As Filed with the Securities and Exchange
Commission on February 27, 1998
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. 13 /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
- - -------- ----------------------------------------------
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 total 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 may invest in securities that represent participation interests in
pools of residential mortgage loans, including collateralized mortgage
obligations (CMOs). Some CMOs may be issued or guaranteed by agencies or
instrumentalities of the U.S. Government (for example, Ginnie Maes, Freddie Macs
and Fannie Maes). Other CMOs are issued by private issuers, such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers. CMOs issued by such private
issuers are not issued or guaranteed by the U.S. Government or its agencies and
are, therefore, also subject to credit risks. Credit risk relates to the ability
of the issuer or a debt security to make interest or principal payments on the
security as they become due. Securities issued or guaranteed by the U.S.
Government are subject to little, if any, credit risk because they are backed by
the "full faith and credit of the U.S. Government", which in general terms means
that the U.S. Treasury stands behind the obligation to pay interest and
principal.
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.
The price and yields to maturity of CMOs are, in part, determined by
assumptions about cash-flows from the rate of payments of underlying mortgages.
However, changes in prevailing interest rates may cause the rate of prepayments
of underlying mortgages to change. In general, prepayments on fixed rate
mortgage loans increase during periods of falling interest rates and decrease
during periods of rising interest rates. Faster than expected prepayments of
underlying mortgages will reduce the market value and yield to maturity of
issued CMOs. If prepayments of mortgages underlying a short-term or
intermediate-term CMO occur more slowly than anticipated because of rising
interest rates, the CMO effectively may become a longer-term security. The
prices of long-term debt securities generally fluctuate more widely than those
of shorter-term securities in response to changes in interest rates which, in
turn, may result in greater fluctuations in the Fund's share prices.
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.
Although U.S. Government Securities involve little credit risk, their
market values will fluctuate until they mature, depending on prevailing interest
rates. When prevailing interest rates go up, the market value of already issued
debt securities tends to go down. When interest rates go down, the market value
of already issued debt securities tends to go up. The magnitude of those
fluctuations generally will be greater when the average maturity of the Fund's
portfolio securities is longer. Certain of the Fund's investments, such as I/Os,
P/Os and mortgage-backed securities such as CMOs, can be very sensitive to
interest rate changes and their values can be quite volatile.
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). This policy does not limit the
acquisition of restricted securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 that are determined to be liquid by the Board
of Trustees or the Adviser under Board-approved guidelines. Such guidelines take
into account trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, the Fund's holdings of those
securities may be illiquid. Restricted 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 to determine whether to sell any holdings to maintain adequate liquidity.
Illiquid securities include repurchase agreements maturing in more than seven
days, or certain participation interests other than those with puts exercisable
within seven days.
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.
o 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, referred to as Financial Futures), (3)
interest rates (referred to as Interest Rate Futures), (4) foreign currencies
(referred to as Forward Contracts), or (5) commodities (referred to as commodity
futures.) An Interest Rate Future obligates the seller to deliver and the
purchaser to take a specific type of debt security at a specific future date for
a fixed price. That obligation may be satisfied by actual delivery of the debt
security or by entering into an offsetting contract. A bond index assigns
relative values to the bonds included in that index and is used as a basis for
trading long-term Bond Index Futures contracts. Bond Index Futures reflect the
price movements of bonds included in the index. They differ from Interest Rate
Futures in that settlement is made in cash rather than by delivery; or
settlement may be made by entering into an offsetting contract.
o Put and Call Options. The Fund may buy and sell exchange-traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 25% of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the Fund's net
assets would have to be segregated to cover put options.
o 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.
o 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.
o 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.
o 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.
o 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:
o 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;
o The Fund will not concentrate investments to the extent of 25% or
more 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.
o 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;
o The Fund will not borrow money, except in conformity with the
restrictions stated above under "Borrowing."
o 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;
o The Fund will not participate on a joint or joint and several basis
in any securities trading account;
o The Fund will not invest in companies for the purpose of exercising
control or management thereof;
o 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;
o 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;
o 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
o 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.
-1-
<PAGE>
Market Price High;(1) Market Price Low;(1)
NAV and Premium/ NAV and Premium/
Ended (Discount) That Day(2) (Discount) That Day(2)
- - -------- ---------------------------- ----------------------------
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)%
4/30/97 Market: $10.25 Market:$9.88
NAV:$10.40 NAV:$10.38
Premium/(Discount): (1.44)% Premium/(Discount): (4.87)%
7/31/97 Market: $10.75 Market:$10.00
NAV:$10.66 NAV:$10.52
Premium/(Discount): (0.84)% Premium/(Discount): (4.94)%
10/31/97 Market: $10.63 Market:$10.13
NAV:$10.64 NAV:$10.62
Premium/(Discount): (0.14)% Premium/(Discount): (4.66)%
1/31/98 Market: $10.63 Market:$10.00
NAV:$10.71 NAV:$10.57
Premium/(Discount): (0.79)% Premium/(Discount): (5.39)%
- - ---------------
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 $75 billion as of December 31,
1997, and having more than 3.5 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, 1995, 1996 and 1997, the
Fund paid management fees to the Adviser of $1,877,737, $1,939,377 and
$1,977,536, respectively. The Fund incurred approximately $55,657 in expenses
for the fiscal year ended October 31, 1997 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.
The management services provided to the Fund by the Adviser, and the
services provided by the Distributor the Transfer Agent to shareholders, depend
on the smooth functioning of their computer systems. Many computer software
systems in use today cannot distinguish the year 2000 from the year 1900 because
of the way dates are encoded and calculated. That failure could have a negative
impact on handling securities trades, pricing and account services. The Adviser
and Transfer Agent have been actively working on necessary changes to their
computer systems to deal with the year 2000 and expect that their systems will
be adapted in time for that event, although there cannot be assurance of
success.
1(c). The Portfolio Managers of the Fund are Thomas Reedy, 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 and Vasan have
been the persons principally responsible for the day-to-day management of the
Trust's portfolio since June 1993. Prior to June, 1993, Mr. Reedy served as a
securities analyst for the Adviser, and Mr. Vasan served as a securities analyst
for Citibank, N.A. Other members of the Adviser's fixed-income portfolio
department, particularly portfolio analysts, traders and other portfolio
managers provide the Fund's portfolio managers with support in managing the
Fund's portfolio.
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, 1995, 1996 and 1997, the
Fund paid administration fees to the Administrator of $577,765, $596,733 and
$614,751, respectively.
1(e). The Bank of New York, 48 Wall Street, New York, New York, acts as
the custodian (the "Custodian") for the Fund's assets held in the United States.
The Adviser and its affiliates have banking relationships with the Custodian.
The Adviser has represented to the Fund that its banking relationships with the
Custodian have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice of the
Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Adviser and its affiliates. Rules
adopted under the 1940 Act permit the Fund to maintain its securities and cash
in the custody of certain eligible banks and securities depositories. Pursuant
to those Rules, the Fund's portfolio of securities and cash, when invested in
foreign securities, will be held in foreign banks and securities depositories
approved by the Trustees of the Fund in accordance with the rules of the
Securities and Exchange Commission.
Shareholder Financial Services, Inc. ("SFSI"), a subsidiary of the
Adviser, acts as primary transfer agent, shareholder servicing agent and
dividend paying agent for the Fund. Fees paid to SFSI are based on the number of
shareholder accounts and the number of shareholder transactions, plus
out-of-pocket costs and expenses. United Missouri Trust Company of New York acts
as co-transfer agent and co-registrar with SFSI to provide such services as SFSI
may request.
1(f). See 1(b) above.
1(g). Inapplicable.
2. Inapplicable.
3. None as of February 20, 1998.
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, 1997, 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. The Fund will monitor its transactions in options and
futures contracts and may make certain tax elections in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company under Subchapter M of the Code. Such tax election may result
in an increase in distribution of ordinary income (relative to long-term capital
gains) to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund) of a
zero coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest payment
in cash on the security during the year. As an investment company, the Fund must
pay out substantially all of its net investment income each year. Accordingly,
the Fund may be required to pay out as an income distribution each year an
amount which is greater than the total amount of cash interest the Fund actually
received. Such distributions will be made from the cash assets of the Fund or by
liquidation of portfolio securities, if necessary. If a distribution of cash
necessitates the liquidation of portfolio securities, the Adviser will select
which securities to sell. The Fund may realize a gain or loss from such sales.
In the event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they would in
the absence of such transactions.
It is the Fund's present policy, which may be changed by the Board of
Trustees, to pay monthly dividends to shareholders from net investment income of
the Fund. The Fund intends to distribute all of its net investment income on an
annual basis. The Fund will distribute all of its net realized long-term and
short-term capital gains, if any, at least once per year. The Fund may, but is
not required to, make such distributions on a more frequent basis to the extent
permitted by applicable law and regulations.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute a specified minimum percentage (currently 98%) of its taxable
investment income earned from January 1 through December 31 of that year and 98%
of its capital gains realized in the period from November 1 of the prior year
through October 31 of that year, or else the Fund must pay an excise tax on
amounts not distributed. While it is presently anticipated that the Fund will
meet those requirements, the Fund's Board and the Adviser might determine in a
particular year it would be in the best interests of the Fund not to make such
distributions at the mandated level and to pay the excise tax which would reduce
the amount available for distributions to shareholders. If the Fund pays a
dividend in January which was declared in the previous December to shareholders
of record on a date in December, then such dividend or distribution will be
treated for tax purposes as being paid in December and will be taxable to
shareholders as if received in December.
Under the Fund's Dividend Reinvestment Plan (the "Plan"), all of the Fund's
dividends and distributions to shareholders will be reinvested in full and
fractional Shares. With respect to distributions made in Shares issued by the
Fund pursuant to the Plan, the amount of the distribution for tax purposes is
the fair market value of the Shares issued on the reinvestment date. In the case
of Shares purchased on the open market, a participating shareholder's tax basis
in each Share is its cost. In the case of Shares issued by the Fund, the
shareholder's tax basis in each Share received is its fair market value on the
reinvestment date.
Distributions of investment company taxable income to shareholders who are
nonresident alien individuals or foreign corporations will generally be subject
to a 30% United States withholding tax under provisions of the Internal Revenue
Code applicable to foreign individuals and entities, unless a reduced rate of
withholding or a withholding exemption is provided under an applicable treaty.
Under Section 988 of the Code, foreign currency gain or loss with
respect to foreign currency-denominated debt instruments and other foreign
currency-denominated positions held or entered into by the Fund will be ordinary
income or loss. In addition, foreign currency gain or loss realized with respect
to certain foreign currency "hedging" transactions will be treated as ordinary
income or loss.
5. The following information is provided as of February 20, 1998:
(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)
- - -------------- ---------- ------------- ------------
Shares of Unlimited None 29,116,067
Beneficial
Interest, $.01
par value
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.
-2-
<PAGE>
Oppenheimer Multi-Sector Income Trust
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 27, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 27, 1998. 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
Control Persons and Principal Holders of Securities
Investment Advisory and Other Services
Brokerage Allocation and Other Practices
Tax Status
Financial Statements
- - -----------------
*See Prospectus
-3-
<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.
-4-
<PAGE>
1. and 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 Enterprise Fund, Oppenheimer Growth
Fund, Oppenheimer Global Fund, Oppenheimer Municipal Bond Fund, Oppenheimer
Money Market Fund, Inc., Oppenheimer Capital Appreciation Fund, Oppenheimer U.S.
Government Trust, Oppenheimer New York Municipal Fund, Oppenheimer California
Municipal Fund, Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple
Strategies Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Global
Growth & Income Fund, Oppenheimer Discovery Fund, Oppenheimer International
Small Company Fund, Oppenheimer International Growth Fund, Oppenheimer
Developing Markets Fund, Oppenheimer Series Fund, Inc., 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. Ms. Macaskill
and Messrs. Spiro, Donohue, Bishop, Bowen, Farrar and Zack hold the same
respective offices with the New York-based Oppenheimer funds as with the Fund.
As of February 20, 1998, the Trustees and officers of the Fund as a group owned
less than 1% of the Fund's outstanding shares. 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 the officers of the Fund listed
above.
Leon Levy, Chairman of the Board of Trustees; Age: 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment
partnership)(since 1982) and Chairman of Avatar Holdings, Inc.
(real estate development).
Robert G. Galli, Trustee; Age: 64
19750 Beach Road, Jupiter Island, FL 33469
Formerly he held the following positions: Vice Chairman of OppenheimerFunds,
Inc. (the "Manager") (October 1995 to December 1997), Vice President (June 1990
to March 1994) and Counsel of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company; Executive Vice President (December 1977 to
October 1995), General Counsel and a director (December 1975 to October 1993) of
the Manager; Executive Vice President and a director of OppenheimerFunds
Distributor, Inc. (the "Distributor") (July 1978 to October 1993); Executive
Vice President and a director of HarbourView Asset Management Corporation
("HarbourView") (April 1986 to October 1995), an investment adviser subsidiary
of the Manager; Vice President and a director (October 1988 to October
1993) and Secretary (March 1981 to September 1988) of Centennial Asset
Management Corporation ("Centennial"), an investment adviser subsidiary of the
Manager; A director (November 1989 to October 1993) and Executive Vice President
(November 1989 to January 1990) of Shareholder Financial Services, Inc.
("SFSI"), a transfer agent subsidiary of the Manager; a director of Shareholder
Services, Inc. ("SSI") (August 1984 to October 1993), a transfer agent
subsidiary of the Manager; an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age: 74
591 Breezy Hill Road, Hillsdale, N.Y. 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 of Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age: 49 President (since June
1991), Chief Executive Officer (since September 1995) and a Director (since
December 1994) of the Adviser; President and director (since June 1991) of
HarbourView; Chairman and a director of SSI (since August 1994), and SFSI
(September 1995); President (since September 1995) and a director (since October
1990) of OAC; President (since September 1995) and a director (since November
1989) of Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of
the Adviser; a director of Oppenheimer Real Asset Management, Inc. (since July
1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund adviser subsidiary of the Adviser ("OFIL")
and Oppenheimer Millennium Funds plc (since October 1997); President and a
director of other Oppenheimer funds; a director of the NASDAQ Stock Market, Inc.
and of Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the Adviser.
Elizabeth B. Moynihan, Trustee; Age: 68
801 Pennsylvania Avenue, N.W., Washington, D.C. 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 of the
Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 70
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), Texas
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc.
(international economic and business research) and a director of Lumbermens
Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee; Age: 67
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. (health care
provider); a director of River Bank America (real estate manager); Trustee,
Financial Accounting Foundation (FASB and GASB); formerly New York State
Comptroller and trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age: 66
8 Sound Shore Drive, Greenwich, Connecticut 06830
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: 72
Chairman Emeritus (since August 1991) and a director (since January
1969) of the Adviser; formerly Chairman of the Adviser and the
Distributor.
Pauline Trigere, Trustee; Age: 85
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: 67
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) 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: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Adviser; Executive Vice
President (since September 1993) a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
a director of OFIL and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
George C. Bowen, Treasurer; Age: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Adviser; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); a trustee or director and an officer of
other Oppenheimer funds.
Thomas P. Reedy, Vice President and Portfolio Manager; Age 36 Vice President of
the Adviser; an officer of other Oppenheimer funds; formerly a Securities
Analyst of the Adviser.
Ashwin Vasan, Vice President and Portfolio Manager; Age 35 Vice President of the
Adviser; and officer of other Oppenheimer funds; formerly, a Securities Ananlyst
of the Adviser (since January 1992).
Carol E. Wolf, Vice President and Portfolio Manager; Age 46 Vice President of
the Adviser and Centennial; an officer of other Oppenheimer funds.
Arthur Zimmer, Vice President and Portfolio Manager; Age 51
Vice President of the Adviser and Centennial; an officer of other
Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer; Age: 39 6803 South Tucson Way, Englewood,
Colorado 80112 Vice President of the Adviser/Mutual Fund Accounting (since May
1996); an officer of other Oppenheimer funds; formerly an Assistant Vice
President of the Adviser/Mutual Fund Accounting (April 1994-May 1996), and a
Fund Controller for the Adviser.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Adviser/Mutual Fund Accounting (since May
1996); Assistant Treasurer of Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds;
formerly an Assistant Vice President of the Adviser/Mutual Fund Accounting
(April 1994-May 1996), and a Fund Controller for the Adviser.
Robert G. Zack, Assistant Secretary; Age: 49 Senior Vice President (since May
1985) and Associate General Counsel (since May 1981) of the Adviser, Assistant
Secretary of SSI (since May 1985), and SFSI (since November 1989); Assistant
Secretary of Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds.
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), Mrs. Moynihan and Mr. Galli, none of whom is an "interested
person" of the Adviser or the Fund. The study committee's function is to report
to the Board on matters that include (i) legal and regulatory developments, (ii)
periodic renewals of the Advisory Agreement, (iii) review of the transfer agent
and registrar agreement, (iv) review of the administrative services provided by
Mitchell Hutchins Asset Management, Inc., (v) portfolio management, (vi)
valuation of portfolio securities, (vii) custodian relationships and use of
foreign subcustodians, (viii) code of ethics matters, policy on use of insider
information, (ix) consideration of tender offers and other repurchases of fund
shares and possible conversion to open-end status, and (x) indemnification and
insurance of the Fund's officers and trustees.
3. Inapplicable.
4. The officers of the Fund and certain Trustees of the Fund (Ms.
Macaskill and Mr. Spiro) who are affiliated with the Adviser receive no salary
or fee from the Fund. Mr. Galli received no salary or fee prior to January 1,
1998. The remaining Trustees of the Fund received the compensation shown below.
The compensation from the Fund was paid during its fiscal year ended October 31,
1997. 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 during the 1997 calendar year.
Retirement Total
Aggregate Benefits Compensation
Compensation Accrued as From All New
From Fund(1) Part of Fund York based
Expenses Oppenheimer funds(3)
Name and
Position
Leon Levy, $6,624 $6,585 $158,500
Chairman and Trustee
Benjamin Lipstein $5,726 $5,692 $137,000
Study Committee
Chairman, Audit
Committee Member
and Trustee(2)
Elizabeth B. Moynihan $4,033 $4,009 $96,500
Study Committee
Member and Trustee
Kenneth A. Randall $3,699 $3,677 $88,500
Audit Committee
Chairman and Trustee
Edward V. Regan $3,675 $3,635 $87,500
Proxy Committee
Chairman, Audit
Committee Member
and Trustee
Russell S. Reynolds, Jr. $2,737 $2,721 $65,500
Proxy Committee
Member and Trustee
Pauline Trigere,
Trustee $2,445 $2,431 $58,500
Clayton K. Yeutter $2,737 $2,721 $65,500
Proxy Committee
Member and Trustee
- - ----------------------
(1)For the fiscal year ended October 31, 1997.
(2)Committee position held during a portion of the period shown.
(3)For the 1997 calendar year.
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.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Fund. Under the plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
Item 19. Control Persons and Principal Holders of Securities.
1. Inapplicable.
2. As of February 20, 1998, the only persons who owned of record or was
known by the Fund to own beneficially 5% or more of the outstanding shares of
the Fund were Paine Webber Incorporated, 1000 Harbor Boulevard, 6th Floor, Union
City, New Jersey 07087-6727, which owned of record 5,819,138 shares (19.99% of
the shares); Smith Barney, Inc., 388 Greenwich Street, 30th Floor, New York, New
York 10013-2375, which owned 2,291,472 shares (7.87% of the shares); Prudential
Securities, Inc., One York Plaza, Floor 8, New York, New York 10004, which owned
1,980,411 shares (6.80% of the shares); and AG Edwards & Sons, Inc., One North
Jefferson Avenue, St. Louis, Missouri 63103, which owned 1,855,426 shares (6.37%
of the shares).
3. As of February 20, 1998, 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, 1995, 1996 and 1997,
the Fund paid approximately $48,614, $14,004 and $93,433 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, 1995, 1996 and 1997, $0, $0
and $509 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, 1997.
-5-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Oppenheimer Multi-Sector Income Trust
The Board of Trustees and Shareholders of Oppenheimer Multi-Sector Income Trust:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Multi-Sector Income Trust as of October 31, 1997 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, 1997 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, 1997 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, 1997
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1997
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> U.S. GOVERNMENT SECTOR -- 10.4%
TREASURY -- 10.3%
U.S. Treasury Bonds:
11.875%, 11/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,130,000 $ 2,776,990
7.125%, 2/15/23(2) . . . . . . . . . . . . . . . . . . . . . . . . . 5,497,000 6,113,698
STRIPS, Zero Coupon, 6.85%, 2/15/19(3) . . . . . . . . . . . . . . . 11,000,000
2,908,015 U.S. Treasury Nts.:
6%, 8/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 806,750
6.125%, 8/31/98 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,151,000 1,156,396
6.25%, 2/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,000 500,413
6.25%, 2/28/02(4) . . . . . . . . . . . . . . . . . . . . . . . . . 793,000 807,621 7%,
4/15/99(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,455,000 13,711,493 7.50%,
10/31/99 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,104,064
-----------
31,885,440
----------- </TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
------ ----------- ------------- <S> <C>
<C> <C> <C> CALL OPTIONS PURCHASED -- 0.1%
U.S. Treasury, 30 yr. Futures, 12/97 Call
Opt. . . . . . . . . . . . . . . . . . . . . . 11/97 $118 180 230,625
----------- Total U.S. Government
Sector (Cost $31,498,519) . . 32,116,065
</TABLE>
<TABLE>
<CAPTION>
Shares
------------- <S>
<C> <C> CONVERTIBLE SECTOR -- 1.4%
PREFERRED STOCKS -- 0.9%
merican Radio Systems Corp., 11.375% Cum. Exchangeable
Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,170 735,772 CGA
Group Ltd., Preferred(5)(6) . . . . . . . . . . . . . . . . . . . 32,000 800,000
Crown American Realty Trust, 11% Cum. Non-Vtg. Preferred,
Series A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 217,000 Del
Monte Foods Corp., 14% Preferred Stock(7) . . . . . . . . . . . . . 250
250,625 Intermedia Communications, Inc., 13.50% Exchangeable
Preferred Stock, Series B(7) . . . . . . . . . . . . . . . . . . . . 500 591,250
Spanish Broadcasting Systems, Inc., 14.25% Cum. Sr.
Exchangeable Preferred Stock, Non-Vtg.(7)(8) . . . . . . . . . . . . 175
185,938 -----------
2,780,585
----------- OTHER SECURITIES -- 0.4%
SD Warren Co., 14% Cum. Exchangeable, Series B(5)(6) . . . . . . . . . 25,000
1,156,250 -----------
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Units See Note 1
------------- ------------- <S>
<C> <C> RIGHTS, WARRANTS AND CERTIFICATES -- 0.1%
American Communications Services, Inc. Wts., Exp. 11/05(6) . . . . . . 700
$ 59,500 American Telecasting, Inc. Wts., Exp. 6/99(6) . . . . . . . . . . . . . 4,750
47 Ames Department Stores, Inc., Litigation Trust(6) . . . . . . . . . . .
128,889 1,289 Becker Gaming, Inc. Wts., Exp. 11/00(6) . . . . . . . . . . . . . . . .
25,000 5,000 Cellular Communications International, Inc. Wts., Exp. 8/03(6) . . . .
2,500 42,500 CGA Group Ltd. Wts., Exp. 12/49(6) . . . . . . . . . . . . . . . . . .
32,000 16,000 Clearnet Communications, Inc. Wts., Exp. 9/05 . . . . . . . . . . .
. . 330 2,310 Foamex LP/JPS Automotive Corp. Wts., Exp. 7/99(6) . . .
. . . . . . . . 1,000 28,000 ICG Communications, Inc. Wts., Exp. 9/05(6) . .
. . . . . . . . . . . . 4,125 61,875 In-Flight Phone Corp. Wts., Exp. 8/02 . . . .
. . . . . . . . . . . . . 900 -- NEXTLINK Communications, Inc. Wts., Exp.
2/09(6) . . . . . . . . . . . 15,000 150 Orion Network Systems, Inc. Wts.,
Exp. 1/07 . . . . . . . . . . . . . . 975 12,188 Protection One, Inc. Wts., Exp.
6/05(6) . . . . . . . . . . . . . . . . 6,400 81,600 UNIFI Communications, Inc.
Wts., Exp. 3/07(6) . . . . . . . . . . . . . 500 1,000 Wireless One, Inc. Wts.,
Exp. 10/00(6) . . . . . . . . . . . . . . . . 1,500 15
-----------
311,474
----------- Total Convertible Sector (Cost $3,382,149) . . . . . . . . . . . . . .
4,248,309
- - ----------- <CAPTION>
Shares
---------------- <S>
<C> <C> CORPORATE SECTOR -- 36.6%
COMMON STOCKS -- 0.0%
Capital Gaming International, Inc.(5) . . . . . . . . . . . . . . . . . 18 --
Optel, Inc.(5)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 815 8
-----------
8
-----------
<CAPTION>
Face Amount(1)
---------------- <S>
<C> <C> CORPORATE BONDS AND NOTES -- 36.6%
BASIC INDUSTRY -- 2.3%
Chemicals -- 1.1%
ICO, Inc., 10.375% Sr. Nts., 6/1/07(8) . . . . . . . . . . . . . . . . $475,000
510,625 Laroche Industries, Inc., 9.50% Sr. Sub. Nts., 9/15/07(8) . . . . . . . 750,000
753,750 Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07(8) . . . .
600,000 597,000 Sovereign Specialty Chemicals, Inc., 9.50% Sr. Sub. Nts., 8/1/07(8) . .
600,000 612,000 Sterling Chemicals, Inc., 11.75% Sr. Unsec. Sub. Nts.,
8/15/06 . . . . 600,000 667,500
-----------
3,140,875
- - ----------- Containers -- 0.4%
Consumers International, Inc., 10.25% Sr. Sec. Nts., 4/1/05(6) . . . . 750,000
813,750 U.S. Can Corp., 10.125% Sr. Sub. Nts., Series B, 10/15/06 . . . . . . .
250,000 265,000
- - ----------- 1,078,750
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Paper -- 0.1%
Four M Corp., 12% Sr. Nts., Series B, 6/1/06(6) . . . . . . . . . . . . $ 300,000 $
321,000 ----------- Steel --
0.7%
AK Steel Corp., 9.125% Sr. Nts., 12/15/06 . . . . . . . . . . . . . . . 700,000
731,500 Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01 . . . . . . . . . 525,000
567,000 Keystone Consolidated Industries, Inc., 9.625% Sr. Nts., 8/1/07(8) . .
900,000 918,000
- - ----------- 2,216,500
----------- CONSUMER
RELATED -- 5.8%
Consumer Products -- 0.4%
Coleman Escrow Corp., Zero Coupon Sr. First Priority Disc. Nts., 10.71%, 5/15/01(3)(8) . . . .
. . . . . . . . . . . . . . . . . . . 800,000 516,000 Dyersburg Corp., 9.75% Sr. Sub.
Nts., 9/1/07(8) . . . . . . . . . . . . 500,000 512,500 Revlon Worldwide Corp.,
Zero Coupon Sr. Sec. Disc. Nts.,
10.947%, 3/15/01(3) . . . . . . . . . . . . . . . . . . . . . . . . 455,000 311,675
-----------
1,340,175
----------- Food/Beverages/Tobacco -- 0.6%
CFP Holdings, Inc., 11.625% Gtd. Sr. Nts., Series B, 1/15/04 . . . . . 600,000
579,000 International Home Foods, Inc., 10.375% Sr. Sub. Nts., 11/1/06 . . . .
500,000 532,500 Windy Hill Pet Food, Inc., 9.75% Sr. Sub. Nts., 5/15/07 . . . . . . . .
700,000 717,500
----------- 1,829,000
----------- Healthcare --
0.7%
Integrated Health Services, Inc.:
11% Sr. Sub. Nts., 4/30/06(12) . . . . . . . . . . . . . . . . . . . 15,000 15,900
9.50% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . . . . . . . . . 1,200,000 1,245,000
Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(8) . . . . . . 800,000
812,000 -----------
2,072,900
----------- Hotel/Gaming -- 2.7%
Arizona Charlie's, Inc., 12% First Mtg. Nts., Series B, 11/15/00(6)(9) 550,000
295,625 Capital Gaming International, Inc., Promissory Nts., 8/1/95(9) . . . .
5,500 -- Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A,
11/15/00(6)(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 28,500 Capstar
Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07(8) . . . . . . . . . . 875,000 884,844
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., 8/15/03 . . . . . 750,000
716,250 Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 . . . . . .
250,000 265,625 HMH Properties, Inc., 9.50% Sr. Sec. Nts., Series B, 5/15/05 . . . . .
500,000 517,500 Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07(8) . .
. . . . . . 1,000,000 1,025,000 Mohegan Tribal Gaming Authority, 13.50% Sr.
Sec. Nts.,
Series B, 11/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . 900,000 1,156,500
</TABLE>
5
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Hotel/Gaming (Continued)
Rio Hotel & Casino, Inc., 9.50% Gtd. Sr. Sub. Nts., 4/15/07 . . . . . . $ 500,000
$ 522,500 Showboat Marina Casino Partnership/Showboat Marina
Finance Corp., 13.50% First Mtg. Nts., Series B, 3/15/03 . . . . . . 1,000,000
1,147,500 Signature Resorts, Inc., 9.75% Sr. Nts., 10/1/07(8) . . . . . . . . . . 530,000
537,950 Station Casinos, Inc., 10.125% Sr. Sub. Nts., 3/15/06 . . . . . . . . .
1,325,000 1,358,125
- - ----------- 8,455,919
----------- Restaurants -- 0.1%
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 . . . . . . . . . . . . . . . 230,000
244,375 -----------
Textile/Apparel -- 1.3%
CMI Industries, Inc., 9.50% Sr. Sub. Nts., 10/1/03(6) . . . . . . . . . 575,000
563,500 Consoltex Group, Inc., 11% Gtd. Sr. Sub. Nts., Series B, 10/1/03(6) . .
500,000 527,500 Dan River, Inc., 10.125% Sr. Sub. Nts., 12/15/03 . . . . . . . . . . .
800,000 854,000 Tultex Corp., 9.625% Sr. Nts., 4/15/07 . . . . . . . . . . . . . . . .
700,000 722,750 WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05 . . . .
. . . 750,000 791,250 William Carter Co., 10.375% Sr. Sub. Nts., Series A,
12/1/06 . . . . . 500,000 527,500
-----------
3,986,500
- - ----------- ENERGY -- 3.2%
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . 1,310,000
1,342,750 Canadian Forest Oil Ltd., 8.75% Sr. Sub. Nts., 9/15/07(8) . . . . . . .
90,000 89,749 Chesapeake Energy Corp.:
12% Gtd. Sr. Exchangeable Nts., 3/1/01 . . . . . . . . . . . . . . . 1,000,000
1,080,000 9.125% Sr. Nts., 4/15/06 . . . . . . . . . . . . . . . . . . . . . . 700,000
724,500 Dailey International, Inc., 9.75% Gtd. Sr. Unsec. Nts.,
8/15/07(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 522,500
Forcenergy, Inc.:
8.50% Sr. Sub. Nts., Series B, 2/15/07 . . . . . . . . . . . . . . . 250,000
250,000 9.50% Sr. Sub. Nts., 11/1/06 . . . . . . . . . . . . . . . . . . . . 540,000
568,350 Gothic Energy Corp., Units (each unit consists of $1,000
principal amount of 0%/12.25% sr. disc. nts., 9/1/04
and 14 warrants to purchase one ordinary share)(8)(10)(11) . . . . . 725,000
772,125 J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 . . . . . . . . . .
275,000 292,875 Mesa Operating Co., 0%/11.625% Gtd. Sr. Sub. Disc. Nts., 7/1/06(11) .
. 1,000,000 805,000 National Energy Group, Inc., 10.75% Sr. Nts., 11/1/06 .
. . . . . . . . 100,000 104,000 Petroleum Heat & Power Co., Inc., 9.375%
Sub. Debs., 2/1/06(6) . . . . 500,000 465,000 Pogo Producing Co., 8.75%
Sub. Nts., 5/15/07 . . . . . . . . . . . . . 900,000 918,000 Statia Terminals
International/Statia Terminals (Canada), Inc., 11.75% First Mtg. Nts., Series B, 11/15/03 . . . . .
. . . . . . . . 200,000 213,000 </TABLE>
6
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> ENERGY (CONTINUED)
Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . $1,400,000
$1,396,500 Wiser Oil Co., 9.50% Sr. Sub. Nts., 5/15/07 . . . . . . . . . . . . . . 385,000
385,000 ----------
9,929,349
---------- FINANCIAL SERVICES -- 2.6%
Banks & Thrifts -- 0.4%
First Nationwide Holdings, Inc., 10.625% Sr. Sub. Nts., 10/1/03 . . . . 530,000
585,650 Western Financial Bank, 8.875% Sub. Bonds, 8/1/07 . . . . . . . . . . .
725,000 728,335
- - ---------- 1,313,985
---------- Diversified Financial --
2.2%
Americredit Corp., 9.25% Sr. Nts., 2/1/04 . . . . . . . . . . . . . . . 190,000
190,950 Amresco, Inc., 10% Sr. Sub. Nts., Series 97-A, 3/15/04 . . . . . . . .
400,000 420,000 Emergent Group, Inc., 10.75% Sr. Nts., 9/15/04(8) . . . . . . . . . . .
925,000 911,125 Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 800,625
Shoshone Partners Loan Trust, 7.375% Sr. Nts., 5/31/02(6)(12) . . . . . 4,225,000
4,339,778 ----------
6,662,478
---------- HOUSING RELATED -- 0.9%
Building Materials -- 0.4%
Building Materials Corp. of America, 8.625% Sr. Nts., Series B, 12/15/06 . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 300,000 306,000 Nortek, Inc.:
9.125% Sr. Nts., 9/1/07(8) . . . . . . . . . . . . . . . . . . . . . 400,000 404,000
9.25% Sr. Nts., Series B, 3/15/07 . . . . . . . . . . . . . . . . . . 600,000 610,500
----------
1,320,500
---------- Homebuilders/Real Estate -- 0.5%
Continental Homes Holding Corp., 10% Gtd. Unsec. Bonds,
4/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 189,900
Hovnanian K. Enterprises, Inc., 11.25% Gtd. Sub. Nts., 4/15/02 . . . . 250,000
261,875 Standard Pacific Corp., 8.50% Sr. Nts., 6/15/07 . . . . . . . . . . . . 1,000,000
1,010,000 ----------
1,461,775
---------- MANUFACTURING -- 4.6%
Aerospace -- 0.9%
America West Airlines, Inc., 10.75% Sr. Nts., 9/1/05(6) . . . . . . . . 1,360,000
1,462,000 Amtran, Inc., 10.50% Sr. Nts., 8/1/04(8) . . . . . . . . . . . . . . . 900,000
911,250 </TABLE>
7
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Aerospace (Continued)
Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts., Cl. B, 6/15/04(6) . . . . . . . . . . . .
. . . . . . . . . . . . . $ 490,315 $ 505,662
----------
2,878,912
- - ---------- Automotive -- 1.2%
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., 7/15/07(8) . . . . . 800,000
836,000 Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 . . .
700,000 798,000 Hayes Wheels International, Inc., 9.125% Sr. Sub. Nts., 7/15/07 . . . .
600,000 618,000 Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 . .
. . . . 750,000 785,625 Oxford Automotive, Inc., 10.125% Sr. Sub. Nts.,
6/15/07(8) . . . . . . 500,000 525,000
----------
3,562,625
- - ---------- Capital Goods -- 2.5%
Burke Industries, Inc., 10% Sr. Nts., 8/15/07(8) . . . . . . . . . . . 700,000
728,000 Clark-Schwebel, Inc.:
10.50% Sr. Nts., 4/15/06 . . . . . . . . . . . . . . . . . . . . . . 250,000 271,250
12.50% Debs., 7/15/07(7)(8) . . . . . . . . . . . . . . . . . . . . 689,910 762,351
Farley, Inc., Zero Coupon Sub. Debs., 14.146%, 12/30/12(3)(6) . . . . . 198,000
24,930 Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts., 8/1/07(8) . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 950,000 985,625 Insilco Corp., 10.25% Sr. Sub.
Nts., 8/15/07(8) . . . . . . . . . . . . 800,000 840,000 International Wire Group,
Inc., 11.75% Sr. Sub. Nts., Series B, 6/1/05(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700,000 768,250 Mettler Toledo, Inc., 9.75% Gtd. Sr. Sub. Nts., 10/1/06 . . . . . . . .
1,000,000 1,130,000 Roller Bearing Co. (America), 9.625% Sr. Sub. Nts.,
6/15/07(6) . . . . 500,000 505,000 Synthetic Industries, Inc., 9.25% Sr. Sub.
Nts., 2/15/07 . . . . . . . 250,000 256,250 Titan Wheel International, Inc.,
8.75% Sr. Sub. Nts., 4/1/07 . . . . . 900,000 936,000 Unifrax Investment
Corp., 10.50% Sr. Nts., 11/1/03(6) . . . . . . . . . 525,000 539,437
----------
7,747,093
---------- MEDIA -- 5.4%
Broadcasting -- 1.9%
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 . . . 900,000
909,000 Chancellor Radio Broadcasting Co., 8.75% Sr. Sub. Nts., 6/15/07(8) . .
700,000 707,000 Jacor Communications Co.:
8.75% Gtd. Sr. Sub. Nts., 6/15/07(8) . . . . . . . . . . . . . . . . 465,000
467,325 9.75% Gtd. Unsec. Sr. Sub. Nts., 12/15/06 . . . . . . . . . . . . . . 250,000
267,500 Radio One, Inc., 7% Sr. Sub. Nts., 5/15/04(8)(13) . . . . . . . . . . .
700,000 675,500 SFX Broadcasting, Inc., 10.75% Sr. Sub. Nts., Series B, 5/15/06 . . . .
800,000 876,000 Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 .
. . . . . 700,000 736,750 </TABLE>
8
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Broadcasting (Continued)
Spanish Broadcasting Systems, Inc., 11% Sr. Nts., 3/15/04 . . . . . . . $ 475,000
$ 515,375 Young Broadcasting, Inc., 9% Sr. Sub. Nts., Series B, 1/15/06 . . . . .
500,000 496,250
- - ---------- 5,650,700
---------- Cable Television --
1.9%
Adelphia Communications Corp.:
9.25% Sr. Nts., 10/1/02(8) . . . . . . . . . . . . . . . . . . . . . 800,000 796,000
9.875% Sr. Nts., Series B, 3/1/07 . . . . . . . . . . . . . . . . . . 800,000 824,000
Cablevision Systems Corp., 9.875% Sr. Sub. Nts., 5/15/06 . . . . . . . 1,000,000
1,070,000 EchoStar DBS Corp., 12.50% Gtd. Nts., 7/1/02(8) . . . . . . . . . . . .
500,000 533,750 EchoStar Satellite Broadcasting Corp., 0%/13.125% Sr. Sec. Disc. Nts.,
3/15/04(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 596,250
FrontierVision Holdings LP, 0%/11.875% Sr. Disc. Nts.,
9/15/07(8)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . 485,000 333,437
Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts., Series B, 11/1/03(12) . . . . . . . . . .
. . . . . . . . . . . . . . 250,000 265,000 Marcus Cable Operating Co. LP/Marcus
Cable Capital Corp.,
0%/13.50% Gtd. Sr. Sub. Disc. Nts., Series II, 8/1/04(11) . . . . . . 750,000
678,750 Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 . . . . . . . . . . . . . 440,000
455,400 TCI Satellite Entertainment, Inc., 10.875% Sr. Sub. Nts., 2/15/07(8) .
390,000 403,650
- - ---------- 5,956,237
---------- Diversified Media --
1.2%
Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07(8) . . . . . . 475,000
501,125 ITT Publimedia BV, 9.375% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . .
570,000 584,250 Katz Media Corp., 10.50% Sr. Sub. Nts., Series B, 1/15/07 . . . . . . .
735,000 810,338 Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07(8) . . . .
. . . . 875,000 883,750 Outdoor Systems, Inc., 8.875% Sr. Sub. Nts.,
6/15/07 . . . . . . . . . 500,000 513,750 Universal Outdoor, Inc., 9.75% Sr.
Sub. Nts., 10/15/06 . . . . . . . . 500,000 557,500
----------
3,850,713
---------- Publishing/Printing -- 0.4%
Hollinger International Publishing, Inc.:
9.25% Gtd. Sr. Sub. Nts., 2/1/06 . . . . . . . . . . . . . . . . . . 500,000 516,250
9.25% Gtd. Sr. Sub. Nts., 3/15/07 . . . . . . . . . . . . . . . . . . 500,000 517,500
----------
1,033,750
---------- OTHER -- 1.3%
Conglomerates -- 0.1%
Maxxam Group, Inc., 0%/12.25% Sr. Sec. Disc. Nts., 8/1/03(11) . . . . . 250,000
243,438 --------
</TABLE>
9
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Environmental -- 0.2%
Allied Waste Industries, Inc., 0%/11.30% Sr. Disc. Nts., 6/1/07(8)(11) $ 500,000
$ 340,000 Allied Waste North America, Inc., 10.25% Sr. Sub. Nts., 12/1/06 . . . .
200,000 216,500
- - ---------- 556,500
---------- Services -- 1.0%
Borg-Warner Security Corp., 9.625% Sr. Sub. Nts., 3/15/07 . . . . . . . 700,000
724,500 Coinstar, Inc., 0%/13% Sr. Disc. Nts., 10/1/06(6)(11) . . . . . . . . .
500,000 395,000 Energy Corp. of America, 9.50% Sr. Sub. Nts., Series A, 5/15/07 . . . .
440,000 442,200 Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts.,
2/15/09 . . . . 500,000 493,750 Protection One Alarm Monitoring, Inc.,
0%/13.625% Sr. Disc. Nts., 6/30/05(11) . . . . . . . . . . . . . . . . . . . . . . . . .
1,100,000 1,171,500
---------- 3,226,950
---------- RETAIL -- 1.3%
Specialty Retailing -- 0.5%
Eye Care Centers of America, Inc., 12% Sr. Nts., 10/1/03 . . . . . . . 165,000
179,850 Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03(6) . . . . . . . . 250,000
263,750 Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07(6) . . . . . . . . .
775,000 763,375 Specialty Retailers, Inc., 9% Gtd. Sr. Sub. Nts., 7/15/07 . . . . . . .
400,000 408,000
---------- 1,614,975
---------- Supermarkets --
0.8%
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., 7/31/07(8) . . . . . . . . . 1,000,000
1,060,000 Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., 7/1/07(8) . . . . .
850,000 845,750 Stater Brothers Holdings, Inc., 9% Sr. Sub. Nts., 7/1/04(8) . . . . . .
700,000 705,250
----------
2,611,000 ----------
TECHNOLOGY -- 7.3%
Information Technology -- 4.2%
CellNet Data Systems, Inc., 0%/13% Sr. Disc. Nts., 6/15/05(6)(11) . . . 400,000
276,000 Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 11.467%, 8/15/00(3) . . . . . . . . . . . . . . . . . 1,000,000
795,000 Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03(11) . . . . . . .
1,250,000 1,237,500 DII Group, Inc., 8.50% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . .
465,000 460,931 Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 . . . . . . . . . . . . . .
600,000 609,000 Globalstar LP/Globalstar Capital Corp., 11.25% Sr. Nts.,
6/15/04 . . . 500,000 490,000 Microcell Telecommunications, Inc.,
0%/14% Sr. Disc. Nts., Series B, 6/1/06(11) . . . . . . . . . . . . . . . . . . . . . . . .
900,000 603,000 Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts.,
6/1/06(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775,000 587,063 Nextel
Communications, Inc., 0%/9.75% Sr. Disc. Nts.,
10/31/07(8)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,050,000 1,142,875
</TABLE>
10
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Information Technology (Continued)
Omnipoint Corp.:
11.625% Sr. Nts., 8/15/06 . . . . . . . . . . . . . . . . . . . . . $ 290,000 $ 300,150
11.625% Sr. Nts., Series A, 8/15/06 . . . . . . . . . . . . . . . . . 1,150,000
1,190,250 Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts.,
1/15/07(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 975,000 721,500 Pierce
Leahy Corp., 11.125% Sr. Sub. Nts., 7/15/06 . . . . . . . . . . 664,000
753,640 Price Communications Cellular Holdings, Inc., Units (each unit consists of $1,000
principal amount of 0%/13.50% sr. sec. disc. nts., 8/1/07 and 3.44 warrants to purchase one
ordinary share)(8)(10)(11) . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000
595,000 Sprint Spectrum LP/Sprint Spectrum Finance Corp.:
0%/12.50% Sr. Disc. Nts., 8/15/06(11) . . . . . . . . . . . . . . . . 500,000
380,000 11% Sr. Nts., 8/15/06 . . . . . . . . . . . . . . . . . . . . . . . 500,000
553,750 Teletrac, Inc., Units (each unit consists of $1,000 principal amount of 14% sr. nts.,
8/1/07 and one warrant to buy
.537495 ordinary shares)(6)(10) . . . . . . . . . . . . . . . . . . 375,000 380,625
Tracor, Inc., 8.50% Sr. Sub. Nts., 3/1/07 . . . . . . . . . . . . . . . 750,000
766,875 Unisys Corp., 11.75% Sr. Nts., 10/15/04 . . . . . . . . . . . . . . . . 500,000
567,500 Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . . . .
800,000 820,000
- - ----------- 13,230,659
-----------
Telecommunications/Technology -- 3.1%
American Communications Services, Inc., 13.75% Sr. Nts.,
7/15/07(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470,000 528,750 BTI
Telecom Corp., 10.50% Sr. Nts., 9/15/07(8) . . . . . . . . . . . . 470,000
470,000 GST USA, Inc., 0%/13.875% Gtd. Sr. Disc. Nts., 12/15/05(11) . . . . . .
1,000,000 715,000 ICG Holdings, Inc.:
0%/12.50% Gtd. Sr. Sec. Disc. Nts., 5/1/06(11) . . . . . . . . . . . 900,000
664,875 0%/13.50% Sr. Disc. Nts., 9/15/05(11) . . . . . . . . . . . . . . . . 475,000
379,406 Intermedia Communications, Inc.:
0%/11.25% Sr. Disc. Nts., 7/15/07(11) . . . . . . . . . . . . . . . . 800,000
532,000 8.875% Sr. Nts., 11/1/07(8) . . . . . . . . . . . . . . . . . . . . 225,000
221,625 IXC Communications, Inc., 12.50% Sr. Nts., Series B, 10/1/05 . . . . .
350,000 399,000 McLeodUSA, Inc.:
0%/10.50% Sr. Disc. Nts., 3/1/07(11) . . . . . . . . . . . . . . . . 500,000
347,500 9.25% Sr. Nts., 7/15/07(8) . . . . . . . . . . . . . . . . . . . . . 200,000
205,000 MGC Communications, Inc., Units (each unit consists of $1,000 principal amount of
13% sr. sec. nts., 10/1/04 and one warrant to purchase 8.07 shares of common stock at $0.01
per share)(8)(10) . . . 885,000 876,150 NEXTLINK Communications, Inc.,
9.625% Sr. Nts., 10/1/07 . . . . . . . . 750,000 753,750 NTL, Inc., 10% Sr.
Nts., 2/15/07 . . . . . . . .. . . . . . . . . 250,000 258,750
</TABLE>
11
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Telecommunications/Technology (Continued)
Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts., 10/15/07(8)(11) . . . . . . .
. . . . . . . . . . . . . . . . . . . $ 1,600,000 $ 1,032,000 Teleport Communications
Group, Inc., 0%/11.125% Sr. Disc. Nts., 7/1/07(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,000,000 1,577,500 UNIFI Communications, Inc., 14% Sr. Nts., 3/1/04 . . . . . . . . .
. . 500,000 472,500
-------------
9,433,806 -------------
TRANSPORTATION -- 1.2%
Railroads -- 0.4%
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc. Nts., Series B,
12/15/03(11) . . . . . . . . . . . . . . . . . . . . 1,500,000 1,286,250
------------- Shipping -- 0.5%
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(8) . . . . . . . . . . 1,250,000
1,343,750 Units (each unit consists of $1,000 principal amount of 12% second priority ship
mtg. nts., 6/30/07 and 7.66
warrants)(8)(10) . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 276,250
-------------
1,620,000
------------- Trucking -- 0.3%
Coach USA, Inc., 9.375% Gtd. Sr. Sub. Nts., 7/1/07(8) . . . . . . . . . 925,000
938,875 -------------
UTILITIES -- 0.7%
Electric Utilities -- 0.7%
AES Corp., 8.375% Sr. Sub. Nts., 8/15/07 . . . . . . . . . . . . . . . 480,000
470,400 Calpine Corp., 10.50% Sr. Nts., 5/15/06(6) . . . . . . . . . . . . . . 700,000
759,500 El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 . . . .
800,000 888,000
- - ------------- 2,117,900
-------------
112,934,464
------------- Total Corporate Sector ($112,337,203) . . . . . . . . .
. . . . . . . . 112,934,472
------------- INTERNATIONAL SECTOR -- 25.2%
CORPORATE BONDS AND NOTES -- 7.6%
BASIC INDUSTRY -- 0.9%
Metals/Mining -- 0.0%
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., Series B, 8/15/06 . . . . . . 35,000
30,975 -------------
</TABLE>
12
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Paper -- 0.6%
Ainsworth Lumber Ltd., 12.50% Sr. Sec. Nts., 7/15/07(7)(8) . . . . . . $ 410,000
$ 416,150 APP International Finance Co. BV, 11.75% Gtd. Sec. Nts., 10/1/05 . . .
450,000 451,125 Indah Kiat International Finance Co. BV, 11.875% Gtd. Sr. Sec. Nts.,
6/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,000 279,825 Pindo
Deli Finance Mauritius Ltd., 10.75% Gtd. Nts., 10/1/07(6) . . . . 455,000
423,150 Tjiwi Kimia International Finance Co. BV, 13.25% Gtd. Sr. Nts., 8/1/01
355,000 370,620
- - ---------- 1,940,870
---------- Steel -- 0.3%
Algoma Steel, Inc., 12.375% First Mtg. Nts., 7/15/05 . . . . . . . . . 700,000
808,500 ----------
CONSUMER RELATED -- 0.3%
Textile/Apparel -- 0.3%
Polysindo International Finance Co. BV, 11.375% Gtd. Sec. Nts., 6/15/06 250,000
255,625 PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts., 30.945%,
3/16/98(3)(IDR) . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000,000 739,863
----------
995,488 FINANCIAL SERVICES -- 1.0%
Banks & Thrifts -- 0.2%
Banco de Colombia, 5.20% Cv. Jr. Unsec. Sub. Nts., 2/1/99 . . . . . . . 550,000
576,125 ----------
Diversified Financial -- 0.5%
Bakrie Investindo, Zero Coupon Promissory Nts., 17.246%,
3/16/98(3)(IDR) . . . . . . . . . . . . . . . . . . . . . . . . . . 3,160,000,000 768,725
Pycsa Panama SA, 10.28% Sr. Sec. Bonds, 12/15/12(6) . . . . . . . . . . 875,000
813,750 ----------
1,582,475
---------- Insurance -- 0.3%
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 . . . . . . . . . . . 1,000,000
1,040,000 ----------
HOUSING RELATED -- 0.3%
Homebuilders/Real Estate -- 0.3%
International de Ceramica SA, 9.75% Gtd. Unsec. Unsub. Nts., 8/1/02(6) . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 970,000 911,800
---------- MEDIA -- 1.6%
Broadcasting -- 0.1%
Conecel Holdings Ltd., Units (each unit consists of $1,000 principal amount of 14% sec. nts.,
10/1/00 and one warrant to buy class B common stock)(6)(10) . . . . . . . . . . . . . . . . . . . . . . . .
355,000 358,550
----------
</TABLE>
13
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Cable Television -- 0.2%
Rogers Communications, Inc., 8.875% Sr. Nts., 7/15/07 . . . . . . . . . $ 675,000
$ 669,937 ----------
Diversified Media -- 0.8%
ITT Promedia CVA, 9.125% Sr. Sub. Nts., 9/15/07(8)(DEM) . . . . . . . . 4,000,000
2,358,885 ----------
Entertainment/Film -- 0.3%
Imax Corp., 10% Sr. Nts., 3/1/01 . . . . . . . . . . . . . . . . . . . 1,000,000
1,055,000
- - ----------
Publishing/Printing -- 0.2%
Sun Media Corp., 9.50% Sr. Sub. Nts., 2/15/07 . . . . . . . . . . . . . 645,000
83,700 ----------
OTHER -- 0.2%
Conglomerates -- 0.2%
Mechala Group Jamaica Ltd.:
12% Bonds, 2/15/02(6) . . . . . . . . . . . . . . . . . . . . . . . 200,000 194,000
12.75% Bonds, 12/30/99 . . . . . . . . . . . . . . . . . . . . . . . 600,000 570,000
----------
764,000
---------- TECHNOLOGY -- 2.3%
Information Technology -- 1.1%
Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts.,
12/15/05(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,000 473,550
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon
Bonds, 11/15/03(11) . . . . . . . . . . . . . . . . . . . . . . . . 1,875,000 1,415,625
Consorcio Ecuatoriano:
14% Nts., 5/1/02(6) . . . . . . . . . . . . . . . . . . . . . . . . 630,000 642,600
14% Nts., 5/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . 185,000 188,700
Microcell Telecommunications, Inc., 0%/11.125% Sr. Disc. Nts., 10/15/07(8)(11)(CAD) . . . .
. . . . . . . . . . . . . . . . . . . 1,810,000 712,969
----------
3,433,444
---------- Telecommunications/Technology -- 1.2%
Call-Net Enterprises, Inc., 0%/9.27% Sr. Disc. Nts., 8/15/07(11) . . . 825,000
548,625 Colt Telecom Group plc, Units (each unit consists of $1,000 principal amount of
0%/12% sr. disc. nts., 12/15/06 and one warrant to purchase 7.8 ordinary shares)(10)(11) . . . . .
. . . . . 900,000 679,500 Diamond Cable Communications plc, 0%/11.75%
Sr. Disc. Nts., 12/15/05(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000
1,856,250 Telewest Communications plc, 0%/11% Sr. Disc. Debs., 10/1/07(11) . . .
1,000,000 745,000
- - ---------- 3,829,375
</TABLE>
14
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> TRANSPORTATION -- 0.4%
Trucking -- 0.4%
Road King Infrastructure Finance (1997) Ltd., 9.50% Gtd. Unsec. Unsub. Bonds, 7/15/07(6) . .
. . . . . . . . . . . . . . . . . . . . $1,200,000 $ 1,119,000
----------- UTILITIES --
1.1%
Electric Utilities -- 1.0%
Panda Global Energy Co., 12.50% Sr. Nts., 4/15/04(6) . . . . . . . . . 900,000
868,500 ----------- Gas
Utilities -- 0.1%
CE Casecnan Water & Energy, Inc., 11.45% Sr. Nts., Series A, 11/15/05 . 300,000
312,750 -----------
23,339,374
----------- FOREIGN GOVERNMENT
OBLIGATIONS -- 11.2%
Argentina -- 0.2%
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
10.625%, 8/7/06(14) . . . . . . . . . . . . . . . . . . . . . . . . 700,000 714,000
----------- Australia -- 0.4%
Queensland Treasury Corp. Exchangeable Gtd. Nts.:
8%, 5/14/03 (AUD) . . . . . . . . . . . . . . . . . . . . . . . . . 210,000 163,127
8%, 8/14/01 (AUD) . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 72,297
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03 (AUD) . . . . . 1,220,000
957,846 -----------
1,193,270
----------- Canada -- 0.2%
Canada (Government of) Bonds, 5.50%, 9/1/02 (CAD) . . . . . . . . . . . 920,000
667,782 -----------
Cayman Islands -- 0.4%
Pera Financial Services Sec. Nts., 9.375%, 10/15/02(8) . . . . . . . . 1,270,000
1,189,037 -----------
Colombia -- 0.2%
Colombia (Republic of) Unsec. Unsub. Bonds, 8.375%, 2/15/27 . . . . . . 200,000
184,248 Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 . . . . . . . .
300,000 302,812
- - ----------- 487,060
----------- Germany -- 1.2%
Germany (Republic of) Bonds:
6.50%, 7/15/03 (DEM) . . . . . . . . . . . . . . . . . . . . . . . . 2,300,000 1,420,769
Series 123, 4.50%, 5/17/02 (DEM) . . . . . . . . . . . . . . . . . . 3,185,000
1,822,007 Series JA07, Zero Coupon, 4.255%, 1/4/01(3) (DEM) . . . . . . . . . .
470,000 235,986 Series JA07, Zero Coupon, 5.747%, 1/4/07(3) (DEM) . . . . . . . . . .
95,000 33,262 Series JL07, Zero Coupon, 5.66%, 7/4/07(3) (DEM) . . . . . .
. . . . 510,000 172,738
-----------
3,684,762 -----------
</TABLE>
15
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Great Britain -- 1.0%
United Kingdom Treasury Nts:
13%, 7/14/00 (GBP) . . . . . . . . . . . . . . . . . . . . . . . . . 315,000 $ 605,972
8%, 6/10/03 (GBP) . . . . . . . . . . . . . . . . . . . . . . . . . 1,360,000 2,420,272
----------
3,026,244
---------- Italy -- 1.0%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali, 12%, 1/1/02 (ITL) . . . . . . . .
. . . . . . . . . . . . . . . . . 4,210,000,000 3,045,627
---------- Ivory Coast -- 0.2%
Ivory Coast (Government of) Past Due Interest Bonds,
12/29/49(13)(15) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,770,000 652,687
---------- Jordan -- 0.7%
Hashemite (Kingdom of Jordan) Bonds, Series DEF, 4%, 12/23/23(13) . . .
1,250,000 800,000 Hashemite (Kingdom of Jordan) Disc. Bonds, 6.75%, 12/23/23(12) . .
. . 1,750,000 1,421,875
----------
2,221,875 ----------
Mexico -- 0.2%
Petroleos Mexicanos Debs., 14.50%, 3/31/06 . . . . . . . . . . . . . . 280,000
605,697 ----------
Moldova -- 0.2%
Moldova (Republic of) Sr. Unsub. Nts., 8.465%, 12/10/99(12) . . . . . . 550,000
550,344 ---------- New
Zealand -- 0.9%
National Bank of New Zealand, New Zealand Dollar Bank Bill, Zero Coupon, 7.594%,
12/10/97(3)(16) (NZD) . . . . . . . . . . . . . 3,885,000 2,403,870 New Zealand
(Government of) Bonds, 8%, 11/15/06 (NZD) . . . . . . . . . 630,000 431,889
----------
2,835,759
---------- Norway -- 0.4%
Norway (Government of) Bonds, 9.50%, 10/31/02 (NOK) . . . . . . . . . . 6,330,000
1,065,610 ----------
Pakistan -- 0.4%
Pakistan (Republic of) Debs., 11.50%, 12/22/99 . . . . . . . . . . . . 64,000
66,880 Pakistan (Republic of) Bonds, 9.946%, 5/30/00(12) . . . . . . . . . . . 1,090,000
1,106,350 ----------
1,173,230
---------- Peru -- 0.3% . . . . .. . . . . . . .
. . . . . . . . . . . . . Peru (Republic of) Front-Loaded Interest Reduction Bonds, 3.25%, 3/7/17(13) .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,760,000 893,200
---------- Romania -- 0.2%
Romania (Government of) Bonds, 7.75%, 6/17/02 (DEM) . . . . . . . . . . 1,349,000
754,386
----------
</TABLE>
16
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> Russia -- 0.4%
Ministry of Finance (Russian Government) Debs., 9%, 3/25/04 (DEM) . . . 1,275,000
$ 711,152 SBS Agro Finance BV Bonds, 10.25%, 7/21/00 . . . . . . . . . . . . . .
670,000 654,088
- - ---------- 1,365,240
---------- South Africa -- 1.4%
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05 (ZAR) . . . . . . . . . . . . . . . . . . . 12,571,150
2,322,402 Series 162, 12.50%, 1/15/02 (ZAR) . . . . . . . . . . . . . . . . . . 6,980,980
1,360,339 Series 175, 9%, 10/15/02 (ZAR) . . . . . . . . . . . . . . . . . . . 3,666,620
615,383 ----------
4,298,124
---------- Spain -- 0.2%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado, 12.25%, 3/25/00 (ESP) . . . .
. . . . . . . . . . . . . . . . . . . 94,240,000 747,558
---------- Sweden -- 0.5%
Sweden (Kingdom of) Bonds, Series 1033, 10.25%, 5/5/03 (SEK) . . . . . 10,600,000
1,691,799 ----------
Turkey -- 0.5%
Export Credit Bank of Turkey Bonds, 8.352%, 8/18/00(12) . . . . . . . . 640,000
632,800 Halkbank Turkiye Halk Bonds, 8%, 2/26/02 (DEM) . . . . . . . . . . . .
1,670,000 907,212
- - ---------- 1,540,012
---------- Venezuela -- 0.1%
Venezuela (Republic of) Disc. Bonds, Series DL, 6.75%, 12/18/07(12) . . 500,000
433,750 ----------
34,837,053
---------- LOAN PARTICIPATIONS --
0.4%
Morocco (Kingdom of) Loan Participation Agreement,
Tranche B, 6.812%, 1/1/04(12) . . . . . . . . . . . . . . . . . . . 764,705
698,750 Trinidad & Tobago Loan Participation Agreement, Tranche B, 1.575%,
9/30/00(6)(12)(JPY) . . . . . . . . . . . . . . . . . . . . . 71,999,999 556,747
----------
1,255,497
---------- <CAPTION>
Units
----------- <S>
<C> <C> RIGHTS, WARRANTS AND CERTIFICATES -- 0.0%
Australis Media Ltd. Wts., Exp. 5/00(6) . . . . . . . . . . . . . . . . 80 --
Comunicacion Celular SA Wts., Exp. 11/03(6) . . . . . . . . . . . . . . 2,125
127,500 Microcell Telecommunications, Inc.:
Conditional Wts., Exp. 12/97(6) . . . . . . . . . . . . . . . . . . 2,800 1,751
Wts., Exp. 12/97(6) . . . . . . . . . . . . . . . . . . . . . . . . 2,800 36,400
----------
165,651
----------
</TABLE>
17
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> STRUCTURED INSTRUMENTS -- 5.8%
Business Development Bank of Canada, Goldman Sachs Excess
Return Commodity Index Linked Commercial Paper, 5.40%,
12/22/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000 $ 2,351,800
Canadian Imperial Bank of Commerce (New York Branch)
Canadian Dollar Three Month Banker's Acceptance Linked
Maximum Rate Nts., 8.66%, 4/13/98 . . . . . . . . . . . . . . . . . . 1,000,000
1,003,200 Canadian Imperial Bank of Commerce, U.S. Dollar Nts. Linked to the Ministry of
Finance of the Russian Federation GKO, Zero Coupon, 9.857%, 9/17/98(3) . . . . . . . . . . . . . . .
. . . 1,170,000 1,042,236 Credit Suisse First Boston (Cayman) Ltd., City of
Moscow,
Credit & Convertibility Linked Nts., Series EM 215, Zero Coupon, 12.046%, 12/30/97(3) . . .
. . . . . . . . . . . . . . . . . 400,000 389,281 ING (U.S.) Financial Holdings
Corp., PT Polysindo Linked Nts., Zero Coupon, 10.426%, 7/15/98(3)(6) . . . . . . . . . . . . . . . . .
400,000 359,212 Merrill Lynch & Co., Inc.:
SPIRES Ltd. -- Series XXX, 10.91%, 10/11/06(15) . . . . . . . . . . . 1,880,000
1,880,000 U.S. Dollar Nts. Linked to the Ministry of Finance of Ukraine OVGZ's, Zero
Coupon, 11.45%, 10/19/98(3) . . . . . . . . . . . . . 2,560,000 2,221,312 Morgan
Guaranty Trust Co. of New York:
2 Times Leveraged Nts. on The Emerging Bond Markets Index, Zero Coupon, 0%,
1/29/98(3) . . . . . . . . . . . . . . . . . . . 3,000,000 2,630,400 Japanese
Government Bond 193 Currency Protected Bank Nts., 8.14%, 4/29/98 . . . . . . . . . . . . . . . . . .
. . . . . . . . 30,000 18,000 Salomon, Inc.:
Colombian Peso Linked Nts., Zero Coupon, 18.174%, 8/20/98(3) . . . . 934,000
754,672 Russian GKO Linked Nts., Zero Coupon:
9.58%, 6/11/99(3) . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 955,800
9.589%, 6/11/99(3) . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 2,389,500
Russian S-Account Credit Linked Nts., Zero Coupon:
14.163%, 5/22/98(3) . . . . . . . . . . . . . . . . . . . . . . . 1,520,000 1,405,696
9.785%, 7/31/98(3) . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 894,900
Union Bank of Switzerland, Indian Rupee Linked Nts., 5.40%, 11/17/97 . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 94,000 94,978
----------
18,390,987
- - ---------- </TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
------ ------------------ ------------- <S> <C>
<C> <C> <C> CALL OPTIONS PURCHASED -- 0.0%
German Mark Call Opt. . . . . . . . . . . . . . . . 12/97 19.22 CZK
735,000 16,905 Russian (Government of) Principal Loans
Debs., 5.80%, 12/29/49 Call Opt. . . .
. . . . . 11/97 75.125% 1,080 540
</TABLE>
18
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
See Note 1
-------------
CALL OPTIONS PURCHASED (CONTINUED)
Date Strike Contracts
------ -------------- ----------- <S> <C>
<C> <C> <C> Russian (Government of) Principal Loans
Debs., 12/29/49 Call Opt. . . . . . . . . . . . 12/97 75.50% 1,590 $
795 -----------
18,240
-----------
PUT OPTIONS PURCHASED -- 0.1%
Brazil (Federal Republic of) Capitalization
Bonds, 8%, 4/15/14 Put Opt. (Cost $216,866) . . . 12/97 76.00% 1,756
199,306 ----------- Total
International Sector (Cost $77,906,933) . . . 78,206,108
----------- <CAPTION>
Face Amount(1)
-------------- <S>
<C> <C> MORTGAGE-BACKED SECTOR -- 24.1%
GOVERNMENT AGENCY -- 20.7%
FHLMC/FNMA/Sponsored -- 16.4%
Federal Home Loan Mortgage Corp., Certificates of Participation: 12%, 10/1/11 . . . . . . . . . . .
. . . . . . . . . . . . . . . . . $ 298,326 342,846 12%, 10/1/14 . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 186,675 211,268 12%, 5/1/10 . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 547,055 622,746 12%, 6/1/15 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 215,322 249,100 12%, 8/1/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,051 50,962 12%, 8/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
463,691 534,942 Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, Series 1343, Cl. LA, 8%, 8/15/22 . . . 1,000,000
1,101,257 Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1610, Cl. PM, 6.25%, 4/15/22 . . . . . . . . . 2,500,000
2,498,425 Interest-Only Stripped Mtg.-Backed Security, Series 177, Cl. B,
10.751%-11.001% 7/1/26(17) . . . . . . . . . . . . . . . . . 11,092,590 3,433,504
Federal National Mortgage Assn.:
11%, 7/1/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812,434 933,031 7%,
11/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,556,568 2,570,271 7%,
11/25/27(15) . . . . . . . . . . . . . . . . . . . . . . . . . . 5,700,000 5,717,841 7%,
12/1/12(15) . . . . . . . . . . . . . . . . . . . . . . . . . . 7,140,000 7,235,962 7.50%,
11/1/27(15) . . . . . . . . . . . . . . . . . . . . . . . . . 12,950,000 13,229,202 7.50%,
6/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,614,509 1,662,202 Gtd. Mtg.
Pass-Through Certificates, 13%, 6/1/15 . . . . . . . . . . 1,050,136 1,254,314
</TABLE>
19
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> FHLMC/FNMA/SPONSORED (Continued)
Federal National Mortgage Assn.: (continued)
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates:
Trust 1992-162, Cl. C, 7%, 10/25/21 . . . . . . . . . . . . . . . $ 5,400,000 $
5,489,424 Trust 1995-4, Cl. PC, 8%, 5/25/25 . . . . . . . . . . . . . . . . 664,690
738,495 Trust 1997-25, Cl. B, 7%, 12/18/22 . . . . . . . . . . . . . . . 340,000
347,196 Trust 1997-27, Cl. J, 7.50%, 4/18/27 . . . . . . . . . . . . . . 537,753
572,931 Trust 1997-5, Cl. B, 7%, 9/18/17 . . . . . . . . . . . . . . . . 1,045,000
1,067,067 Principal-Only Stripped Mtg.-Backed Security, Trust 277-C1, 5.924%,
4/1/27(18) . . . . . . . . . . . . . . . . . . . . . . . . 984,297 746,528
-----------
50,609,514
----------- GNMA/Guaranteed -- 4.3%
Government National Mortgage Assn.:
11%, 10/20/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,365 704,407
12%, 11/20/13-9/20/15 . . . . . . . . . . . . . . . . . . . . . . . 582,878 682,530
6%, 7/20/27-8/20/27 . . . . . . . . . . . . . . . . . . . . . . . . 3,744,319 3,783,522
7.50%, 11/1/27(15) . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 3,578,750
7.50%, 2/15/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,593,751 3,676,983
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1994-5, Cl. PQ, 7.493%, 7/16/24 . . . . . . . . . . . . . . . . . . . . . . . . .
750,000 796,883
----------- 13,223,075
----------- PRIVATE -- 3.4%
Commercial -- 2.4%
Asset Securitization Corp., Commercial Mtg. Pass-Through
Certificates:
Series 1996-D3, Cl. A5, 8.334%, 10/13/26(6)(12) . . . . . . . . . . 500,000
546,094 Series 1996-MD6, Cl. A5, 6.957%, 11/13/26(12) . . . . . . . . . . . 800,000
837,625 Series 1997-MD7, Cl. A6, 8.243%, 1/13/30(12) . . . . . . . . . . .
150,000 161,016 BKB Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 1997-C1, Cl. C, 7.45%, 10/25/00(6) . . . . . . . . . . . . . . 250,000
252,266 Capital Lease Funding Securitization LP, Interest-Only Stripped Mtg.-Backed Security,
Series 1997-CTL1, 0.549%, 6/22/24(6)(17) . . . 11,502,462 540,616
Commercial Mortgage Acceptance Corp., Interest-Only Stripped Mtg.-Backed Security, Series
1996-C1, Cl. X-2, 0.981%, 12/25/20(6)(17) 12,416,600 360,857 General
Motors Acceptance Corp., Interest-Only Stripped Mtg.- Backed Security, Series 1997-C1, Cl.
X, 1.629%, 7/15/27(17) . . . . . 3,600,000 374,625 Merrill Lynch Mortgage
Investors, Inc., Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D, 7.42%, 4/25/28 . . . . . . . . . 800,000
834,062 </TABLE>
20
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
--------------- ------------- <S>
<C> <C> COMMERCIAL (Continued)
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates, Series 1996-C1,
Cl. D-1, 7.51%, 2/15/28(6)(12) . . . . $ 1,000,000 $ 1,039,375
NationsCommercial Corp., NB Commercial Mtg. Pass-Through
Certificates, Series-DMC:
Cl. B, 8.562%, 8/12/11(6) . . . . . . . . . . . . . . . . . . . . 400,000 422,375
Cl. C, 8.921%, 8/12/11(8) . . . . . . . . . . . . . . . . . . . . 400,000 428,937
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates, Series 1, Cl. D,
7.683%, 12/21/26(6) . . . . . . . . . 500,000 511,875 Structured Asset
Securities Corp.:
Commercial Mtg. Pass-Through Certificates, Series 1997-LLI, Cl. E, 7.30%, 10/20/34 . . . . .
. . . . . . . . . . . . . . . . . 500,000 511,094 Multiclass Pass-Through
Certificates, Series 1996-C3, Cl. D, 8%, 6/25/30(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
650,000 669,500
------------ 7,490,317
------------ Residential --
1.0%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through Certificates, Series 1997-C1,
Cl. E, 7.50%, 3/1/11(6) . . . . . . . . 710,000 722,425 First Chicago/Lennar
Trust 1, Commercial Mtg. Pass-Through Certificates, Series 1997-CHL1, 8.134%,
7/25/06(6)(12) . . . . . . . 800,000 827,250 First Union-Lehman Brothers
Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed Security, Series 1997-C1, 1.307%, 4/18/27(17) . . . . . . .
. . . . . . . . . . . . . . . . . 4,748,654 378,501 Salomon Brothers Mortgage
Securities VII, Series 1996-B, Cl. 1, 7.136%, 4/25/26 . . . . . . . . . . . . . . . . . . . . . . . . . .
1,329,112 930,379 Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%,
3/25/22(6) . . 250,000 266,094
------------
3,124,649
- - ------------ Total Mortgage-Backed Sector (Cost $73,079,840) . . . . . . . . . . . .
74,447,555 ------------
MONEY MARKET SECTOR -- 10.5%
Repurchase agreement with First Chicago Capital Markets, 5.69%, dated 10/31/97, to be
repurchased at $32,338,326 on 11/3/97, collateralized by U.S. Treasury Nts., 5.75%-8.50%,
5/15/99-11/15/00, with a value of $32,986,315 (Cost $32,323,000) . . . . . . . . . . .
32,323,000 32,323,000
------------ Total Investments, at Value (Cost $330,527,644) . . . . . . . . . . . .
108.2% 334,275,509 Liabilities in Excess of Other Assets . . . . . . . . . . . . . . . . .
(8.2) (25,303,363) -------
- - ------------ Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0%
$308,972,146 =======
============ </TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
1. Face amount is reported in U.S. Dollars, except for those denoted in the following
currencies:
<S> <C> <C> <C>
AUD -- Australian Dollar ITL -- Italian Lira CAD -- Canadian
Dollar JPY -- Japanese Yen CZK -- Czech Koruna NOK --
Norwegian Krone DEM -- German Mark NZD -- New Zealand Dollar
ESP -- Spanish Peseta SEK -- Swedish Krona GBP -- British Pound
Sterling ZAR -- South African Rand IDR -- Indonesian Rupiah
2. Securities with an aggregate market value of $1,881,407 are held in collateralized accounts
to cover initial margin requirements on open futures sales contracts. See Note 6 of Notes to
Financial Statements.
3. For zero coupon bonds, the interest rate shown is the effective yield on the date of
purchase.
4. A sufficient amount of securities has been designated to cover outstanding forward foreign
currency exchange contracts.
5. Non-income producing security.
6. Identifies issues considered to be illiquid or restricted -- See Note 8 of Notes to Financial
Statements.
7. Interest or dividend is paid in kind.
8. Represents securities sold under Rule 144A, which are exempt from registration under the
Securities Act of 1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees. These securities amount to $43,759,803 or
14.16% of the Trust's net assets as of October 31, 1997.
9. Non-income producing -- issuer is in default of interest payment.
10. 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.
11. Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate
at a designated future date.
12. Represents the current interest rate for a variable rate security.
13. Represents the current interest rate for an increasing rate security.
14. A sufficient amount of cash and securities has been designated to cover outstanding
written options, as follows:
</TABLE>
<TABLE>
<CAPTION>
Expiration Exercise Premium Market
Value Contracts Date Price Received
See Note 1 --------- ---- ----- ----------
- - ------------ <S> <C> <C> <C> <C>
<C> Banco Hipotecario Nacional (Argentina) Medium-
Term Nts., 10.625%, 8/7/06 Call Opt. 700 8/7/00 100.00% $ 6,440
$ 24,500 Natural Gas Futures, 1/98 Call Opt. 20 12/26/97 $3.20
75,880 111,000 United Mexican States Collateralized Fixed Rate
Par Bonds, Series A, 6.25%, 12/31/19 Put Opt. 705 11/28/97 75.00%
63,450 45,120 --------
-------- $145,770
$180,620 ========
======== </TABLE>
15. When-issued security to be delivered and settled after October 31, 1997.
16. A sufficient amount of securities has been designated to cover outstanding
interest rate swap transactions. See Note 9 of Notes to Financial Statements.
17. 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. 18. 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.
22
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1997
Oppenheimer Multi-Sector Income Trust
<TABLE>
<S> <C> ASSETS:
Investments, at value (cost $330,527,644) -- see accompanying statement . . $334,275,509
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378,741 Unrealized appreciation on
forward foreign currency exchange contracts -- Note 5 70,249 Receivables:
Investments sold and options written . . . . . . . . . . . . . . . . . . 50,422,343 Interest,
dividends and principal paydowns . . . . . . . . . . . . . . . 4,232,948 Closed forward foreign
currency exchange contracts . . . . . . . . . . . 212,390 Daily variation on futures contracts
- - -- Note 6 . . . . . . . . . . . . . 7,813 Other . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .
9,878 ------------ Total assets . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 389,609,871
------------ LIABILITIES:
Unrealized depreciation on forward foreign currency exchange contracts -- Note 5 1,526
Options written, at value (premiums received $145,770) -- see accompanying statement -- Note
7 . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,620 Open interest rate swap transactions at
market value -- Note 9 . . . . . . 15,297 Payables and other liabilities:
Investments purchased (including $32,422,733 purchased on a when-issued basis) -- Note 1 .
. . . . . . . . . . . . . . . . . . . . . . . . . . 79,794,979 Closed forward foreign currency exchange
contracts . . . . . . . . . . . 233,072 Trustees' fees -- Note 1 . . . . . . . . . . . . . . . . . . . . . .
. . 154,787 Management and administrative fees . . . . . . . . . . . . . . . . . . .
129,885 Daily variation on futures contracts -- Note 6 . . . . . . . . . . . . . . 17,643 Other .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,916
------------ Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
80,637,725 ------------ NET ASSETS . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $308,972,146
============ COMPOSITION OF NET ASSETS:
Par value of shares of beneficial interest . . . . . . . . . . . . . . . . $ 291,161 Additional paid-in
capital . . . . . . . . . . . . . . . . . . . . . . . . 313,688,210 Overdistributed net investment income
. . . . . . . . . . . . . . . . . . . (249,479) Accumulated net realized loss on investments and
foreign currency transactions (8,495,256) Net unrealized appreciation on investments and
translation of assets and liabilities denominated in foreign currencies . . . . . . . . .
3,737,510 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ------------ NET ASSETS --
applicable to 29,116,068 shares of beneficial interest outstanding . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . $308,972,146
============ NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . .
$10.61 </TABLE>
See accompanying Notes to Financial Statements.
23
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1997 Oppenheimer
Multi-Sector Income Trust
<TABLE>
<S> <C> INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $710) . . . . . . . . . . . . $28,938,776 Dividends .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,377
----------- Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,070,153 ----------- EXPENSES:
Management fees -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . 1,997,563 Administrative fees
- - -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . 614,751 Shareholder reports . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 172,583 Transfer agent and accounting services fees -- Note 4 . . . . . . . .
. . . 79,657 Custodian fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . 58,807
Legal and auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . . 47,243 Trustees' fees and
expenses -- Note 1 . . . . . . . . . . . . . . . . . . . 31,658 Registration and filing fees . . . . . . .
. . . . . . . . . . . . . . . . 23,922 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,985 ----------- Total expenses . . . . .
. . . . . . . . . . . . . . . . . . . . . . . 3,063,169
----------- NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,006,984 ----------- REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (including premiums on options exercised) . . . . . . . . . . 8,829,790 Closing
of futures contracts . . . . . . . . . . . . . . . . . . . . . . (1,015,374) Closing and expiration of
options written -- Note 7 . . . . . . . . . . . (143,877) Foreign currency transactions . . . . . .
. . . . . . . . . . . . . . . . (1,484,706)
- - ----------- Net realized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,185,833
----------- Net change in unrealized appreciation or
depreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,977,811) Translation of assets
and liabilities denominated in foreign currencies . (685,629)
----------- Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,663,440) ----------- NET REALIZED
AND UNREALIZED GAIN . . . . . . . . . . . . . . . . . . . . . 2,522,393
----------- NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . $28,529,377
=========== </TABLE>
See accompanying Notes to Financial Statements.
24
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996
------------ -------------- <S>
<C> <C> OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,006,984 $ 26,471,497
Net realized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,185,833 7,876,133 Net
change in unrealized appreciation or depreciation . . . . . . . . . . . (3,663,440)
3,026,272 ------------ ----------- Net
increase in net assets resulting from operations . . . . . . . . . . 28,529,377 37,373,902
------------ ----------- DIVIDENDS
TO SHAREHOLDERS FROM NET INVESTMENT INCOME . . . . . . . . . . .
(25,738,551) (26,320,905) ------------
----------- NET ASSETS:
Total increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,790,826 11,052,997
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,181,320 295,128,323
------------ ------------- End of period
[including undistributed (overdistributed) net investment income of $(249,479) and $556,961,
respectively] . . . . . . . . . . . . $308,972,146 $306,181,320
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
25
<PAGE>
FINANCIAL HIGHLIGHTS
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- ---------- ----------- ---------- <S>
<C> <C> <C> <C> <C> PER SHARE OPERATING DATA:
Net asset value, beginning of period . . . . . . . . . . . $10.52 $10.14 $10.17 $10.96
$10.46 ------ ------ ------ ------
- - ------ Income (loss) from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . .89 .91 .94 1.00
1.08 Net realized and unrealized gain (loss) . . . . . . . . . .08 .37 (.04) (.82)
.43 ------ ------ ------ ------ ------
Total income from investment operations . . . . . . . . .97 1.28 .90 .18
1.51 ------ ------ ------ ------ ------
Dividends and distributions to shareholders:
Dividends from net investment income . . . . . . . . . . (.88) (.90) (.91) (.84)
(1.01) Tax return of capital distribution . . . . . . . . . . . -- -- (.02) (.13)
-- ------ ------ ------ ------ ------
Total dividends and distributions to shareholders . . . (.88) (.90) (.93) (.97)
(1.01) ------ ------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . . . $10.61 $10.52 $10.14 $10.17
$10.96 ====== ====== ======
====== ====== Market value, end of period . . . . . . . . . . . . . . . . $10.13 $ 9.88
$10.00 $ 9.50 $11.25
TOTAL RETURN, AT MARKET VALUE(1) . . . . . . . . . . . . . 11.40% 7.85%
15.62% (7.46)% 11.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) . . . . . . . . . $308,972 $306,181 $295,128
$295,658 $316,647 Average net assets (in thousands) . . . . . . . . . . . . . $308,712
$298,496 $288,884 $306,686 $307,244 Ratios to average net assets:
Net investment income . . . . . . . . . . . . . . . . . . 8.42% 8.87% 9.51% 9.17%
10.13% Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.99% 1.04% 1.05%
1.02% 1.00% Portfolio turnover rate(2) . . . . . . . . . . . . . . . . 258.9% 225.4%
240.1% 187.6% 131.3% </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 and mortgage
"dollar-rolls") for the period ended October 31, 1997 were $776,051,192 and
$765,405,480, respectively. Prior to the period ended October 31, 1996,
purchases and sales of investment securities included mortgage "dollar-rolls."
See accompanying Notes to Financial Statements.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Oppenheimer Multi-Sector Income Trust
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Multi-Sector Income Trust (the Trust) is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Trust's investment objective is to seek high
current income consistent with preservation of capital by investments among
seven sectors of the fixed income securities market. The Trust's investment
advisor is OppenheimerFunds, Inc. (the Manager). The following is a summary of
significant accounting policies consistently followed by the Trust. Investment
Valuation -- Portfolio securities are valued at the close of the New York Stock
Exchange on the last day of each week 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.
Structured Notes -- The Trust invests in foreign currency-linked structured
notes whereby the market value and redemption price are linked to foreign
currency exchange rates. The structured notes may be leveraged, which increases
the notes' volatility relative to the face of the security. Fluctuations in
values of the securities are recorded as unrealized gains and losses in the
accompanying financial statements. During the year ended October 31, 1997, the
market value of these securities comprised an average of 6% of the Trust's net
assets, and resulted in realized and unrealized losses of $1,634,532. 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, 1997, the Trust had entered into outstanding
when-issued or forward commitments of $32,422,733.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Securities Purchased on a When-Issued Basis (continued)
In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the Trust may enter into mortgage "dollar-rolls" in
which the Trust sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Trust records each dollar-roll as a sale and a new purchase
transaction.
Security Credit Risk -- The Trust invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower-yielding, higher-rated fixed income securities. The Trust
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. At October 31, 1997, securities with an
aggregate market value of $324,125, representing 0.01% 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, 1997, the
Trust had available for federal income tax purposes an unused capital loss
carryover of approximately $7,983,000, which expires in 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,
1997, a provision of $185 was made for the Trust's projected benefit obligations
and payments of $7,544 were made to retired trustees, resulting in an
accumulated liability of $142,773 at October 31, 1997.
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.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
Classification of Distributions to Shareholders -- Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the year from net investment income
or net realized gains may differ from 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 was recorded by the Trust.
The Trust adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
October 31, 1997, amounts have been reclassified to reflect a decrease in
undistributed net investment income of $1,074,873, a decrease in accumulated net
realized loss on investments of $2,827,430, and a decrease in additional paid-in
capital of $1,752,557.
Other -- Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. Dividends in kind are recognized as income
on the ex-dividend date, at the current market value of the underlying security.
Interest on payment-in-kind debt instruments is accrued as income at the coupon
rate and a market adjustment is made periodically.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of $.01 par value shares of
beneficial interest. There were no transactions in shares of beneficial interest
for the years ended October 31, 1997 and 1996.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1997 net unrealized appreciation on investments and options
written of $3,713,015 was composed of gross appreciation of $8,558,085, and
gross depreciation of $4,845,070.
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
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
4. MANAGEMENT AND ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
to SFSI are based on the number of accounts and the number of shareholder
transactions, plus out-of-pocket costs and expenses.
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Trust uses forward contracts to 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.
t October 31, 1997, the Trust had outstanding forward contracts as follows:
At October 31, 1997, the Trust had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
Valuation
Contract as of Expiration Amount October 31,
Unrealized Unrealized Dates (000s) 1997
Appreciation Depreciation
- - ------------------------------------------------------------------------------------------------------------------
- - ---------- <S> <C> <C> <C> <C>
<C> Contracts to Purchase
- - ---------------------
German Mark (DEM) . . . . . . . . . . 11/4/97 1,170 DEM $ 679,660 $ --
$ 151 -------- ------ Contracts
to Sell
- - -----------------
Argentine Peso (ARP) . . . . . . . . 11/5/97 3,042 ARP 1,767,695 --
1,375 Indonesian Rupiah (IDR) . . . . . . . 2/10/98 4,905,000 IDR 1,306,501
7,573 -- South African Rand (ZAR) . . . . . . 12/29/97 16,224 ZAR
3,310,273 62,676 --
- - ------- ------ 70,249
1,375 ------- ------ Total
Appreciation and Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . $70,249 $1,526
</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 more efficient or cost effective than actually
buying fixed income securities.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
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 and/or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
At October 31, 1997, the Trust had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Valuation
Number as of Unrealized Expiration of Futures
October 31, Appreciation Date Contracts 1997
(Depreciation)
- - --------------------------------------------------------------------------------------------------------- <S>
<C> <C> <C> <C> Contracts to Purchase
---------------------
U.S. Treasury Bonds . . . . . . . . . 12/97 25 $2,961,718 $ 20,312
-------- Contracts to Sell
----------------- Hang Seng
Index . . . . . . . . . . . 11/97 16 1,096,061 (52,008) Nikkei 225 . . . . . . . .
. . . . . 12/97 17 1,394,000 24,800 Standard & Poor's 500 . . . . . . . .
12/97 6 2,772,000 (9,750) U.S. Treasury Nts., 5 yr. . . . . . 12/97
44 4,769,875 (18,719) U.S. Treasury Nts., 2 yr. . . . . . 12/97 6
1,247,250 (8,718) U.S. Treasury Nts., 10 yr. . . . . . 12/97 44
4,917,000 -- --------
(64,395)
--------
$(44,083)
</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
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
7. OPTION ACTIVITY (CONTINUED)
to call, expiration date, exercise price, premium received and market value are
detailed in a footnote to the Statement of Investments. Options written are
reported as a liability in the Statement of Assets and Liabilities. Gains and
losses are reported in the Statement of Operations.
The risk in writing a call option is that the Trust gives up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Trust may incur a loss
if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Trust pays a premium whether or not the
option is exercised. The Trust also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended October 31, 1997 was as follows:
<TABLE>
<CAPTION>
Call Options Put Options
----------------------------- --------------------------------
Number Amount Number Amount of
of of of Options Premiums
Options Premiums ------------- ------------ --------------
- - ----------- <S> <C> <C> <C> <C>
Options outstanding at October 31, 1996 9,277,500 $ 107,323 -- $ --
Options written . . . . . . . . . . . 73,237,667 1,151,885 389,549,046 423,720
Options closed or expired . . . . . . (75,477,897) (856,023) (377,347,901)
(291,477) Options exercised . . . . . . . . . . (7,036,550) (320,865) (12,200,440)
(68,793) ------------ ---------- ------------- ----------
Options outstanding at October 31, 1997 720 $ 82,320 705 $
63,450 ============ ========== =============
========== </TABLE>
8. ILLIQUID AND RESTRICTED SECURITIES
At October 31, 1997, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily-available market or if its valuation has not
changed for a certain period of time. The Trust intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at October 31, 1997 was $28,054,853, which represents
9.08% of the Trust's net assets, of which $2,233,753 is considered restricted.
Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation Per
Acquisition Cost Unit as of Security
Date Per Unit October 31, 1997
- - ------------------------------------------------------------------------------------------------------------------
- - ------------------ <S> <C> <C>
<C> Bonds:
Arizona Charlie's, Inc., 12% First Mtg. Nts.,
Series B, 11/15/00 . . . . . . . . . . . . . . 11/18/93 100.00%
53.75% Capitol Queen & Casino, Inc., 12% First Mtg. Nts.,
Series A, 11/15/00 . . . . . . . . . . . . . . 11/18/93 87.50 14.25
Stocks and Warrants:
Becker Gaming, Inc. Wts., Exp. 11/00 . . . . . . 11/18/93 $ 2.00
$ .20 CGA Group Ltd., Preferred . . . . . . . . . . . . 6/17/97 25.00
25.00 CGA Group Ltd. Wts., Exp. 12/49 . . . . . . . . . 6/17/97
- - -- .50 </TABLE>
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
9. INTEREST RATE SWAP TRANSACTIONS
The Trust may enter into an interest rate swap transaction to seek to maintain a
total return or yield spread on a particular investment or portion of its
portfolio, or for other non-speculative purposes. Interest rate swaps involve
the exchange of commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The coupon payments are based on
an agreed upon principal amount and a specified index. Because the principal
amount is not exchanged, it represents neither an asset nor a liability to
either counterparty, and is referred to as a notional principal amount. The
Trust records an increase or decrease to interest income, the amount due or owed
by the Trust at termination or settlement. The Trust enters into swaps only on
securities it owns. Interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to interest rate risks. The
Trust could be obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. The Trust segregates liquid
assets to cover any amounts it could owe under swaps that exceed the amounts it
is entitled to receive.
As of October 31, 1997, the Trust had entered into the following interest rate
swap agreements:
<TABLE>
<CAPTION>
Swap Notional Rate Paid by the Floating Rate Received Floating
Termination Net Counterparty Principal Trust at 10/31/97 by the Trust at 10/31/97
Rate Index Date Unrealized Loss ------------ ----------- -----------------
- - ------------------------ ------------- ------------ --------------- <S> <C> <C>
<C> <C> <C> <C> Morgan $3,830,000
7.65% 7.287% Three- 3/8/01 $15,297 Guaranty
month Trust Co.
New Zealand of New York Dollar Bank
Bills
</TABLE>
33
PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements at fiscal year-end October 31, 1997.
(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 - Filed herewith.
Item 25. Marketing Arrangements.
Inapplicable.
Item 26. Other Expenses of Issuance and Distribution.
Inapplicable.
Item 27. Persons Controlled by or under Common Control.
None.
Item 28. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at February 20, 1998
- - -------------- ------------------------
Shares of Beneficial Interest, 4,148
$.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>
<S> <C>
Name and Current Position with Other Business and Connections
OppenheimerFunds, Inc.("OFI") During the Past Two Years
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 Asset Management Corporation
("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.
Beichert, Kathleen
Vice President None.
Rajeev Bhaman,
Vice President Formerly Vice President (January 1992 - February, 1996) of Asian Equities
for Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting (since May 1996); an officer of other
Oppenheimer funds; formerly an Assistant
Vice President of OFI/Mutual Fund Accounting (April 1994-
May 1996), and a Fund Controller for OFI.
George C. Bowen,
Senior Vice President & Treasurer Vice President (since June 1983) and Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since October 1989) and
Treasurer (since April 1986) of HarbourView; Senior Vice
President (since February 1992), Treasurer (since July 1991)and
a director (since December 1991) of Centennial; President,
Treasurer and a director of Centennial Capital Corporation
(since June 1989); Vice President and Treasurer (since August
1978) and Secretary (since April 1981) of Shareholder
Services, Inc. ("SSI"); Vice President, Treasurer and Secretary
of Shareholder Financial Services, Inc. ("SFSI") (since
November 1989); Treasurer of Oppenheimer Acquisition Corp.
("OAC") (since June 1990); Treasurer of Oppenheimer
Partnership Holdings, Inc. (since November 1989); Vice
President and Treasurer of ORAMI (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource
Services, Inc., a broker-dealer (since December 1995); an
officer of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President of Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President & 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 Executive Vice President (since September 1993), and a director
(since January 1992) of the Distributor; Executive Vice
President, General Counsel and a director of HarbourView, SSI,
SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-
dealer) (since December 1995); President and a director of
Centennial (since September 1995); President and a director of
ORAMI (since July 1996); General Counsel (since May 1996)
and Secretary (since April 1997) of OAC; Vice President of
OppenheimerFunds International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds; formerly an Assistant
Vice President of OFI/Mutual Fund
Accounting (April 1994-May 1996), and a
Fund Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the Distributor; Secretary of HarbourView,
MultiSource and Centennial; 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;
Presently he holds the following other
positions: Director (since 1995) of ICI Mutual Insurance
Company; Governor (since 1994) of St. John's College; Director
(since 1994 - present) of International Museum of Photography
at George Eastman House; Director (since 1986) of GeVa
Theatre. Formerly he held the following positions: 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.; Director (1993 - 1997)
of VehiCare Corp.; Director (1993 - 1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following positions: An officer of certain former
Rochester funds (May, 1993 - January, 1996); Secretary
of Rochester Capital Advisors, Inc. and General Counsel (June,
1993 - January 1996) of Rochester Capital Advisors, L.P.
Jennifer Fission,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based Oppenheimer Funds. Formerly Vice President and
General Counsel of Oppenheimer
Acquisition Corp.
Linda Gardener,
Vice President None.
Alan Gallstone,
Vice President Formerly Vice President for Schroder Capital Management International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of the Institute of Chartered Accountants;
formerly an accountant for Arthur Young (London,
U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President for Bankers Trust Company (1993-1996);
Steering Committee Member, Subcommittee
Chairman for American Savings Education Council (1995-
1996).
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.
Elaine T. Hamann,
Vice President Formerly Vice President (September, 1989 - January, 1997) of Bankers Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President (1994-1997) of Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice 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, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President and Portfolio Manager for Warburg,
Pincus Counsellors, Inc. (1993-1997), Co-manager of
Warburg, Pincus Emerging Markets Fund (12/94 - 10/97), Co-
manager Warburg, Pincus Institutional
Emerging Markets Fund - Emerging Markets
Portfolio (8/96 - 10/97), Warburg Pincus
Japan OTC Fund, Associate Portfolio
Manager of Warburg Pincus International
Equity Fund, Warburg Pincus Institutional
Fund - Intermediate Equity Portfolio, and
Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
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.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director (1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President None.
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,
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 for certain Oppenheimer funds;
a Chartered Financial Analyst; a Vice President of HarbourView; prior to March 1996,
the senior bond portfolio
manager for Panorama Series Fund Inc., other mutual funds and
pension accounts managed by G.R. Phelps; 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.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995); President and director (since June 1991)
of HarbourView; Chairman and a
director of SSI (since August 1994), and SFSI (September
1995); President (since September 1995) and a director (since
October 1990) of OAC; President (since September 1995) and
a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of OFI; a director
of ORAMI (since July 1996) ; President and a director (since
October 1997) of OFIL, an offshore fund manager subsidiary of
OFI and Oppenheimer Millennium Funds plc (since October
1997); President and a director of other Oppenheimer funds; a
director of the NASDAQ Stock Market, Inc. and of Hillsdown
Holdings plc (a U.K. food company); formerly an Executive
Vice President of OFI.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995 - June, 1996) of Manufacturers Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Tanya Mrva,
Assistant Vice President None.
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 (August, 1989 - August,
1995) 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.
Tanya Mrva,
Assistant Vice President None.
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.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division 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.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset Management, Inc. (since March, 1995);
formerly director of Quantitative Research
for the Adviser. Prior to that he was a lecturer at Stamford
University, an investment manager for The Prudential, and
Associate Economist for the First National Bank of Chicago.
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 None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of certain Oppenheimer funds; Formerly,
Vice President (June, 1983 - January, 1996) of
RFS, President and Director of RFD; Vice President and
Director of FMC; Vice President and director of RCAI; General
Partner of RCA; Vice President and Director of Rochester Tax
Managed Fund Inc.
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 None.
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.
Richard Soper,
Vice President None.
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.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of Rochester Capitol Advisors, L.P.
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, 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 An officer and/or portfolio manager of certain Oppenheimer funds;
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 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, 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.; Point of Contact: Finance Supporters of
Children; Member of the Oncology Advisory Board of the
Childrens Hospital; Member of the Board of Directors of the
Colorado Museum of Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May 1985), and SFSI (since November 1989);
Assistant Secretary of Oppenheimer
Millennium Funds plc (since October 1997); an officer of other
Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
Vice President of Centennial.
>
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as set
forth below:
</TABLE>
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
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
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 Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the 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 the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625- 2807.
Item 29. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1215 W. 10th Street
Apt. 510
Cleveland, OH 44113
Birmingham, MI 48009
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
C. Webb Heidinger(2) Vice President None
Byron Ingram(2) Assistant Vice President None
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Assistant Vice President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Steve Puckett Vice President None
2555 N. Clark, #209
Chicago, IL 60614
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI 48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd. #123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
201 Summerfield
Northbrook, IL 60062
Sarah Turpin Vice President None
2735 Dover Road
Atlanta, GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 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
-6-
<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 27th day of February, 1998.
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:
Signatures Title Date
- - ---------- ----- ----
/s/ Leon Levy* Chairman of the
- - -------------- Board of Trustees February 27, 1998
Leon Levy
/s/ Donald W. Spiro* Principal Executive
- - ------------------- Officer and Trustee February 27, 1998
Donald W. Spiro
/s/ Bridget A. Macaskill* President and Trustee February 27, 1998
- - ------------------------
Bridget A. Macaskill
/s/ George Bowen* Treasurer and
- - ----------------- Principal Financial
George Bowen and Accounting Officer February 27, 1998
/s/ Robert G. Galli* Trustee February 27, 1998
- - -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee February 27, 1998
- - ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee February 27, 1998
- - --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee February 27, 1998
- - -----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee February 27, 1998
- - --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee February 27, 1998
- - -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins* Trustee February 27, 1998
- - ----------------------
Sidney M. Robbins
/s/ Pauline Trigere* Trustee February 27, 1998
- - --------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee February 27, 1998
- - -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- - --------------------------
Robert G. Zack
-7-
<PAGE>
OPPENHEIMER MULTI-SECTOR INCOME TRUST
Registration No. 811-5473
Post-Effective Amendment No. 13
Index to Exhibits
Exhibit No. Description
24(1)(h) Independent Auditor's Consent
24(2)(r) Financial Data Schedule
-8-
Consent of Independent Auditors
The Board of Trustees
Oppenheimer Multi-Sector Income Trust
We consent to the use of our report dated November 21, 1997 included herein.
/s/ KPMG Peat Marwick LLP
- - -------------------------
KPMG Peat Marwick LLP
Denver, Colorado
February 26, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 829801
<NAME> Oppenheimer Multi-Sector Income Trust
<S> <C> <PERIOD-TYPE>
12-MOS <FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996 <PERIOD-END>
OCT-31-1997 <INVESTMENTS-AT-COST>
330,527,644 <INVESTMENTS-AT-VALUE>
334,275,509 <RECEIVABLES>
54,875,494 <ASSETS-OTHER> 9,878
<OTHER-ITEMS-ASSETS> 448,990
<TOTAL-ASSETS> 389,609,871
<PAYABLE-FOR-SECURITIES> 79,794,979
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 842,746
<TOTAL-LIABILITIES> 80,637,725
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 313,979,371
<SHARES-COMMON-STOCK> 29,116,068
<SHARES-COMMON-PRIOR> 29,116,068
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 249,479
<ACCUMULATED-NET-GAINS> (8,495,256)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,737,510
<NET-ASSETS> 308,972,146
<DIVIDEND-INCOME> 131,377
<INTEREST-INCOME> 28,938,776
<OTHER-INCOME> 0
<EXPENSES-NET> 3,063,169
<NET-INVESTMENT-INCOME> 26,006,984
<REALIZED-GAINS-CURRENT> 6,185,833
<APPREC-INCREASE-CURRENT> (3,663,440)
<NET-CHANGE-FROM-OPS> 28,529,377
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,738,551
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,790,826
<ACCUMULATED-NII-PRIOR> 556,961
<ACCUMULATED-GAINS-PRIOR> (17,508,519)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,997,563
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,063,169
<AVERAGE-NET-ASSETS> 308,712,000
<PER-SHARE-NAV-BEGIN> 10.52
<PER-SHARE-NII> 0.89
<PER-SHARE-GAIN-APPREC> 0.08
<PER-SHARE-DIVIDEND> 0.88
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.61
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
