As Filed with the Securities and Exchange
Commission on February 25, 1999
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. 14 /X/
OPPENHEIMER MULTI-SECTOR INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, 34th Floor
New York, New York 10048-0203
(Address of Principal Executive Offices)
212-323-0200
- -
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, 34th Floor
New York, New York 10048-0203
(Name and Address of Agent for Service)
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FORM N-2
OPPENHEIMER MULTI-SECTOR INCOME TRUST
Cross Reference Sheet
Part A of
Form N-2
Item No. Prospectus Heading
1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 General Description of the Registrant
9 Management
10 Capital Stock, Long-Term Debt, and Other Securities
11 *
12 *
13 See Item 15 of the Statement of Additional Information
Part B of
Form N-2
Item No. Heading In Statement of Additional Information
14 Cover Page
15 Table of Contents
16 *
17 See Item 8 of the Prospectus
18 Management
19 Control Persons and Principal Holders of Securities
20 See Item 9 of the Prospectus
21 Brokerage Allocation and Other Practices
22 See Item 10 of the Prospectus
23 Financial Statements
* Not applicable or negative answer.
<PAGE>
OPPENHEIMER MULTI-SECTOR INCOME TRUST
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover.
Inapplicable.
Item 2. Inside Front and Outside Back Cover Page.
Inapplicable.
Item 3. Fee Table and Synopsis
Inapplicable.
Item 4. Financial Highlights.
Inapplicable.
Item 5. Plan of Distribution.
Inapplicable.
Item 6. Selling Shareholders.
Inapplicable.
Item 7. Use of Proceeds.
Inapplicable.
Item 8. General Information and History.
1. Oppenheimer Multi-Sector Income Trust (the "Fund" or "Registrant") is a
closed-end diversified management investment company organized as a
Massachusetts business trust on February 22, 1988.
2, 3, and 4. The Fund's primary investment objective is high current
income consistent with preservation of capital. Its secondary objective is
capital appreciation. In seeking those objectives, the Fund will allocate its
assets among seven sectors of the fixed-income securities market to take
advantage of opportunities anticipated by OppenheimerFunds, Inc., the Fund's
investment adviser (the "Adviser"), 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 help formulate its decisions on which
sectors present attractive investment opportunities at a particular time.
Historically, the markets for the sectors identified below 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 can 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 can 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 can
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 can 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 Rating Service ("Standard & Poor's") or Moody's
Investors Service, Inc. ("Moody's"), Fitch IBCA, Inc. ("Fitch") or Duff &
Phelps, Inc. ("Duff & Phelps") or another nationally recognized 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 can 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 can 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 Fund's portfolio
might not always include all of the different types of investments described
below. The allocation among the different types of investments the Fund is
permitted to invest in will vary over time based on the Advisor's evaluation of
economic and market conditions.
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 can 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 can also acquire participation interests, as
described below.
Ratings. Certain corporate fixed-income securities in which the Fund can
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, commonly called junk bonds,
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 can 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, could be subject to greater market fluctuations and
risks of loss of income and principal and could 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 can 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 can acquire participation interests in
loans that are made to U.S. or foreign companies (the "borrower"). They can 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 could 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 could have senior securities rated as low as "C" by
Moody's or "D" by Standard & Poor's or Duff & Phelps, but can 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
can not exceed 50% of the Fund's total assets. The Fund can 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
can 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 can 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 could be less information
publicly available about foreign issuers than about U.S. issuers.
On January 1, 1999, eleven countries in the European Union adopted the euro
as their official currency. However, their current currencies (for example, the
franc, the mark, and the lira) will also continue in use until January 1, 2002.
After that date, it is expected that only the euro will be used in those
countries. A common currency is expected to confer some benefits in those
markets, by consolidating the government debt market for those countries and
reducing some currency risks and costs. But the conversion to the new currency
will affect the Fund operationally and also has potential risks, some of which
are listed below. Among other things, the conversion will affect: i. issuers in
which the Fund invests, because of changes in the
competitive environment from a consolidated currency market and
greater operational costs from converting to the new currency. This
might depress securities values;
ii. vendors the Fund depends on to carry out its business, such as its
custodian (which holds the foreign securities the Fund buys), the Adviser
(which must price the Fund's investments to deal with the conversion to
the euro) and brokers, foreign markets and securities depositories. If
they are not prepared, there could be delays in settlements and
additional costs to the Fund;
iii. exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations between
the affected currencies and the need to update the Fund's contracts could
pose extra costs to the Fund.
The Adviser is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's custodian bank has advised the
Adviser of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio manager will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
Because the Fund can 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. Because a portion of the Fund's
investment income can 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 can 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 can 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 can 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 can 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 can be a lack
of liquidity for emerging market securities; interest rates and foreign currency
exchange rates could be more volatile; sovereign limitations on foreign
investments may be more likely to be imposed; there can be significant balance
of payment deficits; and their economies and markets can respond in a more
volatile manner to economic changes than those of developed countries.
The Asset-Backed Sector
Asset-Backed Securities. The Fund can 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 can 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 can 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 can 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 can invest in securities that represent participation interests in
pools of residential mortgage loans, including collateralized mortgage
obligations (CMOs). Some CMOs can 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 can 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 can 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 can 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 can 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, can 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 can 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 can 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
can increase the yield to shareholders more than debt obligations that pay
interest semi-annually.
Because of those factors, mortgage-backed securities can 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 can 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 can 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.
Interest Rate Risks. 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 can 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 could 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 can 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 can 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 can 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 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 can 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
or 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 can 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 can 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
can 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, can 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 can 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 can 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 can be non-negotiable until expiration and can 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 can
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 can invest in U.S. dollar-denominated securities of
foreign banks and foreign branches of U.S. banks, the Fund can be subject to
additional investment risks which can 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 can use the following special investment techniques, however, the
Fund's portfolio might not always include all of the different types of
investment described below.
Direct Placements and Other Illiquid Securities
The Fund can 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 can 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 can 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 can preclude a public offering of
an issuer's unregistered securities. There can be undesirable delays in selling
restricted securities at prices representing fair value.
The Fund can invest up to an additional 10% of its assets in securities
which, although not restricted, are not readily marketable. Such securities can
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 can
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 can 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 can be
subject to repurchase agreements.
When-Issued and Delayed-Delivery Transactions
The Fund can purchase asset-backed securities, municipal bonds and other
debt securities on a "when-issued" basis, and can 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 can dispose of a commitment prior to settlement. The Fund does not
intend to make such purchases for speculative purposes. When such transactions
are negotiated, the price (which is generally expressed in yield terms) is fixed
at the time the commitment is made, but delivery and payment for the securities
take place at a later date. During the period between commitment by the Fund and
settlement (generally within 45 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 until the Fund receives the security at settlement of
the trade. Such securities are subject to market fluctuations; the value at
delivery can be less than the purchase price. The Fund will identify to its
custodian, liquid assets on its records as segregated 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 can 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 can 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 can purchase 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". The Fund is not obligated to use hedging instruments even though
it is permitted to use them in the Advisor's discretion, as described below.
Hedging Instruments can 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 can also be written on securities to attempt to increase the Fund's
income. The Fund will not use futures and options on futures for speculation.
The hedging instruments the Fund can use are described below. As of the date of
this Registration Statement, the Fund does not intend to enter into futures,
forward contracts and options on futures if after any such purchase, the sum of
margin deposits on futures and premiums paid on futures options would exceed 5%
of the value of the Fund's total assets.
|_| Futures. The Fund can 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 can 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 can be made by entering into an offsetting contract.
|_| Put and Call Options. The Fund can 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 can 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 can be subject to calls.
The Fund can 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.
|_| Foreign Currency Options. The Fund can 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
can 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 can be
partially offset by writing calls or purchasing puts on that foreign currency.
However, in the event of currency rate fluctuations adverse to the Fund's
position, it would either lose the premium it paid and incur transaction costs,
or purchase or sell the foreign currency at a disadvantageous price.
|_| Forward Contracts. The Fund can 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 can 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 can 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 can 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 can 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 can 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 could be required to buy the underlying security at a
disadvantageous price. The principal risks relating to the use of futures are:
(a) possible imperfect correlation between the prices of the futures and the
market value of the securities in the Fund's portfolio; (b) possible lack of a
liquid secondary market for closing out a futures position; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; and (d) losses on futures resulting from interest rate movements not
anticipated by the Adviser.
|_| Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest on a
security. For example, they can swap a right to receive floating rate payments
for fixed rate payments. The Fund enters into swaps only on securities it owns.
The Fund can 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 can 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 can
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 can trade in the
over-the-counter market and can 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) can be considered "derivative investments."
The Fund can 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 can 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 can 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 can 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 can 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 can acquire interests in loans that
are made to U.S. companies, foreign companies and foreign governments (the
"borrower"). They can 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 can 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 can
have senior securities rated as low as "C" by Moody's or "D" by Standard &
Poor's or Duff & Phelps, but can 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 can 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
can 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 can 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 can 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 can 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 can also borrow to finance repurchases and/or tenders of its
shares and can 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 can 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 can be affected.
Defensive Strategies
There can 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 can invest all or any portion of its assets in nonconvertible
high-grade debt securities, or U.S. government and agency obligations. The Fund
can 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 can be decreased or its potential capital loss can 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. Under these
restrictions, the Fund will not do any of the following:
|_| As to 75% of its total assets, the Fund will not invest in securities
of any one issuer (other than the United States government, its agencies or
instrumentalities) if after any such investment either (a) more than 5% of the
Fund's total assets would be invested in the securities of that issuer, or (b)
the Fund would then own more than 10% of the voting securities of that issuer;
|_| The Fund will not concentrate investments to the extent of 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.
|_| The Fund will not make loans except through (a) the purchase of debt
securities in accordance with its investment objectives and policies; (b) the
lending of portfolio securities as described above; or (c) the acquisition of
securities subject to repurchase agreements;
|_| The Fund will not borrow money, except in conformity with the
restrictions stated above under "Borrowing."
|_| The Fund will not pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings or for the escrow arrangements
contemplated in connection with the use of Hedging Instruments;
|_| The Fund will not participate on a joint or joint and several
basis in any securities trading account;
|_| The Fund will not invest in companies for the purpose of
exercising control or management thereof;
|_| The Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or by virtue of ownership of other securities has the
right, without payment of any further consideration, to obtain an equal amount
of the securities sold short ("short sales against the box"). Because changes in
Federal income tax laws would not enable the Fund to defer realization of gain
or loss for Federal income tax purposes, short sales against the box therefore
would not be used by the Fund;
|_| The Fund will not invest in (a) real estate, except that it can
purchase and sell securities of companies which deal in real estate or interests
therein; (b) commodities or commodity contracts (except that the Fund can
purchase and sell hedging instruments whether or not they are considered to be a
commodity or commodity contract); or (c) interests in oil, gas or other mineral
exploration or development programs;
|_| The Fund will not act as an underwriter of securities, except insofar
as the Fund might be deemed to be an underwriter for purposes of the Securities
Act of 1933 in the resale of any securities held for its own portfolio;
|_| The Fund will not purchase securities on margin, except that the Fund
can make margin deposits in connection with any of the Hedging Instruments it
can use; or
|_| The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral, or escrow arrangements are established, to
cover the related obligations. Examples of those activities include borrowing
money, reverse repurchase agreements, delayed-delivery agreements and
when-issued arrangements for portfolio securities transactions and contracts to
buy or sell derivatives, hedging instruments or options or futures.
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.
Market Price High;(1) Market Price Low;(1)
NAV and Premium/ NAV and Premium/
Ended Discount That Day(2) Discount That Day(2)
- -------- ---------------------------- ----------------------------
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%
4/30/98 Market: $10.56 Market: $10.13
NAV: $10.76 NAV: $10.74
Premium//Discount: -1.86% Premium//Discount: -5.68%
7/31/98 Market: $10.44 Market: $10.00
NAV: $10.59 NAV: $10.64
Premium//Discount: -1.42% Premium//Discount: -6.02%
10/31/98 Market: $10.13 Market: $8.50
NAV: $10.33 NAV: $9.80
Premium//Discount: -1.94% Premium//Discount: -13.27%
1/31/99 Market: $9.56 Market: $8.50
NAV: $9.87 NAV: $9.94
Premium//Discount: -3.14% Premium//Discount: -14.49%
- ---------------
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 could 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
could, 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
could 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 could be
required to sell portfolio securities for other than investment purposes and
could realize gains and losses. Gains realized on securities held for less than
three months could 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
can 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 $95 billion as of December 31,
1998, and having more than 4 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.
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 0.65 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, 1996, 1997 and 1998, the Fund
paid management fees to the Adviser of $1,939,377, $1,997,563 and $1,980,152,
respectively. The Fund incurred approximately $54,062 in expenses for the fiscal
year ended October 31, 1998 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 Transfer Agent to shareholders, depend on the smooth
functioning of their computer systems. Because many computer software systems in
use today cannot distinguish the year 2000 from the year 1900, the markets for
securities in which the Fund invests could be detrimentally affected by computer
failures beginning January 1, 2000. Failure of computer systems used for
securities trading could result in settlement and liquidity problems for the
Fund and other investors. That failure could have a negative impact on handling
securities trades, pricing and accounting services. Data processing errors by
government issuers of securities could result in economic uncertainties, and
those issuers may incur substantial costs in attempting to prevent or fix such
errors, all of which could have a negative effect on the Fund's investments and
returns.
The Adviser and the Transfer Agent have been working on necessary
changes to their computer systems to deal with the year 2000 and expect that
their systems will be adapted in time for that event, although there cannot be
assurance of success. Additionally, the services they provide depend on the
interaction of their computer systems with those of brokers, information
services, the Fund's Custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 might also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
1(c). The Portfolio managers of the Fund are Arthur Steinmetz and
Caleb Wong, Mr. Steinmetz is a Vice President of the Fund and a Senior Vice
President of the Adviser and Mr. Wong is an Assistant Vice President of the
Adviser. Messrs. Steinmetz and Wong have been the persons principally
responsible for the day-to-day management of the Trust's portfolio since
February 1, 1999. Prior to February 1999, Mr. Steinmetz served as a portfolio
manager and officer of other Oppenheimer funds. Mr. Wong worked on fixed-income
quantitative research and risk management for the Adviser since July 1996, prior
to which we was enrolled in the Ph.D. program for Economics as the University of
Chicago. 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 is 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:
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;
(viii) 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,
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, 1996, 1997 and 1998, the
Fund paid administration fees to the Administrator of $596,733, $614,751, and
$604,427, 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 19, 1999.
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, 1998, 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 prior distributions made by
the Fund must be re-characterized as a non-taxable return of capital at the end
of the fiscal year as a result of the effect of the Fund's investment policies,
they will be identified as such in notices sent to shareholders.
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 19, 1999:
(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.
<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 24, 1999
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 24, 1999. 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
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page.
Reference is made to the preceding page.
Item 15. Table of Contents.
Reference is made to the preceding page and to Items 16 through 23
of the Statement of Additional Information set forth below.
Item 16. General Information and History.
Inapplicable.
Item 17. Investment Objective and Policies.
Reference is made to Item 8 of the Prospectus.
Item 18. Management.
1. and 2. The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are 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. Each of the Trustees
are Trustees or Directors of the following New York-based Oppenheimer funds1:
Oppenheimer California Municipal Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Developing Markets Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Discovery Fund Oppenheimer Multi-Sector Income Trust
Oppenheimer Enterprise Fund Oppenheimer Multi-State Municipal Trust
Oppenheimer Global Fund Oppenheimer Municipal Bond Fund
Oppenheimer Global Growth & Income Fund Oppenheimer New York Municipal Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Series Fund, Inc.
Oppenheimer Growth Fund Oppenheimer U.S. Government Trust
Oppenheimer International Growth Fund Oppenheimer World Bond Fund
Oppenheimer International Small Company
Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Bowen, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of February 19, 1999, 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.
1 Ms. Macaskill is not a Director of Oppenheimer Money Market Fund, Inc.
Leon Levy, Chairman of the Board of Trustees, Age: 73.
280 Park Avenue, New York, NY 10017
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: 65.
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Adviser, OppenheimerFunds, Inc. (October 1995 to
December 1997); Vice President (June 1990 to March 1994) and General Counsel of
Oppenheimer Acquisition Corp., the Adviser's parent holding company; Executive
Vice President (December 1977 to October 1995), General Counsel and a director
(December 1975 to October 1993) of the Adviser; Executive Vice President and a
director (July 1978 to October 1993) and General Counsel of OppenheimerFunds
Distributor, Inc.; Executive Vice President and a director (April 1986 to
October 1995) of HarbourView Asset Management Corporation; Vice President and a
director (October 1988 to October 1993) of Centennial Asset Management
Corporation, (HarbourView and Centennial are investment adviser subsidiaries of
the Adviser); and an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee, Age: 75.
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill, President and Trustee*, Age:50.
Two World Trade Center, New York, New York 10048-0203
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 Asset Management Corp., an investment adviser
subsidiary of the Adviser; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Adviser; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Adviser's parent holding company; 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 management
subsidiary of the Adviser and of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Hillsdown Holdings plc (a
U.K. food company), formerly (until October 1998) a director of NASDAQ Stock
Market, Inc.
Elizabeth B. Moynihan, Trustee, Age: 69.
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Trustee, Age: 71.
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), and 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: 68
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 director of RBAsset
(real estate manager); a director of OffitBank; 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: 67.
8 Sound Shore Drive, Greenwich, Connecticut 06830
Retired 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: 73.
Two World Trade Center, New York, New York 10048-0203
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Adviser; formerly Chairman of the Adviser and the OppenheimerFunds Distributor,
Inc.
Pauline Trigere, Trustee, Age: 85.
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of P.T. Concept (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee, Age: 68.
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (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, U.S. Trade Representative;
formerly a director of B.A.T. Industries, Ltd. (tobacco and financial
services), IMC Global (fertilizer) and Lindsay Mfg. Co. (irrigation
equipment).
Arthur P. Steinmetz, Vice President and Portfolio Manager, Age: 40.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Adviser (since March 1993); an officer of other
Oppenheimer funds.
Caleb Wong, Portfolio Manager, Age: 33
Assistant Vice President of the Adviser (since January 1997); worked in
fixed-income quantitative research and risk management for the Adviser (Since
July 1996) prior to which he was enrolled in the Ph.D. program for Economics at
the University of Chicago.
Andrew J. Donohue, Secretary, Age: 48.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Adviser; Executive Vice
President and General Counsel (since September 1993), and a director (since
January 1992) of the OppenheimerFunds Distributor, Inc.; Executive Vice
President, General Counsel and a director of HarbourView, Shareholder Services,
Inc., SFSI and Oppenheimer Partnership Holdings, Inc. (since September 1995);
President and a director of Centennial (since September 1995); President,
General Counsel and a director of Oppenheimer Real Asset Management, Inc. (since
July 1996); General Counsel (since May 1996) and Secretary (since April 1997) of
Oppenheimer Acquisition Corporation; Vice President and a director of
OppenheimerFunds International, Ltd. and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
George C. Bowen, Treasurer, Age: 62.
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 OppenheimerFunds Distributor, Inc.; 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.; Vice President,
Treasurer and Secretary of SFSI (since November 1989); Assistant Treasurer of
Oppenheimer Acquisition Corporation (since March 1998); Treasurer of Oppenheimer
Partnership Holdings, Inc. (since November 1989); Vice President and Treasurer
of Oppenheimer Real Asset Management, Inc. (since July 1996); Treasurer of
OppenheimerFunds International, Ltd. and Oppenheimer Millennium Fund plc (since
October 1997); a trustee or director and an officer of other Oppenheimer funds;
formerly Treasurer of Oppenheimer Acquisition Corporation (June 1990 - March
1998).
Robert J. Bishop, Assistant Treasurer, Age: 40.
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: 33.
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: 50.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Adviser, Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and SFSI (since November 1989); Assistant Secretary of Oppenheimer
Millennium Funds plc and OppenheimerFunds International, Ltd. (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. 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,
1998. The compensation from all of the New York-based Oppenheimer funds
(including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 1998.
<PAGE>
Total
Compensation
Retirement from all
Benefits New York based
Aggregate Accrued as Part Oppenheimer
Trustee's Name Compensation of Fund Funds (21
and Other Positions from Fund1 Expenses Funds)2
Leon Levy
Chairman $17,906 $8,986 $162,600
Robert G. Galli
Study Committee Member2 $3,369 $0 $113,383
Benjamin Lipstein
Study Committee Chairman,
Audit Committee Member $20,318 $12,608 $140,550
Elizabeth B. Moynihan
Study Committee
Member $5,431 $0 $99,000
Kenneth A. Randall
Audit Committee Member $10,921 $5,940 $90,800
Edward V. Regan
Proxy Committee Chairman,
Audit Committee Member $4,926 $0 $89,800
Russell S. Reynolds, Jr.
Proxy Committee
Member $5,317 $1,631 $67,200
Pauline Trigere $7,496 $4,204 $60,000
Clayton K. Yeutter
Proxy Committee
Member $3,6863 $0 $67,200
1 Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a Trustee.
2 For the 1998 calendar year.
3 Aggregate compensation from the Fund reflects fees from 1/1/98 to 10/31/98.
Total compensation for the 1998 calendar year includes compensation received
for serving as Trustee or Director of 20 other Oppenheimer funds.
4 Includes $635 deferred under Deferred Compensation Plan described below.
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 19, 1999, 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 Inc., 1000 Harbor Boulevard, 6th Floor, Weehawken,
New Jersey 07087, which owned of record 4,733,709 shares (16.26% of the shares);
Salomon Smith Barney, Inc., 333 W. 34th Street New York, New York 10001, which
owned 2,173,923 shares (7.47% of the shares); Prudential Securities, Inc., One
York Plaza, 8th Floor, New York, New York 10004, which owned 1,796,339 shares
(6.17% of the shares); AG Edwards & Sons, Inc., One North Jefferson Avenue, St.
Louis, Missouri 63103, which owned 1,980,439 shares (6.80% of the shares); and
Donaldson, Lufkin and Jenrette Securities Corp., One Pershing Plaza, Jersey
City, New Jersey 07399, which owned 1,644,705 shares (5.65% of the shares).
3. As of February 19, 1999, 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, 1996, 1997 and 1998,
the Fund paid approximately $14,004, $93,433 and $245,257 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, 1996 and 1998, no money was
paid to brokers as commissions in return for research services. During the
fiscal year ended October 31, 1997, $509 was 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, 1998.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements at fiscal year-end October 31, 1998.
(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; amended By-Laws dated June 4, 1998, Filed herewith.
(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) (1) Retirement Plan for Non-Interested Trustees (adopted
by Registrant on 6/7/90) - previously filed with Post-Effective Amendment No.
97 of Oppenheimer Fund (Reg. No. 2-14586), 8/30/90, refiled with
Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg. No.
2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(2) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No. 33, of the
Registration Statement for Oppenheimer Gold & Special Minerals Fund (Reg. No.
2-82590), 10/28/98, 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 19, 1999
- -------------- ------------------------
Shares of Beneficial Interest,
$.01 par value 3,855
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
29(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.
Name and Current Position with Other Business and Connections
OppenheimerFunds, Inc.("OFI") During the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds (since April
1998); a Chartered Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services,
the investment management subsidiary of
The Guardian Life Insurance Company
(since 1972).
Edward Amberger,
Assistant Vice President Formerly Assistant Vice President,
Securities Analyst for Morgan Stanley
Dean Witter (May 1997 - April 1998); and
Research Analyst (July 1996 - May 1997),
Portfolio Manager (February 1992 - July
1996) and Department Manager (June 1988
to February 1992) for The Bank of New
York.
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; he 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.
George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice President, Group
Executive, and Senior Systems Officer for
American International Group (October
1994 - May, 1998).
John R. Blomfield,
Vice President Formerly Senior Product Manager
(November, 1995 - August, 1997) of
International Home Foods and American
Home Products (March, 1994 - October,
1996).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
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.
Chad Boll,
Assistant Vice President None
George C. Bowen,
Senior Vice President, Treasurer
and Director 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); Assistant Treasurer of Oppenheimer
Acquisition Corp. ("OAC") (since March,
1998); Treasurer of Oppenheimer
Partnership Holdings, Inc. (since
November 1989); Vice President and
Treasurer of ORAMI (since July 1996);
an officer of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Kevin Brosmith,
Vice President None.
Nancy Bush,
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.
John Cardillo,
Assistant Vice President None.
Mark Curry,
Assistant Vice President None.
H.C. Digby Clements,
Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Chief Executive Officer and
Senior Manager of HarbourView Asset
Management Corporation; Trustee (1993 -
present) of Awhtolia College - Greece.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of Human
Resources for Fidelity Investments-Retail
Division (January, 1995 - January, 1996),
Fidelity Investments FMR Co. (January,
1996 - June, 1997) and Fidelity
Investments FTPG (June, 1997 - January,
1998).
Robert Doll, Jr.,
Executive Vice President and
Chief Investment Officer and
Director An officer and/or portfolio manager of
certain Oppenheimer funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director 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); 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 and
Director of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
Daniel Engstrom,
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
George Fahey,
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,
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. 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.
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.
David Foxhoven,
Assistant Vice President Formerly Manager, Banking Operations
Department (July 1996-November 1998).
Jennifer Foxson,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for
Schroder Capital Management International.
Jill Glazerman,
Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President and
Chief Financial Officer Chief Financial Officer and Treasurer
(since March, 1998) of Oppenheimer
Acquisition Corp.; a Member and Fellow of
the Institute of Chartered Accountants;
formerly, an accountant for Arthur Young
(London, U.K.).
Robert Grill,
Senior 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.
Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989
- January, 1997) of Bankers Trust Company.
Robert Haley
Assistant Vice President Formerly, Vice President of
Information Services for Bankers Trust
Company (January, 1991 - November, 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and
Director of SFSI; President and Chief
executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
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,
Vice President None.
Richard Hymes,
Vice President None.
Jane Ingalls,
Vice President None.
Kathleen T. Ives,
Vice President None.
Christopher Jacobs,
Assistant Vice President None.
William Jaume,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Susan Katz,
Vice President None.
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Avram Kornberg,
Vice President None.
John Kowalik,
Senior Vice President An officer and/or portfolio manager for
certain OppenheimerFunds; formerly,
Managing Director and Senior Portfolio
Manager at Prudential Global Advisors
(1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
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.
Dan Loughran,
Assistant Vice President:
Rochester Division None.
David Mabry,
Vice President None.
Steve Macchia,
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 Hillsdown Holdings plc (a
U.K. food company); formerly, an
Executive Vice President of OFI.
Philip T. Masterson,
Vice President Formerly an Associate at Davis,
Graham, & Stubbs (January 1998-July 1998);
Associate; Myer, Swanson, Adams & Wolf, P.C.
(May 1996-June 1998).
Loretta McCarthy,
Executive Vice President None.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager,
Assistant Vice President (June 1995-
October, 1997) of Merrill Lynch Pierce
Fenner & Smith.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing
Manager May, 1996 - June, 1997) and Director
of Product Marketing (August, 1992 - May,
1996) with Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager
of certain Oppenheimer funds (since April
1998); a Certified Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services,
the management subsidiary of The Guardian
Life Insurance Company (since 1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase Investment
Services Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant 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.
James Phillips
Assistant Vice President None.
Stephen Puckett,
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice
President (April, 1995 - January, 1998) of
Van Kampen American Capital.
Julie Radtke,
Vice President Formerly Assistant Vice President and
Business Analyst for Pershing, Jersey
City (August 1997-November 1997); Senior
Business Consultant, American
International Group (January 1996-July
1997)
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March, 1995).
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
John Reinhardt,
Vice President: Rochester Division None
Ruxandra Risko,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Martha Shapiro,
Assistant Vice President None
Stephanie Seminara,
Vice President None.
Michelle Simone,
Assistant Vice President None.
Richard Soper,
Vice President None.
Cathleen Stahl,
Vice President Assistant Vice President & Manager of
Women & Investing Program
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 Manager 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 None.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of
HarbourView.
Wayne Strauss,
Assistant Vice President: Rochester
Division Formerly Senior Editor, West Publishing
Company (January 1997-March 1997).
James C. Swain,
Vice Chairman of the Board Chairman, CEO and
Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; formerly,
President and Director of OAMC, CAMC and
Chairman of the Board of SSI.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Annette Von Brandis,
Assistant Vice President None.
Teresa Ward,
Assistant Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income Oppenheimer 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.
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; Point of Contact: Finance
Supporters of Children; Member of the
Oncology Advisory Board of the Childrens
Hospital.
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), SFSI (since November 1989), OFIL
(since 1998), 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:
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 Large Cap Growth 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 Convertible Securities Fund
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 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 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 other
registered open-end investment companies for which OppenheimerFunds, Inc. is
the investment adviser.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30364
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Susan Burton(2) Vice President None
Erin Cawley(2) Assistant Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1) Vice President None
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55403
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
And General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Eric Edstrom(2) Vice President None
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
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
412 Commons Way
Doylestown, PA 18901
Patrice Falagrady(1) Senior Vice President None
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
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
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Allen Hamilton Vice President None
5 Giovanni
Aliso Viejo, CA 92656
C. Webb Heidinger Vice President None
138 Gales Street
Portsmouth, NH 03801
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
John Kennedy Vice President None
799 Paine Drive
Westchester, PA 19382
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) Vice President/ None
Director of Sales
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
2714 Orchard Terrace
Linden, NJ 07036
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
LuAnn Mascia(2) Assistant Vice President None
Wesley Mayer(2) Vice President None
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
100 Anderson Street, #427
Pittsburgh, PA 15212
John McDonough Vice President None
3812 Leland Street
Chevey Chase, MD 20815
Wayne Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005
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
2408 Eagleridge Dr.
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
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
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
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
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ruxandra Risko(2) Vice President None
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
James Ruff(2) President None
Alfredo Scalzo Vice President None
19401 Via Del Mar, #303
Tampa, FL 33647
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Michelle Simone(2) Assistant Vice President None
Stuart Speckman(2) Vice President None
Timothy Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
44 Abington Road
Danvers, MA 0923
Scott Such(1) Senior Vice President None
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
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
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
7009 Metropolitan Place, #300
Falls Church, VA 22043
Susan Torrisi(2) Assistant Vice President None
Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201
Mark Vandehey(1) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
James Wiaduck Vice President None
29900 Meridian Place
#22303
Farmington Hills, MI 48331
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
(1) 6803 South Tucson Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
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
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 23rd day of February, 1999.
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 23, 1999
Leon Levy
/s/ Donald W. Spiro* Principal Executive
Officer and Trustee February 23, 1999
Donald W. Spiro
/s/ Bridget A. Macaskill* President and Trustee February 23, 1999
Bridget A. Macaskill
/s/ George Bowen* Treasurer and
Principal Financial
George Bowen and Accounting Officer February 23, 1999
/s/ Robert G. Galli* Trustee February 23, 1999
Robert G. Galli
/s/ Benjamin Lipstein* Trustee February 23, 1999
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee February 23, 1999
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee February 23, 1999
Kenneth A. Randall
/s/ Edward V. Regan* Trustee February 23, 1999
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee February 23, 1999
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee February 23, 1999
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee February 23, 1999
Clayton K. Yeutter
*By: /s/ Robert G. Zack
Robert G. Zack
<PAGE>
OPPENHEIMER MULTI-SECTOR INCOME TRUST
Registration No. 811-5473
Post-Effective Amendment No. 14
Index to Exhibits
Exhibit No. Description
24(1) Financial Statements and Independent Auditors' Report and
Consent
24(2)(b) Amended By-Laws
24(2)(r) Financial Data Schedule
680N2-99.doc
FINANCIAL HIGHLIGHTS
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
- -------------------------------------------------------------------------
1998
1997 1996 1995 1994
--------
- ------- ------- ------- -------
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period................. $10.61
$10.52 $10.14 $10.17 $10.96
------
- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income .............................
.79 .89 .91 .94 1.00
Net realized and unrealized gain (loss)............
(.75) .08 .37 (.04) (.82)
------
- ------ ------ ------ ------
Total income from investment operations..........
.04 .97 1.28 .90 .18
------
- ------ ------ ------ ------
Dividends to shareholders:
Dividends from net investment income............... (.78)
(.88) (.90) (.91) (.84)
Tax return of capital..............................
(.05) -- -- (.02) (.13)
------
- ------ ------ ------ ------
Total dividends to shareholders.................. (.83)
(.88) (.90) (.93) (.97)
------
- ------ ------ ------ ------
Net asset value, end of period....................... $9.82
$10.61 $10.52 $10.14 $10.17
======
====== ====== ====== ======
Market value, end of period.......................... $9.38
$10.13 $ 9.88 $10.00 $ 9.50
======
====== ====== ====== ======
TOTAL RETURN, AT MARKET VALUE(1)..................... 0.17%
11.40% 7.85% 15.62% (7.46)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $285,907
$308,972 $306,181 $295,128 $295,658
Average net assets (in thousands).................... $304,773
$308,712 $298,496 $288,884 $306,686
Ratios to average net assets:
Net investment income.............................. 7.56%
8.42% 8.87% 9.51% 9.17%
Expenses........................................... 1.01%
0.99% 1.04% 1.05% 1.02%
Portfolio turnover rate(2)........................... 401.5%
258.9% 225.4% 240.1% 187.6%
</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, 1998 were $1,174,378,376 and $1,196,177,680, respectively.
Prior
to the period ended October 31, 1996, purchases and sales of investment
securities included mortgage dollar-rolls.
<PAGE>
<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, 1998 and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998 by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Multi-Sector Income Trust as of October 31, 1998 the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 20, 1998
STATEMENT OF INVESTMENTS October 31, 1998
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
- --------------- ------------
<S>
<C> <C>
U.S. GOVERNMENT SECTOR -- 20.7%
U.S. Treasury Bonds, 11.875%,
11/15/03.................................. $25,000,000
$33,218,775
U.S. Treasury Nts.:
4.50%,
9/30/00........................................................
15,000,000 15,079,695
5.625%,
5/15/08(2)....................................................
10,000,000 10,775,010
- -----------
Total U.S. Government Sector (Cost
$59,397,884) 59,073,480
- -----------
Shares
- --------------
CONVERTIBLE SECTOR -- 1.9% PREFERRED STOCKS -- 1.7% CGA Group Ltd., Preferred,
Series
A(3)(4)............................... 32,000
800,000
Concentric Network Corp., 13.50% Preferred, Series
B(4)(5).............. 206 155,015
Crown American Realty Trust, 11% Cum., Series A,
Non-Vtg................ 4,000 199,000
Dobson Communications Corp., 12.25% Sr.
Exchangeable(3)(4).............. 545 489,137
e.spire Communications, Inc., 12.75% Jr. Redeemable
Preferred(3)(4)..... 441 336,262
Eagle-Picher Holdings, Inc., Cum. Exchangeable, Series B, 3/1/08,
Non-Vtg.(3)(5)........................................................
4,000 215,000
EchoStar Communications Corp., 12.125% Sr. Redeemable
Exchangeable, Series B,
Non-Vtg.(4)................................... 95
90,962
Intermedia Communications, Inc., 13.50% Exchangeable, Series
B(4)....... 718 800,570
Nebco Evans Holdings, Inc., 11.25% Cum.
Exchangeable(4)................. 2,638 132,560
Nextel Communications, Inc., 11.125% Exchangeable, Series
E(4).......... 328 285,360
NEXTLINK Communications, Inc., 14% Cum. Exchangeable,
Vtg.(4)........... 7,986 405,290
Paxson Communications Corp., 13.25% Cum. Jr. Exchangeable,
Non-Vtg.(3)(4)........................................................
20 170,500
SD Warren Co., 14% Cum. Exchangeable, Series B,
Non-Vtg.(5)............. 12,000 565,500
Spanish Broadcasting Systems, Inc., 14.25% Cum. Exchangeable,
Non-Vtg.(3)(4)........................................................
200 194,500
Viatel, Inc., 10% Cv., Series
A(3)(4)................................... 290
17,473
- -----------
4,857,129
- -----------
Units
- --------------
RIGHTS, WARRANTS AND CERTIFICATES -- 0.2%
American Telecasting, Inc. Wts., Exp.
6/99(3)........................... 4,750
47
Ames Department Stores, Inc., Litigation
Trust(3)....................... 128,889 1,289
Becker Gaming, Inc. Wts., Exp.
11/00(3).................................
25,000 6,250
CellNet Data Systems, Inc. Wts., Exp.
10/07(6).......................... 559
1,887
CGA Group Ltd. Wts., Exp.
12/49(3)......................................
32,000 9,600
Clearnet Communications, Inc. Wts., Exp.
9/05........................... 330 621
Concentric Network Corp. Wts., Exp.
12/07(3)............................ 600
60,000
Covad Communications Group, Inc. Wts., Exp.
3/08(3)..................... 320 3,200
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
- -------------- ------------
<S>
<C> <C>
RIGHTS, WARRANTS AND CERTIFICATES (CONTINUED)
e.spire Communications, Inc. Wts., Exp.
11/05........................... 700 $ 58,360
FirstWorld Communications, Inc. Wts., Exp.
4/08(3)...................... 700 7,000
Foamex LP/JPS Automotive Corp. Wts., Exp.
7/99(3)....................... 1,000 20,000
Globix Corp.Wts., Exp.
5/05.............................................
600 6,000
Gothic Energy Corp. Wts., Exp.
1/03(6)..................................
9,509 95
Gothic Energy Corp. Wts., Exp.
9/04(3)..................................
10,150 11,419
ICG Communications, Inc. Wts., Exp.
9/05(3)............................. 4,125
61,543
In-Flight Phone Corp. Wts., Exp.
8/02...................................
900 --
KMC Telecom Holdings, Inc. Wts., Exp.
4/08(3)........................... 920
2,990
Millenium Seacarriers, Inc. Wts., Exp.
7/05(6).......................... 700
4,375
Orbital Imaging Corp. Wts., Exp.
3/05(3)................................
240 9,630
Orion Network Systems, Inc. Wts., Exp.
1/07(3).......................... 975
12,188
Price Communications Corp. Wts., Exp.
8/07(3)........................... 4,300
129,000
Protection One, Inc. Wts., Exp.
6/05(3).................................
6,400 64,000
Teletrac, Inc. Wts., Exp.
8/07(3).......................................
125 1
WAM!NET, Inc. Wts., Exp.
3/05(3)........................................
1,500 12,000
Wireless One, Inc. Wts., Exp.
10/00(3)..................................
1,500 15
- -----------
481,510
- -----------
Total Convertible Sector (Cost
$5,429,341)
5,338,639
- -----------
Shares
- --------------
CORPORATE SECTOR -- 35.7%
COMMON STOCKS -- 0.0%
Capital Gaming International,
Inc.(5)...................................
18 --
Intermedia Communications,
Inc.(5)......................................
757 14,005
Optel,
Inc.(5)..........................................................
815 8
- -----------
14,013
- -----------
Face Amount(1)
- --------------
CORPORATE BONDS AND NOTES -- 32.7%
Aerospace -- 2.1%
America West Airlines, Inc., 10.75% Sr. Nts.,
9/1/05.................... $1,000,000 987,500
Amtran, Inc., 10.50% Sr. Nts.,
8/1/04...................................
850,000 839,375
Atlas Air, Inc., 9.25% Sr. Nts.,
4/15/08(6)............................. 675,000
602,437
BE Aerospace, Inc., 9.50% Sr. Sub. Nts.,
11/1/08(3)..................... 900,000 918,000
Constellation Finance LLC, 9.80% Airline Receivable
Asset-Backed Nts., Series 1997-1,
1/1/01(3)........................... 500,000
485,000
</TABLE>
4
<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)
Decrane Aircraft Holdings, Inc., Units (each unit consists of
$1,000 principal amount of 12% sr. sub. nts., 9/30/08 and
one warrant to purchase 1.55 shares of common
stock)(6)(7)............ $ 800,000 $ 780,000
Pegasus Aircraft Lease Securitization Trust, 11.76% Sr. Nts.,
Series 1997-A, Cl. B,
6/15/04(3)......................................
455,778 492,743
Trans World Airlines, Inc., 11.50% Sr. Sec. Nts.,
12/15/04.............. 1,000,000 860,000
- -----------
5,965,055
- -----------
Chemicals -- 0.7%
ClimaChem, Inc., 10.75% Sr. Unsec. Nts., Series B,
12/1/07.............. 300,000 291,000
ICO, Inc., 10.375% Sr. Nts.,
6/1/07.....................................
475,000 441,750
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., Series B,
9/15/07........ 500,000 432,500
Pioneer Americas Acquisition Corp., 9.25% Sr. Nts.,
6/15/07............. 200,000 151,000
Sovereign Specialty Chemicals, Inc., 9.50% Sr. Unsec. Sub. Nts.,
Series B,
8/1/07......................................................
600,000 570,000
- -----------
1,886,250
- -----------
Consumer Durables -- 0.1%
Holmes Products Corp., 9.875% Sr. Unsec. Sub. Nts.,
Series B,
11/15/07....................................................
400,000 358,000
- -----------
Consumer Non-Durables -- 1.2%
AKI Holdings, Inc., 10.50% Sr. Nts.,
7/1/08(6).......................... 510,000
471,750
American Pad & Paper Co., 13% Sr. Sub. Nts., Series B,
11/15/05......... 340,000 164,900
Bell Sports, Inc., 11% Sr. Sub. Nts.,
8/15/08(6)........................ 400,000
378,000
Consoltex Group, Inc., 11% Sr. Sub. Nts., Series B,
10/1/03............. 550,000 559,625
Globe Manufacturing, Inc., 10% Sr. Sub. Nts.,
8/1/08(6)................. 400,000 314,000
Phillips-Van Heusen Corp., 9.50% Sr. Unsec. Sub. Nts.,
5/1/08........... 360,000 347,400
Revlon Consumer Products Corp., 8.625% Sr. Unsec. Sub. Nts.,
2/1/08................................................................
800,000 726,000
Revlon Worldwide Corp., Zero Coupon Sr. Sec. Disc. Nts.,
Series B, 9.73%,
3/15/01(8)...........................................
360,000 216,000
Styling Technology Corp., 10.875% Sr. Sub. Nts.,
7/1/08(6).............. 195,000 182,325
- -----------
3,360,000
- -----------
Energy -- 1.9%
Belden & Blake Corp., 9.875% Sr. Sub. Nts.,
6/15/07..................... 155,000 123,225
Chesapeake Energy Corp., 9.625% Sr. Unsec. Nts., Series B,
5/1/05....... 510,000 436,050
Clark Refinancing & Marketing, Inc., 8.875% Sr. Sub. Nts.,
11/15/07..... 845,000 722,475
Dailey International, Inc., 9.50% Sr. Unsec. Nts., Series B,
2/15/08.... 400,000 182,000
Denbury Management, Inc., 9% Sr. Sub. Nts.,
3/1/08...................... 400,000 336,000
</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>
Energy (Continued)
Gothic Production Corp., 11.125% Sr. Sec. Nts., Series B,
5/1/05(6)..... $250,000 $ 163,750
Grant Geophysical, Inc., 9.75% Sr. Unsec. Nts., Series B,
2/15/08....... 380,000 286,900
National Energy Group, Inc., 10.75% Sr. Nts., Series D,
11/1/06(9)...... 180,000 72,900
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts.,
5/15/08(6)............... 700,000 696,500
Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs.,
2/1/06............. 500,000 457,500
Pogo Producing Co., 8.75% Sr. Sub. Nts.,
5/15/07........................ 790,000 754,450
Statia Terminals International/Statia Terminals (Canada), Inc.,
11.75% First Mtg. Nts., Series B,
11/15/03............................ 200,000
199,000
Stone Energy Corp., 8.75% Sr. Sub. Nts.,
9/15/07........................ 700,000 693,000
Universal Compression Holdings, Inc., 0%/9.875% Sr. Disc. Nts.,
2/15/08(6)(10)........................................................
700,000 399,000
- -----------
5,522,750
- -----------
Financial -- 0.5%
CB Richard Ellis Services, Inc., 8.875% Sr. Unsec. Sub. Nts.,
6/1/06.... 300,000 288,000
Saul (B.F.) Real Estate Investment Trust, 9.75% Sr. Sec. Nts.,
Series B,
4/1/08......................................................
800,000 644,000
Veritas Capital Trust, 10% Nts.,
1/1/28................................. 525,000
492,187
- -----------
1,424,187
- -----------
Food & Drug -- 0.3%
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., Series B,
7/31/07............ 750,000 690,000
Pathmark Stores, Inc., 0%/10.75% Jr. Sub. Deferred Coupon Nts.,
11/1/03(10)...........................................................
400,000 294,000
- -----------
984,000
- -----------
Food/Tobacco -- 0.7%
Aurora Foods, Inc., 8.75% Sr. Sub. Nts., Series B,
7/1/08............... 200,000 207,000
Del Monte Foods Co., 0%/12.50% Sr. Disc. Nts., Series B,
12/15/07(10)... 500,000 287,500
International Home Foods, Inc., 10.375% Sr. Sub. Nts.,
11/1/06.......... 500,000 530,000
Packaged Ice, Inc., 9.75% Sr. Unsec. Nts., Series B,
2/1/05............. 650,000 594,750
Purina Mills, Inc., 9% Sr. Unsec. Sub. Nts.,
3/15/10.................... 100,000 98,250
SmithField Foods, Inc., 7.625% Sr. Unsec. Sub. Nts.,
2/15/08............ 400,000 391,000
- -----------
2,108,500
- -----------
Forest Products/Containers -- 0.6%
Ball Corp.: 7.75% Sr. Nts.,
8/1/06(6).................................
300,000 310,500
8.25% Sr. Sub. Nts.,
8/1/08(6)........................................
400,000 416,500
Four M Corp., 12% Sr. Sec. Nts., Series B,
6/1/06....................... 300,000 226,500
</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>
Forest Products/Containers (Continued)
Riverwood International Corp., 10.625% Sr. Unsec. Nts.,
8/1/07.......... $ 450,000 $ 420,750
U.S. Can Corp., 10.125% Sr. Sub. Nts., Series B,
10/15/06............... 250,000 251,250
- -----------
1,625,500
- -----------
Gaming/Leisure -- 2.2%
AP Holdings, Inc., 0%/11.25% Sr. Disc. Nts.,
3/15/08(10)................ 150,000 70,875
Apcoa, Inc., 9.25% Sr. Unsec. Sub. Nts.,
3/15/08........................ 400,000 352,000
Capital Gaming International, Inc., 11.50% Promissory Nts.,
8/1/95(9)... 5,500 --
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A,
11/15/00(3)(9)........................................................
200,000 13,000
Capstar Hotel Co., 8.75% Sr. Sub. Nts.,
8/15/07......................... 435,000 408,900
Empress Entertainment, Inc., 8.125% Sr. Sub. Nts.,
7/1/06(6)............ 60,000 59,550
Hard Rock Hotel, Inc., 9.25% Sr. Sub. Nts.,
4/1/05...................... 550,000 541,750
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts.,
6/15/07..................... 1,000,000 975,000
Mohegan Tribal Gaming Authority (Connecticut), 13.50% Sr. Sec.
Nts., Series B,
11/15/02..............................................
900,000 1,120,500
Outboard Marine Corp., 10.75% Sr. Nts.,
6/1/08(6)....................... 240,000 222,600
Premier Parks, Inc.:
0%/10% Sr. Disc. Nts.,
4/1/08(10).....................................
500,000 302,500
9.25% Sr. Nts.,
4/1/06................................................
300,000 302,250
Rio Hotel & Casino, Inc., 9.50% Sr. Sub. Nts.,
4/15/07.................. 300,000 327,000
Showboat Marina Casino Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts., Series B,
3/15/03...................... 1,000,000 1,135,000
Six Flags Entertainment Corp., 8.875% Sr. Nts.,
4/1/06.................. 440,000 445,500
- -----------
6,276,425
- -----------
Healthcare -- 0.8%
Fresenius Medical Care Capital Trust II, 7.875% Nts.,
2/1/08............ 400,000 377,000
ICN Pharmaceutical, Inc., 8.75% Sr. Nts.,
11/15/08(6)................... 415,000 404,625
Integrated Health Services, Inc.:
9.50% Sr. Sub. Nts.,
9/15/07..........................................
455,000 420,875
10.25% Sr. Sub. Nts.,
4/30/06.........................................
15,000 14,025
Magellan Health Services, Inc., 9% Sr. Sub. Nts.,
2/15/08(6)............ 250,000 208,125
Oxford Health Plans, Inc., 11% Sr. Nts.,
5/15/05(6)..................... 600,000 489,000
Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts.,
7/1/07................. 375,000 279,375
Tenet Healthcare Corp., 8.125% Sr. Sub. Nts.,
12/1/08(6)................ 250,000 255,000
- -----------
2,448,025
- -----------
</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>
Housing -- 0.5%
Engle Homes, Inc., 9.25% Sr. Unsec. Nts., Series C,
2/1/08.............. $400,000 $ 377,000
Nortek, Inc.:
9.125% Sr. Nts., Series B,
9/1/07.....................................
420,000 411,600
9.25% Sr. Nts., Series B,
3/15/07.....................................
600,000 597,000
- -----------
1,385,600
- -----------
Information Technology -- 1.0%
Covad Communications Group, Inc., 0%/13.50% Sr. Disc. Nts.,
3/15/08(10)...........................................................
320,000 107,200
Details, Inc., 10% Sr. Sub. Nts., Series B,
11/15/05.................... 600,000 555,000
Dyncorp, Inc., 9.50% Sr. Sub. Nts.,
3/1/07.............................. 600,000
544,500
Unisys Corp., 11.75% Sr. Nts.,
10/15/04.................................
500,000 564,375
WAM!NET, Inc., 0%/13.25% Sr. Unsec. Disc. Nts., Series B,
3/1/05(10).... 500,000 237,500
Wavetek Corp., 10.125% Sr. Sub. Nts.,
6/15/07........................... 800,000
740,000
- -----------
2,748,575
- -----------
Manufacturing -- 2.0%
Axia, Inc. (New), 10.75% Sr. Sub. Nts.,
7/15/08(6)...................... 150,000 141,750
Burke Industries, Inc., 10% Sr. Sub. Nts.,
8/15/07...................... 700,000 656,250
Eagle-Picher Industries, Inc., 9.375% Sr. Unsec. Sub. Nts.,
3/1/08...... 350,000 313,250
Grove Worldwide LLC, 9.25% Sr. Sub. Nts.,
5/1/08(6)..................... 315,000 269,325
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts.,
8/1/07...... 950,000 871,625
Insilco Corp., 10.25% Sr. Sub. Nts.,
8/15/07............................ 800,000
812,000
International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B,
6/1/05.. 700,000 714,000
Moll Industries, Inc., 10.50% Sr. Sub. Nts.,
7/1/08(6).................. 280,000 263,200
Polymer Group, Inc., 8.75% Sr. Sub. Nts.,
3/1/08........................ 500,000 462,500
Roller Bearing Co. of America, Inc., 9.625% Sr. Sub. Nts.,
Series B,
6/15/07.....................................................
500,000 457,500
Terex Corp., 8.875% Sr. Unsec. Sub. Nts.,
4/1/08........................ 210,000 192,150
Unifrax Investment Corp., 10.50% Sr. Nts.,
11/1/03(3)................... 525,000 518,437
- -----------
5,671,987
- -----------
Media/Entertainment: Broadcasting -- 1.8%
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts.,
7/1/07........ 900,000 895,500
CBS Radio, Inc., 11.375% Unsec. Sub. Debs.,
1/15/09(4).................. 617,000 731,145
Chancellor Media Corp.:
8.75% Sr. Unsec. Sub. Nts., Series B,
6/15/07......................... 700,000 693,000
9% Sr. Sub. Nts.,
10/1/08(3)..........................................
500,000 505,000
10.50% Sr. Sub. Nts., Series B,
1/15/07............................... 735,000
804,825
Jacor Communications Co., 8% Sr. Sub. Nts.,
2/15/10..................... 400,000 414,000
</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>
Media/Entertainment: Broadcasting (Continued)
Radio One, Inc., 7% Sr. Sub. Nts., Series B,
5/15/04(11)................ $ 700,000 $ 647,500
Spanish Broadcasting Systems, Inc., 11% Sr. Nts.,
3/15/04............... 475,000 486,875
- -----------
5,177,845
- -----------
Media/Entertainment: Cable/Wireless Video -- 2.5%
Adelphia Communications Corp.:
8.125% Sr. Nts.,
7/15/03(6)...........................................
250,000 248,750
8.375% Sr. Nts., Series B,
2/1/08.....................................
100,000 100,000
9.25% Sr. Nts.,
10/1/02...............................................
435,000 449,138
9.875% Sr. Nts., Series B,
3/1/07.....................................
565,000 608,788
CSC Holdings, Inc.:
9.875% Sr. Sub. Debs.,
4/1/23.........................................
1,000,000 1,075,000
9.875% Sr. Sub. Nts.,
5/15/06.........................................
1,000,000 1,080,000
EchoStar DBS Corp., 12.50% Sr. Sec. Nts.,
7/1/02........................ 800,000 834,000
EchoStar Satellite Broadcasting Corp., 0%/13.125% Sr. Sec.
Disc. Nts.,
3/15/04(10)...............................................
1,000,000 875,000
Falcon Holding Group LP, 8.375% Sr. Unsec. Debs., Series B,
4/15/10...............................................................
1,000,000 995,000
Helicon Group LP/Helicon Capital Corp., 11% Sr. Sec. Nts.,
Series B,
11/1/03(12).................................................
250,000 266,250
Optel, Inc., 13% Sr. Nts., Series B,
2/15/05............................ 480,000
468,000
United International Holdings, Inc., 0%/10.75% Sr. Disc. Nts.,
Series B,
2/15/08(10).................................................
600,000 285,000
- -----------
7,284,926
- -----------
Media/Entertainment: Diversified Media -- 0.7%
Hollinger International Publishing, Inc., 9.25% Sr. Unsec. Sub.
Nts.,
2/1/06..........................................................
250,000 261,875
Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts.,
8/1/07................. 475,000 429,875
Lamar Advertising Co., 8.625% Sr. Sub. Nts.,
9/15/07.................... 875,000 896,875
SFX Entertainment, Inc., 9.125% Sr. Unsec. Sub. Nts.,
Series B,
2/1/08......................................................
600,000 562,500
- -----------
2,151,125
- -----------
Media/Entertainment: Telecommunications -- 4.2%
Amazon.Com, Inc., 0%/10% Sr. Unsec. Disc. Nts.,
5/1/08(10).............. 1,000,000 550,000
Concentric Network Corp., 12.75% Sr. Unsec. Nts.,
12/15/07.............. 495,000 438,075
e.spire Communications, Inc., 13.75% Sr. Nts.,
7/15/07.................. 205,000 208,075
Exodus Communications, Inc., 11.25% Sr. Nts.,
7/1/08(6)................. 365,000 327,588
FaciliCom International, Inc., 10.50% Sr. Nts., Series B,
1/15/08....... 205,000 162,975
</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>
Media/Entertainment: Telecommunications (Continued)
FirstWorld Communications, Inc., 0%/13% Sr. Disc. Nts.,
4/15/08(3)(10)........................................................
$ 700,000 $ 206,500
Focal Communications Corp., 0%/12.125% Sr. Unsec. Disc. Nts.,
2/15/08(10)...........................................................
590,000 295,000
Global Crossing Holdings Ltd., 9.625% Sr. Nts.,
5/15/08(6).............. 100,000 97,250
Globix Corp., 13% Sr. Unsec. Nts.,
5/1/05(3)............................ 600,000
462,000
ICG Holdings, Inc., 0%/13.50% Sr. Disc. Nts.,
9/15/05(10)............... 405,000 305,775
ICG Services, Inc., 0%/10% Sr. Unsec. Disc. Nts.,
2/15/08(10)........... 800,000 385,000
Intermedia Communications, Inc.:
8.50% Sr. Nts., Series B,
1/15/08.....................................
500,000 475,000
8.60% Sr. Unsec. Nts., Series B,
6/1/08............................... 360,000
342,900
8.875% Sr. Nts.,
11/1/07..............................................
265,000 255,725
ITC Deltacom, Inc.:
8.875% Sr. Nts.,
3/1/08...............................................
500,000 485,000
11% Sr. Nts.,
6/1/07..................................................
250,000 268,125
KMC Telecom Holdings, Inc., 0%/12.50% Sr. Unsec. Disc. Nts.,
2/15/08(10)...........................................................
920,000 427,800
Level 3 Communications, Inc., 9.125% Sr. Unsec. Nts.,
5/1/08............ 600,000 567,000
Long Distance International, Inc., Units (each unit consists of
$1,000 principal amount of 12.25% sr. nts., 4/15/08 and one
warrant to purchase 15.0875 shares of common
stock)(6)(7)............. 400,000 338,000
NEXTLINK Communications, Inc.:
0%/9.45% Sr. Unsec. Disc. Nts.,
4/15/08(10)........................... 750,000
397,500
9% Sr. Nts.,
3/15/08..................................................
250,000 228,750
9.625% Sr. Nts.,
10/1/07..............................................
500,000 465,000
NorthEast Optic Network, Inc., 12.75% Sr. Nts.,
8/15/08................. 500,000 442,500
PSINet, Inc., 10% Sr. Unsec. Nts., Series B,
2/15/05.................... 1,300,000 1,264,250
Qwest Communications International, Inc., 0%/9.47% Sr. Disc. Nts.,
10/15/07(10)..........................................................
350,000 276,500
Time Warner Telecom LLC, 9.75% Sr. Nts.,
7/15/08........................ 900,000 911,250
US Xchange LLC, 15% Sr. Nts.,
7/1/08(6).................................
400,000 377,000
Verio, Inc.:
10.375% Sr. Unsec. Nts.,
4/1/05.......................................
645,000 615,975
13.50% Sr. Unsec. Nts.,
6/15/04.......................................
165,000 179,850
Viatel, Inc.:
0%/12.50% Sr. Unsec. Disc. Nts.,
4/15/08(10).......................... 385,000
190,575
11.25% Sr. Sec. Nts.,
4/15/08.........................................
195,000 172,575
- ------------
12,119,513
- ------------
</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>
Media/Entertainment: Wireless Communications -- 2.2%
Arch Communications, Inc., 12.75% Sr. Nts.,
7/1/07(6)................... $ 100,000 $ 85,500
CellNet Data Systems, Inc., 0%/14% Sr. Disc. Nts.,
10/1/07(10).......... 709,000 216,245
Crown Castle International Corp., 0%/10.625% Sr. Unsec. Disc. Nts.,
11/15/07(10)..........................................................
800,000 468,000
ICO Global Communications (Holdings) Ltd., Units (each unit
consists of $1,000 principal amount of 15% sr. nts., 8/1/05 and
one warrant to buy 19.85 shares of common
stock)(7)................... 400,000 250,000
Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts.,
6/1/06(10)............................................................
205,000 124,025
Nextel Communications, Inc., 0%/9.75% Sr. Disc. Nts.,
10/31/07(10)...... 860,000 481,600
Omnipoint Corp., 11.625% Sr. Nts., Series A,
8/15/06(13)................ 1,250,000 812,500
ORBCOMM Global LP/ORBCOMM Capital Corp., 14% Sr. Nts.,
8/15/04...............................................................
175,000 156,625
Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts.,
1/15/07(10)...... 1,275,000 758,625
Pinnacle Holdings, Inc., 0%/10% Sr. Unsec. Disc. Nts.,
3/15/08(10)...... 800,000 372,000
Price Communications Cellular Holdings, Inc., 11.25% Sr. Nts.,
8/15/08(4)............................................................
200,000 173,000
Price Communications Wireless, Inc.:
9.125% Sr. Sec. Nts.,
12/15/06(6).....................................
250,000 246,250
11.75% Sr. Sub. Nts.,
7/15/07.........................................
100,000 101,500
Rural Cellular Corp., 9.625% Sr. Sub. Nts., Series B,
5/15/08........... 700,000 663,250
SBA Communications Corp., 0%/12% Sr. Unsec. Disc. Nts.,
3/1/08(10)...... 1,000,000 455,000
Spectrasite Holdings, Inc., 0%/12% Sr. Disc. Nts.,
7/15/08(6)(10)....... 600,000 237,000
Sprint Spectrum LP/Sprint Spectrum Finance Corp., 11% Sr. Nts.,
8/15/06...............................................................
500,000 567,500
- ----------
6,168,620
- ----------
Metals/Minerals -- 1.1%
AK Steel Corp., 9.125% Sr. Nts.,
12/15/06............................... 400,000
415,000
Bar Technologies, Inc., 13.50% Sr. Sec. Nts.,
4/1/01.................... 250,000 268,750
Great Lakes Carbon Corp., 10.25% Sr. Sub. Nts.,
5/15/08(6).............. 800,000 772,000
Keystone Consolidated Industries, Inc., 9.625% Sr. Sec. Nts.,
8/1/07.... 900,000 832,500
Metallurg Holdings, Inc., 0%/12.75% Sr. Disc. Nts.,
7/15/08(6)(10)...... 1,200,000 402,000
Metallurg, Inc., 11% Sr. Nts.,
12/1/07..................................
365,000 323,025
- ----------
3,013,275
- ----------
Retail -- 0.9%
Boyds Collection Ltd., 9% Sr. Sub. Nts.,
5/15/08(6)..................... 500,000 477,500
Eye Care Centers of America, Inc., 9.125% Sr. Sub. Nts.,
5/1/08(6)...... 500,000 412,500
Finlay Enterprises, Inc., 9% Debs.,
5/1/08.............................. 500,000
380,000
Finlay Fine Jewelry Corp., 8.375% Sr. Nts.,
5/1/08...................... 300,000 247,500
</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>
Retail (Continued)
Home Interiors & Gifts, Inc., 10.125% Sr. Sub. Nts.,
6/1/08(6).......... $ 400,000 $ 374,000
Pantry, Inc. (The), 10.25% Sr. Sub. Nts.,
10/15/07...................... 775,000 755,625
- ------------
2,647,125
- ------------
Service -- 1.6%
Allied Waste Industries, Inc., 0%/11.30% Sr. Disc. Nts.,
6/1/07(10)..... 500,000 375,000
Borg-Warner Security Corp., 9.625% Sr. Sub. Nts.,
3/15/07............... 700,000 761,250
Coinstar, Inc., 0%/13% Sr. Disc. Nts.,
10/1/06(10)...................... 500,000
356,250
Comforce Operating, Inc., 12% Sr. Nts., Series B,
12/1/07............... 200,000 193,500
Fisher Scientific International, Inc., 9% Sr. Unsec. Sub. Nts.,
2/1/08.. 1,000,000 967,500
Great Lakes Dredge & Dock Corp., 11.25% Sr. Sub. Nts.,
8/15/08(6)....... 445,000 431,650
Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts.,
2/15/09......... 250,000 241,875
Newcor, Inc., 9.875% Sr. Unsec. Sub. Nts., Series B,
3/1/08............. 500,000 422,500
Protection One Alarm Monitoring, Inc., 13.625% Sr. Sub. Disc. Nts.,
6/30/05...............................................................
655,000 749,975
- ------------
4,499,500
- ------------
Transportation -- 2.4%
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., Series B,
7/15/07..... 800,000 726,000
Coach USA, Inc., 9.375% Sr. Sub. Nts., Series B,
7/1/07................. 195,000 195,975
Collins & Aikman Products Co., 11.50% Sr. Unsec. Sub. Nts.,
4/15/06...............................................................
700,000 696,500
HDA Parts System, Inc., 12% Sr. Sub. Nts.,
8/1/05(6).................... 300,000 241,500
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B,
3/15/07............. 775,000 736,250
Millenium Seacarriers, Inc., Units (each unit consists of $1,000
principal amount of 12% first priority ship mtg. nts., 7/15/05 and one
warrant to purchase five shares of common
stock)(6)(7)................ 700,000 591,500
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts.,
6/30/07(6)...................... 1,250,000 1,193,750
Units (each unit consists of $1,000 principal amount of
12% second priority ship mtg. nts., 6/30/07 and
7.66
warrants)(6)(7)................................................
100,000 98,500
Oxford Automotive, Inc., 10.125% Sr. Unsec. Sub. Nts.,
6/15/07.......... 600,000 555,000
Sea Containers Ltd., 7.875% Sr. Nts.,
2/15/08........................... 500,000
472,500
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc.
Nts., Series B,
12/15/03(10)..........................................
1,500,000 1,286,250
- ------------
6,793,725
- ------------
</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>
Utility -- 0.7%
Calpine Corp., 10.50% Sr. Nts., 5/15/06.................................
$ 565,000 $ 613,025
El Paso Electric Co., 9.40% First Mtg. Sec. Nts., Series E,
5/1/11...... 570,000 649,800
ESI Tractebel Acquisition Corp., 7.99% Bonds,
12/30/11(6)............... 500,000 466,903
Niagara Mohawk Power Corp., 7.75% Sr. Unsec. Nts., Series G,
10/1/08...............................................................
250,000 262,667
- -----------
1,992,395
- -----------
93,612,903
- -----------
STRUCTURED INSTRUMENTS -- 3.0%
Bank of America NT & SA (London Branch), Goldman Sachs
Commodity Index Excess Return Linked Nts., 5.50%,
1/5/00.............. 500,000 355,950
Bear Stearns High Yield Composite Index Linked Nts., 9%,
2/5/99......... 3,000,000 2,650,200
Commerzbank International SA, Energy Linked Nts., 5.156%,
7/1/99(12)............................................................
500,000 389,050
Goldman Sachs Group LP, High Yield Index Nts., 8%,
3/4/99............... 3,000,000 2,799,300
Shoshone Partners Loan Trust Sr. Nts., 6.97%, 4/28/02 (representing
a basket of reference loans and a total return swap between Chase Manhattan
Bank and the
Trust)(3)(12)............................ 2,500,000
2,316,889
- -----------
8,511,389
- -----------
Total Corporate Sector (Cost
$110,888,566)
102,138,305
- -----------
INTERNATIONAL SECTOR -- 24.8%
CORPORATE BONDS AND NOTES -- 3.9%
Algoma Steel, Inc., 12.375% First Mtg. Nts.,
7/15/05.................... 215,000 153,725
Bakrie Investindo, Zero Coupon Promissory Nts., 3/16/99(3)(9)IDR........
3,160,000,000 103,268
COLT Telecom Group plc:
0%/12% Sr. Unsec. Disc. Nts.,
12/15/06(10)............................
100,000 78,000
Units (each unit consists of $1,000 principal amount of 0%/12%
sr. disc. nts., 12/15/06 and one warrant to purchase
7.8 ordinary
shares)(7)(10).........................................
900,000 715,500
Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts.,
12/15/05(10)..........................................................
1,600,000 1,208,000
Diamond Holdings plc, 9.125% Sr. Nts.,
2/1/08(3)........................ 200,000
186,500
Imax Corp., 10% Sr. Nts.,
3/1/01........................................
1,000,000 1,035,000
International Utility Structures, Inc., 10.75% Sr. Sub. Nts.,
2/1/08.... 200,000 167,000
Intrawest Corp., 9.75% Sr. Nts.,
8/15/08................................ 250,000
249,375
NTL, Inc.:
0%/12.375% Sr. Nts.,
10/1/08(6)(10)(14)...............................
5,000,000 2,775,250
10% Sr. Nts., Series B,
2/15/07.......................................
550,000 530,750
</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>
CORPORATE BONDS AND NOTES (CONTINUED)
Ocean Rig Norway AS, 10.25% Sr. Sec. Nts., 6/1/08(6)....................
$ 700,000 $ 493,500
Orange plc, 8% Sr. Nts.,
8/1/08.........................................
800,000 784,000
Pacific & Atlantic Holdings, Inc., 11.50% First Preferred Ship
Mtg. Nts.,
5/30/08(6)...................................................
300,000 232,500
PT Polysindo Eka Perkasa:
24% Nts., 6/19/03IDR..................................................
1,314,400,000 20,618
Zero Coupon Promissory Nts., 3/16/99(3)(9)IDR.........................
3,000,000,000 47,059
RSL Communications plc, 9.125% Sr. Unsec. Nts.,
3/1/08.................. 500,000 425,000
Sparkling Spring Water Group Ltd., 11.50% Sr. Sec. Sub. Nts.,
11/15/07(3)...........................................................
565,000 546,637
TeleWest Communications plc:
0%/11% Sr. Disc. Debs.,
10/1/07(10)...................................
500,000 400,000
11.25% Sr. Nts.,
11/1/08(6)...........................................
965,000 1,008,425
- ------------
11,160,107
- ------------
FOREIGN GOVERNMENT OBLIGATIONS -- 20.1%
Argentina -- 1.3%
Argentina (Republic of) Sr. Unsec. Unsub. Bonds, 11%,
10/9/06........... 3,200,000 3,168,000
Banco Hipotecario Nacional (Argentina) Medium-Term Unsec.
Nts., Series 3, 10.625%,
8/7/06.......................................
700,000 640,500
- ------------
3,808,500
- ------------
Australia -- 0.3%
Australia (Government of) Bonds, Series 904, 9%,
9/15/04AUD............. 1,175,000 892,140
- ------------
Brazil -- 0.9%
Brazil (Federal Republic of) Bonds, Series RG, 6.188%,
4/15/12(12)...... 820,000 403,850
Brazil (Federal Republic of) Debt Conversion Bonds, 6.188%,
4/15/12(12)...........................................................
4,215,000 2,075,887
- ------------
2,479,737
- ------------
Bulgaria -- 1.0%
Bulgaria (Republic of) Disc. Bonds, Tranche A, 6.688%,
7/28/24(12)...... 3,891,000 2,733,427
- ------------
Canada -- 0.2%
Canada (Government of) Bonds, 10.25%,
12/1/98CAD........................ 760,000
495,737
- ------------
Denmark -- 0.4%
Denmark (Kingdom of) Bonds:
7%,
12/15/04DKK.......................................................
3,470,000 626,565
8%,
5/15/03DKK........................................................
2,855,000 522,826
- ------------
1,149,391
- ------------
</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>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
Ecuador -- 0.4%
Ecuador (Republic of) Debs., 6.625%, 2/27/15(12)........................
$ 1,154,293 $ 500,675
Ecuador (Republic of) Past Due Interest Bonds, 6.625%,
2/27/15(12)...... 1,556,032 674,929
- ------------
1,175,604
- ------------
France -- 0.6%
France (Government of) Bonds, Obligations Assimilables
du Tresor, 5.50%,
4/25/29(FRF)........................................
9,080,000 1,704,734
- ------------
Germany -- 5.2%
Germany (Republic of) Bonds, 6.25%,
4/26/06DEM.......................... 705,000
484,210
Germany (Republic of) Treasury Bills, Zero Coupon, 7.87%,
1/15/99(8)(DEM).......................................................
24,000,000 14,397,302
- ------------
14,881,512
- ------------
Great Britain -- 1.3%
United Kingdom Treasury Bonds, 6.75%,
11/26/04GBP....................... 880,000
1,607,848
United Kingdom Treasury Nts., 8%,
6/10/03(GBP).......................... 1,190,000
2,231,246
- ------------
3,839,094
- ------------
Italy -- 0.8%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali,
8.50%, 1/1/04(ITL)....................................................
2,925,000,000 2,151,839
- ------------
Ivory Coast -- 0.7%
Ivory Coast (Government of) Past Due Interest Bonds, 2%,
3/29/18(6)(12)........................................................
7,011,250 2,120,903
- ------------
Jordan -- 0.6%
Hashemite (Kingdom of Jordan) Bonds, Series DEF, 5%,
12/23/23(11)..........................................................
3,125,000 1,664,062
- ------------
Korea, Republic of (South) -- 0.7%
Korea (Republic of) Bonds, 8.875%,
4/15/08.............................. 2,100,000
1,913,518
- ------------
Mexico -- 1.1%
United Mexican States Bonds, 11.50%,
5/15/26............................ 3,015,000
3,112,988
- ------------
Nigeria -- 0.6%
Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%,
11/15/20.......... 1,750,000 1,100,313
Nigeria (Federal Republic of) Promissory Nts., Series RC,
5.092%,
1/5/10........................................................
1,256,782 673,427
- ------------
1,773,740
- ------------
</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>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
Norway -- 0.1%
Norway (Government of) Bonds, 9.50%,
10/31/02(NOK)...................... 2,655,000 $
414,099
- ------------
Panama -- 0.5%
Panama (Government of) Bonds, 8.875%,
9/30/27........................... 545,000
492,544
Panama (Government of) Past Due Interest Debs., 6.688%,
7/17/16(12)...........................................................
1,318,325 985,448
- ------------
1,477,992
- ------------
Peru -- 1.0%
Peru (Republic of) Front-Loaded Interest Reduction Bonds,
3.25%,
3/7/17(11).....................................................
5,580,000 2,845,800
- ------------
Philippines -- 0.2%
Philippines (Republic of) Bonds, 8.75%,
10/7/16......................... 710,000 602,613
- ------------
Poland -- 0.6%
Poland (Republic of) Par Bonds, 3%,
10/27/24(11)........................ 2,725,000
1,804,461
- ------------
Russia -- 0.2%
Russia (Government of) Debs.:
6.719%,
12/15/15(12)..................................................
1,258,480 128,994
Series 19 yr., 6.625%,
12/15/15(12)...................................
1,623,039 166,362
Russia (Government of) Principal Loan Debs., Series 24 yr.,
6.625%,
12/15/20(12)..................................................
2,100,000 166,031
- ------------
461,387
- ------------
Spain -- 1.0%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado:
6%,
1/31/29ESP........................................................
273,900,000 2,079,204
10%,
2/28/05ESP.......................................................
73,410,000 686,367
- ------------
2,765,571
- ------------
Venezuela -- 0.4%
Venezuela (Republic of) Front-Loaded Interest Reduction Bonds,
Series A, 6.125%,
3/31/07(12).........................................
1,821,425 1,057,565
- ------------
57,326,414
- ------------
LOAN PARTICIPATIONS -- 0.7%
Algeria (Republic of) Reprofiled Debt Loan Participation Nts.:
Tranche 1, 6.375%,
9/4/06(12).........................................
1,065,272 508,668
Tranche A, 7.188%,
3/4/00(12).........................................
532,636 450,078
</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>
LOAN PARTICIPATIONS (CONTINUED)
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 6.563%,
1/1/09(3)(12)...................................... $
187,000 $ 140,717
Tranche B, 6.563%,
1/1/04(3)(12)......................................
647,058 524,117
Trinidad & Tobago Loan Participation Agreement, Tranche B,
1.497%,
9/30/00(3)(12)JPY.............................................
59,999,999 424,796
- ------------
2,048,376
- ------------
MORTGAGE-BACKED OBLIGATIONS -- 0.1%
Nykredit AS, 8% Cv. Bonds,
10/1/26DKK...................................
2,778,000 453,722
- ------------
Units
- --------------
RIGHTS, WARRANTS AND CERTIFICATES -- 0.0%
Australis Holdings PTY Ltd./Australia Media Ltd. Wts., Exp.
5/00(3)..... 80 --
Microcell Telecommunications, Inc. Wts., Exp.
6/06(3)................... 2,800 50,750
- ------------
50,750
- ------------
Total International Sector (Cost
$78,976,545)
71,039,369
- ------------
MORTGAGE-BACKED SECTOR -- 10.2%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:..
Face Amount(1)
- --------------
Series 1996-D3, Cl. A5, 8.33%,
10/13/26(3)(12)........................ $ 500,000
507,656
Series 1996-MD6, Cl. A5, 6.955%,
11/13/26(12)......................... 800,000
817,125
BKB Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 1997-C1, Cl. C, 7.45%,
10/25/00(3).............................
250,000 249,844
Capital Lease Funding Securitization LP, Interest-Only Stripped
Mtg.-Backed Security, Series 1997-CTL1, 0.549%,
6/22/24(3)(15)........ 10,938,078 450,649
Commercial Mortgage Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 0.98%,
12/25/20(3)(15).......................................................
12,416,600 256,092
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates, Series 1997-C1, Cl. E, 7.50%,
3/1/11(3)................. 710,000 708,891
Federal Home Loan Mortgage Corp.:
Certificates of Participation, 12%,
5/1/10-6/1/15..................... 1,395,518
1,594,303
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, Series 1343, Cl. LA, 8%,
8/15/22........ 1,000,000 1,095,940
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 2054, Cl. TE, 6.25%,
4/15/24................... 534,000 542,678
Interest-Only Stripped Mtg.-Backed Security, Series 197,
Cl. IO, 15.225%,
4/1/28(15).........................................
4,934,053 1,147,938
Interest-Only Stripped Mtg.-Backed Security, Series 199,
Cl. IO, 6.50%,
8/1/28(15)...........................................
5,656,280 1,236,428
</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>
MORTGAGE-BACKED SECTOR (CONTINUED)
Federal National Mortgage Assn.:
7.50%,
6/1/10.........................................................
$1,095,379 $1,124,933
11%,
7/1/16...........................................................
614,453 703,549
Federal National Mortgage Assn., Gtd. Mtg. Pass-Through
Certificates, 13%,
6/1/15.............................................
792,198 927,610
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1992-162, Cl. C, 7%,
10/25/21................................. 5,400,000
5,656,500
Trust 1995-4, Cl. PC, 8%,
5/25/25...................................
664,690 723,262
Trust 1997-25, Cl. B, 7%,
12/18/22..................................
340,000 349,561
Federal National Mortgage Assn., Principal-Only Stripped
Mtg.-Backed Security:
Trust 277, Cl. 1, 20.156%,
4/1/27(16)...............................
174,943 156,465
Trust 294, Cl. 1, 5.536%,
2/1/28(16)................................
1,428,879 1,231,069
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1, 8.131%,
7/25/06(3)(12)................ 800,000 805,750
First Union-Lehman Brothers Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed Security, Series 1997-C1,
1.31%,
4/18/27(15)....................................................
4,688,333 311,060
General Motors Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1997-C1, Cl. X, 2.08%,
7/15/27(15)....... 3,489,616 314,066
Government National Mortgage Assn.:
6%,
7/20/27...........................................................
632,303 640,403
7%,
1/15/28-3/15/28...................................................
973,446 996,713
11%,
10/20/19.........................................................
403,778 459,550
12%,
11/20/13-9/20/15.................................................
451,661 505,105
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D, 7.42%,
4/25/28................... 800,000 843,922
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D-1, 7.436%,
2/15/28(3)(12)......... 1,000,000 1,061,250
NationsCommercial Corp., NB Commercial Mtg. Pass-Through
Certificates, Series-DMC:
Cl. B, 8.562%,
8/12/11(3)...........................................
400,000 411,625
Cl. C, 8.921%,
8/12/11(3)...........................................
400,000 410,438
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through
Certificates, Series 1, Cl. D, 7.683%,
12/21/26(3).................... 500,000 508,906
</TABLE>
18
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
- --------------- ------------
<S>
<C> <C>
MORTGAGE-BACKED SECTOR (CONTINUED)
Salomon Brothers Mortgage Securities VII, Series 1996-B,
Cl. 1, 7.132%,
4/25/26(3)............................................. $
1,311,201 $ 963,733
Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%,
3/25/22(3)...... 250,000 256,563
Structured Asset Securities Corp.:
Commercial Mtg. Pass-Through Certificates, Series 1997-LLI,
Cl. E, 7.30%,
4/12/12.................................................
500,000 489,844
Multiclass Pass-Through Certificates, Series 1996-C3,
Cl. D, 8%,
6/25/30(3).................................................
650,000 659,953
- -------------
Total Mortgage-Backed Sector (Cost
$28,132,410)
29,119,374
- -------------
MONEY MARKET SECTOR -- 7.4%
Repurchase agreement with PaineWebber, Inc., 5.35%, dated 10/30/98, to be
repurchased at $21,259,474 on 11/2/98, collateralized by U.S. Treasury Nts.,
5.625%-6.625%, 5/31/99-2/15/03, with a value of $21,728,009 (Cost
$21,250,000)........................................
21,250,000 21,250,000
- -------------
TOTAL INVESTMENTS, AT VALUE (COST
$304,074,746)......................... 100.7%
287,959,167
LIABILITIES IN EXCESS OF OTHER
ASSETS................................... (0.7)
(2,052,230)
- ----- -------------
NET
ASSETS..............................................................
100.0% $285,906,937
===== =============
</TABLE>
19
<PAGE>
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:
<TABLE>
<S> <C>
AUD - Australian Dollar GBP - British Pound Sterling
CAD - Canadian Dollar IDR - Indonesian Rupiah
DEM - German Mark ITL - Italian Lira
DKK - Danish Krone JPY - Japanese Yen
ESP - Spanish Peseta NOK - Norwegian Krone
FRF - French Franc
</TABLE>
2. Securities with an aggregate market value of $10,775,010 are held in
collateralized accounts to cover initial margin requirements on open
futures
sales contracts. See Note 6 of Notes to Financial Statements.
3. Identifies issues considered to be illiquid or restricted -- See Note 8 of
Notes to Financial Statements.
4. Interest or dividend is paid-in-kind.
5. Non-income producing security.
6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These
securities
have been determined to be liquid under guidelines established by the
Board
of Trustees. These securities amount to $21,084,013 or 7.37% of the
Trust's
net assets as of October 31, 1998.
7. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents underlying
principal of the notes.
8. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
9. Non-income producing -- issuer is in default.
10. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
11. Represents the current interest rate for an increasing rate security.
12. Represents the current interest rate for a variable rate security.
13. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to
Financial Statements.
14. When-issued security to be delivered and settled after October 31, 1998.
15. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities
typically
decline in price as interest rates decline. Most other fixed income
securities increase in price when interest rates decline. The principal
amount of the underlying pool represents the notional amount on which
current interest is calculated. The price of these securities is typically
more sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs). Interest
rates
disclosed represent current yields based upon the current cost basis and
estimated timing and amount of future cash flows.
16. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these
securities generally increases as interest rates decline and prepayment
rates rise. The price of these securities is typically more volatile than
that of coupon-bearing bonds of the same maturity. Interest rates
disclosed
represent current yields based upon the current cost basis and estimated
timing of future cash flows.
See accompanying Notes to Financial Statements.
20
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1998 Oppenheimer Multi-Sector
Income Trust
<TABLE>
<CAPTION>
<S>
<C>
ASSETS
Investments, at value (cost $304,074,746)--see accompanying
statement........................................... $287,959,167
Cash............................................................................................................
20,506
Receivables and other assets:
Interest......................................................................................................
5,679,681
Investments
sold..............................................................................................
4,833,962
Closed forward foreign currency exchange
contracts............................................................
96,781
Other.........................................................................................................
16,905
- -------------
Total
assets................................................................................................
298,607,002
- -------------
LIABILITIES
Unrealized depreciation on forward foreign currency exchange contracts --
Note 5................................ 130,021
Payables and other liabilities:
Investments purchased (including $2,775,250 purchased on a when-issued
basis) -- Note
1............................................................................................
11,565,530
Closed forward foreign currency exchange
contracts............................................................
534,294
Trustees' fees -- Note
1......................................................................................
172,482
Management and administrative
fees............................................................................
118,020
Daily variation on futures contracts -- Note
6................................................................
89,127
Shareholder
reports...........................................................................................
55,629
Custodian
fees................................................................................................
6,782
Transfer agent and accounting services
fees...................................................................
2,215
Other.........................................................................................................
25,965
- -------------
Total
liabilities...........................................................................................
12,700,065
- -------------
NET
ASSETS......................................................................................................
$285,906,937
=============
COMPOSITION OF NET ASSETS
Par value of shares of beneficial
interest......................................................................
$ 291,161
Additional paid-in
capital......................................................................................
312,140,847
Undistributed net investment
income.............................................................................
169,342
Accumulated net realized loss on investments and foreign currency
transactions.................................. (10,400,329)
Net unrealized depreciation on investments and translation of assets and
liabilities
denominated in foreign
currencies.............................................................................
(16,294,084)
- -------------
NET ASSETS -- applicable to 29,116,068 shares of beneficial interest
outstanding................................ $285,906,937
=============
NET ASSET VALUE PER
SHARE.......................................................................................
$9.82
=====
</TABLE>
See accompanying Notes to Financial Statements.
21
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1998
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
<S>
<C>
INVESTMENT INCOME
Interest (net of foreign withholding taxes of
$411)............................................................. $
25,603,479
Dividends.......................................................................................................
494,062
- ------------
Total
income..................................................................................................
26,097,541
- ------------
EXPENSES
Management fees -- Note
4.......................................................................................
1,980,152
Administrative fees -- Note
4...................................................................................
604,427
Shareholder
reports.............................................................................................
192,299
Trustees' fees and expenses -- Note
1...........................................................................
79,370
Transfer and shareholder servicing agent fees -- Note
4......................................................... 54,062
Legal, auditing and other professional
fees.....................................................................
39,202
Custodian fees and
expenses.....................................................................................
36,101
Registration and filing
fees....................................................................................
30,258
Accounting service fees -- Note
4...............................................................................
24,000
Insurance
expenses..............................................................................................
11,460
Other...........................................................................................................
16,816
- ------------
Total
expenses................................................................................................
3,068,147
- ------------
NET INVESTMENT
INCOME...........................................................................................
23,029,394
- ------------
REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on:
Investments (including premiums on options
exercised).........................................................
(1,967,924)
Closing of futures
contracts..................................................................................
(530,310)
Closing and expiration of option contracts written -- Note
7.................................................. 119,030
Foreign currency
transactions.................................................................................
425,153
- ------------
Net realized
loss...........................................................................................
(1,954,051)
- ------------
Net change in unrealized appreciation or depreciation on:
Investments...................................................................................................
(19,491,964)
Translation of assets and liabilities denominated in foreign
currencies....................................... (539,630)
- ------------
Net
change..................................................................................................
(20,031,594)
- ------------
Net realized and unrealized
loss................................................................................
(21,985,645)
- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................................ $
1,043,749
============
</TABLE>
See accompanying Notes to Financial Statements.
22
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997
- ------------ ------------
<S>
<C> <C>
OPERATIONS
Net investment
income........................................................... $
23,029,394 $ 26,006,984
Net realized gain
(loss)........................................................
(1,954,051) 6,185,833
Net change in unrealized appreciation or
depreciation........................... (20,031,594)
(3,663,440)
- ------------ ------------
Net increase in net assets resulting from
operations.......................... 1,043,749
28,529,377
- ------------ ------------
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment
income............................................
(22,561,595) (25,738,551)
Tax return of capital
..........................................................
(1,547,363) --
- ------------ ------------
NET ASSETS
Total increase
(decrease).......................................................
(23,065,209) 2,790,826
Beginning of
period.............................................................
308,972,146 306,181,320
- ------------ ------------
End of period [including undistributed (overdistributed) net investment
income of $169,342 and ($249,479),
respectively].............................. $285,906,937
$308,972,146
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
23
<PAGE>
FINANCIAL HIGHLIGHTS
Oppenheimer Multi-Sector Income Trust
<TABLE>
<CAPTION>
Year Ended October 31,
- -------------------------------------------------------------------------
1998
1997 1996 1995 1994
--------
- ------- ------- ------- -------
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period................. $10.61
$10.52 $10.14 $10.17 $10.96
------
- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income .............................
.79 .89 .91 .94 1.00
Net realized and unrealized gain (loss)............
(.75) .08 .37 (.04) (.82)
------
- ------ ------ ------ ------
Total income from investment operations..........
.04 .97 1.28 .90 .18
------
- ------ ------ ------ ------
Dividends to shareholders:
Dividends from net investment income............... (.78)
(.88) (.90) (.91) (.84)
Tax return of capital..............................
(.05) -- -- (.02) (.13)
------
- ------ ------ ------ ------
Total dividends to shareholders.................. (.83)
(.88) (.90) (.93) (.97)
------
- ------ ------ ------ ------
Net asset value, end of period....................... $9.82
$10.61 $10.52 $10.14 $10.17
======
====== ====== ====== ======
Market value, end of period.......................... $9.38
$10.13 $ 9.88 $10.00 $ 9.50
======
====== ====== ====== ======
TOTAL RETURN, AT MARKET VALUE(1)..................... 0.17%
11.40% 7.85% 15.62% (7.46)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............. $285,907
$308,972 $306,181 $295,128 $295,658
Average net assets (in thousands).................... $304,773
$308,712 $298,496 $288,884 $306,686
Ratios to average net assets:
Net investment income.............................. 7.56%
8.42% 8.87% 9.51% 9.17%
Expenses........................................... 1.01%
0.99% 1.04% 1.05% 1.02%
Portfolio turnover rate(2)........................... 401.5%
258.9% 225.4% 240.1% 187.6%
</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, 1998 were $1,174,378,376 and $1,196,177,680, respectively.
Prior
to the period ended October 31, 1996, purchases and sales of investment
securities included mortgage dollar-rolls.
See accompanying Notes to Financial Statements.
24
<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. The Trust's
investment advisor is OppenheimerFunds, Inc. (the Manager). The following
is
a summary of significant accounting policies consistently followed by the
Trust.
Investment Valuation -- Portfolio securities are valued at the close of
the
New York Stock Exchange on the last day of each week in which the New York
Stock Exchange is open. Listed and unlisted securities for which such
information is regularly reported are valued at the last sale price of the
day or, in the absence of sales, at values based on the closing bid or the
last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing
service
approved by the Board of Trustees. Such securities which cannot be valued
by
the approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering the
quotes is reliable and that the quotes reflect current market value, or
are
valued under consistently applied procedures established by the Board of
Trustees to determine fair value in good faith. Short-term "money market
type" debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization
to maturity of any premium or discount. Forward foreign currency exchange
contracts are valued based on the closing prices of the forward currency
contract rates in the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. Options are valued based upon the
last sale price on the principal exchange on which the option is traded
or,
in the absence of any transactions that day, the value is based upon the
last sale price on the prior trading date if it is within the spread
between
the closing bid and asked prices. If the last sale price is outside the
spread, the closing bid is used.
Structured Notes -- The Trust invests in foreign currency-linked
structured
notes whereby the market value and redemption price are linked to foreign
currency exchange rates. The structured notes may be leveraged, which
increases the notes' volatility relative to the face of the security.
Fluctuations in values of the securities are recorded as unrealized gains
and losses in the accompanying financial statements. During the year ended
October 31, 1998, the market value of these securities comprised an
average
of 7% of the Trust's net assets, and resulted in realized and unrealized
losses of $5,521,850.
Securities Purchased on a When-Issued Basis -- Delivery and payment for
securities that have been purchased by the Trust on a forward commitment
or
when-issued basis can take place a month or more after the transaction
date.
During this period, such securities do not earn interest, are subject to
market fluctuation and may increase or decrease in value prior to their
delivery. The Trust maintains, in a segregated account with its custodian,
assets with a market value equal to the amount of its purchase
commitments.
The purchase of securities on a when-issued or forward commitment basis
may
increase the volatility of the Trust's net asset value to the extent the
Trust makes such purchases while remaining substantially fully invested.
As
of October 31, 1998, the Trust had entered into outstanding when-issued or
forward commitments of $2,775,250.
25
<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. As
of
October 31, 1998, securities with an aggregate market value of $236,227,
representing 0.08% of the Trust's net assets, were in default.
Foreign Currency Translation -- The accounting records of the Trust are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of foreign securities
and
investment income are translated at the rates of exchange prevailing on
the
respective dates of such transactions.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency
gains
and losses in the Trust's Statement of Operations.
Repurchase Agreements -- The Trust requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian's vault, all securities
held as collateral for repurchase agreements. The market value of the
underlying securities is required to be at least 102% of the resale price
at
the time of purchase. If the seller of the agreement defaults and the
value
of the collateral declines, or if the seller enters an insolvency
proceeding, realization of the value of the collateral by the Trust may be
delayed or limited.
Federal Taxes -- The Trust intends to continue to comply with provisions
of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income, including any net realized gain
on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. As of October 31,
1998,
the Trust had available for federal income tax purposes an unused capital
loss carryover of approximately $9,493,000, which expires between 2003 to
2006.
Trustees' Fees and Expenses -- The Trust has adopted a nonfunded
retirement
plan for the Trust's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the year ended October 31, 1998, a provision of $33,369 was made for the
Trust's projected benefit obligations and payments of $7,543 were made to
retired trustees, resulting in an accumulated liability of $168,599 as of
October 31, 1998.
The Board of Trustees has adopted a deferred compensation plan for
independent Trustees that enables a Trustee to elect to defer receipt of
all
or a portion of annual fees they are entitled to receive from the Trust.
Under the plan, the compensation deferred by a Trustee is periodi-
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
cally adjusted as though an equivalent amount had been invested in shares
of
one or more Oppenheimer funds selected by the Trustee. The amount paid to
the Trustee under the plan will be determined based upon the performance
of
the selected funds. Deferral of Trustees' fees under the plan will not
materially affect the Trust's assets, liabilities or net income per share.
Distributions to Shareholders -- The Trust intends to declare and pay
dividends from net investment income monthly. Distributions from net
realized gains on investments, if any, will be made at least once each
year.
Classification of Distributions to Shareholders -- Net investment income
(loss) and net realized gain (loss) may differ for financial statement and
tax purposes primarily because of paydown gains and losses and the
recognition of certain foreign currency gains (losses) as ordinary income
(loss) for tax purposes. The character of the distributions made during
the
year from net investment income or net realized gains may differ from its
ultimate characterization for federal income tax purposes. Also, due to
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or
realized
gain was recorded by the Trust.
The Trust adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended October 31, 1998, amounts have been
reclassified to reflect a decrease in additional paid-in capital of
$1,547,363, a decrease in overdistributed net investment income of
$1,498,385, and a decrease in accumulated net realized loss on investments
of $48,978.
Other -- Investment transactions are accounted for on the date the
investments are purchased or sold (trade date) and dividend income is
recorded on the ex-dividend date. Discount on securities purchased is
amortized over the life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses on investments
and unrealized appreciation and depreciation are determined on an
identified
cost basis, which is the same basis used for federal income tax purposes.
Dividends-in-kind are recognized as income on the ex-dividend date, at the
current market value of the underlying security. Interest on
payment-in-kind
debt instruments is accrued as income at the coupon rate and a market
adjustment is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial
statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of $.01 par value shares of
beneficial interest. There were no transactions in shares of beneficial
interest for the years ended October 31, 1998 and 1997.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
As of October 31, 1998, net unrealized depreciation on investments of
$16,115,579 was composed of gross appreciation of $4,250,501, and gross
depreciation of $20,366,080.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
4. MANAGEMENT AND ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust which provides for an annual fee of
0.65%
on the Trust's average annual net assets.
Mitchell Hutchins Asset Management Inc. serves as the Trust's
Administrator.
The Trust pays the Administrator an annual fee of 0.20% of the Trust's
average annual net assets.
The Manager acts as the accounting agent for the Trust at an annual fee of
$24,000, plus out-of-pocket costs and expenses reasonably incurred.
Shareholder Financial Services, Inc. (SFSI), a wholly-owned subsidiary of
the Manager, is the transfer agent and registrar for the Trust. Fees paid
to
SFSI are based on the number of accounts and the number of shareholder
transactions, plus out-of-pocket costs and expenses.
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a
commitment to purchase or sell a foreign currency at a future date, at a
negotiated rate.
The Trust uses forward contracts to seek to manage foreign currency risks.
They may also be used to tactically shift portfolio currency risk. The
Trust
generally enters into forward contracts as a hedge upon the purchase or
sale
of a security denominated in a foreign currency. In addition, the Trust
may
enter into such contracts as a hedge against changes in foreign currency
exchange rates on portfolio positions.
Forward contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily
basis as provided by a reliable bank or dealer. The Trust will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on
outstanding
forward contracts are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation on forward contracts
is
reported in the Statement of Assets and Liabilities. Realized gains and
losses are reported with all other foreign currency gains and losses in
the
Trust's Statement of Operations.
Risks include the potential inability of the counterparty to meet the
terms
of the contract and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
As of October 31, 1998, the Trust had outstanding forward contracts as
follows:
<TABLE>
<CAPTION>
Valuation
Contract As of
Expiration Amount October 31, Unrealized
Contract Description
Date (000s) 1998 Depreciation
- --------------------------------------------------------------------------------------------------------------------------------
Contracts to Sell
-----------------
<S>
<C> <C> <C> <C>
Canadian Dollar.............................................
12/16/98 760 CAD $492,742 $ 3,461
Japanese Yen................................................
12/16/98 47,750 JPY 412,485 44,866
New Zealand Dollar..........................................
12/16/98 1,670 NZD 885,457 63,149
Norwegian Krone.............................................
12/16/98 2,970 NOK 405,105 7,755
Swedish Krona...............................................
12/16/98 3,370 SEK 432,130 10,790
- --------
$130,021
========
</TABLE>
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
6. FUTURES CONTRACTS
The Trust may buy and sell interest rate futures contracts in order to
gain
exposure to or protect against changes in interest rates. The Trust may
also
buy or write put or call options on these futures contracts.
The Trust generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed
rate
portfolio securities. The Trust may also purchase futures contracts to
gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Trust is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are
made or received by the Trust each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Trust recognizes a realized gain or loss
when the contract is closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the
value of the contract or option may not correlate with changes in the
value
of the underlying securities.
As of October 31, 1998, the Trust had outstanding futures contracts as
follows:
<TABLE>
<CAPTION>
Valuation
As of
Expiration Number of October 31, Unrealized
Contract Description
Date Contracts 1998 Depreciation
- --------------------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
---------------------
<S>
<C> <C> <C> <C>
U.S. Treasury Bonds, 20 yr. ......................................
12/98 101 $13,019,531 $44,469
=======
</TABLE>
7. OPTION ACTIVITY
The Trust may buy and sell put and call options, or write put and covered
call options on portfolio securities in order to produce incremental
earnings or protect against changes in the value of portfolio securities.
The Trust generally purchases put options or writes covered call options
to
hedge against adverse movements in the value of portfolio holdings. When
an
option is written, the Trust receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise
of
the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Trust will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sales for a written call option, the purchase
cost for a written put option, or the cost of the security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
7. OPTION ACTIVITY (CONTINUED)
call, expiration date, exercise price, premium received and market value
are
detailed in a footnote to the Statement of Investments. Options written
are
reported as a liability in the Statement of Assets and Liabilities. Gains
and losses are reported in the Statement of Operations.
The risk in writing a call option is that the Trust gives up the
opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Trust may incur a
loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Trust pays a premium
whether or not the option is exercised. The Trust also has the additional
risk of not being able to enter into a closing transaction if a liquid
secondary market does not exist.
Written option activity for the year ended October 31, 1998 was as follows:
<TABLE>
<CAPTION>
Call Options
- ------------------------------------------------------
Number of Options Amount of Premiums
- ------------------ ------------------
<S>
<C> <C>
Options outstanding as of October 31,
1997.......................... 720
$ 82,320
Options written
....................................................
2,285 225,866
Options closed or
expired...........................................
(1,995) (279,136)
Options
exercised...................................................
(1,010) (29,050)
- ------ ---------
Options outstanding as of October 31, 1998
......................... -- $
- --
====== =========
<CAPTION>
Put Options
- -----------------------------------------------------
Number of Options Amount of Premiums
- ----------------- ------------------
<S>
<C> <C>
Options outstanding as of October 31, 1997
......................... 705 $
63,450
Options written
....................................................
22,352,800 559,073
Options closed or
expired...........................................
(1,143,505) (620,867)
Options
exercised...................................................
(21,210,000) (1,656)
- ----------- ---------
Options outstanding as of October 31, 1998
......................... -- $
- --
=========== =========
</TABLE>
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Sector Income Trust
8. ILLIQUID AND RESTRICTED SECURITIES
As of October 31, 1998, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in
private
placement transactions, are not registered under the Securities Act of
1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may
be considered illiquid if it lacks a readily available market or if its
valuation has not changed for a certain period of time. The Trust intends
to
invest no more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid or restricted securities.
Certain restricted securities, eligible for resale to qualified
institutional investors, are not subject to that limit. The aggregate
value
of illiquid or restricted securities subject to this limitation as of
October 31, 1998 was $17,825,807, which represents 6.23% of the Trust's
net
assets, of which $828,850 is considered restricted. Information concerning
restricted securities is as follows:
<TABLE>
<CAPTION>
Valuation Per
Acquisition Cost Unit as of
Security
Date Per Unit October 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S>
<C> <C> <C>
Bonds
-----
Capitol Queen & Casino, Inc., 12% First Mtg. Nts., Series A,
11/15/00........... 11/18/93 87.50% 6.50%
Stocks and Warrants
-------------------
Becker Gaming, Inc. Wts., Exp.
11/00............................................ 11/18/93 $
2.00 $ .25
CGA Group Ltd., Preferred, Series
A............................................. 6/17/97
25.00 25.00
CGA Group Ltd. Wts. Exp.
12/49..................................................
6/17/97 -- .30
</TABLE>
31
<PAGE>
Consent of Independent Auditors
The Board of Trustees
Oppenheimer Multi-Sector Income Trust
We consent to the use of our report dated November 20, 1998 included herein.
/s/ KPMG LLP
- -------------------------
KPMG LLP
Denver, Colorado
February 23, 1998
BY-LAWS
OF
OPPENHEIMER MULTI-SECTOR INCOME TRUST
Amended and Restated as of June 4, 1998
ARTICLE I
Definitions
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
Transfer Agent", "Trust", "Trust Property", and "Trustees" have the respective
meanings given them in the Declaration of Trust of OPPENHEIMER MULTI-SECTOR
INCOME TRUST dated February 22, 1988, as amended from time to time.
ARTICLE II
Offices
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts
shall be in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and without
the Commonwealth as the Trustees may from time to time designate or the business
of the Trust may require.
ARTICLE III
Shareholders' Meetings
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Annual Meetings. An annual meeting of Shareholders, at which
the Shareholders shall elect Trustees and transact such other business as may
properly come before the meeting, shall be held each year on such date and at
such time as shall be fixed by the Board of Trustees.
SECTION 3.3. Special Meetings. Special meetings of Shareholders of the
Trust shall be held whenever called by the Board of Trustees or the President of
the Trust. Special meetings of Shareholders shall also be called by the
Secretary upon the written request of the holders of Shares entitled to vote not
less than twenty-five percent (25%) of all the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of such meeting and
the matters proposed to be acted on thereat. The Secretary shall inform such
Shareholders of the reasonable estimated cost of preparing and mailing such
notice of the meeting, and, upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No special meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any special meeting of
Shareholders held during the preceding twelve months.
SECTION 3.4. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Trust.
SECTION 3.5. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum for the transaction of business. In the
absence of a quorum, the Shareholders present or represented by proxy and
entitled to vote thereat shall have power to adjourn the meeting from time to
time. Any adjourned meeting may be held as adjourned without further notice. At
any adjourned meeting at which a quorum shall be present, any business may be
transacted as if the meeting had been held as originally called.
SECTION 3.6. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Trust on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting. No proxy shall be valid after eleven months from its date, unless
otherwise provided in the proxy. At all meetings of Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of one or more
Trustees or Officers of the Trust.
SECTION 3.7. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.8. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. On request of
the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors
of Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts found by
them.
SECTION 3.9. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as are
granted to Shareholders under the Corporations and Associations Law of the State
of Massachusetts.
SECTION 3.10. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
ARTICLE IV
Trustees
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall be
called by the President or the Secretary upon the written request of any two (2)
Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Trust. Subject to
the provisions of the 1940 Act, notice or waiver of notice need not specify the
purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Except as may otherwise be required by
law, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the Trustees present shall be the act of the
Trustees, unless the concurrence of a greater proportion is expressly required
for such action by law, the Declaration or these By-Laws. If at any meeting of
the Trustees there be less than a quorum present, the Trustees present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all of the Trustees entitled to vote
upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and each
Trustee who is not an officer or employee of the Trust or of its investment
manager or underwriter or of any corporate affiliate of any of said persons
shall receive for services rendered as a Trustee of the Trust such compensation
as may be fixed by the Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other papers
shall be executed in the name and on behalf of the Trust and all checks, notes,
drafts and other obligations for the payment of money by the Trust shall be
signed, and all transfer of securities standing in the name of the Trust shall
be executed, by the President, any Vice President or the Treasurer or by any one
or more officers or agents of the Trust as shall be designated for that purpose
by vote of the Trustees.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents.
(a) As used in this Declaration of Trust the following
terms shall have the meanings set forth below:
(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present or former Trustee,
partner, Director or officer of another trust, partnership, corporation or
association whose securities are or were owned by the Trust or of which
the Trust is or was a creditor and who served or serves in such capacity
at the request of the Trust, and the heirs, executors, administrators,
successors and assigns of any of the foregoing; however, whenever conduct
by an indemnitee is referred to, the conduct shall be that of the original
indemnitee rather than that of the heir, executor, administrator,
successor or assignee;
(ii) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which an indemnitee
is or was a party or is threatened to be made a party by reason of the
fact or facts under which he or it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses
(including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by an indemnitee in connection
with a covered proceeding; and
(v) the term "adjudication of liability" shall mean, as to
any covered proceeding and as to any indemnitee, an adverse determination
as to the indemnitee whether by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent.
(b) The Trust shall not indemnify any indemnitee for any
covered expenses in any covered proceeding if there has been an
adjudication of liability against such indemnitee expressly based on a
finding of a disabling conduct.
(c) Except as set forth in paragraph (b) above, the Trust
shall indemnify any indemnitee for covered expenses in any covered
proceeding, whether or not there is an adjudication of liability as to
such indemnitee, such indemnification by the Trust to be to the fullest
extent now or hereafter permitted by any applicable law unless the By-Laws
limit or restrict the indemnification to which any indemnitee may be
entitled. The Board of Trustees may adopt By-Law provisions to implement
paragraphs (a), (b) and (c) hereof.
(d) Nothing herein shall be deemed to affect the right of
the Trust and/or any indemnitee to acquire and pay for any insurance
covering any or all indemnitees to the extent permitted by applicable law
or to affect any other indemnification rights to which any indemnitee may
be entitled to the extent permitted by applicable law. Such rights to
indemnification shall not, except as otherwise provided by law, be deemed
exclusive of any other rights to which such indemnitee may be entitled
under any statute, By-Law, contract or otherwise.
(e) In case any Shareholder or former Shareholder shall be
held to be personally liable solely by reason of his being or having been
a Shareholder and not because of his acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor)
shall be entitled out of the Trust estate to be held harmless from and
indemnified against all loss and expense arising from such liability. The
Trust shall, upon request by the Shareholder, assume the defense of any
such claim made against any Shareholder for any act or obligation of the
Trust and satisfy any judgment thereon.
SECTION 4.9 Removal, Resignation and Retirement. The Board of Trustees, by
the vote of a majority of the entire Board, may increase the number of Trustees
to a number not exceeding fifteen, and may elect Trustees to fill the vacancies
occurring for any reason, including vacancies created by any such increase in
the number of Trustees until the next annual meeting or until their successors
are duly elected and qualify; the Board of Trustees, by the vote of a majority
of the entire Board, may likewise decrease the number of Trustees to a number
not less than three but the tenure of the office of any Trustee shall not be
affected by any such decrease. In the event that after the proxy material has
been printed for a meeting of Shareholders at which Trustees are to be elected
and any one or more nominees named in such proxy material dies or become
incapacitated, the authorized number of Trustees shall be automatically reduced
by the number of such nominees, unless the Board of Trustees prior to the
meeting shall otherwise determine. A Trustee at any time may be removed either
with or without cause by resolution duly adopted by the affirmative votes of the
holders of the majority of the outstanding Shares of the Trust, present in
person or by proxy at any meeting of Shareholders at which such vote may be
taken, provided that a quorum is present. Any Trustee at any time may be removed
for cause by resolution duly adopted at any meeting of the Board of Trustees
provided that notice thereof is contained in the notice of such meeting and that
such resolution is adopted by the vote of at least two thirds of the Trustees
whose removal is not proposed. As used herein, "for cause" shall mean any cause
which under Massachusetts law would permit the removal of a Trustee of a
business trust.
Any Trustee may resign or retire as Trustee by written instrument signed
by him and delivered to the other Trustees or to any officer of the Trust, and
such resignation or retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument and shall be effective as to the
Trust and each Series of the Trust hereunder. Notwithstanding the foregoing, any
and all Trustees shall be subject to the provisions with respect to mandatory
retirement set forth in the Trust's Retirement Plan for Non-Interested Trustees
or Directors adopted by the Trust, as the same may be amended from time to time.
ARTICLE V
Committees
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or other committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
Officers
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more officers, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity.
The executive officers of the Trust shall be elected annually by the
Trustees and each executive officer so elected shall hold office until his
successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the President the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any officer
or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to the
extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to these
By-Laws, or to the extent not so provided, as may be prescribed by the Trustees;
provided, that no rights of any third party shall be affected or impaired by any
such By-Law or resolution of the Trustees unless he has knowledge thereof.
SECTION 6.6. The Chairman. The Chairman shall preside at all
meetings of the Shareholders and of the Trustees, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. The President. The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Trustees
are carried into effect, and, in connection therewith, shall be authorized to
delegate to one or more Vice Presidents such of his powers and duties at such
times and in such manner as he may deem advisable.
SECTION 6.8. The Vice Presidents. The Vice President shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there be more than one, the Vice Presidents
in the order of their seniority as may be determined from time to time by the
Trustees or the President, shall, in the absence or disability of the President,
exercise the powers and perform the duties of the President, and he or they
shall perform such other duties as the Trustees or the President may from time
to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform such
duties and have such powers as may be assigned them from time to time by the
Trustees or the President.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the proceedings
of the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Trustees, and shall perform such other
duties and have such powers as the Trustees, or the President, may from time to
time prescribe. He shall keep in safe custody the seal of the Trust and affix or
cause the same to be affixed to any instrument requiring it, and, when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by the
Trustees or the President, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such duties and have such other powers as the Trustees or the President may from
time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and he
shall render to the Trustees and the President, whenever any of them require it,
an account of his transactions as Treasurer and of the financial condition of
the Trust; and he shall perform such other duties as the Trustees, or the
President, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order determined
by the Trustees or the President, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Trustees, or the
President, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
Dividends and Distributions
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sale of
securities or other properties for federal income tax purposes may vary from the
computation thereof on the records of the Trust, the Trustees shall have power,
in their discretion, to distribute as income dividends and as capital gain
distributions, respectively, amounts sufficient to enable the Trust to avoid or
reduce liability for federal income taxes.
<PAGE>
ARTICLE VIII
Certificates of Shares
SECTION 8.1. Certificates of Shares. Certificates for Shares of the Trust
shall be in such form and of such design as the Trustees shall approve, subject
to the right of the Trustees to change such form and design at any time or from
time to time, and shall be entered in the records of the Trust as they are
issued. Each such certificate shall bear a distinguishing number; shall exhibit
the holder's name and certify the number of full Shares owned by such holder;
shall be signed by or in the name of the Trust by the President, or a Vice
President, and countersigned by the Secretary or an Assistant Secretary or the
Treasurer and an Assistant Treasurer of the Trust; shall be sealed with the
seal; and shall contain such recitals as may be required by law. Where any
certificate is signed by a Transfer Agent or by a Registrar, the signature of
such officers and the seal may be facsimile, printed or engraved. The Trust may,
at its option, determine not to issue a certificate or certificates to evidence
Shares owned of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Trust, such certificate or certificates shall,
nevertheless, be adopted by the Trust and be issued and delivered as though the
person or persons who signed such certificate or certificates or whose facsimile
signature or signatures shall appear therein had not ceased to be such officer
or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2 Transfer of Shares. Shares shall be transferable on the books
of the Trust by the holder thereof in person or by his duly authorized attorney
or legal representative, upon surrender and cancellation of certificates, if
any, for the same number of Shares, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the authenticity of
the signature as the Trust or its agent may reasonably require; in the case of
shares not represented by certificates, the same or similar requirements may be
imposed by the Board of Trustees.
SECTION 8.3 Share Ledgers. The share ledgers of the Trust, containing the
name and address of the Shareholders of the Trust and the number of shares held
by them respectively, shall be kept at the principal offices of the Trust or, if
the Trust employs a transfer agent, at the offices of the transfer agent of the
Trust.
SECTION 8.4. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give to
the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may be
authorized or required to countersign such new certificate or certificates, a
bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be against
them or any of them on account of or in connection with the alleged loss, theft
or destruction of any such certificate.
<PAGE>
ARTICLE IX
Waiver of Notice
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the
meeting of Shareholders, Trustees or committee, as the case may be, in
person, shall be deemed equivalent to the giving of such notice to such
person.
ARTICLE X
Miscellaneous
SECTION 10.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 10.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice of,
or to vote at, any meeting of Shareholders, or Shareholders entitled to receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. Such date, in any
case, shall be not more than ninety (90) days, and in case of a meeting of
Shareholders not less than ten (10) days, prior to the date on which particular
action requiring such determination of Shareholders is to be taken. In lieu of
fixing a record date the Trustees may provide that the transfer books shall be
closed for a stated period but not to exceed, in any case, twenty (20) days. If
the transfer books are closed for the purpose of determining Shareholders
entitled to notice of a vote at a meeting of Shareholders, such books shall be
closed for at least ten (10) days immediately preceding such meeting.
SECTION 10.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from time
to time provide. The seal of the Trust may be affixed to any document, and the
seal and its attestation may be lithographed, engraved or otherwise printed on
any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
SECTION 10.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time to
time.
SECTION 10.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer or
officers or such other person or persons as the Trustees may from time to time
designate, or as may be specified in or pursuant to the agreement between the
Trust and the bank or trust company appointed as Custodian of the securities and
funds of the Trust.
ARTICLE XI
Compliance with Federal Regulations
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be
in compliance with any federal or state statute, rule or regulation with
which compliance by the Trust is required.
ARTICLE XII
Amendments
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by
the Trustees if such amendment, adoption or repeal requires, pursuant to
law, the Declaration, or these By-Laws, a vote of the Shareholders. The
Trustees shall in no event adopt By-Laws which are in conflict with the
Declaration, and any apparent inconsistency shall be construed in favor
of the related provisions in the Declaration.
ARTICLE XIII
Declaration of Trust
The Declaration of Trust establishing Oppenheimer Special Government
Trust, dated February 22, 1988, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name
Oppenheimer Premium Government Fund refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
Shareholder, officer, employee or agent of the Trust shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Trust, but the Trust Estate only shall be liable.
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<EQUALIZATION>
0
<DISTRIBUTIONS-OF-INCOME>
22,561,595
<DISTRIBUTIONS-OF-GAINS>
0
<DISTRIBUTIONS-OTHER>
1,547,363
<NUMBER-OF-SHARES-SOLD>
0
<NUMBER-OF-SHARES-REDEEMED>
0
<SHARES-REINVESTED>
0
<NET-CHANGE-IN-ASSETS>
(23,065,209)
<ACCUMULATED-NII-PRIOR>
0
<ACCUMULATED-GAINS-PRIOR>
(8,495,256)
<OVERDISTRIB-NII-PRIOR>
249,479
<OVERDIST-NET-GAINS-PRIOR>
0
<GROSS-ADVISORY-FEES>
1,980,152
<INTEREST-EXPENSE>
0
<GROSS-EXPENSE>
3,068,147
<AVERAGE-NET-ASSETS>
304,773,000
<PER-SHARE-NAV-BEGIN>
10.61
<PER-SHARE-NII>
0.79
<PER-SHARE-GAIN-APPREC>
(0.75)
<PER-SHARE-DIVIDEND>
0.78
<PER-SHARE-DISTRIBUTIONS>
0.00
<RETURNS-OF-CAPITAL>
0.05
<PER-SHARE-NAV-END>
9.82
<EXPENSE-RATIO>
1.01
<AVG-DEBT-OUTSTANDING>
0
<AVG-DEBT-PER-SHARE>
0.00
</TABLE>
