As Filed with the Securities and Exchange
Commission on April 4, 1997
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. 12 /X/
OPPENHEIMER MULTI-SECTOR INCOME TRUST
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(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, Suite 3400
New York, New York 10048-0203
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(Address of Principal Executive Offices)
212-323-0200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
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(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
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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
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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
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* 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"), which 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,
International, Asset-Backed and Convertible Sectors 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"), Fitch Investors Service, Inc. ("Fitch") or Duff &
Phelps, Inc. ("Duff & Phelps") or another nationally recognized
statistical rating organization, 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, Fitch's or Duff & Phelps. 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;
- - 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 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.
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 below "Baa"
by Moody's or below "BBB" by Standard & Poor's or Duff & Phelps.
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. The Fund's investments in lower-
rated securities may not exceed 75% of the Fund's total assets,
with no more than 50% of the Fund's total assets in lower-rated
foreign securities (see "The International Sector," below).
The Fund's ability to increase its investments in high yield
securities will enable it to seek higher investment return.
However, high yield securities, whether rated or unrated, may be
subject to greater market fluctuations and risks of loss of income
and principal and may have less liquidity than lower yielding,
higher-rated fixed-income securities. Principal risks of high
yield securities include (i) limited liquidity and secondary market
support, (ii) substantial market price volatility resulting from
changes in prevailing interest rates, (iii) subordination of the
holder's claims to the prior claims of banks and other senior
lenders in bankruptcy proceedings, (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of
declining interest rates, whereby the holder might receive
redemption proceeds at times when only lower-yielding portfolio
securities are available for investment, (v) the possibility that
earnings of the issuer may be insufficient to meet its debt
service, and (vi) the issuer's low creditworthiness and potential
for insolvency during periods of rising interest rates and economic
downturn.
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 Adviser 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 or Duff & Phelps, 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." The Fund's investments in foreign lower-rated
securities may not exceed 50% of the Fund's total assets. The Fund
may invest in any country where the Adviser believes there is a
potential to achieve the Fund's investment objectives. The Fund
may not invest more than 15% of its total assets in foreign
securities of any one country.
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.
Private and U.S Government Issued Mortgage-Backed Securities
and CMOs. The Fund's investments may include securities which
represent participation interests in pools of residential mortgage
loans which may be issued or guaranteed by private issuers or 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.
Some mortgage-backed securities issued or guaranteed by U.S.
Government agencies or instrumentalities 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. 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 liquid assets of any type, including
equity and debt securities of any grade 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, Standard & Poor's, Fitch's or Duff & Phelps ("Baa" or
better by Moody's or "BBB" or better by Standard & Poor's or Duff
& Phelps), or another nationally recognized statistical rating
organization, 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. The
Adviser monitors holdings of illiquid securities on an ongoing
basis and at time the Fund may be required to sell some holdings to
maintain adequate liquidity.
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 (not to exceed
120 days from the date the offer is accepted), 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, liquid assets of any type, including equity and debt
securities of any grade 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 certain kinds of futures contracts; forward contracts;
call and put options on securities, futures, indices and foreign
currencies; and enter into interest rate swap agreements. These
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
securities markets, to protect the Fund's unrealized gains in the
value of its securities which have appreciated, to facilitate
selling securities for investment reasons, to establish a position
in the securities markets as a temporary substitute for purchasing
particular 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 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.
Futures. The Fund may buy and sell futures contracts that
relate to (1) stock indices (referred to as Stock Index Futures),
other securities indices (together with Stock Index Futures,
refereed to as Financial Futures), (3) interest rates (referred to
as Interest Rate Futures), or (4) foreign currencies (Referred to
as Forward Contracts). 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 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. That means the Fund owns the securities on which
the call was written or the Fund owns and segregates liquid assets
to satisfy its obligation if the call is exercised. 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 securities (whether or not it
holds such securities in its portfolio) or Futures. It may also
write puts on 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
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 of
any type, including equity and debt securities of any grade, 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, currency or commodity.
The Fund may not purchase or sell physical commodities or commodity
contracts; however this does not prevent the Fund from buying or
selling options and futures contracts or from investing in
securities or other instruments backed by physical commodities. 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 Adviser 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.
Derivative investments used by the Fund are used in some cases for
hedging purposes and in other cases for "non-hedging" investment
purposes to seek income or total return. In the broadest sense,
exchange-traded options and futures contracts (discussed in
"Hedging," above) may be considered "derivative investments."
The Fund may invest in different types of derivatives,
generally known as "Structured Investments." "Index-linked or
commodity -linked" notes are debt securities of companies that call
for interest payments and/or payment on the maturity of the note in
different terms than the typical note where the borrower agrees to
make fixed interest payments and to pay a fixed sum on the maturity
of the note. Principal and/or interest payments on an index-linked
note depend on the performance of one or more market indices, such
as the S&P 500 Index or a weighted index of commodity futures, such
as crude oil, gasoline and natural gas. 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
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.
The Fund may also invest in currency-indexed securities.
Typically these are short-term or intermediate-term debt securities
having a value at maturity, and/or interest rates 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 Adviser 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 or Duff & Phelps, 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). After any such borrowing, the Fund's total assets,
less its liabilities other than borrowings, must remain equal to at
least 300% of all borrowings, as set forth in the Investment
Company Act. Interest on borrowed money is an expense the Fund
would not otherwise incur, so that it may have substantially
reduced net investment income during periods of substantial
borrowings. The Fund's ability to borrow money from banks subject
to the 300% asset coverage requirement is a fundamental policy. 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. Unless it is specifically stated
that a percentage restriction applies on an ongoing basis, it
applies only at the time the Fund makes an investment, and the Fund
need not sell securities to meet the percentage limits if the value
of the investment increases in proportion to the size of the Fund.
Other investment restrictions are listed in the Statement of
Additional Information. Under these restrictions, the Fund will
not do any of the following:
As to 75% of its total assets, the Fund will not 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;
The Fund will not 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.
The Fund will not 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;
The Fund will not borrow money, except in conformity with
the restrictions stated above under "Borrowing."
The Fund will not 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;
The Fund will not participate on a joint or joint and
several basis in any securities trading account;
The Fund will not invest in companies for the purpose of
exercising control or management thereof;
The Fund will not 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;
The Fund will not 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;
The Fund will not 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
The Fund will not 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/
Ended (Discount) That Day(2) (Discount) That Day(2)
- ----- --------------------- ---------------------
<S> <C> <C>
1/31/94 Market: $8.50 Market: $7.75
NAV: $8.57 NAV: $8.54
Premium/(Discount):(.82)% Premium/(Discount): (9.25)%
4/30/94 Market: $8.25 Market: $7.375
NAV: $8.61 NAV: $8.13
Premium/(Discount):(4.18)% Premium/(Discount): (9.29)%
7/31/94 Market: $7.875 Market: $7.25
NAV: $8.07 NAV: $8.01
Premium/(Discount):(2.42)% Premium/(Discount): (9.49)%
10/31/94 Market: $7.625 Market: $6.625
NAV: $8.05 NAV: $7.88
Premium/(Discount):(5.28)% Premium/(Discount): (15.93)%
1/31/95 Market: $7.25 Market: $6.625
NAV: $7.86 NAV: $7.84
Premium/(Discount): (7.76)% Premium/(Discount): (15.50)%
4/30/95 Market: $7.375 Market: $6.5
NAV: $7.58 NAV: $7.68
Premium/(Discount): (2.70)% Premium/(Discount): (15.36)%
7/31/95 Market: $7.25 Market: $6.5
NAV: $7.85 NAV: $7.84
Premium/(Discount): (7.64)% Premium/(Discount): (17.09)%
10/31/95 Market: $7.125 Market: $6.625
NAV: $7.87 NAV: $7.87
Premium/(Discount): (9.47)% Premium/(Discount): (15.82)%
1/31/96 Market: $7.375 Market: $6.75
NAV: $8.04 NAV: $7.91
Premium/(Discount): (8.27)% Premium/(Discount): (14.66)%
4/30/96 Market: $10.25 Market:$ 9.13
NAV:$10.37 NAV:$10.10
Premium/(Discount): (1.16)% Premium/(Discount):(9.65)%
7/31/96 Market: $ 9.75 Market:$ 9.38
NAV:$10.25 NAV:$10.10
Premium/(Discount): (4.88)% Premium/(Discount):(7.18)%
10/31/96 Market: $10.00 Market:$ 9.63
NAV:$10.52 NAV:$10.25
Premium/(Discount): (4.94)% Premium/(Discount):(6.10)%
1/31/97 Market: $10.00 Market:$9.63
NAV:$10.66 NAV:$10.50
Premium/(Discount): (6.19)% Premium/(Discount): (8.33)%
</TABLE>
- ---------------
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.
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 $62
billion as of December 31, 1996, and having more than 3 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,
1994, 1995 and 1996, the Fund paid management fees to the Adviser
of $1,995,015, $1,877,737 and $1,939,377, respectively. The Fund
incurred approximately $59,643 in expenses for the fiscal year
ended October 31, 1996 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, Robert E. Patterson, Ashwin Vasan, Carol
Wolf and Arthur Zimmer, 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 Adviser,
and, prior to joining the Adviser, 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, 1994, 1995 and 1996, the Fund paid administration
fees to the Administrator of $613,851, $577,765 and $596,733,
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 March 15, 1997.
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, 1996,
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 January 31, 1997:
<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 April 4, 1997
This Statement of Additional Information is not a Prospectus.
This document contains additional information about the Fund and
supplements information in the Prospectus dated April 4, 1997. 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 46
Control Persons and Principal Holders of Securities 52
Investment Advisory and Other Services *
Brokerage Allocation and Other Practices 53
Tax Status *
Financial Statements 55
- -----------------
*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. 2.The Fund's Trustees and officers and their
principal occupations and business affiliations during the past
five years are set forth below. The address for 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 or directors of Oppenheimer Fund, Oppenheimer Growth
Fund, Oppenheimer Enterprise Fund, Oppenheimer Municipal Bond
Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer Capital
Appreciation Fund (formerly named "Oppenheimer Target Fund"),
Oppenheimer U.S. Government Trust, Oppenheimer New York Municipal
Fund, Oppenheimer California Municipal Fund, Oppenheimer Multi-
State Municipal Trust, Oppenheimer Asset Allocation Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Global Fund,
Oppenheimer International Growth Fund, Oppenheimer Developing
Markets Fund, Oppenheimer Series Fund, Inc., Oppenheimer Global
Growth & Income Fund, Oppenheimer Global Emerging Growth Fund and
Oppenheimer World Bond Fund (collectively, the "New York-based
Oppenheimer funds"), except that Ms. Macaskill is not a director of
Oppenheimer Money Market Fund, Inc. As of January 31, 1997 the
Trustees and officers of the Fund as a group owned of record or
beneficially less than 1% of the shares of the Fund. That
statement does not include ownership of shares held of record by an
employee benefit plan for employees of the Adviser (one of the
Trustees of the Fund listed below, Ms. Macaskill, and one of the
officers, Mr. Donohue are trustees of that plan), other than the
shares beneficially owned under that plan by officers of the Fund
listed below.
Leon Levy, Chairman of the Board of Trustees; Age: 71
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).
Robert G. Galli, Trustee*; Age: 63
Vice Chairman of the Adviser; formerly he held the following
positions: Vice President and Counsel of Oppenheimer Acquisition
Corp. ("OAC"), the Adviser's parent holding company; Executive Vice
President & General Counsel of the Adviser and OppenheimerFunds
Distributor, Inc., a director of the Adviser and 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 and an officer of other Oppenheimer
funds.
- ---------------
*A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Benjamin Lipstein, Trustee; Age: 73
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex
Publishers, Inc. (Publishers of Psychology Today and Mother Earth
News) and Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age: 48
President, CEO and a director of the Adviser; Chairman and a
director of SSI and SFSI; President and a director of OAC and
HarbourView and Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Adviser a director of Oppenheimer Real
Asset Management, Inc.; formerly an Executive Vice President of the
Adviser.
- ---------------
*A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Elizabeth B. Moynihan, Trustee; Age: 67
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 and the
Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 69
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding
company), Dominion Energy, Inc. (electric power and oil & gas
producer), Enron-Dominion Cogen Corp. (cogeneration company),
Kemper Corporation (insurance and financial services company), and
Fidelity Life Association (mutual life insurance company); formerly
Chairman of the Board of ICL, Inc. (information systems),
President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research), and a director of
Lumbermen Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee; Age: 66
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New
York; Senior Fellow of Jerome Levy Economics Institute, Bard
College; a member of the U.S. Competitiveness Policy Council; a
director of GranCare, Inc. (healthcare provider); formerly New York
State Comptroller and trustee, New York State and Local Retirement
Fund.
Russell S. Reynolds, Jr., Trustee; Age: 65
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship, Inc. (corporate governance
consulting); a director of Professional Staff Limited (U.K.); a
trustee of Mystic Seaport Museum, International House and Greenwich
Historical Society.
Donald W. Spiro, Vice Chairman and Trustee*; Age: 71
Chairman Emeritus and a director of the Adviser; formerly Chairman
of the Adviser and the Distributor.
- ---------------
*A Trustee who is an "interested person" of the Fund as defined in
the Investment Company Act.
Pauline Trigere, Trustee; Age: 84
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: 66
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, 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), IMC Global, Inc. (chemicals and animal feed) and Texas
Instruments, Inc. (electronics); 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.
Andrew J. Donohue, Secretary; Age: 46
Executive Vice President and General Counsel of the Adviser and the
Distributor; President and a director of Centennial; Executive Vice
President, General Counsel and a director of HarbourView, SSI,
SFSI, and Oppenheimer Partnership Holdings, Inc.; President and a
director of Oppenheimer Real Asset Management, Inc.; General
Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (a broker-dealer); an
officer of other Oppenheimer funds; formerly Senior Vice President
and Associate General Counsel of the Adviser and the Distributor,
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 director and an officer of First Investors Family of Funds and
First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age: 60
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of the Adviser; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer and Assistant Secretary and a director of
Centennial; Senior Vice President, Treasurer and Secretary of SSI;
Vice President, Treasurer and Secretary of SFSI; Treasurer of OAC;
Vice President and Treasurer of Oppenheimer Real Asset Management,
Inc.; Chief Executive Officer, Treasurer and director of
MultiSource Services, Inc. (a broker-dealer); and an officer of
other Oppenheimer funds.
Robert E. Patterson, Vice President and Portfolio Manager; Age 53
Vice President of the Adviser, formerly a Managing director at
Paine Webber s Mitchell Hutchins division.
Thomas P. Reedy, Vice President and Portfolio Manager; Age 35
Vice President of the Adviser; an officer of other Oppenheimer
funds; formerly a Securities Analyst of the Adviser.
David Rosenberg, Vice President and Portfolio Manager; Age 38
Vice President of the Adviser; an officer of other Oppenheimer
funds; formerly Vice President and Portfolio Manager for Delaware
Investment Advisors.
Ashwin Vasan, Vice President and Portfolio Manager; Age 34
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.
Carol E. Wolf, President and Portfolio Manager; Age 45
Vice President of the Adviser and Centennial; an officer of other
Oppenheimer funds.
Arthur Zimmer, Vice President and Portfolio Manager; Age 50
Vice President of the Adviser and Centennial; an officer of other
Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 48
Senior Vice President and Associate General Counsel of the Adviser;
Assistant Secretary of SSI and SFSI; an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 38
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Adviser/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly 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 T. Farrar, Assistant Treasurer; Age: 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Adviser/Mutual Fund Accounting; an officer of
other Oppenheimer funds; formerly a Fund Controller for the
Adviser.
The Board of Trustees does not have an executive or investment
committee. The Trustees of the Fund have appointed a study
committee consisting of Mr. Lipstein (Chairman)and Mrs. Moynihan,
neither of whom is an "interested person" of the Adviser or the
Fund, and Mr. Galli. 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 and certain Trustees of the Fund
(Ms. Macaskill and Messrs. Galli and Spiro; Ms. Macaskill is also
an officer) who are affiliated with the Adviser receive no salary
or fees from the Fund. The remaining Trustees of the Fund received
the compensation shown below from the Fund. The compensation from
the Fund was paid during its fiscal year ended October 31, 1996.
The compensation from all of the New York-based Oppenheimer funds
includes the Fund and is compensation received as a director,
trustee or member of a committee of the Board of those funds during
the calendar year 1996.
<TABLE>
<CAPTION>
Retirement Total
Benefits Compensation
Aggregate Accrued as From All
Name and Compensation Part of New York-based
Position from Fund Fund Expenses Oppenheimer funds1
<S> <C> <C> <C>
Leon Levy $8,375 $15,221 $152,750
Chairman and Trustee
Benjamin Lipstein $5,120 $9,305 $ 91,350
Study Committee
Chairman, Audit
Committee Member
and Trustee2
Elizabeth B. Moynihan $5,120 $9,305 $ 91,350
Study Committee
Member and Trustee
Kenneth A. Randall $4,656 $8,463 $ 83,450
Audit Committee
Chairman and Trustee
Edward V. Regan $4,086 $7,427 $ 78,150
Proxy Committee
Chairman, Audit
Committee Member
and Trustee
Russell S. Reynolds, Jr. $3,094 $5,624 $58,800
Proxy Committee
Member and Trustee
Pauline Trigere $3,094 $5,624 $ 55,300
Trustee
Clayton K. Yeutter $3,094 $5,624 $ 58,800
Proxy Committee
Member and Trustee
</TABLE>
- ---------------------
1For the 1996 calendar year.
2Committee position held during a portion of the period shown.
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.
Because each Trustee's retirement benefits will depend on the
amount of the Trustee's future compensation and length of service,
the amount of those benefits cannot be determined at this time, nor
can the Fund estimate the number of years of credited service that
will be used to determine those benefits.
Item 19. Control Persons and Principal Holders of Securities.
1. Inapplicable.
2. As of January 31, 1997, no person owned of record or was
known by the Fund to own beneficially 5% or more of the outstanding
Shares except:
3. As of January 31, 1997, 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, 1994, 1995
and 1996, the Fund paid approximately $16,685, $48,614 and $14,004,
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 Adviser
(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, 1994, 1995 and
1996, $2,689, $0 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 at fiscal year-end October 31, 1996.
Statement of Investments October 31, 1996
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
U.S. Government Sector -- 3.0%
Treasury -- 3.0%
U.S. Treasury Bonds, 7.125%, 2/15/23(2)(3)................. $ 7,577,000 $ 7,922,700
U.S. Treasury Nts., 6%, 8/31/97(2)(3)...................... 1,256,000 1,261,102
-----------
Total U.S. Government Sector (Cost $9,193,588)............. 9,183,802
-----------
Shares
Convertible Sector -- 0.9%
Preferred Stocks -- 0.5%
California Federal Bank, 10.625% Non-Cum., Series B........ 1,995 215,460
Gulfstream Housing Corp. (4)............................... 714 --
SD Warren Co., 14% Cum. Exchangeable, Series B (4)......... 20,000 725,000
SDW Holdings Corp., 15% Cum. Sr. Exchangeable Preferred
Stock (4)(5)............................................. 18,750 675,000
-----------
1,615,460
-----------
Units
Rights, Warrants and Certificates -- 0.4%
American Communications Services, Inc. Wts., Exp. 11/05
(5)...................................................... 700 59,500
American Telecasting, Inc. Wts., Exp. 6/99................. 7,250 25,375
Ames Department Stores, Inc.:
Excess Cash Flow Payment Certificates, Series AG-7A
(5).................................................... 40,300 403
Litigation Trust (5)..................................... 128,889 1,289
Becker Gaming, Inc. Wts., Exp. 11/00 (5)................... 25,000 6,250
Cellular Communications International, Inc. Wts., Exp. 8/03
(5)...................................................... 2,500 50,000
Federated Department Stores, Inc.:
Cl. C Wts., Exp. 12/99................................... 20,000 242,500
Cl. D Wts., Exp. 12/01................................... 20,000 247,500
Foamex LP/JPS Automotive Corp. Wts., Exp. 7/99(5).......... 1,000 25,000
Gaylord Container Corp. Wts., Exp. 11/02................... 50,625 379,687
In-Flight Phone Corp. Wts., Exp. 8/02 (5).................. 900 --
IntelCom Group, Inc. Wts., Exp. 9/05 (5)................... 4,125 63,937
Protection One, Inc. Wts., Exp. 6/05 (5)................... 6,400 84,000
SD Warren Co. Wts., Exp. 12/06 (5)......................... 20,000 62,500
SDW Holdings Corp., Cl. B Wts., Exp. 12/06 (5)............. 1,875 24,375
Wireless One, Inc. Wts., Exp. 10/00........................ 1,500 6,000
-----------
1,278,316
-----------
Total Convertible Sector (Cost $1,612,189)................. 2,893,776
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Value
Shares See Note 1
<S> c> <C>
Corporate Sector -- 35.1%
Common Stocks -- 0.1%
Capital Gaming International, Inc. (4)..................... 7,198 $ 396
Grand Union Co. (4)........................................ 40,000 270,000
Gulfstream Housing Corp. (4)............................... 357,150 --
Hollywood Casino Corp., Class A (4)........................ 20,000 90,000
Triangle Wire & Cable, Inc. (4) (5)........................ 84,444 84,444
-----------
444,840
-----------
Face Amount
(1)
Corporate Bonds and Notes -- 35.0%
Basic Industry -- 3.7%
Chemicals -- 0.7%
Harris Chemical North America, Inc., 10.25% Gtd. Sr. Sec.
Disc. Nts., 7/15/01...................................... $ 200,000 207,000
ISP Holdings, Inc., 9% Sr. Nts., 10/15/03 (6).............. 1,000,000 1,015,000
Terra Industries, Inc., 10.50% Sr. Nts., Series B,
6/15/05.................................................. 750,000 812,812
Texas Petrochemicals Corp., 11.125% Sr. Sub. Nts., 7/1/06
(6)...................................................... 175,000 185,937
-----------
2,220,749
-----------
Containers -- 0.2%
U.S. Can Corp., 10.125% Sr. Sub. Nts., 10/15/06 (6)........ 500,000 518,750
-----------
Metals/Mining -- 0.2%
Carbide/Graphite Group, Inc. (The), 11.50% Sr. Nts.,
9/1/03................................................... 500,000 551,250
-----------
Paper -- 1.7%
Buckeye Cellulose Corp., 9.25% Sr. Sub. Nts., 9/15/08
(3)...................................................... 1,000,000 1,020,000
Gaylord Container Corp., 12.75% Sr. Sub. Disc. Debs.,
5/15/05.................................................. 875,000 960,312
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts.,
2/1/02................................................... 500,000 507,500
Riverwood International Corp.:
10.25% Sr. Nts., 4/1/06 (3).............................. 1,400,000 1,359,750
10.875% Sr. Sub. Nts., 4/1/08............................ 750,000 690,937
SD Warren Co., 12% Sr. Sub. Nts., Series B, 12/15/04....... 575,000 619,562
Stone Container Corp., 10.75% First Mtg. Nts., 10/1/02..... 300,000 312,750
-----------
5,470,811
-----------
Steel -- 0.9%
Bar Technologies, Inc., 13.50% Gtd. Bonds, 4/1/01.......... 700,000 707,000
Gulf States Steel, Inc., Alabama, 13.50% First Mtg. Nts.,
Series B, 4/15/03........................................ 1,000,000 946,250
Republic Engineered Steels, Inc., 9.875% First Mtg. Nts.,
12/15/01................................................. 250,000 233,750
WCI Steel, Inc., 10.50% Sr. Gtd. Nts., Series B, 3/1/02.... 750,000 840,938
-----------
2,727,938
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<C> <C>
Consumer Related -- 7.2%
Consumer Products -- 1.0%
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 10.615%, 5/27/98 (7)........................... $ 1,000,000 $ 865,000
E & S Holdings Corp., 10.375% Sr. Sub. Nts., 10/1/06 (6)... 1,350,000 1,392,188
Samsonite Corp., 11.125% Sr. Sub. Nts., 7/15/05............ 750,000 810,000
-----------
3,067,188
-----------
Food/Beverages/Tobacco -- 0.9%
Consolidated Cigar Corp., 10.50% Sr. Sub. Nts., 3/1/03
(3)...................................................... 1,000,000 1,047,500
Doane Products Co., 10.625% Sr. Nts., 3/1/06............... 750,000 783,750
Foodbrands America, Inc., 10.75% Sr. Sub. Nts., 5/15/06.... 500,000 516,250
International Home Foods, Inc., 10.375% Sr. Sub. Nts.,
11/1/06 (6).............................................. 500,000 505,625
-----------
2,853,125
-----------
Healthcare -- 1.3%
Genesis Health Ventures, Inc. 9.25% Sr. Sub. Nts., 10/1/06
(6)...................................................... 2,000,000 2,015,000
Magellan Health Services, Inc., 11.25% Sr. Sub. Nts.,
Series A, 4/15/04........................................ 1,500,000 1,642,500
OrNda Healthcorp., 11.375% Gtd. Sr. Sub. Nts., 8/15/04..... 200,000 227,000
-----------
3,884,500
-----------
Hotel/Gaming -- 2.9%
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series A,
11/15/00 (5)............................................. 550,000 385,000
California Hotel Finance Corp., 11% Sr. Sub. Nts.,
12/1/02.................................................. 500,000 523,750
Capital Gaming International, Inc., Promissory Nts., 8/1/95
(8)...................................................... 5,500 --
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series
A,
11/15/00 (5)(8).......................................... 200,000 150,000
Empress River Casino Finance Corp., 10.75% Sr. Gtd. Nts.,
4/1/02................................................... 1,545,000 1,660,875
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts.,
12/1/03.................................................. 650,000 642,688
HMC Acquisition Properties, Inc., 9% Sr. Nts., Series B,
12/15/07................................................. 750,000 727,500
HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B,
5/15/05.................................................. 2,000,000 2,030,000
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts.,
Series B, 11/15/02....................................... 750,000 960,000
Players International, Inc., 10.875% Sr. Nts., 4/15/05..... 350,000 348,250
Showboat Marina Casino Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts., Series B, 3/15/03......... 1,250,000 1,353,125
-----------
8,781,188
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Textile/Apparel -- 1.1%
Clark-Schwebel, Inc., 10.50% Sr. Nts., 4/15/06............. $ 750,000 $ 783,750
Consoltex Group, Inc., 11% Sr. Sub. Gtd. Nts., Series B,
10/1/03.................................................. 500,000 495,000
Unifrax Investment Corp., 10.50% Sr. Nts., 11/1/03......... 525,000 536,156
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05... 1,500,000 1,522,500
-----------
3,337,406
-----------
Energy -- 6.2%
Chesapeake Energy Corp.:
10.50% Sr. Nts., 6/1/02.................................. 400,000 429,500
9.125% Sr. Nts., 4/15/06 (3)............................. 2,340,000 2,363,400
DeepTech International, Inc., 12% Sr. Sec. Nts.,
12/15/00................................................. 1,500,000 1,567,500
Falcon Drilling Co., Inc.:
8.875% Sr. Nts., Series B, 3/15/03....................... 1,125,000 1,130,625
9.75% Sr. Nts., Series B, 1/15/01........................ 100,000 104,125
Forcenergy, Inc., 9.50% Sr. Sub. Nts., 11/1/06 (9)......... 815,000 826,206
Mariner Energy, Inc., 10.50% Sr. Sub. Nts., 8/1/06 (6)..... 2,750,000 2,860,000
Mesa Operating Co., 0%/11.625% Gtd. Sr. Sub. Disc. Nts.,
7/1/06 (10).............................................. 4,700,000 3,125,500
National Energy Group, Inc., 10.75% Sr. Nts., 11/1/06
(6)...................................................... 1,000,000 1,006,875
Petroleum Heat & Power Co., Inc.:
10.125% Sub. Nts., 4/1/03................................ 300,000 301,875
12.25% Sub. Debs., 2/1/05................................ 456,000 503,880
9.375% Sub. Debs., 2/1/06................................ 1,300,000 1,261,000
TransTexas Gas Corp., 11.50% Sr. Sec. Gtd. Nts., 6/15/02
(3)...................................................... 3,200,000 3,416,000
-----------
18,896,486
-----------
Financial Services -- 1.4%
Banks & Thrifts -- 0.7%
First Nationwide Escrow Corp., 10.625% Sr. Sub. Nts.,
10/1/03 (6).............................................. 1,650,000 1,744,875
First Nationwide Holdings, Inc., 9.125% Sr. Sub. Nts.,
1/15/03.................................................. 250,000 251,250
-----------
1,996,125
-----------
Diversified Financial -- 0.7%
Aames Financial Corp., 9.125% Sr. Nts., 11/1/03............ 1,000,000 1,012,500
GPA Delaware, Inc., 8.75% Gtd. Nts., 12/15/98.............. 1,250,000 1,270,313
-----------
2,282,813
-----------
Housing Related -- 0.7%
Building Materials -- 0.3%
Building Materials Corp., 0%/11.75% Sr. Deferred Coupon
Nts., Series B, 7/1/04 (10).............................. 500,000 410,000
Pacific Lumber Co., 10.50% Sr. Nts., 3/1/03................ 500,000 502,500
-----------
912,500
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Homebuilders/Real Estate -- 0.4%
NVR, Inc., 11% Sr. Gtd. Nts., 4/15/03...................... $ 500,000 $ 517,500
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec.
Nts., Series B, 4/1/02................................... 500,000 537,500
U.S. Home Corp., 9.75% Sr. Nts., 6/15/03................... 300,000 305,250
-----------
1,360,250
-----------
Manufacturing -- 3.1%
Aerospace/Electronics/Computers -- 0.6%
Tracor, Inc., 10.875% Sr. Sub. Nts., 8/15/01............... 500,000 532,500
Unisys Corp., 11.75% Sr. Nts., 10/15/04.................... 1,350,000 1,377,000
-----------
1,909,500
-----------
Automotive -- 1.8%
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts.,
4/15/06.................................................. 1,000,000 1,046,250
Foamex LP/JPS Automotive Corp., 0%/14% Sr. Disc. Nts.,
Series B, 7/1/04 (10).................................... 750,000 581,250
Hayes Wheels International, Inc., 11% Sr. Sub. Nts.,
7/15/06.................................................. 1,640,000 1,709,700
Lear Corp., 9.50% Sub. Nts., 7/15/06....................... 2,000,000 2,070,000
-----------
5,407,200
-----------
Capital Goods -- 0.7%
Farley, Inc., Zero Coupon Sub. Debs., 14.167%, 12/30/12
(5)(7)................................................... 198,000 21,986
Mettler Toledo, Inc., 9.75% Gtd. Sr. Unsec. Unsub. Nts.,
10/1/06.................................................. 2,100,000 2,157,750
-----------
2,179,736
-----------
Media -- 3.2%
Broadcasting -- 0.9%
Argyle Television, Inc., 9.75% Sr. Sub. Nts., 11/1/05...... 500,000 502,500
Paxson Communications Corp., 11.625% Sr. Sub. Nts.,
10/1/02.................................................. 225,000 231,750
SFX Broadcasting, Inc., 10.75% Sr. Sub. Nts., Series B,
5/15/06.................................................. 1,150,000 1,188,813
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts.,
9/30/05.................................................. 500,000 487,500
Young Broadcasting, Inc., 9% Sr. Sub. Nts., Series B,
1/15/06.................................................. 500,000 457,500
-----------
2,868,063
-----------
Cable Television -- 1.7%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts.,
6/15/04 (10)............................................. 1,000,000 685,000
Cablevision Systems Corp.:
10.50% Sr. Sub. Debs., 5/15/16........................... 500,000 491,250
10.75% Sr. Sub. Debs., 4/1/04............................ 250,000 255,625
Comcast Corp., 10.625% Sr. Sub. Debs., 7/15/12............. 500,000 534,375
EchoStar Communications Corp., 0%/12.875% Sr. Disc. Nts.,
6/1/04 (10).............................................. 700,000 556,500
Helicon Group LP/Helicon Capital Corp., 9% Sr. Sec. Nts.,
Series B, 11/1/03 (11)................................... 625,000 640,625
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
International CableTel, Inc., 0%/11.50% Sr. Deferred Coupon
Nts., Series B, 2/1/06 (10).............................. $ 1,500,000 $ 915,000
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)(10)(12)........................................... 650,000 364,000
United International Holdings, Inc.:
0%/14% Sr. Disc. Nts., Series B, 5/15/06 (10)............ 300,000 158,250
Zero Coupon Sr. Sec. Disc. Nts., Series B, 14%, 11/15/99
(7).................................................... 800,000 560,000
Zero Coupon Sr. Sec. Disc. Nts., 12.579%, 11/15/99 (7)... 200,000 140,000
-----------
5,300,625
-----------
Diversified Media -- 0.3%
Universal Outdoor, Inc., 9.75% Sr. Sub. Nts., 10/15/06..... 1,000,000 992,500
-----------
Publishing/Printing -- 0.3%
Bell & Howell Co. (New), 0%/11.50% Sr. Disc. Debs., Series
B, 3/1/05 (10)........................................... 500,000 358,750
Hollinger International Publishing, Inc., 9.25% Sr. Sub.
Gtd. Nts., 2/1/06........................................ 500,000 488,750
-----------
847,500
-----------
Other -- 1.4%
Environmental -- 0.1%
Mid-American Waste Systems, Inc., 12.25% Sr. Sub. Nts.,
2/15/03 (5)(8)........................................... 300,000 195,000
-----------
Services -- 1.3%
Imo Industries, Inc., 11.75% Sr. Sub. Nts., 5/1/06......... 750,000 772,500
Iron Mountain, Inc., 10.125% Sr. Sub. Nts., 10/1/06........ 1,000,000 1,032,500
Protection One Alarm Monitoring, Inc.:
0%/13.625% Sr. Disc. Nts., 6/30/05 (10).................. 2,000,000 1,850,000
6.75% Cv. Sr. Sub. Nts., 9/15/03......................... 325,000 312,406
-----------
3,967,406
-----------
Retail -- 1.1%
Grand Union Co., 12% Sr. Nts., 9/1/04...................... 750,000 759,375
Kash 'N Karry Food Stores, Inc., 11.50% Sr. Nts., 2/1/03... 951,300 958,435
Ralph's Grocery Co.:
10.45% Sr. Nts., 6/15/04................................. 1,250,000 1,271,875
10.45% Sr. Nts., 6/15/04................................. 250,000 254,375
-----------
3,244,060
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Transportation -- 0.8%
Air Transportation -- 0.2%
Atlas Air, Inc., 12.25% Pass-Through Certificates,
12/1/02.................................................. $ 500,000 $ 546,250
-----------
Railroads -- 0.3%
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr.
Disc. Nts., Series B, 12/15/03 (10)...................... 1,500,000 1,147,500
-----------
Shipping -- 0.3%
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts.,
7/1/04................................................... 750,000 877,500
-----------
Utilities -- 6.2%
Electric Utilities -- 1.2%
CalEnergy, Inc., 9.50% Sr. Nts., 9/15/06 (6)............... 575,000 582,906
California Energy, Inc., 0%/10.25% Sr. Disc. Nts., 1/15/04
(10)..................................................... 750,000 768,750
Calpine Corp., 10.50% Sr. Nts., 5/15/06 (6)................ 750,000 781,875
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E,
5/1/11................................................... 1,500,000 1,560,000
-----------
3,693,531
-----------
Telecommunications -- 5.0%
A+ Network, Inc., 11.875% Sr. Sub. Nts., 11/1/05........... 2,100,000 2,100,000
American Communications Services, Inc., 0%/13% Sr. Disc.
Nts., 11/1/05 (10)....................................... 700,000 399,000
Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 12.892%, 8/15/00 (7)..................... 1,500,000 997,500
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03
(10)..................................................... 2,000,000 1,730,000
Metrocall, Inc., 10.375% Sr. Sub. Nts., 10/1/07............ 850,000 709,750
MFS Communications Co., Inc., 0%/9.375% Sr. Disc. Nts.,
1/15/04 (10)............................................. 1,000,000 853,750
Omnipoint Corp., 11.625% Sr. Nts., 8/15/06 (6)............. 2,500,000 2,550,000
PriCellular Wireless Corp.:
0%/12.25% Sr. Sub. Disc. Nts., 10/1/03 (10).............. 1,700,000 1,389,750
10.75% Sr. Nts., 11/1/04 (6)(9).......................... 600,000 604,688
Teleport Communications Group, Inc., 0%/11.125% Sr. Disc.
Nts., 7/1/07 (10)........................................ 2,500,000 1,618,750
Western Wireless Corp.:
10.50% Sr. Sub. Nts., 2/1/07 (5)......................... 1,500,000 1,505,625
10.50% Sr. Sub. Nts., 6/1/06............................. 700,000 708,750
-----------
15,167,563
-----------
Total Corporate Sector (Cost $105,632,435)................. 107,649,853
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
International Sector -- 37.0%
Corporate Bonds and Notes -- 8.8%
Basic Industry -- 1.3%
Metals/Mining -- 0.5%
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06 (6)...... $ 1,500,000 $ 1,552,500
-----------
Paper -- 0.8%
APP International Finance Co. BV, 11.75% Gtd. Sec. Nts.,
10/1/05.................................................. 750,000 774,375
Indah Kiat International Finance Co. BV, 12.50% Sr. Sec.
Gtd. Nts., Series C, 6/15/06............................. 500,000 540,000
QUNO Corp., 9.125% Sr. Nts., 5/15/05....................... 500,000 507,500
Tembec Finance Corp., 9.875% Gtd. Sr. Nts., 9/30/05........ 750,000 723,750
-----------
2,545,625
-----------
Consumer Related -- 1.1%
Consumer Products -- 0.6%
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05
(6)...................................................... 1,500,000 1,702,500
-----------
Food/Beverages/Tobacco -- 0.2%
Cott Corp., 9.375% Sr. Nts., 7/1/05........................ 750,000 761,250
-----------
Textile/Apparel -- 0.3%
PT Polysindo Eka Perkasa, 13% Sr. Nts., 6/15/01............ 750,000 826,875
-----------
Financial Services -- 3.1%
Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97.................................... 750,000 744,844
11% Unsec. Unsub. Nts., 11/24/97......................... 1,800,000 1,787,625
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts.,
2/1/99................................................... 1,750,000 1,662,500
Banco Itamarati SA, 10.50% Medium-Term Nts., 11/29/96...... 50,000 50,156
Bank Internationale Indonesia, Zero Coupon Negotiable CD,
15.912%, 1/6/97 (7) (IDR)................................ 7,500,000,000 3,134,670
Siam Commercial Bank Public Ltd., Zero Coupon Debs.,
10.581%, 11/18/96 (7) (THB).............................. 20,500,000 801,167
Snap Ltd., 11.50% Sec. Bonds, 1/29/09 (DEM)................ 2,200,000 1,442,123
-----------
9,623,085
-----------
Housing Related -- 0.1%
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A,
12/1/11 (6).............................................. 500,000 414,063
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Media -- 2.2%
Cable Television -- 1.9%
Bell Cablemedia PLC:
0%/11.875% Sr. Disc. Nts., 9/15/05 (10).................. $ 1,250,000 $ 937,500
0%/11.95% Sr. Disc. Nts., 7/15/04 (10)................... 2,000,000 1,655,000
Diamond Cable Communications PLC, 0%/11.75% Sr. Disc. Nts.,
12/15/05 (10)............................................ 1,200,000 792,000
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority
Debs., 12/1/07........................................... 500,000 502,500
TeleWest PLC, 0%/11% Sr. Disc. Debs., 10/1/07 (10)......... 3,000,000 1,935,000
-----------
5,822,000
-----------
Entertainment/Film -- 0.3%
Imax Corp., 7% Sr. Nts., 3/1/01 (13)....................... 1,000,000 1,000,000
-----------
Other -- 0.2%
CE Casecnan Water & Energy, Inc., 11.45% Sr. Nts., Series
A, 11/15/05.............................................. 500,000 550,000
-----------
Transportation -- 0.3%
Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04............ 750,000 813,750
-----------
Utilities -- 0.5%
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon
Bonds, 11/15/03 (5)(10).................................. 1,000,000 630,000
Rogers Cantel, Inc., 9.375% Sr. Sec. Debs., 6/1/08......... 750,000 759,375
-----------
1,389,375
-----------
Foreign Government Obligations -- 18.7%
Argentina -- 1.2%
Argentina (Republic of):
Treasury Bills, Zero Coupon, 12.117%, 1/17/97 (7)
(ARP).................................................. 1,000,000 983,996
Treasury Bills, Zero Coupon, 10.156%, 11/15/96 (7)
(ARP).................................................. 1,000,000 997,960
Unsec. Unsub. Bonds, 11.50%, 8/14/01 (GBP)............... 75,000 123,962
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
10.625%, 8/7/06.......................................... 1,000,000 1,016,250
Buenos Aires (Province of) Bonds, 10%, 3/5/01 (DEM)........ 680,000 471,955
-----------
3,594,123
-----------
Australia -- 1.1%
First Australia National Mortgage Acceptance Corp. Ltd.
Bonds, Series 22, 11.40%, 12/15/01 (AUD)................. 1,575,355 1,370,218
New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01
(AUD).................................................... 2,010,000 1,919,267
-----------
3,289,485
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Brazil -- 0.5%
Banco Estado Minas Gerais, 8.25%, 2/10/00.................. $ 1,370,000 $ 1,301,500
Telecomunicacoes Brasileiras SA Bonds, 13%, 2/5/99 (ITL)... 470,000,000 330,489
-----------
1,631,989
-----------
Bulgaria -- 0.7%
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds, Tranche A,
2.25%, 7/28/12 (3)(13)................................. 6,000,000 1,918,125
Interest Arrears Bonds, 6.688%, 7/28/11 (11)............. 559,000 245,960
-----------
2,164,085
-----------
Canada -- 1.7%
Canada (Government of) Real Return Debs., 4.25%, 12/1/21
(14) (CAD)............................................... 6,525,000 5,322,873
-----------
Costa Rica -- 0.4%
Central Bank of Costa Rica Interest Claim Bonds, Series B,
6.344%, 5/21/05 (5)(11).................................. 1,023,212 974,610
-----------
Denmark -- 0.9%
Denmark (Kingdom of) Bonds, 8%, 11/15/01 (DKK)............. 14,535,000 2,738,604
-----------
Great Britain -- 3.0%
United Kingdom Treasury Nts., 13%, 7/14/00 (3) (GBP)....... 4,660,000 9,006,412
-----------
Italy -- 1.4%
Italy (Republic of):
Sr. Unsec. Unsub. Global Bonds, 0.563%, 7/26/99 (11)
(JPY).................................................. 110,000,000 972,195
Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%,
7/15/00 (ITL).......................................... 4,725,000,000 3,424,522
-----------
4,396,717
-----------
Jordan -- 1.2%
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.625%, 12/23/23 (11)....................... 2,250,000 1,760,625
Interest Arrears Bonds, 6.625%, 12/23/05 (11)............ 2,260,000 2,005,750
-----------
3,766,375
-----------
Mexico -- 3.1%
Banco Nacional de Comercio Exterior SNC International
Finance BV Gtd. Nts., 8%, 8/5/03......................... 2,225,000 1,970,516
Bonos de la Tesoreria de la Federacion, Zero Coupon:
28.589%, 7/31/97 (7) (MXP)............................... 6,200,000 632,077
27.799%, 9/4/97 (7) (MXP)................................ 9,750,000 972,097
United Mexican States Bonds, 10.375%, 1/29/03 (DEM)........ 8,700,000 6,046,841
-----------
9,621,531
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Norway -- 0.7%
Norwegian Government Bonds, 9.50%, 10/31/02 (NOK).......... $ 12,315,000 $ 2,234,011
-----------
Panama -- 0.3%
Panama (Republic of) Interest Reduction Bonds, 3.50%,
7/17/14 (13)............................................. 1,500,000 986,250
-----------
Portugal -- 0.4%
Portugal (Republic of) Bonds, Obrigicion do tes Medio
Prazo, 11.875%, 2/23/00 (PTE)............................ 175,000,000 1,311,613
-----------
Sweden -- 1.2%
Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01
(SEK).................................................... 19,200,000 3,668,359
-----------
Venezuela -- 0.9%
Venezuela (Republic of) Front-Loaded Interest Reduction
Bonds:
Series A, 6.375%, 3/31/07 (11)........................... 2,075,000 1,730,031
Series B, 6.50%, 3/31/07 (11)............................ 1,250,000 1,042,188
-----------
2,772,219
-----------
Loan Participations -- 3.3%
Algeria (Republic of) Reprofiled Debt Loan Participation,
Tranche A, 6.625%, 9/4/06 (5)(11)........................ 6,000,000 4,275,000
Colombia (Republic of) Concorde Loan Participation, 8.625%,
1/31/98 (5)(11).......................................... 499,492 494,497
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 5.531%, 10/16/00 (5)(11)...................... 625,000 603,125
Tranche B, 6.312%, 11/15/04 (5)(11)...................... 1,778,957 1,512,114
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 6.437%, 1/1/09 (11)........................... 875,000 694,258
Tranche B, 6.437%, 1/1/04 (11)........................... 882,352 783,088
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.772%, 9/30/00 (5)(11) (JPY)................. 96,000,000 751,186
Tranche B, 1.772%, 9/30/00 (5)(11) (JPY)................. 96,000,000 751,187
United Mexican States, Combined Facility 3, Loan
Participation Agreement, Tranche A, 6.563%, 9/20/97
(5)(11).................................................. 193,194 166,872
-----------
10,031,327
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Value
Units See Note 1
<S> <C> <C>
Rights, Warrants and Certificates -- 0.0%
Australis Media Ltd. Wts., Exp. 5/00 (5).................. 80 $ 1
Comunicacion Celular SA Wts., Exp. 11/03 (5).............. 1,000 65,000
-----------
65,001
-----------
</TABLE>
<TABLE>
<CAPTION>
Expiration
Date Strike Contracts
<S> <C> <C> <C> <C>
Put Options Purchased -- 0.1%
Australian Dollar Put Opt....... 1/97 0.78 AUD 2,070,000 8,694
Bulgaria (Republic of) Interest
Arrears Bonds:
6.688%, 7/28/11 Put Opt....... 11/96 41.10% 500 3,350
6.688%, 7/28/11 Put Opt....... 12/96 40.75% 6,000 59,400
Italy (Republic of) Treasury
Bonds, Buoni del Tesoro
Poliennali,
9.50%, 2/1/06 Put Opt......... 7/97 99.96 ITL 2,548 11,212
Swiss Franc Put Opt............. 1/97 1.256 CHF 12,672,242 225,312
-----------
307,968
-----------
</TABLE>
<TABLE>
<S> <C> <C>
Face Amount
(1)
Structured Instruments -- 6.1%
Bayerische Landesbank Girozentrale, New York Branch:
14% CD Linked Nts., 12/17/96 (indexed to the cross
currency rates of Greek Drachma and European Currency
Unit).................................................. $ 1,000,000 988,600
6.28% Deutsche Mark Currency Protected Yield Curve CD,
7/25/97................................................ 1,000,000 998,950
Canadian Imperial Bank, 10% CD British Pound Sterling
Maximum Rate Linked Nts., 11/8/96 (indexed to the 3-month
GBP LIBOR, multiplied by 9) (5).......................... 750,000 750,375
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross
currency rates of Greek Drachma and European Currency
Unit).................................................. 1,000,000 990,200
16.75% CD Linked Nts., 4/16/97 (indexed to the Federation
GKO, Zero Coupon, 4/9/97).............................. 2,000,000 1,990,000
17% CD Linked Nts., 2/26/97 (indexed to the Federation
GKO, Zero Coupon, 2/19/97)............................. 1,000,000 997,000
17% CD Linked Nts., 4/2/97 (indexed to the Russian
Federation GKO, Zero Coupon, 3/26/97).................. 1,000,000 995,500
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Zero Coupon Chilean Peso Linked Nts., 11.813%, 6/23/97
(7).................................................... 2,250,000 2,036,700
Zero Coupon Indian Rupee Linked Nts., 15.672%, 12/20/96
(7).................................................... 500,000 490,250
Lehman Brothers, Inc., Zero Coupon Citibank Czech Koruna
Linked Nts., 12.399%, 11/21/96 (7) (9) (CZK)............. 40,500,000 1,497,926
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Structured Instruments (Continued)
Morgan Guaranty Trust Co. of New York, Nassau Branch, Zero
Coupon Indian Rupee Currency Linked Nts., 17.392%,
11/27/96 (7)............................................. $ 250,000 $ 248,142
Salomon Brothers, Inc., Zero Coupon:
Brazilian Credit Linked Nts., 12.38%, 1/3/97 (indexed to
the Brazilian National Treasury Nts., Zero Coupon,
1/2/97) (7)............................................ 3,000,000 2,946,900
Chilean Peso Indexed Enhanced Access Nts., 12.145%,
12/11/96 (7)........................................... 1,000,000 969,100
Chilean Peso Indexed Enhanced Access Nts., 11.792%,
12/11/96 (7)........................................... 1,000,000 969,400
Chilean Peso Indexed Enhanced Access Nts., 12.218%,
12/18/96 (7)........................................... 500,000 482,850
Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts.,
6/20/97 (indexed to the closing Nikkei 225 Index on
1/23/97, 5 yr. & 3 mos. Japanese Yen Swap rate & New
Zealand Dollar).......................................... 1,000,000 1,009,250
-----------
18,361,143
-----------
Total International Sector (Cost $109,112,559)............. 113,245,718
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Mortgage-Backed Sector -- 22.3%
Government Agency -- 20.9%
FHLMC/FNMA/Sponsored -- 13.9%
Federal Home Loan Mortgage Corp.:
Certificates of Participation, 12%, 10/1/11.............. $ 359,173 $ 412,072
Certificates of Participation, 12%, 10/1/14.............. 191,808 216,086
Certificates of Participation, 12%, 5/1/10............... 680,507 774,635
Certificates of Participation, 12%, 6/1/15............... 284,054 326,927
Certificates of Participation, 12%, 8/1/13............... 44,889 51,665
Certificates of Participation, 12%, 8/1/14............... 659,623 759,180
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, Series 1343, Cl. LA, 8%,
8/15/22................................................ 1,000,000 1,037,500
Gtd. Multiclass Mtg. Participation Certificates, 7.50%,
5/1/26................................................. 3,976,495 3,999,996
Interest-Only Stripped Mtg.-Backed Security, Trust 177,
Cl. B, 6.90%-7.20%, 7/15/26 (15)....................... 25,159,524 8,974,874
Federal National Mortgage Assn.:
11%, 7/1/16.............................................. 1,013,626 1,158,702
7%, 11/1/25.............................................. 18,111,159 17,789,506
7.50%, 6/1/10............................................ 1,901,629 1,937,798
8%, 11/15/26 (9)......................................... 2,500,000 2,550,000
Gtd. Mtg. Pass-Through Certificates, 13%, 6/1/15......... 1,307,757 1,551,733
Principal-Only Stripped Mtg.-Backed Security, Trust 4,
Cl. J, Zero Coupon, 2.261%, 9/25/22 (16)............... 1,700,000 1,026,375
-----------
42,567,049
-----------
GNMA/Guaranteed -- 7.0%
Government National Mortgage Assn.:
6%, 11/15/26 (9)......................................... 3,000,000 3,005,625
7%, 3/15/26-4/15/26...................................... 4,530,679 4,445,865
7.50%, 8/15/25........................................... 8,845,824 8,866,258
8%, 12/15/26 (9)......................................... 2,500,000 2,550,775
11%, 11/15/26 (9)........................................ 804,000 915,298
12%, 11/20/13-9/20/15.................................... 801,014 911,817
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Series
1994-5, Cl. PQ, 7.493%, 7/16/24........................ 750,000 755,152
-----------
21,450,790
-----------
</TABLE>
Statement of Investments October 31, 1996 (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
<S> <C> <C>
Private -- 1.4%
Commercial -- 0.8%
Asset Securitization Corp., Series 1996-D3, Cl. A5, 8.165%,
10/13/26 (5)............................................. $ 500,000 $ 517,187
Morgan Stanley Capital I, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1996-C1, Cl. D-1,
7.51%, 2/15/28 (5)(11)................................... 1,000,000 983,125
NationsCommercial Corp., NB Commercial Mtg. Pass-Through
Certificates, Series-DMC:
Cl. B, 8.562%, 8/12/11 (5)............................... 400,000 404,063
Cl. C, 8.921%, 8/12/11 (5)............................... 400,000 403,938
-----------
2,308,313
-----------
Multi-Family -- 0.2%
Mortgage Capital Funding, Inc., Multifamily Mtg.
Pass-Through Certificates, Series 1996-MC1, Cl. G, 7.15%,
6/15/06 (5).............................................. 750,000 593,438
-----------
Other -- 0.1%
Nomura Asset Securities Corp., Series 1994-MD1, Cl. B2,
8.422%, 3/15/18 (6)(11).................................. 500,000 442,852
-----------
Residential -- 0.3%
Salomon Brothers Mortgage Securities VII, Series 1996-B,
Cl. 1, 7.136%, 4/25/26................................... 1,344,444 803,306
-----------
Total Mortgage-Backed Sector (Cost $68,274,518)............ 68,165,748
-----------
Money Market Sector -- 3.6%
Repurchase agreement with Zion First National Bank, 5.52%,
dated 10/31/96, to be repurchased at $10,901,671 on
11/1/96, collateralized by U.S. Treasury Nts.,
5.75%-9.25%, 5/15/97-8/15/04, with a value of $11,129,860
(Cost $10,900,000)....................................... 10,900,000 10,900,000
-----------
Total Investments, at Value (Cost $304,725,289)............ 101.9% 312,038,897
Liabilities in Excess of Other Assets...................... (1.9) (5,857,577)
------------- -----------
Net Assets................................................. 100.0% $306,181,320
------------- -----------
------------- -----------
</TABLE>
Statement of Investments October 31, 1996 (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> <C> <C> <C>
Indonesian
ARP -- Argentine Peso IDR -- Rupiah
AUD -- Australian Dollar ITL -- Italian Lira
CAD -- Canadian Dollar JPY -- Japanese Yen
CHF -- Swiss Franc MXP -- Mexican Peso
CZK -- Czech Koruna NOK -- Norwegian Krone
German Deutsche Portuguese
DEM -- Mark PTE -- Escudo
DKK -- Danish Krone SEK -- Swedish Krona
British Pound
GBP -- Sterling THB -- Thai Baht
</TABLE>
2. Securities with an aggregate market value of $1,477,791 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See Note 6 of Notes to Financial Statements.
3. A sufficient amount of securities has been designated to cover outstanding
written call options, as follows:
<TABLE>
<CAPTION>
Face/Contracts Market
Subject to Expiration Exercise Premium Value
Call Date Price Received See Note 1
----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar......... 2,070,000 11/27/96 1.263AUD $ 9,936 $ 8,694
Call Option on Banco Hipotecario Nacional
(Argentina) Medium Term Nts., 10.625%,
8/7/06.................................. 1,000 8/7/00 100% 9,200 20,000
Call Option on British Pound Sterling.... 950,000 1/30/97 0.613GBP 21,394 24,890
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction Bearer
Bonds, Tranche A, 2.25%, 7/28/12........ 3,000 12/4/96 32.75% 22,500 46,500
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction Bearer
Bonds, Tranche A, 2.25%, 7/28/12........ 3,000 12/11/96 32.13% 17,100 60,000
Call Option on Bulgaria (Republic of)
Interest Arrears Bonds, 6.688%,
7/28/11................................. 500 11/29/96 47.10% 2,850 3,000
Call Option on Swiss Franc............... 6,250,000 1/6/97 1.20CHF 24,343 15,469
--------- -----------
$ 107,323 $ 178,553
--------- -----------
--------- -----------
</TABLE>
4. Non-income producing security.
5. Identifies issues considered to be illiquid -- See Note 8 of Notes to
Financial Statements.
6. 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 $19,875,634 or 6.49% of the
Trust's net assets, at October 31, 1996.
7. For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
8. Non-income producing -- issuer is in default of interest payment.
9. When-issued security to be delivered and settled after October 31, 1996.
10. Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
11. Represents the current interest rate for a variable rate security.
12. 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.
13. Represents the current interest rate for an increasing rate security.
14. Indexed instrument for which the principal amount and/or interest is
affected by the relative value of a foreign index.
15. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities
typically decline in price as interest rates decline. Most other
fixed-income securities increase in price when interest rates decline. The
principal amount of the underlying pool represents the notional amount on
which current interest is calculated. The price of these securities is
typically more sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs). Interest
rates disclosed represent current yields based upon the current cost basis
and estimated timing and amount of future cash flows.
16. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these
securities generally increases as interest rates decline and prepayment
rates rise. The price of these securities is typically more volatile than
that of coupon-bearing bonds of the same maturity. Interest rates
disclosed represent current yields based upon the current cost basis and
estimated timing of future cash flows.
See accompanying Notes to Financial Statements.
Statement of Assets and Liabilities October 31, 1996
Oppenheimer Multi-Sector Income Trust
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $304,725,289) -- see accompanying
statement............................................................. $312,038,897
Cash.................................................................... 63,053
Unrealized appreciation on forward foreign currency exchange
contracts -- Note 5................................................. 39,636
Receivables:
Investments sold...................................................... 11,923,650
Interest and principal paydowns....................................... 5,751,475
Closed forward foreign currency exchange contracts.................... 360,796
Daily variation on futures contracts -- Note 6...................... 32,813
Other................................................................... 21,129
-----------
Total assets........................................................ 330,231,449
-----------
LIABILITIES:
Options written, at value (premiums received $107,323) -- see
accompanying statement -- Note 7.................................... 178,553
Unrealized depreciation on forward foreign currency exchange
contracts -- Note 5................................................. 5,744
Payables and other liabilities:
Investments purchased (including $15,967,473 purchased on a
when-issued basis) -- Note 1...................................... 23,385,124
Trustees' fees........................................................ 150,132
Closed forward foreign currency exchange contracts.................... 138,861
Management and administrative fees.................................... 72,923
Other................................................................. 118,792
-----------
Total liabilities................................................... 24,050,129
-----------
NET ASSETS.............................................................. $306,181,320
-----------
-----------
COMPOSITION OF NET ASSETS:
Par value of shares of beneficial interest.............................. $ 291,161
Additional paid-in capital.............................................. 315,440,767
Undistributed net investment income..................................... 556,961
Accumulated net realized loss on investments and foreign currency
transactions.......................................................... (17,508,519)
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies......................... 7,400,950
-----------
NET ASSETS -- applicable to 29,116,068 shares of beneficial interest
outstanding........................................................... $306,181,320
-----------
-----------
NET ASSET VALUE PER SHARE............................................... $10.52
</TABLE>
See accompanying Notes to Financial Statements.
Statement of Operations For the Year Ended October 31, 1996
Oppenheimer Multi-Sector Income Trust
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $8,969).................... $29,402,390
Dividends................................................................ 183,032
----------
Total income......................................................... 29,585,422
----------
EXPENSES:
Management fees -- Note 4.............................................. 1,939,377
Administrative fees -- Note 4.......................................... 596,733
Shareholder reports...................................................... 173,286
Custodian fees and expenses.............................................. 133,049
Trustees' fees and expenses -- Note 1.................................. 93,175
Transfer agent and accounting service fees -- Note 4................... 71,592
Legal and auditing fees.................................................. 37,084
Registration and filing fees............................................. 29,098
Other.................................................................... 40,531
----------
Total expenses....................................................... 3,113,925
----------
NET INVESTMENT INCOME.................................................... 26,471,497
----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (including premiums on options exercised).................. 8,093,575
Closing of futures contracts........................................... (536,439)
Closing and expiration of options written -- Note 7.................. (403,592)
Foreign currency transactions.......................................... 722,589
----------
Net realized gain.................................................... 7,876,133
----------
Net change in unrealized appreciation or depreciation on:
Investments............................................................ 3,143,529
Translation of assets and liabilities denominated in foreign
currencies........................................................... (117,257)
----------
Net change........................................................... 3,026,272
----------
NET REALIZED AND UNREALIZED GAIN......................................... 10,902,405
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $37,373,902
----------
----------
</TABLE>
See accompanying Notes to Financial Statements.
Statements of Changes in Net Assets
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income........................................... $26,471,497 $27,458,297
Net realized gain (loss)........................................ 7,876,133 (9,847,515)
Net change in unrealized appreciation or depreciation........... 3,026,272 8,597,737
----------- -----------
Net increase in net assets resulting from operations........ 37,373,902 26,208,519
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income............................ (26,320,905) (26,608,817)
Tax return of capital distribution.............................. -- (625,807)
----------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from shares issued to shareholders in reinvestment of
dividends -- Note 2......................................... -- 496,299
----------- -----------
Total increase (decrease)....................................... 11,052,997 (529,806)
NET ASSETS:
Beginning of period............................................. 295,128,323 295,658,129
----------- -----------
End of period [including undistributed (overdistributed) net
investment income of $556,961 and $(113,075), respectively]... $306,181,320 $295,128,323
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
Financial Highlights
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period $ 10.14 $ 10.17 $ 10.96 $ 10.46 $ 10.64
--------- --------- --------- --------- ---------
Income (loss) from investment
operations:
Net investment income.......... .91 .94 1.00 1.08 1.06
Net realized and unrealized
gain (loss).................. .37 (.04) (.82) .43 (.08)
--------- --------- --------- --------- ---------
Total income from investment
operations.................. 1.28 .90 .18 1.51 .98
--------- --------- --------- --------- ---------
Dividends and distributions to
shareholders:
Dividends from net investment
income....................... (.90) (.91) (.84) (1.01) (1.16)
Tax return of capital
distribution................. -- (.02) (.13) -- --
--------- --------- --------- --------- ---------
Total dividends and
distributions to
shareholders................ (.90) (.93) (.97) (1.01) (1.16)
--------- --------- --------- --------- ---------
Net asset value, end of
period......................... $ 10.52 $ 10.14 $ 10.17 $ 10.96 $ 10.46
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Market value, end of period..... $ 9.88 $ 10.00 $ 9.50 $ 11.25 $ 11.13
TOTAL RETURN, AT MARKET
VALUE(1)....................... 7.85% 15.62% (7.46)% 11.10% 11.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)..................... $ 306,181 $ 295,128 $ 295,658 $ 316,647 $ 299,368
Average net assets (in
thousands)..................... $ 298,496 $ 288,884 $ 306,686 $ 307,244 $ 303,773
Ratios to average net assets:
Net investment income........ 8.87% 9.51% 9.17% 10.13% 9.95%
Expenses..................... 1.04% 1.05% 1.02% 1.00% 1.11%
Portfolio turnover rate(2)...... 225.4% 240.1% 187.6% 131.3% 95.9%
</TABLE>
(1) Assumes a hypothetical purchase at the current market price on the
business day before the first day of the fiscal period, with all dividends
and distributions reinvested in additional shares on the reinvestment
date, and a sale at the current market price on the last business day of
the period. Total return does not reflect sales charges or brokerage
commissions.
(2) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended October 31, 1996 were
$620,563,409 and $621,303,130, respectively. For the years ended October
31, 1995 and 1994, purchases and sales of investment securities included
mortgage 'dollar-rolls.'
See accompanying Notes to Financial Statements.
Notes to Financial Statements
Oppenheimer Multi-Sector Income Trust
1. Significant Accounting Policies
Oppenheimer Multi-Sector Income Trust (the Trust) is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Trust's investment objective is to seek
high current income. The Trust's investment adviser is OppenheimerFunds, Inc.
(the Manager). The following is a summary of significant accounting policies
consistently followed by the Trust.
Investment Valuation -- Portfolio securities are valued at the close of the
New York Stock Exchange on the last day of each week 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 the last
sale price on the prior trading day. Long-term and short-term 'non-money
market' debt securities are valued by a portfolio pricing service approved
by the Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term 'money market type' debt
securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency contracts are valued based on
the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or
dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions
that day, the value is based upon the last sale price on the prior trading
date if it is within the spread between the closing bid and asked prices. If
the last sale price is outside the spread, the closing bid is used.
Securities Purchased on a When-Issued Basis --
Delivery and payment for securities that have been purchased by the Trust on a
forward commitment or when-issued basis can take place a month or more after
the transaction date. During this period, such securities do not earn
interest, are subject to market fluctuation and may increase or decrease in
value prior to their delivery. The Trust maintains, in a segregated account
with its custodian, assets with a market value equal to the amount of its
purchase commitments. The purchase of securities on a when-issued or forward
commitment basis may increase the volatility of the Trust's net asset value to
the extent the Trust makes such purchases while remaining substantially fully
invested. As of October 31, 1996, the Trust had entered into outstanding
when-issued or forward commitments of $15,967,473.
In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the Trust may enter into mortgage 'dollar-rolls'
in which the Trust sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar
(same type, coupon and maturity) but not identical securities on a specified
future date. The Trust records each dollar-roll as a sale and a new purchase
transaction.
Security Credit Risk -- The Trust invests in high yield securities, which
may be subject to a greater degree of credit risk, greater market fluctuations
and risk of loss of income and principal, and may be more sensitive to eco-
23
Notes to Financial Statements (Continued)
Oppenheimer Multi-Sector Income Trust
nomic conditions than lower yielding, higher rated fixed income securities.
The Trust may acquire securities in default, and is not obligated to dispose
of securities whose issuers subsequently default. At October 31, 1996,
securities with an aggregate market value of $345,000, representing 0.11% of
the Trust's net assets, were in default.
Foreign Currency Translation -- The accounting records of the Trust are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of exchange.
Amounts related to the purchase and sale of 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, 1996, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $15,600,000, which expires between 1999 and 2003.
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, 1996, a provision of $41,911 was made for the Trust's
projected benefit obligations and payments of $4,853 were made to retired
trustees, resulting in an accumulated liability of $150,132 at October 31,
1996.
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. 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, 1996, the Fund adjusted the classification
of distributions to shareholders to reflect the differences between financial
statement amounts and distributions determined in accordance with
24
Notes to Financial Statements (Continued)
Oppenheimer Multi-Sector Income Trust
income tax regulations. Accordingly, during the year ended October 31, 1996,
amounts have been reclassified to reflect an increase in undistributed net
investment income of $459,398. Accumulated net realized loss on investments
was increased by the same amount. In addition, to properly reflect foreign
currency gain in the components of capital, $60,046 of foreign exchange gain
determined according to U.S. Federal income tax rules has been reclassified
from accumulated net realized loss to undistributed net investment income.
Other -- Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is recorded
on the ex-dividend date. Discount on securities purchased is amortized over
the life of the respective securities, in accordance with federal income tax
requirements. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis,
which is the same basis used for federal income tax purposes. Dividends in
kind are recognized as income on the ex-dividend date, at the current market
value of the underlying security. Interest on payment-in-kind debt instruments
is accrued as income at the coupon rate and a market adjustment is made
periodically.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
2. Shares of Beneficial Interest
The Trust has authorized an unlimited number of $.01 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------
1996 1995
------------ --------------------
Shares Amount Shares Amount
--------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net increase
from dividends
reinvested.... -- $ -- 51,219 $ 496,299
</TABLE>
3. Unrealized Gains and Losses on Investments
At October 31, 1996 net unrealized appreciation on investments and options
written of $7,242,379 was composed of gross appreciation of $10,513,258, and
gross depreciation of $3,270,879.
4. Management and Administrative Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust which provides for an annual fee of 0.65% on
the Trust's average annual net assets.
Mitchell Hutchins Asset Management Inc. serves as the Trust's Administrator.
The Trust pays the Administrator an annual fee of 0.20% of the Trust's average
annual net assets.
The Manager acts as the accounting agent for the Trust at an annual fee of
$24,000, plus out-of-pocket costs and expenses reasonably incurred.
Shareholder Financial Services, Inc. (SFSI), a wholly-owned subsidiary of the
Manager, is the transfer agent and registrar for the Trust. Fees paid to SFSI
are based on the number of accounts and the number of shareholder
transactions, plus out-of-pocket costs and expenses.
25
Notes to Financial Statements (Continued)
Oppenheimer Multi-Sector Income Trust
5. Forward Contracts
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at a
negotiated rate. The Trust uses forward contracts to seek to manage foreign
currency risks. They may also be used to tactically shift portfolio currency
risk. The Trust generally enters into forward contracts as a hedge upon the
purchase or sale of a security denominated in a foreign currency. In addition,
the Trust may enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily
basis as provided by a reliable bank or dealer. The Trust will realize a gain
or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on outstanding
forward contracts are noted in the Statement of Investments where applicable.
Unrealized appreciation or depreciation on forward contracts is reported in
the Statement of Assets and Liabilities. Realized gains and losses are
reported with all other foreign currency gains and losses in the Trust's
Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms of
the contract and unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At October 31, 1996, the Trust had outstanding forward contracts to
purchase and sell currencies as follows:
<TABLE>
<CAPTION>
Valuation as
Contract of
Expiration Amount October 31, Unrealized Unrealized
Contracts to Purchase Date (000s) 1996 Appreciation Depreciation
- --------------------------- ------------ --------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Italian Lira (ITL)......... 10/20/97-10/30/97 2,803,294ITL $1,822,865 $ 12,819 $ --
Mexican Peso (MXP)......... 11/1/96 5,078MXP 630,001 -- 5,320
Spanish Peseta (ESP)....... 10/20/97 149,800ESP 1,161,379 10,820 --
------------- ----------- -----
$3,614,245 23,639 5,320
Contracts to Sell
Japanese Yen (JPY)......... 12/20/96-10/30/97 125,000JPY $1,131,759 $ 4,635 $ 424
Swiss Franc (CHF).......... 10/20/97 2,810CHF 2,294,745 11,362 --
------------- ----------- -----
$3,426,504 15,997 424
------------- ----------- -----
-------------
Total Unrealized Appreciation and Depreciation $ 39,636 $ 5,744
----------- -----
----------- -----
</TABLE>
6. Futures Contracts
The Trust may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Trust may also
buy or write put or call options on these futures contracts.
The Trust generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Trust may also purchase futures contracts to gain
exposure to changes in interest rates as it may be
Notes to Financial Statements (Continued)
Oppenheimer Multi-Sector Income Trust
more efficient or cost effective than actually buying fixed income securities.
Upon entering into a futures contract, the Trust is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Trust each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Trust recognizes a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the value of
the underlying securities.
At October 31, 1996, the Trust had outstanding futures contracts to purchase
debt securities as follows:
<TABLE>
<CAPTION>
Valuation
Number as of
of October
Expiration Futures 31, Unrealized
Date Contracts 1996 Appreciation
----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
U.S.
Treasury
Bonds...... 12/96 90 $10,170,000 $ 109,219
</TABLE>
7. Option Activity
The Trust may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Trust generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Trust receives a premium and becomes obligated to sell
or purchase the underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Trust will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a
written put option, or the cost of the security for a purchased put or call
option is adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to 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.
27
Notes to Financial Statements (Continued)
Oppenheimer Multi-Sector Income Trust
Written option activity for the year ended October 31, 1996 was as follows:
<TABLE>
<CAPTION>
Call Options
--------------------
Number of Amount of
Options Premiums
--------- ---------
<S> <C> <C>
Options outstanding at
October 31, 1995........ 7,745 $ 91,447
Options written.......... 36,665,597 460,599
Options closed or
expired................. (25,233,036) (426,961)
Options exercised........ (2,162,806) (17,762)
--------- ---------
Options outstanding at
October 31, 1996........ 9,277,500 $ 107,323
--------- ---------
--------- ---------
Put Options
--------------------
Number of Amount of
Options Premiums
--------- ---------
Options outstanding at
October 31, 1995........ -- $ --
Options written.......... 2,177 75,337
Options closed........... (2,177) (75,337)
--------- ---------
Options outstanding at
October 31, 1996........ -- $ --
--------- ---------
--------- ---------
</TABLE>
8. Illiquid and Restricted Securities
At October 31, 1996, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may be
considered illiquid if it lacks a readily-available market or if its valuation
has not changed for a certain period of time. The Trust intends to invest no
more than 10% of its net assets (determined at the time of purchase and
reviewed from time to time) in illiquid or restricted securities. Certain
restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limit. The aggregate value of illiquid or
restricted securities subject to this limitation at October 31, 1996 was
$17,270,027, which represents 5.64% of the Trust's net assets. Information
concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation
Per Unit
as of
Acquisition Cost October 31,
Security Date Per Unit 1996
- ---------------------------------------------------------- ----------- --------- -----------
<S> <C> <C> <C>
Arizona Charlie's Inc., 12% First Mtg. Nts. Series A,
11/15/00................................................. 11/18/93 $ 100.00 $ 70.00
Becker Gaming, Inc. Wts., Exp. 11/00...................... 11/18/93 2.00 0.25
Canadian Imperial Bank, 10% CD British Pound Sterling
Maximum Rate Linked Nts., 11/8/96........................ 4/28/95 100.00 100.05
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series
A, 11/15/00.............................................. 11/18/93 87.50 75.00
Triangle Wire & Cable, Inc. Common Stock.................. 5/2/94 9.50 1.00
</TABLE>
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, 1996
and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five year period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1996 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, 1996 the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two year period then ended, and the financial highlights
for each of the years in the five year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
November 21, 1996
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements at fiscal year-end October 31, 1996.
(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: Filed with
Registrant's Registration Statement, 2/2/88, refiled with
Registrant's Amendment No. 8, 2/27/95, and incorporated herein by
reference.
(2) Amendment No. 1 dated as of March 10, 1988 to
Declaration of Trust of Registrant: Filed with Amendment No. 2 to
Registrant's Registration Statement, 3/24/88, refiled with
Registrant's Amendment No. 8, 2/27/95, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(3) Amendment No. 2 dated November 6, 1989 to
Declaration of Trust of Registrant: Filed with Registrant s Post-
Effective Amendment No. 8, 2/27/95, and incorporated herein by
reference.
(b) By-Laws of Registrant (amended by-laws): Declaration
of Trust of Registrant: Filed with Registrant's Registration
Statement, 2/2/88, refiled with Post-Effective Registrant's
Amendment No. 8, 2/27/95, and incorporated herein by reference.
(c) Inapplicable
(d) Specimen certificate for Shares of Beneficial
Interest, $.01 par value: Filed with Amendment No. 10 to
Registrant's Registration Statement.
(e) Inapplicable
(f) Inapplicable
(g) (1) Investment Advisory Agreement with Oppenheimer
Management Corporation dated 10/22/90 - Filed with Amendment No. 5
to Registrant's Registration Statement dated 2/27/91, refiled with
Amendment No. 8 to Registrant's Registration Statement, and
incorporated herein by reference.
(2) Form of Administration Agreement with Mitchell
Hutchins Asset Management Inc.: Filed with Amendment No. 2 to
Registrant's Registration Statement, 3/24/88, refiled with
Registrant's Amendment No. 8, 2/27/95, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(h) Form of Underwriting Agreement: 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.
(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 Amendment No. 8 to Registrant's Registration Statement,
and incorporated herein by reference.
(k) Accounting Service Agreement previously filed with
Registrant's Amendment No. 9 under the Investment Company Act of
1940, 2/29/96, and incorporated herein by reference.
(l) Inapplicable
(m) Inapplicable
(n) Inapplicable
(o) Inapplicable
(p) Inapplicable
(q) Inapplicable
(r) Financial Data Schedule previously filed with
Registrant's Amendment No. 11 under the Investment Company Act of
1940, 2/20/97, 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 March 15, 1997
- -------------- ------------------------
Shares of Beneficial Interest, 5,114
$.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>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; Senior
Vice President of HarbourView; prior
to March, 1996 he was the senior
equity portfolio manager for the
Panorama Series Fund, Inc. (the
"Company") and other mutual funds and
pension funds managed by G.R.
Phelps & Co. Inc. ("G.R. Phelps"),
the Company's former investment
adviser, which was a subsidiary of
Connecticut Mutual Life Insurance
Company; was also responsible for
managing the common stock department
and common stock investments of
Connecticut Mutual Life Insurance Co.
Lawrence Apolito, Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly a Vice President and Senior
Portfolio Manager at First of America
Investment Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith Barney,
Inc.
David Bernard, Vice President Previously a Regional Sales Director
for Retirement Plan Services at
Charles Schwab & Co., Inc.
Rajeev Bhaman,
Assistant Vice President Formerly Vice President of Asian
Equities for Barclays de Zoete Wedd,
Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the
Oppenheimer Funds (listed below);
previously a Fund Controller for
OppenheimerFunds, Inc. (the
"Adviser").
George Bowen, Senior Vice
President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Assistant 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; Director, Treasurer
and Chief Executive Officer of
MultiSource Services, Inc.; Vice
President and Treasurer of
Oppenheimer Real Asset Management,
Inc.; President, Treasurer and
Director of Centennial Capital
Corporation; Vice President and
Treasurer of Main Street Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of Educational
Services for H.D. Vest Investment
Securities, Inc.
Michael A. Carbuto,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
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.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President and
Director An officer and/or portfolio manager
of certain Oppenheimer funds.
John Doney, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York- based
Oppenheimer Funds; Vice President and
Secretary of the Denver-based
Oppenheimer Funds; Secretary of the
Oppenheimer Quest and Oppenheimer
Rochester Funds; Executive Vice
President, Director and General
Counsel of the Distributor; President
and a Director of Centennial; Chief
Legal Officer and a Director of
MultiSource Services, Inc.; President
and a Director of Oppenheimer Real
Asset Management, Inc.; Executive
Vice President, General Counsel and
Director of SFSI and SSI; formerly
Senior Vice President and Associate
General Counsel of the Adviser and
the Distributor.
George Evans, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Scott Farrar, Vice President Assistant Treasurer of the New York-
based and Denver-based Oppenheimer
funds.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView Asset
Management Corporation, MultiSource
Services, Inc. and Centennial Asset
Management Corporation; Secretary,
Vice President and Director of
Centennial Capital Corporation; Vice
President and Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds.
Formerly 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"), Managing
Partner of Rochester Capital
Advisors, L.P., President and
Director of Rochester Fund Services,
Inc. ("RFS"), President and Director
of Rochester Tax Managed Fund, Inc.
John Fortuna, Vice President None.
Patricia Foster, Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds; Secretary and
General Counsel of Rochester Capital
Advisors, L.P. and Secretary of
Rochester Tax Managed Fund, Inc.
Jennifer Foxson,
Assistant Vice President None.
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: Vice President
and a director of HarbourView and
Centennial, a director of SFSI and
SSI, an officer of other Oppenheimer
Funds.
Linda Gardner,
Assistant Vice President None.
Jill Glazerman, None.
Assistant Vice President
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President /
Director of Graphic and Print
Communications for Shearson Lehman
Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Caryn Halbrecht,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President of Fixed
Income Portfolio Management at
Bankers Trust.
Glenna Hale,
Director of Investor Marketing Formerly Vice President (1994-1997)
of Retirement Plans Services for
OppenheimerFunds Services.
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the
Adviser President and Director of SFSI;
President and Chief Executive Officer
of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden, Vice President None.
Merryl Hoffman, Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Ronald Jamison, Vice President Formerly Vice President and Associate
General Counsel at
Prudential Securities, Inc.
Frank Jennings, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
Vice President Formerly Senior Managing Director of
Van Eck Global.
Avram Kornberg, Vice President Formerly a Vice President with
Bankers Trust.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Assistant Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly
Chairman (11/94-2/96)), Chinese
Finance Society; and Director (6/94-
6/95), Greater China Business
Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March, 1996 he was the senior bond
portfolio manager for Panorama Series
Fund, Inc., other mutual funds and
pension accounts managed by G.R.
Phelps; was also responsible for
managing the public fixed-income
securities department at Connecticut
Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive
Officer and Director President, Director and Trustee of
the New York-based and the Denver-
based Oppenheimer funds; President
and a Director of OAC, HarbourView
and Oppenheimer Partnership Holdings,
Inc.; Director of ORAMI; Chairman and
Director of SSI; a Director of
Oppenheimer Real Asset Management,
Inc.
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage
Trading, at S.N. Phelps & Co., Salomon
Brothers, and Kidder Peabody.
Sally Marzouk, Vice President None.
Michelle McCann,
Assistant Vice President Formerly Vice President, Quest for
Value Distributors, Oppenheimer
Capital Corporation.
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Portfolio Manager with
Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore, Vice President Formerly Marketing Manager (July,
1995 - November, 1996) for Chase
Investment Services Corp.
Kenneth Nadler, Vice President None.
David Negri, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly a Vice President with Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the
Distributor.
Jane Putnam, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly Senior Investment Officer
and Portfolio Manager with Chemical
Bank.
Russell Read, Vice President Consultant for Prudential Insurance
on behalf of the General Motors
Pension Plan.
Thomas Reedy, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly a Securities Analyst for the
Adviser.
David Robertson, Vice President None.
Adam Rochlin, Vice President Formerly a Product Manager for
Metropolitan Life Insurance Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio manager
of certain Oppenheimer funds.
Formerly 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, an officer
and/or portfolio manager of certain
Oppenheimer funds.
David Rosenberg, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Vice President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar Dry
Dock Bank.
James Ruff,
Executive Vice President None.
Valerie Sanders, Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of Citicorp
Investment Services.
Diane Sobin, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds;
formerly a Vice President and Senior
Portfolio Manager for Dean Witter
InterCapital, Inc.
Richard A. Soper, None.
Assistant Vice President
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New
York-based Oppenheimer Funds;
formerly Chairman of the Adviser and
the Distributor.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March, 1996 he was an equity
portfolio manager for Panorama Series
Fund, Inc. and other mutual funds and
pension accounts managed by G.R.
Phelps.
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.
Ashwin Vasan, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds.
Jerry A. Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income Oppenheimer Funds;
Formerly Managing Director and Chief
Fixed Income Strategist at Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice
President of HarbourView; prior to
March, 1996 he was an equity
portfolio manager for Panorama Series
Fund, Inc. and other mutual funds and
pension funds managed by G.R. Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf, Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting and
member of the Board of Directors of
the Junior League of Denver, Inc.
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.
Arthur J. Zimmer,
Vice President An officer and/or portfolio manager
of certain Oppenheimer funds; Vice
President of Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds, and the Quest/Rochester Funds, set
forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Multiple Strategies Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation 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 International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer New York Municipal Fund
Oppenheimer Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Oppenheimer Developing Markets Fund
Denver-based Oppenheimer Funds
- ------------------------------
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.
Oppenheimer Cash Reserves
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 Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Quest/Rochester Funds
- ---------------------------------
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Bond Fund For Growth
Rochester Fund Municipals
Limited-Term New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer Funds, Quest 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 Oppenheimer Real Asset Management,
Inc. is 6803 South Tucson Way, Englewood, Colorado 80112.
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
The address of Oppenheimer Bond Fund For Growth, Rochester
Fund Municipals and Limited Term New York Municipal Fund 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 OppenheimerFunds,
Inc. at its offices at 6803 South Tucson Way, Englewood, Colorado
80112.
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 4th day of April, 1997.
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 April 4, 1997
Leon Levy
/s/ Donald W. Spiro* Principal Executive
- ------------------- Officer and Trustee April 4, 1997
Donald W. Spiro
/s/ Bridget A. Macaskill* President and Trustee April 4, 1997
- ------------------------
Bridget A. Macaskill
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting Officer April 4, 1997
/s/ Robert G. Galli* Trustee April 4, 1997
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee April 4, 1997
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee April 4, 1997
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee April 4, 1997
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee April 4, 1997
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee April 4, 1997
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins* Trustee April 4, 1997
- ----------------------
Sidney M. Robbins
/s/ Pauline Trigere* Trustee April 4, 1997
- --------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee April 4, 1997
- -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- --------------------------
Robert G. Zack
</TABLE>
<PAGE>
OPPENHEIMER MULTI-SECTOR INCOME TRUST
Registration No. 811-5473
Post-Effective Amendment No. 12
Index to Exhibits
Exhibit No. Description
24(1)(h) Independent Auditor's Consent
Consent of Independent Auditors
The Board of Trustees
Oppenheimer Multi-Sector Income Trust
We consent to the use of our report dated November 21, 1996
included herein.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Denver, Colorado
April 4, 1997
