Backed Obligations (Cost $67,771,931)............... 67,720,783
------------
MONEY MARKET SECTOR -- 2.2%
Repurchase agreement with Zion First National Bank, 5.85%, dated
10/31/95, to be repurchased at $6,601,073 on 11/1/95,
collateralized by U.S. Treasury Nts., 4.375%-7.25%,
8/15/96-5/15/97, with a value of $6,741,230 (Cost $6,600,000).... 6,600,000 6,600,000
------------
Total Investments, at Value (Cost $295,001,871).................... 101.3% 299,026,525
Liabilities in Excess of Other Assets.............................. (1.3) (3,898,202)
-------------- ------------
Net Assets......................................................... 100.0% $295,128,323
============== ============
</TABLE>
16
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Sector Income Trust
(1) Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
<TABLE>
<S> <C> <C>
ARA -- Argentine Austral
AUD -- Australian Dollar
CLP -- Chilean Peso
ESP -- Spanish Peseta
GBP -- British Pound Sterling
IDR -- Indonesian Rupiah
IEP -- Irish Punt
INR -- Indian Rupee
ITL -- Italian Lira
NLG -- Netherlands Guilder
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
PLZ -- Polish Zloty
PTE -- Portuguese Escudo
SEK -- Swedish Krona
THB -- Thai Baht
</TABLE>
(2) A sufficient amount of liquid assets has been designated to cover
outstanding written call options, as follows:
<TABLE>
<CAPTION>
FACE AMOUNT MARKET
SUBJECT TO EXPIRATION EXERCISE PREMIUM
VALUE
CALL DATE PRICE RECEIVED SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Bulgaria (Republic of) Interest Arrears
Bonds, 6.75%, 7/28/11.................................... $5,500,000 1/22/96 $45.00 $78,650 $ 64,350
Call Option on Spain (Kingdom of) Gtd. Bonds, Bonos y
Obligacion del Estado, 12.25%, 3/25/00................... 271,000,000ESP 11/24/95 105.47ESP 12,797
17,069
------- ---------
$91,447 $ 81,419
======= =========
</TABLE>
(3) Identifies issue considered to be illiquid -- See Note 6 of Notes to
Financial Statements.
(4) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $17,523,157 or 5.94% of the Fund's
net assets, at October 31, 1995.
(5) Units may be comprised of several components, such as debt and equity
and/or warrants to purchase equity at some point in the future. For units
which represent debt securities, face amount disclosed represents total
underlying principal.
(6) Non-income producing security.
(7) Interest or dividend is paid in kind.
(8) Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
(9) Represents the current interest rate for a variable rate security.
(10) Indexed instrument for which the principal amount and/or interest due at
maturity is affected by the relative value of a foreign currency.
(11) Represents the current interest rate for an increasing rate security.
(12) 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.
(13) When-issued security to be delivered and settled after October 31, 1995.
(14) For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
See accompanying Notes to Financial Statements.
17
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1995
Oppenheimer Multi-Sector Income Trust
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $295,001,871) -- see accompanying statement................. $299,026,525
Net unrealized appreciation on forward foreign currency exchange contracts -- Note 7.... 350,436
Receivables:
Interest and principal paydowns....................................................... 6,686,995
Investments sold...................................................................... 5,452,532
Other................................................................................... 143,783
------------
Total assets........................................................................ 311,660,271
------------
LIABILITIES:
Bank overdraft.......................................................................... 568,379
Options written, at value (premiums received $91,447) -- Note 4......................... 81,419
Payables and other liabilities:
Investments purchased................................................................. 15,357,437
Dividends............................................................................. 244,262
Deferred trustees' fees -- Note 1..................................................... 113,074
Management and administrative fees -- Note 5.......................................... 60,548
Transfer agent and accounting services fees........................................... 15,161
Other................................................................................. 91,668
------------
Total liabilities................................................................... 16,531,948
------------
NET ASSETS.............................................................................. $295,128,323
============
COMPOSITION OF NET ASSETS:
Par value of shares of beneficial interest.............................................. $ 291,161
Additional paid-in capital.............................................................. 315,440,767
Overdistributed net investment income................................................... (113,075)
Accumulated net realized loss from investment, written option and foreign currency
transactions.......................................................................... (24,865,208)
Net unrealized appreciation on investments, written options and translation of assets
and liabilities denominated in foreign currencies..................................... 4,374,678
------------
NET ASSETS -- Applicable to 29,116,068 shares of beneficial interest outstanding........ $295,128,323
============
NET ASSET VALUE PER SHARE............................................................... $10.14
=======
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1995
Oppenheimer Multi-Sector Income Trust
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $193,536)................................. $30,316,133
Dividends............................................................................... 160,706
-----------
Total income................................................................... 30,476,839
-----------
EXPENSES:
Management fees -- Note 5............................................................... 1,877,737
Administrative fees -- Note 5........................................................... 577,765
Shareholder reports..................................................................... 150,863
Custodian fees and expenses............................................................. 142,278
Transfer agent and accounting service fees -- Note 5.................................... 66,926
Legal and auditing fees................................................................. 46,702
Trustees' fees and expenses............................................................. 44,903
Registration and filing fees............................................................ 33,875
Other................................................................................... 77,493
-----------
Total expenses................................................................. 3,018,542
-----------
NET INVESTMENT INCOME................................................................... 27,458,297
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS WRITTEN AND FOREIGN
CURRENCY:
Net realized gain (loss) on:
Investments........................................................................... (9,572,176)
Closing of futures contracts.......................................................... 69,120
Closing and expiration of options written -- Note 4................................... (86,336)
Foreign currency transactions......................................................... (258,123)
-----------
Net realized loss.............................................................. (9,847,515)
-----------
Net change in unrealized appreciation or depreciation on:
Investments and options written....................................................... 10,663,948
Translation of assets and liabilities denominated in foreign currencies............... (2,066,211)
-----------
Net change..................................................................... 8,597,737
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS, OPTIONS WRITTEN AND FOREIGN
CURRENCY... (1,249,778)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... $26,208,519
===========
</TABLE>
See accompanying Notes to Financial Statements.
19
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 27,458,297 $ 28,123,352
Net realized loss on investments, options written and foreign currency
transactions........................................................... (9,847,515) (7,693,213)
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated
in foreign currencies.................................................. 8,597,737 (15,068,472)
------------ ------------
Net increase in net assets resulting from operations................. 26,208,519 5,361,667
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income..................................... (26,608,817) (24,512,388)
Tax return of capital distribution....................................... (625,807) (3,638,975)
BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from shares issued to shareholders in reinvestment of
dividends -- Note 2.................................................... 496,299 1,801,323
------------ ------------
Total decrease in net assets............................................. (529,806) (20,988,373)
NET ASSETS:
Beginning of period...................................................... 295,658,129 316,646,502
------------ ------------
End of period (including overdistributed net investment income of
$113,075 and $3,324,611, respectively)................................. $295,128,323 $295,658,129
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE>
FINANCIAL HIGHLIGHTS
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(1)
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period................ $ 10.17 $ 10.96 $ 10.46 $ 10.64 $ 9.88 $ 10.63 $ 11.17 $ 11.16
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
investment operations:
Net investment income.... .94 1.00 1.08 1.06 1.11 1.15 1.12 .64
Net realized and
unrealized gain
(loss)................. (.04) (.82) .43 (.08) .82 (.78) (.52) .05
-------- -------- -------- -------- -------- -------- -------- --------
Total income from
investment
operations........... .90 .18 1.51 .98 1.93 .37 .60 .69
-------- -------- -------- -------- -------- -------- -------- --------
Dividends and
distributions to
shareholders:
Dividends from net
investment income...... (.91) (.84) (1.01) (1.16) (1.07) (1.10) (1.13) (.59)
Distributions from net
realized gain.......... -- -- -- -- (.10) (.02) (.01) (.06)
Tax return of capital.... (.02) (.13) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions to
shareholders......... (.93) (.97) (1.01) (1.16) (1.17) (1.12) (1.14) (.65)
Offering costs............ -- -- -- -- -- -- -- (.03)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period................... $ 10.14 $ 10.17 $ 10.96 $ 10.46 $ 10.64 $ 9.88 $ 10.63 $ 11.17
======== ======== ======== ========
======== ======== ======== ========
Market value, end of
period................... $ 10.00 $ 9.50 $ 11.25 $ 11.13 $ 11.13 $ 9.38 $ 10.13 $ 11.50
TOTAL RETURN, AT MARKET
VALUE(2)................. 15.62% (7.46)% 11.10% 11.48% 33.05% 4.09% (1.86)%
6.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)........... $295,128 $295,658 $316,647 $299,368 $301,568 $278,511 $299,673
$314,656
Average net assets (in
thousands)............... $288,884 $306,686 $307,244 $303,773 $289,681 $290,533 $307,735
$311,254
Number of shares
outstanding at end of
period (in thousands).... 29,116 29,065 28,896 28,625 28,347 28,194 28,194 28,162
Ratios to average net
assets:
Net investment income.... 9.51% 9.17% 10.13% 9.95% 10.80% 11.16% 10.28%
9.80%(3)
Expenses................. 1.05% 1.02% 1.00% 1.11% 1.16%(4) 1.03% 1.03%
1.01%(3)
Portfolio turnover
rate(5).................. 240.1% 187.6% 131.3% 95.9% 59.7% 85.7% 162.0%
60.1%
</TABLE>
(1) For the period from March 24, 1988 (commencement of operations) to October
31, 1988.
(2) 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. Total
returns are not annualized for periods of less than one full year.
(3) Annualized.
(4) Includes $.01 per share of federal excise tax expense. The expense ratio,
exclusive of federal excise tax expense, was 1.10%.
(5) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the period ended October 31, 1995 were
$637,018,865 and $644,253,972, respectively.
See accompanying Notes to Financial Statements.
21
<PAGE>
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 advisor is Oppenheimer
Management Corporation (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 on which day 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 asked price or the last
sale price on the prior trading day. Long-term and short-term "non-money market"
debt securities are valued by a portfolio pricing service approved by the Board
of Trustees. Such securities which cannot be valued by the approved portfolio
pricing service are valued using dealer-supplied valuations provided the Manager
is satisfied that the firm rendering the quotes is reliable and that the quotes
reflect current market value, or are valued under consistently applied
procedures established by the Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount. 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. 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 or asked price closest to the last reported sale price is used.
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 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. At October 31, 1995, the
Trust had available for federal income tax purposes an unused capital loss
carryover of approximately $22,900,000, $6,700,000 of which will expire in 1998,
$2,500,000 in 1999, $4,500,000 in 2002 and $9,200,000 in 2003.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
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, 1995, the Trust's projected benefit obligations were reduced by
$2,641. In addition, one retired trustee is eligible for payments under the
Trust's retirement plan and a payment of $2,026 was made. The accumulated
liability for the Trust's projected benefit obligations was $113,074 at October
31, 1995.
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 the recognition of paydown gains and losses and certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year that the
income or realized gain (loss) was recorded by the Trust.
During the year ended October 31, 1995, the Trust changed the classification of
distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with
income tax regulations. Accordingly, during the year ended October 31, 1995,
amounts have been reclassified to reflect a decrease in paid-in capital of
$3,832,676, a decrease in overdistributed net investment income of $2,987,863,
and a decrease in accumulated net realized loss on investments of $844,813.
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.
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of $.01 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1995 October 31, 1994
------------------ ---------------------
Shares Amount Shares Amount
------ -------- ------- ----------
<S> <C> <C> <C> <C>
Net increase from
dividends reinvested..... 51,219 $496,299 168,788 $1,801,323
</TABLE>
3. UNREALIZED GAINS AND LOSSES ON
INVESTMENTS
At October 31, 1995, net unrealized appreciation on investments and options
written of $4,034,682 was composed of gross appreciation of $9,659,546, and
gross depreciation of $5,624,864.
4. OPTION ACTIVITY
The Trust may buy put and call options, or write covered call options on
portfolio securities or cash secured put options in order to produce incremental
earnings or protect against changes in the value of portfolio securities.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
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.
In this report, securities designated to cover outstanding call options are
noted in the Statement of Investments. Shares subject to call, expiration date,
exercise price, premium received and market value are detailed in a footnote to
the Statement of Investments. Options written are reported as a liability in the
Statement of Assets and Liabilities. Gains and losses are reported in the
Statement of Operations.
The risk in writing a call option is that the 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, 1995 was as follows:
<TABLE>
<CAPTION>
Call Options
--------------------
Number Amount
of of
Options Premiums
------- ---------
<S> <C> <C>
Options outstanding at October 31, 1994..... -- --
Options written............................. 38,535 $ 312,206
Options cancelled in closing transactions... (15,932) (137,048)
Options expired............................. (6,874) (22,375)
Options exercised........................... (7,984) (61,336)
------ ---------
Options outstanding at October 31, 1995..... 7,745 $ 91,447
====== =========
</TABLE>
<TABLE>
<CAPTION>
Put Options
--------------------
Number Amount
of of
Options Premiums
-------- --------
<S> <C> <C>
Options outstanding at October 31, 1994.... -- --
Options written............................ 856,164 $ 8,850
Options expired............................ (856,164) (8,850)
-------- -------
Options outstanding at October 31, 1995.... -- $ --
======== =======
</TABLE>
5. 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 .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 .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.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
6. ILLIQUID AND RESTRICTED SECURITIES
At October 31, 1995, investments in securities included issues that are illiquid
or restricted. The securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. The Trust intends to invest no more
than 10% of its net assets (determined at the time of purchase) in illiquid or
restricted securities. The aggregate value of these securities subject to this
limitation at October 31, 1995 was $2,638,989 which represents .89% of the
Trust's net assets. Information concerning these securities is as follows:
<TABLE>
<CAPTION>
Valuation Per
Acquisition Cost Unit as of
Security Date Per Unit October 31, 1995
- ------------------------------ ----------- -------- ---------------
<S> <C> <C> <C>
Arizona Charlie's, Inc., 12%
First Mtg. Nts., Series A,
11/15/00..................... 11/18/93 $100.00 $ 79.00
Becker Gaming, Inc. Wts.,
Exp. 11/00................... 11/18/93 $ 2.00 $ 1.00
Canadian Imperial Bank, 10%
Certificate of Deposit
British Pound Sterling
Maximum Rate Linked Nts.,
11/8/96...................... 4/28/95 $100.00 $102.00
Capitol Queen & Casino, Inc.,
12% First Mtg. Nts., Series
A, 11/15/00.................. 11/18/93 $ 87.50 $ 89.00
Jamaica (Government of) 1990
Refinancing Agreement Nts., 7/12/95-
Tranche A, 6.75%, 10/16/00... 8/15/95 $ 88.75 $ 89.50
Purity Supreme, Inc. Wts.,
Exp. 8/97.................... 7/29/92 -- $ .02
Triangle Wire & Cable, Inc.
Common Stock................. 5/2/94 $ 9.50 $ 2.00
United Mexican States,
Combined Facility 3, Loan
Participation Agreement,
Tranche A, 6.75%, 9/20/97.... 10/25/94 $ 89.00 $ 69.38
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
7. FORWARD FOREIGN CURRENCY EXCHANGE 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.
In this report, 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 and unrealized
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.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
At October 31, 1995, the Trust had outstanding forward contracts to purchase and
sell foreign currencies as follows:
<TABLE>
<CAPTION>
Contract Valuation Unrealized
Contracts Exchange Amount as of Appreciation
to Purchase Date (000s) October 31, 1995 (Depreciation)
- ----------- --------- ------------- ----------- --------
<S> <C> <C> <C> <C>
Canadian
Dollar
(CAD)..... 11/2/95 5,525 CAD $ 4,107,758 $ 75,647
German
Deutsche
Mark 11/6/95-
(DEM)..... 11/30/95 28,240 DEM 20,053,058 41,604
Netherlands
Guilder
(NLG)..... 11/1/95 1,607 NLG 1,017,098 (2,671)
Swedish
Krone
(SEK)..... 11/2/95 172 SEK 25,923 (69)
---- -------- ------
35,544 $25,203,837 $114,511
---- -------- ------
Contracts
to Sell
- -----------
Canadian
Dollar
(CAD)..... 11/2/95 5,525 CAD $ 4,107,758 $ 16,115
German
Deutsche
Mark 11/6/95-
(DEM)..... 11/30/95 28,240 DEM 20,053,058 219,808
New Zealand
Dollar
(NZD)..... 11/3/95 4 NZD 2,702 2
---- -------- ------
33,769 $24,163,518 235,925
------ ----------- --------
Net
Unrealized
Appreciation.. $350,436
========
</TABLE>
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
8. QUARTERLY RESULTS OF OPERATIONS: (UNAUDITED)
<TABLE>
<CAPTION>
Net Realized and
Unrealized Gain (Loss) Net Increase
on Investments, (Decrease) in Net
Options and Foreign Assets Resulting from
Net Investment Income Currency Transactions Operations Market Price
---------------------- ---------------------- ---------------------- on NYSE
Quarter Total Per Total Per Total Per -------------------
ended (000) Share (000) Share (000) Share High Low
- ------------- ------- ----- -------- ----- -------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
October 31, 1995... $ 6,825 $ .23 $ 454 $ .02 $ 7,279 $ .25 $ 10.00 $ 9.375
July 31, 1995...... 7,054 .24 6,929 .24 13,983 .48 9.875 9.375
April 30, 1995..... 6,516 .23 5,028 .17 11,544 .40 10.00 9.25
January 31, 1995... 7,063 .24 (13,660) (.47) (6,597) (.23) 10.00 8.875
------- ----- -------- ----- -------- -----
Totals... $27,458 $ .94 $ (1,249) $(.04) $ 26,209 $ .90
======= ===== ======== ===== ========
=====
October 31, 1994... $ 6,743 $ .23 $ (3,543) $(.12) $ 3,200 $ .11 $10.375 $ 9.125
July 31, 1994...... 7,104 .25 (2,081) (.08) 5,023 .17 10.625 10.00
April 30, 1994..... 7,073 .26 (24,698) (.87) (17,625) (.61) 11.375 10.00
January 31, 1994... 7,203 .26 7,561 .25 14,764 .51 11.375 10.625
------- ----- -------- ----- -------- -----
Totals... $28,123 $1.00 $(22,761) $(.82) $ 5,362 $ .18
======= ===== ======== ===== ========
=====
October 31, 1993... $ 7,974 $ .27 $ (3) $ .00 $ 7,971 $ .27 $11.375 $ 11.00
July 31, 1993...... 7,175 .25 4,200 .16 11,375 .41 11.375 11.00
April 30, 1993..... 7,782 .27 9,342 .31 17,124 .58 11.25 10.75
January 31, 1993... 8,200 .29 (1,263) (.04) 6,937 .25 11.00 10.00
------- ----- -------- ----- -------- -----
Totals... $31,131 $1.08 $ 12,276 $ .43 $ 43,407 $1.51
======= ===== ======== ===== ========
=====
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements.
(a) Statement of Investments - (See Part B, Statement of
Additional Information): filed herewith.
(b) Statement of Assets and Liabilities - (See Part B,
Statement of Additional Information): filed herewith.
(c) Statement of Operations - (See Part B, Statement of
Additional Information): filed herewith.
(d) Statements of Changes in Net Assets - (See Part B,
Statement of Additional Information): filed herewith.
(e) Financial Highlights - (See Part B, Statement of
Additional Information): filed herewith.
(f) Notes to Financial Statements - (See Part B, Statement
of Additional Information): filed herewith.
(g) Independent Auditors' Report - (See Part B, Statement
of Additional Information): filed herewith.
(h) Independent Auditors' Consent - (See Part B, Statement
of Additional Information): filed herewith.
2. Exhibits:
(a) (1) Declaration of Trust of Registrant (1)
(2) Amendment No. 1 dated as of March 10, 1988 to
Declaration of Trust of Registrant (2)
(3) Amendment No. 2 dated November 6, 1989 to
Declaration of Trust of Registrant: Filed with Amendment No. 8 to
Registrant's Registration Statement.
(b) By-Laws of Registrant (1) (amended by-laws)
(c) Inapplicable
(d) Specimen certificate for Shares of Beneficial Interest,
$.01 par value (2)
(e) Inapplicable
(f) Inapplicable
(g) (1) Investment Advisory Agreement with Oppenheimer
Management Corporation dated 10/22/90 - Filed with Post-Effective
Amendment No. 5 to Registrant's Registration Statement dated 2/27/91,
refiled with Post-Effective Amendment No. 8 to Registrant's
Registration Statement, and incorporated herein by reference.
(2) Form of Administration Agreement with Mitchell
Hutchins Asset Management Inc. (2)
(h) Form of Underwriting Agreement (2)
(i) Retirement Plan for Non-Interested Trustees (adopted by
Registrant on 6/7/90) -Filed with Post-Effective Amendment No. 45 to
the Registration Statement of Oppenheimer Special Fund (Reg. No. 2-
14586) dated 10/21/94, and incorporated herein by reference.
(j) Co-Custody Agreement, dated 8/18/92 - Previously filed with
Post-Effective Amendment No. 8 to Registrant's Registration Statement,
and incorporated herein by reference.
(k) Accounting Service Agreement: Filed herewith.
(l) Inapplicable
(m) Inapplicable
(n) Inapplicable
(o) Inapplicable
(p) Inapplicable
(q) Inapplicable
(r) Financial Data Schedule - Filed herewith
__________________
(1) Filed with Registrant's Registration Statement, 2/2/88, refiled
with Registrant's Post-Effective Amendment No. 8, 2/27/95, and
incorporated herein by reference.
(2) Filed with Amendment No. 2 to Registrant's Registration Statement,
3/24/88, refiled with Registrant's Post-Effective Amendment No. 8,
2/27/95, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
Item 25. Marketing Arrangements.
Inapplicable.
Item 26. Other Expenses of Issuance and Distribution.
Inapplicable.
Item 27. Persons Controlled by or under Common Control.
None.
Item 28. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at February 6, 1996
-------------- ------------------------
Shares of Beneficial Interest, 5,189
$.01 par value
Item 29. Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the
Registrant by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its By-laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation therein
of Sections 17(h) and 17(i) of the Investment Company Act remains in
effect.
Registrant, in conjunction with the Registrant's Trustees, and other
registered management investment companies managed by the Adviser,
generally maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant. However, in no
event will Registrant pay that portion of the premium, if any, for
insurance to indemnify any such person for any act for which Registrant
itself is not permitted to indemnify him.
Item 30. Business and Other Connections of Investment Adviser.
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same
capacity to other registered investment companies as described in Parts
A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which
each officer and director of OppenheimerFunds, Inc. is, or at any time
during the past two fiscal years has been, engaged for his/her own
account or in the capacity of director, officer, employee, partner or
trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- -------------------------------
<S> <C>
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Robert J. Bishop,
Assistant Vice President Treasurer of the Oppenheimer Funds
(listed below); previously a Fund
Controller for OppenheimerFunds,
Inc. (the "Adviser").
Bruce Bartlett,
Vice President Vice President and Portfolio
Manager of Oppenheimer Total
Return Fund, Inc., Oppenheimer
Main Street Funds, Inc. and
Oppenheimer Variable Account
Funds; formerly a Vice President
and Senior Portfolio Manager at
First of America Investment Corp.
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Secretary and Treasurer of the
Denver-based Oppenheimer Funds.
Vice President and Treasurer of
OppenheimerFunds Distributor, Inc.
(the "Distributor") and
HarbourView Asset Management
Corporation ("HarbourView"), an
investment adviser subsidiary of
the Adviser; Senior Vice
President, Treasurer, Assistant
Secretary and a director of
Centennial Asset Management
Corporation ("Centennial"), an
investment adviser subsidiary of
the Adviser; Vice President,
Treasurer and Secretary of
Shareholder Services, Inc. ("SSI")
and Shareholder Financial
Services, Inc. ("SFSI"), transfer
agent subsidiaries of the Adviser;
President, Treasurer and Director
of Centennial Capital Corporation;
Vice President and Treasurer of
Main Street Advisers.
Michael A. Carbuto,
Vice President Vice President and Portfolio
Manager of Centennial California
Tax Exempt Trust, Centennial New
York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice
President of Centennial.
William Colbourne,
Assistant Vice President Formerly, Director of Alternative
Staffing Resources, and Vice
President of Human Resources,
American Cancer Society.
Lynn Coluccy,
Vice President Formerly Vice President / Director
of Internal Audit of the Adviser.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street Research &
Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President Vice President and Portfolio
Manager of Oppenheimer Growth
Fund, Oppenheimer Variable Account
Funds; Senior Vice President and
Portfolio Manager of Oppenheimer
Strategic Income & Growth Fund;
Vice President of Oppenheimer
Quest Value Fund, Inc.,
Oppenheimer Quest Officers Value
Fund, Oppen-heimer Quest For Value
Funds and Oppenheimer Quest Global
Value Fund, Inc.
John Doney,
Vice President Vice President and Portfolio
Manager of Oppenheimer Equity
Income Fund.
Andrew J. Donohue,
Executive Vice President
& General Counsel Secretary of the New York-based
Oppenheimer Funds; Vice President
of the Denver-based Oppenheimer
Funds; Executive Vice President,
Director and General Counsel of
the Distributor; President and a
director of Centennial; formerly
Senior Vice President and
Associate General Counsel of the
Adviser and the Distributor.
Kenneth C. Eich,
Executive Vice President /
Chief Financial Officer Treasurer of Oppenheimer
Acquisition Corporation ("OAC").
George Evans,
Vice President Vice President and Portfolio
Manager of Oppenheimer Global
Emerging Growth Fund.
Scott Farrar,
Assistant Vice President Assistant Treasurer of the
Oppenheimer Funds; previously a
Fund Controller for the Manager.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
the Distributor; Secretary of
HarbourView, Main Street Advisers,
Inc. and Centennial; Secretary,
Vice President and Director of
Centennial Capital Corp.
Ronald H. Fielding,
Senior Vice President Chairman of the Board and Director
of Rochester Fund Distributors,
Inc. ("RFD"); President and
Director of Fielding Management
Company, Inc. ("FMC"); President
and Director of Rochester Capital
Advisors, Inc. ("RCAI"); President
and Director of Rochester Fund
Services, Inc. ("RFS"); President
and Director of Rochester Tax
Managed Fund, Inc.; Vice President
and Portfolio Manager of Rochester
Fund Municipals and Rochester
Portfolio Series - Limited Term
New York Municipal Fund.
Jon S. Fossel,
Chairman of the Board and Director Director of OAC, the Adviser's
parent holding company; and a
director of HarbourView; a
director of SSI and SFSI;
President, Director, Trustee, and
Managing General Partner of the
Denver-based Oppenheimer Funds;
President and Chairman of the
Board of Main Street Advisers,
Inc.; formerly Chief Executive
Officer of the Adviser.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President
and Counsel of OAC; formerly he
held the following positions: a
director of the Distributor, Vice
President and a director of
HarbourView and Centennial, a
director of SFSI and SSI, an
officer of other Oppenheimer Funds
and Executive Vice President &
General Counsel of the Manager and
the Distributor.
Linda Gardner,
Assistant Vice President None.
Ginger Gonzalez,
Vice President Formerly 1st Vice President /
Director of Creative Services for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Dorothy Hirshman, None.
Assistant Vice President
Caryn Halbrecht,
Vice President Vice President and Portfolio
Manager of Oppenheimer Insured
Tax-Exempt Fund and Oppenheimer
Intermediate Tax Exempt Fund; an
officer of other Oppenheimer
Funds; formerly Vice President of
Fixed Income Portfolio Management
at Bankers Trust.
Barbara Hennigar,
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Bennett Inkeles,
Assistant Vice President Formerly employed by Doremus &
Company, an advertising agency.
Frank Jennings,
Vice President Portfolio Manager of Oppenheimer
Global Growth & Income Fund.
Formerly a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Stephen Jobe,
Vice President None.
Heidi Kagan,
Assistant Vice President None.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
Paul LaRocco,
Assistant Vice President Portfolio Manager of Oppenheimer
Variable Account Funds and
Oppenheimer Variable Account
Funds; Associate Portfolio Manager
of Oppenheimer Discovery Fund.
Formerly a Securities Analyst for
Columbus Circle Investors.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Senior Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of
the Oppenheimer Funds; President
and a Director of OAC, HarbourView
and Oppenheimer Partnership
Holdings, Inc.; Director of
HarbourView; Director of Main
Street Advisers, Inc.; and
Chairman of SSI.
Sally Marzouk,
Vice President None.
Marilyn Miller,
Vice President Formerly a Director of marketing
for TransAmerica Fund Management
Company.
Robert J. Milnamow,
Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc. Formerly a Portfolio
Manager with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer Asset
Allocation Fund, Oppenheimer
Strategic Income Fund, Oppenheimer
Strategic Income & Growth Fund; an
officer of other Oppenheimer
Funds.
Barbara Niederbrach,
Assistant Vice President None.
Stuart Novek,
Vice President Formerly a Director Account
Supervisor for J. Walter Thompson.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc., Oppenheimer Multi-
State Tax-Exempt Trust,
Oppenheimer Tax-Exempt Fund,
Oppenheimer California Tax-Exempt
Fund, Oppenheimer New York Tax-
Exempt Fund and Oppenheimer Tax-
Free Bond Fund; Vice President of
The New York Tax-Exempt Income
Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income
Trust.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President Associate Portfolio Manager of
Oppenheimer Growth Fund; Vice
President and Portfolio Manager of
Oppenheimer Target Fund and
Oppenheimer Variable Account
Funds. Formerly Senior Investment
Officer and Portfolio Manager with
Chemical Bank.
Russell Read,
Vice President Formerly an International Finance
Consultant for Dow Chemical.
Thomas Reedy,
Vice President Vice President of Oppenheimer
Multi-Sector Income Trust and
Oppenheimer Multi-Government
Trust; an officer of other
Oppenheimer Funds; formerly a
Securities Analyst for the
Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Assistant Vice President Formerly a Product Manager for
Metropolitan Life Insurance
Company.
Michael S. Rosen
Vice President Vice President of RFS; President
and Director of RFD; Vice
President and Director of FMC;
Vice President and director of
RCAI; General Partner of RCA; Vice
President and Director of
Rochester Tax Managed Fund Inc.;
Vice President and Portfolio
Manager of Rochester Fund Series -
The Bond Fund For Growth.
David Rosenberg,
Vice President Vice President and Portfolio
Manager of Oppenheimer Limited-
Term Government Fund, Oppenheimer
U.S. Government Trust and
Oppenheimer Integrity Funds.
Formerly Vice President and Senior
Portfolio Manager for Delaware
Investment Advisors.
Richard H. Rubinstein,
Vice President Vice President and Portfolio
Manager of Oppenheimer Asset
Allocation Fund, Oppenheimer Fund
and Oppenheimer Variable Account
Funds; an officer of other
Oppenheimer Funds; formerly Vice
President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Diane Sobin,
Vice President Vice President and Portfolio
Manager of Oppenheimer Gold &
Special Minerals Fund, Oppenheimer
Total Return Fund, Inc.
Oppenheimer Main Street Funds,
Inc. and Oppenheimer Variable
Account Funds; formerly a Vice
President and Senior Portfolio
Manager for Dean Witter
InterCapital, Inc.
Nancy Sperte,
Senior Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Trustee of the New York-based
Oppenheimer Funds; formerly
Chairman of the Adviser and the
Distributor.
Arthur Steinmetz,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Strategic
Income Fund, Oppenheimer Strategic
Income & Growth Fund; an officer
of other Oppenheimer Funds.
Ralph Stellmacher,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Champion
Income Fund and Oppenheimer High
Yield Fund; an officer of other
Oppenheimer Funds.
John Stoma,
Vice President Formerly Vice President of Pension
Marketing with Manulife Financial.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee,
Director or Managing Partner of
the Denver-based Oppenheimer
Funds; President and a Director of
Centennial; formerly President and
Director of OAMC, and Chairman of
the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Adviser;
Vice President and Portfolio
Manager of Oppenheimer Discovery
Fund Oppenheimer Global Emerging
Growth Fund and Oppenheimer
Enterprise Fund. Formerly
Managing Director of Buckingham
Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Jeffrey Van Giesen,
Vice President Formerly employed by Kidder
Peabody Asset Management.
Ashwin Vasan,
Vice President Vice President and Portfolio
Manager of Oppenheimer Multi-
Sector Income Trust, Oppenheimer
Multi-Government Trust and
Oppenheimer International Bond
Fund; an officer of other
Oppenheimer Funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President Vice President and Portfolio
Manager of Daily Cash Accumulation
Fund, Inc., Oppenheimer Cash
Reserves, Centennial America Fund,
L.P., Centennial Government Trust
and Centennial Money Market Trust;
Vice President of Centennial.
Christine Wells,
Vice President None.
William L. Wilby,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer Global
Fund and Oppenheimer Global Growth
& Income Fund; Vice President of
HarbourView; an officer of other
Oppenheimer Funds.
Susan Wilson-Perez,
Vice President None.
Carol Wolf,
Vice President Vice President and Portfolio
Manager of Oppenheimer Money
Market Fund, Inc., Centennial
America Fund, L.P., Centennial
Government Trust, Centennial Money
Market Trust and Daily Cash
Accumulation Fund, Inc.; Vice
President of Oppenheimer Multi-
Sector Income Trust; Vice
President of Centennial.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Adviser; Assistant Secretary of
the Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an officer
of other Oppenheimer Funds.
Eva A. Zeff,
Assistant Vice President An officer of certain Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
Arthur J. Zimmer,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Centennial America
Fund, L.P., Centennial Government
Trust, Centennial Money Market
Trust and Daily Cash Accumulation
Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income
Trust; Vice President of
Centennial; an officer of other
Oppenheimer Funds.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer
Funds, the Denver-based Oppenheimer Funds and the Rochester-based Funds
set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer U.S. Government Trust
Denver-based Oppenheimer Funds
- ------------------------------
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Rochester-based Funds
- ---------------------
Rochester Fund Municipals
Rochester Fund Series - The Bond Fund For
Growth
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, OppenheimerFunds Distributor, Inc., HarbourView
Asset Management Corp., Oppenheimer Partnership Holdings, Inc., and
Oppenheimer Acquisition Corp. is Two World Trade Center, New York, New
York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds
Services, Centennial Asset Management Corporation, Centennial Capital
Corp., and Main Street Advisers, Inc. is 3410 South Galena Street,
Denver, Colorado 80231.
The address of the Rochester-based Funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Item 31. Location of Accounts and Records.
All accounts, books and other documents, required to be
maintained by the Registrant under Section 31(a) of the Investment
Company Act of 1940 and the Rule thereunder are maintained by
Oppenheimer Management Corporation at its offices at 3410 South Galena
Street, Denver, Colorado 80231.
Item 32. Management Services.
The Registrant is not a party to any management-related service
contract not discussed in Part A of this Registration Statement.
Item 33. Undertakings.
1. The Registrant undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus if (1) subsequent to the
effective date of this Registration Statement, its net asset value per
share declines more than 10 percent from its net asset value per share
as of the effective date of this Registration Statement, or (2) its net
asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
2. Inapplicable
3. Inapplicable
4. Inapplicable
5. Inapplicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New
York on the 28th day of February, 1996.
OPPENHEIMER MULTI-SECTOR INCOME TRUST
By: /s/ Bridget A. Macaskill
---------------------------
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Leon Levy Chairman of the
- -------------- Board of Trustees February 28, 1996
Leon Levy
/s/ Donald W. Spiro Principal Executive Officer
- ------------------- and Trustee February 28, 1996
Donald W. Spiro
/s/ Bridget A. Macaskill President and Trustee February 28, 1996
- ------------------------
Bridget A. Macaskill
/s/ George Bowen Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting Officer February 28, 1996
/s/ Robert G. Galli Trustee February 28, 1996
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein Trustee February 28, 1996
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan Trustee February 28, 1996
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall Trustee February 28, 1996
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan Trustee February 28, 1996
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr. Trustee February 28, 1996
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins Trustee February 28, 1996
- ----------------------
Sidney M. Robbins
/s/ Pauline Trigere Trustee February 28, 1996
- --------------------
Pauline Trigere
/s/ Clayton K. Yeutter Trustee February 28, 1996
- -----------------------
Clayton K. Yeutter
</TABLE>
<PAGE>
OPPENHEIMER MULTI-SECTOR INCOME TRUST
Registration No. 811-5473
Post-Effective Amendment No. 9
Index to Exhibits
Exhibit No. Description
- ----------- -----------
24(1)(h) Independent Auditors' Consent
24(2)(r) Financial Data Schedule
Independent Auditors' Consent
The Board of Trustees
Oppenheimer Multi-Sector Income Trust:
We consent to the use of our report dated November 21, 1995 included
herein.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Denver, Colorado
February 26, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 295,001,871
<INVESTMENTS-AT-VALUE> 299,026,525
<RECEIVABLES> 12,139,527
<ASSETS-OTHER> 143,783
<OTHER-ITEMS-ASSETS> 350,436
<TOTAL-ASSETS> 311,660,271
<PAYABLE-FOR-SECURITIES> 15,357,437
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,174,511
<TOTAL-LIABILITIES> 16,531,948
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 315,731,928
<SHARES-COMMON-STOCK> 29,116,068
<SHARES-COMMON-PRIOR> 29,064,849
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 113,075
<ACCUMULATED-NET-GAINS> (24,865,208)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,374,678
<NET-ASSETS> 295,128,323
<DIVIDEND-INCOME> 160,706
<INTEREST-INCOME> 30,316,133
<OTHER-INCOME> 0
<EXPENSES-NET> 3,018,542
<NET-INVESTMENT-INCOME> 27,458,297
<REALIZED-GAINS-CURRENT> (9,847,515)
<APPREC-INCREASE-CURRENT> 8,597,737
<NET-CHANGE-FROM-OPS> 26,208,519
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26,608,817
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 625,807
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 51,219
<NET-CHANGE-IN-ASSETS> (529,806)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15,862,506)
<OVERDISTRIB-NII-PRIOR> 3,324,611
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,877,737
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,018,542
<AVERAGE-NET-ASSETS> 288,884,000
<PER-SHARE-NAV-BEGIN> 10.17
<PER-SHARE-NII> .94
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> .91
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .02
<PER-SHARE-NAV-END> 10.14
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
