UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04797
---------
Oppenheimer Equity Income Fund, Inc.
------------------------------------
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
------------------------------------------------------
(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
---------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
--------------
Date of fiscal year end: October 31
----------
Date of reporting period: 10/31/2007
----------
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOP TEN COMMON STOCK INDUSTRIES
- --------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels 12.9%
- --------------------------------------------------------------------------------
Diversified Financial Services 11.4
- --------------------------------------------------------------------------------
Tobacco 7.9
- --------------------------------------------------------------------------------
Pharmaceuticals 7.7
- --------------------------------------------------------------------------------
Aerospace & Defense 7.0
- --------------------------------------------------------------------------------
Diversified Telecommunication Services 6.8
- --------------------------------------------------------------------------------
Insurance 6.4
- --------------------------------------------------------------------------------
Industrial Conglomerates 5.3
- --------------------------------------------------------------------------------
Capital Markets 4.1
- --------------------------------------------------------------------------------
Media 3.5
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets.
TOP TEN COMMON STOCK HOLDINGS
- --------------------------------------------------------------------------------
Altria Group, Inc. 4.8%
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 3.8
- --------------------------------------------------------------------------------
ConocoPhillips 3.4
- --------------------------------------------------------------------------------
Citigroup, Inc. 3.3
- --------------------------------------------------------------------------------
General Electric Co. 3.2
- --------------------------------------------------------------------------------
Loews Corp./Carolina Group 3.2
- --------------------------------------------------------------------------------
Bank of America Corp. 3.0
- --------------------------------------------------------------------------------
UBS AG 3.0
- --------------------------------------------------------------------------------
Everest Re Group Ltd. 2.7
- --------------------------------------------------------------------------------
TJX Cos., Inc. (The) 2.5
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on net assets. For up-to-date Top 10 Fund
holdings, please visit www.oppenheimerfunds.com.
- --------------------------------------------------------------------------------
8 | OPPENHEIMER EQUITY INCOME FUND, INC.
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 26.8%
Diversified Financial Services 11.6
Insurance 6.5
Capital Markets 4.2
Commercial Banks 2.3
Real Estate Investment Trusts 1.5
Thrifts & Mortgage Finance 0.7
Industrials 14.9
Energy 14.4
Consumer Staples 10.7
Health Care 7.8
Telecommunication Services 6.9
Consumer Discretionary 6.7
Information Technology 6.4
Utilities 3.7
Materials 1.7
Portfolio holdings and allocations are subject to change. Percentages are as of
October 31, 2007, and are based on the total market value of common stocks.
- --------------------------------------------------------------------------------
9 | OPPENHEIMER EQUITY INCOME FUND, INC.
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED OCTOBER 31, 2007, FOLLOWED
BY A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE
BROAD-BASED MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The Fund's Class A shares (without
sales charge) returned 10.43% during the reporting period, underperforming the
broader equity market, as measured by the S&P 500 Index, which returned 14.55%,
but outperforming the Russell 3000 Value Index, which returned 10.06%. The Fund
benefited from an overweight in industrials, which outperformed, and stock
selection in the energy, health care and telecommunication services sectors,
which added value versus the S&P 500 Index. However, its performance was
hampered by an overweighting in the weak-performing consumer discretionary
sector as well as an underweighting in technology stocks, which enjoyed strong
results as a group.
Upon assuming the Fund's management on July 16, 2007, we began to
reposition the portfolio to focus on dividend-paying stocks, in line with the
Fund's new investment approach, approved by shareholders earlier in 2007.
Specifically, we spent several months eliminating nearly all of the portfolio's
non-dividend-paying holdings. When adding new positions, we favored stocks with
above-average dividend yields and good capital appreciation prospects.
Our efforts to replace stocks paying low or no dividends led to a variety
of changes. A number of these were in the health care sector, where we added to
existing holdings that met our investment criteria. We also established new
positions in pharmaceutical companies Johnson & Johnson and Novartis AG. In the
energy sector, we sold a handful of non-dividend-paying oil service companies
and instead bought integrated oil companies such as BP plc and Chevron Corp.,
both of which offered shareholders healthy income streams. Other notable
purchases included shares of tobacco manufacturer Altria Group, Inc.--our top
holding at period end--and a significant new position in its rival Loews
Corp./Carolina Group. Both stocks offered generous dividend yields.
On a sector basis, we sought to reduce the Fund's modest overweighting in
the industrials sector. We believed this move was prudent, given the potential
for a slower economy. We also added to our energy sector weighting to take
advantage of persistent strength in energy prices, and increased our allocation
to consumer staples stocks, whose defensive nature we felt would be helpful if
consumer spending slows.
10 | OPPENHEIMER EQUITY INCOME FUND, INC.
During the period, the subprime mortgage crisis weighed on many financial
stocks, including our position in E*TRADE Financial Corp. The online brokerage
firm's shares fell, as nervous investors worried about the credit quality of the
loans made by the company's bank subsidiary. A weaker housing market also hurt
Centex Corp., a homebuilder and mortgage financing company whose business
deteriorated in line with the slowdown in construction activity. In the
technology sector, contract electronics manufacturer Jabil Circuit, Inc. and
communications technology company Motorola, Inc. both declined on disappointing
quarterly earnings reports. Athletic footwear maker K-Swiss, Inc. also
underperformed after seeing its earnings fall short of Wall Street analysts'
estimates. We exited our positions in Centex, Jabil Curcuit, Motorola and
K-Swiss.
On the positive side, some of our best recent performers were energy
service companies. Businesses such as FMC Technologies, Inc. and National
Oilwell Varco, Inc. continued to see increased demand for the equipment and
services they provide to oil producers, such as ConocoPhillips, a diversified
energy company that also added to our results during the period. After taking
over the Fund, we replaced FMC and National Oilwell, which didn't pay any
dividend, with other energy stocks which offer dividend yields. Another area of
emphasis was reinsurance stocks--companies that provide insurance to other
insurers. Reinsurer Everest Re Group Ltd. was very profitable during the year,
in part because of relatively few costly natural disasters weighing on its
profits. Of final note, we saw good performance from positions in
defense-related stocks, including aerospace systems providers Goodrich Corp. and
L-3 Communications Holdings, Inc. Both companies benefited from strong defense
industry fundamentals.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until October 31, 2007. In the case of Class A, B and C shares,
performance is measured over a ten fiscal year period. In the case of Class N
shares, performance is measured from inception of the Class on March 1, 2001.
The Fund's performance reflects the deduction of the maximum initial sales
charge on Class A shares, the applicable contingent deferred sales charge on
Class B, Class C and Class N shares, and reinvestment of all dividends and
capital gains distributions. Past performance cannot guarantee future results.
11 | OPPENHEIMER EQUITY INCOME FUND, INC.
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
The Fund's performance is compared to the performance of the Standard &
Poor's (S&P) 500 Index, a broad-based index of equity securities widely regarded
as a general measure of the performance of the U.S. equity securities market.
Index performance reflects the reinvestment of income but does not consider the
effect of transaction costs, and none of the data in the graphs shows the effect
of taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
12 | OPPENHEIMER EQUITY INCOME FUND, INC.
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Equity Income Fund, Inc. (Class A)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Equity
Income Fund, Inc.
(Class A) S&P 500 Index
10/31/1997 $ 9,425 $10,000
01/31/1998 $ 9,579 $10,760
04/30/1998 $10,919 $12,250
07/31/1998 $10,883 $12,396
10/31/1998 $10,677 $12,201
01/31/1999 $11,928 $14,258
04/30/1999 $12,107 $14,924
07/31/1999 $11,522 $14,900
10/31/1999 $11,581 $15,332
01/31/2000 $11,495 $15,732
04/30/2000 $12,815 $16,434
07/31/2000 $13,048 $16,236
10/31/2000 $13,970 $16,264
01/31/2001 $14,432 $15,590
04/30/2001 $14,138 $14,303
07/31/2001 $13,891 $13,910
10/31/2001 $12,585 $12,216
01/31/2002 $13,646 $13,075
04/30/2002 $13,867 $12,499
07/31/2002 $11,612 $10,625
10/31/2002 $11,717 $10,372
01/31/2003 $11,563 $10,067
04/30/2003 $12,202 $10,836
07/31/2003 $13,419 $11,756
10/31/2003 $14,568 $12,528
01/31/2004 $15,816 $13,545
04/30/2004 $15,723 $13,314
07/31/2004 $16,094 $13,303
10/31/2004 $16,639 $13,707
01/31/2005 $17,815 $14,387
04/30/2005 $17,641 $14,157
07/31/2005 $18,737 $15,171
10/31/2005 $18,269 $14,902
01/31/2006 $20,255 $15,880
04/30/2006 $21,235 $16,337
07/31/2006 $20,218 $15,987
10/31/2006 $21,635 $17,335
01/31/2007 $22,621 $18,182
04/30/2007 $23,189 $18,825
07/31/2007 $22,949 $18,565
10/31/2007 $23,893 $19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 4.09% 5-Year 13.96% 10-Year 9.10%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE
10-YEAR RETURN FOR CLASS B USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. SEE PAGE 17 FOR FURTHER INFORMATION.
13 | OPPENHEIMER EQUITY INCOME FUND, INC.
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Equity Income Fund, Inc. (Class B)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Equity
Income Fund, Inc.
(Class B) S&P 500 Index
10/31/1997 $10,000 $10,000
01/31/1998 $10,147 $10,760
04/30/1998 $11,549 $12,250
07/31/1998 $11,489 $12,396
10/31/1998 $11,254 $12,201
01/31/1999 $12,553 $14,258
04/30/1999 $12,722 $14,924
07/31/1999 $12,091 $14,900
10/31/1999 $12,135 $15,332
01/31/2000 $12,036 $15,732
04/30/2000 $13,396 $16,434
07/31/2000 $13,622 $16,236
10/31/2000 $14,564 $16,264
01/31/2001 $15,028 $15,590
04/30/2001 $14,695 $14,303
07/31/2001 $14,415 $13,910
10/31/2001 $13,038 $12,216
01/31/2002 $14,117 $13,075
04/30/2002 $14,323 $12,499
07/31/2002 $11,977 $10,625
10/31/2002 $12,057 $10,372
01/31/2003 $11,877 $10,067
04/30/2003 $12,510 $10,836
07/31/2003 $13,730 $11,756
10/31/2003 $14,881 $12,528
01/31/2004 $16,156 $13,545
04/30/2004 $16,061 $13,314
07/31/2004 $16,441 $13,303
10/31/2004 $16,997 $13,707
01/31/2005 $18,198 $14,387
04/30/2005 $18,021 $14,157
07/31/2005 $19,140 $15,171
10/31/2005 $18,663 $14,902
01/31/2006 $20,691 $15,880
04/30/2006 $21,692 $16,337
07/31/2006 $20,653 $15,987
10/31/2006 $22,101 $17,335
01/31/2007 $23,108 $18,182
04/30/2007 $23,688 $18,825
07/31/2007 $23,443 $18,565
10/31/2007 $24,408 $19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 4.46% 5-Year 14.08% 10-Year 9.33%
14 | OPPENHEIMER EQUITY INCOME FUND, INC.
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Equity Income Fund, Inc. (Class C)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Equity
Income Fund, Inc.
(Class C) S&P 500 Index
10/31/1997 $10,000 $10,000
01/31/1998 $10,146 $10,760
04/30/1998 $11,547 $12,250
07/31/1998 $11,486 $12,396
10/31/1998 $11,249 $12,201
01/31/1999 $12,546 $14,258
04/30/1999 $12,715 $14,924
07/31/1999 $12,084 $14,900
10/31/1999 $12,128 $15,332
01/31/2000 $12,029 $15,732
04/30/2000 $13,392 $16,434
07/31/2000 $13,614 $16,236
10/31/2000 $14,559 $16,264
01/31/2001 $15,017 $15,590
04/30/2001 $14,691 $14,303
07/31/2001 $14,411 $13,910
10/31/2001 $13,031 $12,216
01/31/2002 $14,114 $13,075
04/30/2002 $14,320 $12,499
07/31/2002 $11,971 $10,625
10/31/2002 $12,051 $10,372
01/31/2003 $11,871 $10,067
04/30/2003 $12,504 $10,836
07/31/2003 $13,721 $11,756
10/31/2003 $14,866 $12,528
01/31/2004 $16,104 $13,545
04/30/2004 $15,977 $13,314
07/31/2004 $16,312 $13,303
10/31/2004 $16,828 $13,707
01/31/2005 $17,973 $14,387
04/30/2005 $17,762 $14,157
07/31/2005 $18,818 $15,171
10/31/2005 $18,308 $14,902
01/31/2006 $20,251 $15,880
04/30/2006 $21,190 $16,337
07/31/2006 $20,120 $15,987
10/31/2006 $21,493 $17,335
01/31/2007 $22,424 $18,182
04/30/2007 $22,938 $18,825
07/31/2007 $22,654 $18,565
10/31/2007 $23,542 $19,857
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 8.53% 5-Year 14.33% 10-Year 8.94%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE
10-YEAR RETURN FOR CLASS B USES CLASS A PERFORMANCE FOR THE PERIOD AFTER
CONVERSION. SEE PAGE 17 FOR FURTHER INFORMATION.
15 | OPPENHEIMER EQUITY INCOME FUND, INC.
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Equity Income Fund, Inc. (Class N)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer Equity
Income Fund, Inc.
(Class N) S&P 500 Index
03/01/2001 $10,000 $10,000
04/30/2001 $10,103 $10,094
07/31/2001 $ 9,914 $ 9,817
10/31/2001 $ 8,981 $ 8,621
01/31/2002 $ 9,739 $ 9,227
04/30/2002 $ 9,884 $ 8,821
07/31/2002 $ 8,277 $ 7,499
10/31/2002 $ 8,343 $ 7,320
01/31/2003 $ 8,233 $ 7,104
04/30/2003 $ 8,677 $ 7,647
07/31/2003 $ 9,537 $ 8,296
10/31/2003 $10,345 $ 8,841
01/31/2004 $11,219 $ 9,559
04/30/2004 $11,144 $ 9,396
07/31/2004 $11,392 $ 9,388
10/31/2004 $11,768 $ 9,674
01/31/2005 $12,581 $10,154
04/30/2005 $12,447 $ 9,991
07/31/2005 $13,207 $10,707
10/31/2005 $12,863 $10,517
01/31/2006 $14,249 $11,207
04/30/2006 $14,925 $11,530
07/31/2006 $14,191 $11,282
10/31/2006 $15,170 $12,234
01/31/2007 $15,846 $12,832
04/30/2007 $16,224 $13,285
07/31/2007 $16,041 $13,102
10/31/2007 $16,689 $14,014
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
10/31/07
1-Year 9.02% 5-Year 14.87% Since Inception (3/1/01) 7.98%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
BECAUSE CLASS B SHARES CONVERT TO CLASS A SHARES 72 MONTHS AFTER PURCHASE, THE
"SINCE-INCEPTION" RETURN FOR CLASS B USES CLASS A PERFORMANCE FOR THE PERIOD
AFTER CONVERSION. SEE PAGE 17 FOR FURTHER INFORMATION.
16 | OPPENHEIMER EQUITY INCOME FUND, INC.
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 2/13/87. Unless
otherwise noted, average annual total returns for Class A shares includes the
current 5.75% maximum initial sales charge. Class A shares are subject to a
maximum annual 0.25% asset-based sales charge currently. The asset-based sales
charge is subject to a voluntary waiver of a portion or all of the charge as
described in the Prospectus, and the Board of Directors has set the rate at
zero.
CLASS B shares of the Fund were first publicly offered on 3/3/97. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the 10-year return for Class B uses
Class A performance for the period after conversion. Class B shares are subject
to a maximum annual 0.75% asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 3/3/97. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to an annual 0.75%
asset-based sales charge.
17 | OPPENHEIMER EQUITY INCOME FUND, INC.
NOTES
- --------------------------------------------------------------------------------
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
18 | OPPENHEIMER EQUITY INCOME FUND, INC.
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended October 31, 2007.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
19 | OPPENHEIMER EQUITY INCOME FUND, INC.
FUND EXPENSES Continued
- --------------------------------------------------------------------------------
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
5/1/07 10/31/07 OCTOBER 31, 2007
- --------------------------------------------------------------------------------
Class A Actual $ 1,000.00 $ 1,030.40 $ 6.42
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,018.90 6.38
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,025.60 10.88
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,014.52 10.82
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,026.30 10.73
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,014.67 10.67
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,028.70 8.16
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.19 8.12
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding indirect expenses from affiliated fund, based on the 6-month period
ended October 31, 2007 are as follows:
CLASS EXPENSE RATIOS
- -----------------------------
Class A 1.25%
- -----------------------------
Class B 2.12
- -----------------------------
Class C 2.09
- -----------------------------
Class N 1.59
The expense ratios reflect reduction to custodian expenses and voluntary waivers
or reimbursements by the Fund's Manager and Transfer Agent that can be
terminated at any time, without advance notice. The "Financial Highlights"
tables in the Fund's financial statements, included in this report, also show
the gross expense ratios, without such waivers or reimbursements and reduction
to custodian expenses, if applicable.
- --------------------------------------------------------------------------------
20 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENT OF INVESTMENTS October 31, 2007
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS--98.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--6.6%
- --------------------------------------------------------------------------------
MEDIA--3.5%
Cinemark
Holdings, Inc. 235,000 $ 4,044,350
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 100,000 5,098,000
- --------------------------------------------------------------------------------
Time Warner, Inc. 450,000 8,217,000
--------------
17,359,350
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--3.1%
OfficeMax, Inc. 100,000 3,165,000
- --------------------------------------------------------------------------------
TJX Cos., Inc. (The) 1 425,000 12,295,250
--------------
15,460,250
- --------------------------------------------------------------------------------
CONSUMER STAPLES--10.5%
- --------------------------------------------------------------------------------
BEVERAGES--0.4%
Coca-Cola Co. (The) 31,250 1,930,000
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.0%
SUPERVALU, Inc. 52,500 2,034,375
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 65,000 2,938,650
--------------
4,973,025
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.2%
B&G Foods, Inc. 275,000 5,357,000
- --------------------------------------------------------------------------------
ConAgra Foods, Inc. 20,000 474,600
--------------
5,831,600
- --------------------------------------------------------------------------------
TOBACCO--7.9%
Altria Group, Inc. 325,000 23,702,250
- --------------------------------------------------------------------------------
Loews Corp./Carolina
Group 185,000 15,869,300
--------------
39,571,550
- --------------------------------------------------------------------------------
ENERGY--14.1%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.2%
GlobalSantaFe
Corp. 37,500 3,038,625
- --------------------------------------------------------------------------------
Halliburton Co. 80,000 3,153,600
--------------
6,192,225
SHARES VALUE
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS--12.9%
Arlington
Tankers Ltd. 4,000 $ 98,400
- --------------------------------------------------------------------------------
BP plc, ADR 1 112,500 8,773,875
- --------------------------------------------------------------------------------
Capital Product
Partners LP 125,000 3,363,750
- --------------------------------------------------------------------------------
Chevron Corp. 27,500 2,516,525
- --------------------------------------------------------------------------------
ConocoPhillips 197,500 16,779,600
- --------------------------------------------------------------------------------
El Paso Corp. 95,000 1,677,700
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 6,000 551,940
- --------------------------------------------------------------------------------
Hess Corp. 137,500 9,846,375
- --------------------------------------------------------------------------------
Kinder Morgan
Management LLC 1,2 203,537 10,339,680
- --------------------------------------------------------------------------------
Marathon Oil
Corp. 10,000 591,300
- --------------------------------------------------------------------------------
Occidental
Petroleum Corp. 100,000 6,905,000
- --------------------------------------------------------------------------------
Petroleo Brasileiro
SA, ADR 1 7,500 717,225
- --------------------------------------------------------------------------------
Williams
Cos., Inc. (The) 57,500 2,098,175
--------------
64,259,545
- --------------------------------------------------------------------------------
FINANCIALS--26.4%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--4.1%
E*TRADE
Financial Corp. 2 500,000 5,570,000
- --------------------------------------------------------------------------------
UBS AG 275,000 14,764,750
--------------
20,334,750
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.3%
Wachovia Corp. 250,000 11,432,500
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--11.4%
Bank of America
Corp. 312,500 15,087,500
- --------------------------------------------------------------------------------
Citigroup, Inc. 387,500 16,236,250
- --------------------------------------------------------------------------------
JPMorgan Chase
& Co. 400,000 18,800,000
- --------------------------------------------------------------------------------
KKR Financial
Holdings LLC 450,000 7,024,500
--------------
57,148,250
21 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENT OF INVESTMENTS continued
- --------------------------------------------------------------------------------
SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE--6.4%
ACE Ltd. 100,000 $ 6,061,000
- --------------------------------------------------------------------------------
Everest Re Group Ltd. 125,000 13,317,500
- --------------------------------------------------------------------------------
Fidelity National
Title Group, Inc., Cl. A 27,500 423,225
- --------------------------------------------------------------------------------
Hartford Financial
Services Group,
Inc. (The) 100,000 9,703,000
- --------------------------------------------------------------------------------
Platinum Underwriters
Holdings Ltd. 64,300 2,314,800
--------------
31,819,525
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--1.5%
Anthracite
Capital, Inc. 1 195,000 1,622,400
- --------------------------------------------------------------------------------
Care Investment
Trust, Inc. 2 151,350 1,740,525
- --------------------------------------------------------------------------------
Crystal River
Capital, Inc. 1 177,500 2,582,625
- --------------------------------------------------------------------------------
iStar Financial, Inc. 45,000 1,372,950
--------------
7,318,500
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.7%
Freddie Mac 55,000 2,872,650
- --------------------------------------------------------------------------------
Washington
Mutual, Inc. 1 25,000 697,000
--------------
3,569,650
- --------------------------------------------------------------------------------
HEALTH CARE--7.7%
- --------------------------------------------------------------------------------
PHARMACEUTICALS--7.7%
Abbott Laboratories 175,000 9,558,500
- --------------------------------------------------------------------------------
Johnson & Johnson 90,000 5,865,300
- --------------------------------------------------------------------------------
Novartis AG, ADR 110,000 5,848,700
- --------------------------------------------------------------------------------
Pfizer, Inc. 275,000 6,767,750
- --------------------------------------------------------------------------------
Schering-Plough
Corp. 175,000 5,341,000
- --------------------------------------------------------------------------------
Wyeth 100,000 4,863,000
--------------
38,244,250
- --------------------------------------------------------------------------------
INDUSTRIALS--14.7%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--7.0%
Boeing Co. 120,000 11,830,800
SHARES VALUE
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
Goodrich Corp. 120,000 $ 8,359,200
- --------------------------------------------------------------------------------
L-3 Communications
Holdings, Inc. 25,000 2,741,000
- --------------------------------------------------------------------------------
Raytheon Co. 67,500 4,293,675
- --------------------------------------------------------------------------------
United Technologies
Corp. 100,000 7,659,000
--------------
34,883,675
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--5.3%
3M Co. 100,000 8,636,000
- --------------------------------------------------------------------------------
General Electric Co. 390,000 16,052,400
- --------------------------------------------------------------------------------
Siemens AG,
Sponsored ADR 1 13,750 1,875,088
--------------
26,563,488
- --------------------------------------------------------------------------------
MACHINERY--1.2%
Joy Global, Inc. 100,000 5,806,000
- --------------------------------------------------------------------------------
MARINE--0.6%
Eagle Bulk Shipping, Inc. 10,000 340,900
- --------------------------------------------------------------------------------
Omega Navigation
Enterprises, Inc., Cl. A 5,000 94,900
- --------------------------------------------------------------------------------
Paragon Shipping,
Inc., Cl. A 2 90,000 2,257,200
--------------
2,693,000
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTIONS--0.6%
Textainer Group
Holdings Ltd. 2 200,000 3,172,000
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--6.3%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--1.1%
Corning, Inc. 225,000 5,460,750
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT--3.2%
Applied Materials, Inc. 27,500 534,050
- --------------------------------------------------------------------------------
Intel Corp. 45,000 1,210,500
- --------------------------------------------------------------------------------
KLA-Tencor Corp. 1 150,000 7,897,500
- --------------------------------------------------------------------------------
Microchip
Technology, Inc. 18,250 605,353
- --------------------------------------------------------------------------------
Taiwan
Semiconductor
Manufacturing Co.
Ltd., ADR 488,976 5,207,594
22 | OPPENHEIMER EQUITY INCOME FUND, INC.
SHARES VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT Continued
Texas Instruments, Inc. 17,500 $ 570,500
--------------
16,025,497
- --------------------------------------------------------------------------------
SOFTWARE--2.0%
Microsoft Corp. 275,000 10,122,750
- --------------------------------------------------------------------------------
MATERIALS--1.7%
- --------------------------------------------------------------------------------
CHEMICALS--0.9%
Eastman
Chemical Co. 12,500 832,375
- --------------------------------------------------------------------------------
PPG
Industries, Inc. 45,000 3,363,300
--------------
4,195,675
- --------------------------------------------------------------------------------
METALS & MINING--0.8%
Carpenter
Technology Corp. 23,500 3,405,385
- --------------------------------------------------------------------------------
Freeport-McMoRan
Copper & Gold, Inc.,
Cl. B 6,000 706,080
--------------
4,111,465
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--6.8%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATIONS SERVICES--6.8%
AT&T, Inc. 145,000 6,059,550
- --------------------------------------------------------------------------------
Citizens
Communications Co. 380,000 5,000,800
- --------------------------------------------------------------------------------
Consolidated
Communications
Holdings, Inc. 1 300,000 5,973,000
- --------------------------------------------------------------------------------
FairPoint
Communications, Inc. 1 225,000 4,160,250
- --------------------------------------------------------------------------------
NTELOS
Holdings Corp. 170,000 5,132,300
- --------------------------------------------------------------------------------
Windstream Corp. 570,000 7,666,500
--------------
33,992,400
- --------------------------------------------------------------------------------
UTILITIES--3.6%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.6%
Cleco Corp. 1 227,500 5,994,625
- --------------------------------------------------------------------------------
FirstEnergy Corp. 100,000 6,970,000
--------------
12,964,625
SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY TRADERS--0.5%
Constellation
Energy Group, Inc. 27,500 $ 2,604,250
- --------------------------------------------------------------------------------
MULTI--UTILITIES & UNREGULATED POWER--0.5%
CenterPoint
Energy, Inc. 100,000 1,676,000
- --------------------------------------------------------------------------------
Teco Energy, Inc. 50,000 841,499
--------------
2,517,499
--------------
Total Common Stocks
(Cost $450,755,989) 490,558,044
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.6%
- --------------------------------------------------------------------------------
NRG Energy, Inc., 5.75%
Cv. (Cost $2,571,616) 7,500 2,973,750
- --------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--0.7%
- --------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund,
Cl. E, 5.20% 3,4
(Cost $3,483,696) 3,483,696 3,483,696
- --------------------------------------------------------------------------------
Total Investments, at Value
(excluding Investments
Purchased with Cash
Collateral from Securities
Loaned) (Cost $456,811,301) 497,015,490
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--4.9% 5
- --------------------------------------------------------------------------------
Undivided interest of 1.22% in
joint repurchase agreement
(Principal Amount/Value
$2,000,000,000, with a maturity
value of $2,000,273,889) with
Bank of America NA, 4.93%,
dated 10/31/07, to be
repurchased at $24,324,228 on
11/1/07, collateralized by U.S.
Agency Mortgages, 5%-6%,
5/1/33-6/1/37, with a value
of $2,040,000,000
(Cost $24,320,897) $ 24,320,897 24,320,897
23 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $481,132,198) 104.6% $ 521,336,387
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (4.6) (23,019,992)
----------------------
NET ASSETS 100.0% $ 498,316,395
======================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Partial or fully-loaned security. See Note 6 of accompanying Notes.
2. Non-income producing security.
3. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended October 31, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment advisor. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
OCTOBER 31, 2006 ADDITIONS REDUCTIONS OCTOBER 31, 2007
- -----------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E -- 145,191,798 141,708,102 3,483,696
DIVIDEND
VALUE INCOME
- -----------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money
Market Fund, Cl. E $ 3,483,696 $ 336,749
4. Rate shown is the 7-day yield as of October 31, 2007.
5. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 6 of
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES October 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $477,648,502) $ 517,852,691
Affiliated companies (cost $3,483,696) 3,483,696
---------------
521,336,387
- -----------------------------------------------------------------------------------------------------------
Cash 160,901
- -----------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 5,398,248
Dividends 592,161
Shares of capital stock sold 501,015
Other 34,054
---------------
Total assets 528,022,766
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 24,320,897
- -----------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 4,231,704
Shares of capital stock redeemed 855,287
Distribution and service plan fees 107,796
Transfer and shareholder servicing agent fees 85,247
Directors' compensation 76,400
Shareholder communications 7,577
Other 21,463
---------------
Total liabilities 29,706,371
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $ 498,316,395
===============
- -----------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -----------------------------------------------------------------------------------------------------------
Par value of shares of capital stock $ 1,720
- -----------------------------------------------------------------------------------------------------------
Additional paid-in capital 391,440,773
- -----------------------------------------------------------------------------------------------------------
Accumulated net investment income 2,287,637
- -----------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 64,376,488
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 40,209,777
---------------
NET ASSETS $ 498,316,395
===============
25 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- -----------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $362,739,730 and 12,147,756 shares of capital stock outstanding) $ 29.86
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price) $ 31.68
- -----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $60,105,683 and 2,269,493 shares of capital stock outstanding) $ 26.48
- -----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $56,130,460 and 2,115,181 shares of capital stock outstanding) $ 26.54
- -----------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $19,340,522 and 664,834 shares of capital stock outstanding) $ 29.09
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENT OF OPERATIONS For the Year Ended October 31, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $77,086) $ 9,343,381
Affiliated companies 336,749
- -----------------------------------------------------------------------------------------------------------
Interest 467,127
- -----------------------------------------------------------------------------------------------------------
Portfolio lending fees 12,611
- -----------------------------------------------------------------------------------------------------------
Other income 11,337
---------------
Total investment income 10,171,205
- -----------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------
Management fees 4,171,523
- -----------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 907,225
Class B 725,411
Class C 564,647
Class N 96,591
- -----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 637,081
Class B 195,484
Class C 146,130
Class N 107,717
- -----------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 114,421
Class B 37,716
Class C 20,607
Class N 3,383
- -----------------------------------------------------------------------------------------------------------
Directors' compensation 25,112
- -----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 6,369
- -----------------------------------------------------------------------------------------------------------
Administration service fees 1,500
- -----------------------------------------------------------------------------------------------------------
Other 125,720
---------------
Total expenses 7,886,637
Less reduction to custodian expenses (3,595)
Less waivers and reimbursements of expenses (52,221)
---------------
Net expenses 7,830,821
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,340,384
27 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments from unaffiliated companies $ 74,979,539
Foreign currency transactions 509,025
---------------
Net realized gain 75,488,564
- -----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (27,595,650)
Translation of assets and liabilities denominated in foreign currencies (101,725)
---------------
Net change in unrealized appreciation (27,697,375)
- -----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 50,131,573
===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER EQUITY INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2007 2006
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
Net investment income $ 2,340,384 $ 428,999
- ------------------------------------------------------------------------------------------------------------------
Net realized gain 75,488,564 45,675,662
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (27,697,375) 37,078,653
-------------------------------
Net increase in net assets resulting from operations 50,131,573 83,183,314
- ------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (455,828) --
Class B -- --
Class C -- --
Class N -- --
-------------------------------
(455,828) --
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (27,989,679) (35,134,229)
Class B (6,130,440) (8,357,741)
Class C (4,420,958) (5,324,375)
Class N (1,429,839) (1,754,083)
-------------------------------
(39,970,916) (50,570,428)
- ------------------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital stock transactions:
Class A (27,860,279) 18,026,045
Class B (16,994,059) (1,297,118)
Class C 488,589 5,624,017
Class N (101,286) 1,395,263
-------------------------------
(44,467,035) 23,748,207
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (34,762,206) 56,361,093
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 533,078,601 476,717,508
-------------------------------
End of period (including accumulated net investment income of
$2,287,637 and $387,927, respectively) $ 498,316,395 $ 533,078,601
===============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER EQUITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.15 $ 27.34 $ 26.89 $ 23.71 $ 19.07
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .20 1 .09 1 (.05) 1 (.10) (.09)
Net realized and unrealized gain 2.67 4.61 2.58 3.45 4.73
----------------------------------------------------------------
Total from investment operations 2.87 4.70 2.53 3.35 4.64
- ----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) -- -- -- --
Distributions from net realized gain (2.13) (2.89) (2.08) (.17) --
----------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.16) (2.89) (2.08) (.17) --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 29.86 $ 29.15 $ 27.34 $ 26.89 $ 23.71
================================================================
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.43% 18.43% 9.80% 14.22% 24.33%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 362,740 $ 382,512 $ 339,703 $ 252,661 $ 193,955
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 370,916 $ 369,074 $ 309,617 $ 225,711 $ 165,906
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.68% 0.32% (0.19)% (0.37)% (0.43)%
Total expenses 1.28% 4 1.29% 1.34% 1.40% 1.56%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.28% 1.28% 1.34% 1.40% 1.56%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 124% 56% 89% 61% 74%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.28%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER EQUITY INCOME FUND, INC.
CLASS B YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.27 $ 25.11 $ 25.07 $ 22.31 $ 18.09
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.05) 1 (.14) 1 (.28) 1 (.29) (.22)
Net realized and unrealized gain 2.39 4.19 2.40 3.22 4.44
-----------------------------------------------------------------
Total from investment operations 2.34 4.05 2.12 2.93 4.22
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain (2.13) (2.89) (2.08) (.17) --
----------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.13) (2.89) (2.08) (.17) --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 26.48 $ 26.27 $ 25.11 $ 25.07 $ 22.31
=================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.46% 17.37% 8.81% 13.22% 23.33%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 60,106 $ 76,583 $ 74,004 $ 64,069 $ 55,449
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 72,568 $ 76,606 $ 73,417 $ 60,460 $ 46,785
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.21)% (0.58)% (1.10)% (1.26)% (1.23)%
Total expenses 2.16% 4 2.19% 2.25% 2.30% 2.43%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 2.16% 2.19% 2.25% 2.30% 2.36%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 124% 56% 89% 61% 74%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 2.16%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER EQUITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.31 $ 25.14 $ 25.10 $ 22.34 $ 18.11
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.04) 1 (.14) 1 (.27) 1 (.29) (.14)
Net realized and unrealized gain 2.40 4.20 2.39 3.22 4.37
------------------------------------------------------------------
Total from investment operations 2.36 4.06 2.12 2.93 4.23
- ------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain (2.13) (2.89) (2.08) (.17) --
------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.13) (2.89) (2.08) (.17) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 26.54 $ 26.31 $ 25.14 $ 25.10 $ 22.34
==================================================================
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.53% 17.39% 8.80% 13.20% 23.36%
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 56,130 $ 54,971 $ 46,560 $ 34,414 $ 30,510
- ------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 56,496 $ 51,822 $ 42,635 $ 32,051 $ 20,901
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.17)% (0.57)% (1.09)% (1.26)% (1.24)%
Total expenses 2.13% 4 2.17% 2.24% 2.31% 2.43%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 2.13% 2.17% 2.24% 2.31% 2.36%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 124% 56% 89% 61% 74%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 2.13%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER EQUITY INCOME FUND, INC.
CLASS N YEAR ENDED OCTOBER 31, 2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.52 $ 26.91 $ 26.61 $ 23.56 $ 19.00
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .08 1 (.03) 1 (.16) 1 (.19) (.15)
Net realized and unrealized gain 2.62 4.53 2.54 3.41 4.71
-----------------------------------------------------------------
Total from investment operations 2.70 4.50 2.38 3.22 4.56
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- -- --
Distributions from net realized gain (2.13) (2.89) (2.08) (.17) --
-----------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.13) (2.89) (2.08) (.17) --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 29.09 $ 28.52 $ 26.91 $ 26.61 $ 23.56
=================================================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 10.02% 17.93% 9.31% 13.75% 24.00%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 19,340 $ 19,013 $ 16,451 $ 10,554 $ 6,408
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 19,387 $ 17,985 $ 13,849 $ 8,724 $ 4,218
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.29% (0.12)% (0.61)% (0.78)% (0.75)%
Total expenses 1.91% 4 1.90% 2.08% 2.20% 1.97%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 1.67% 1.72% 1.76% 1.81% 1.87%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 124% 56% 89% 61% 74%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment 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 redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
3. Annualized for periods less than one full year.
4. Total expenses including indirect expenses from affiliated fund were as
follows:
Year Ended October 31, 2007 1.91%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Equity Income Fund, Inc. (the Fund), formerly known as Oppenheimer
Quest Capital Value Fund, Inc., is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund's
investment objective is to seek total return. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. All classes of
shares have identical rights and voting privileges with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ due to each class
having its own expenses, such as transfer and shareholder servicing agent fees
and shareholder communications, directly attributable to that class. Class A, B,
C and N have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Directors. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Options are
valued daily based upon the last sale price on the principal exchange
34 | OPPENHEIMER EQUITY INCOME FUND, INC.
on which the option is traded. Securities (including restricted securities) for
which market quotations are not readily available are valued at their fair
value. Foreign and domestic securities whose values have been materially
affected by what the Manager identifies as a significant event occurring before
the Fund's assets are valued but after the close of their respective exchanges
will be fair valued. Fair value is determined in good faith using consistently
applied procedures under the supervision of the Board of Directors. Investments
in open-end registered investment companies (including affiliated funds) are
valued at that fund's net asset value. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Directors.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
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 Fund's Statement of Operations.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") which seeks current income and
stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The Fund's
investment in IMMF is included in the Statement of Investments, if applicable.
As a shareholder, the Fund is subject to its proportional share of IMMF's Class
E expenses, including its management fee. The Manager will waive fees and/or
reimburse Fund expenses in an amount equal to the indirect management fees
incurred through the Fund's investment in IMMF.
35 | OPPENHEIMER EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2 TAX PURPOSES
-------------------------------------------------------------------
$ 14,324,795 $ 54,347,286 $ -- $ 38,281,221
1. During the fiscal year ended October 31, 2007, the Fund did not utilize any
capital loss carryforward.
2. During the fiscal year ended October 31, 2006, the Fund did not utilize any
capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for October 31, 2007. Net assets of the
Fund were unaffected by the reclassifications.
36 | OPPENHEIMER EQUITY INCOME FUND, INC.
INCREASE TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL INCOME ON INVESTMENTS 3
------------------------------------------------------------
$ 10,902,561 $ 15,154 $ 10,917,715
3. $10,902,560, including $9,479,491 of long-term capital gain, was distributed
in connection with Fund share redemptions.
The tax character of distributions paid during the years ended October 31, 2007
and October 31, 2006 was as follows:
YEAR ENDED YEAR ENDED
OCTOBER 31, 2007 OCTOBER 31, 2006
------------------------------------------------------------
Distributions paid from:
Ordinary income $ 13,108,260 $ 1,473,065
Long-term capital gain 27,318,484 49,097,363
------------------------------
Total $ 40,426,744 $ 50,570,428
==============================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of October 31, 2007 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 483,060,752
=============
Gross unrealized appreciation $ 48,431,761
Gross unrealized depreciation (10,150,540)
-------------
Net unrealized appreciation $ 38,281,221
=============
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Fund has adopted an unfunded retirement plan for
the Fund's independent directors. Benefits are based on years of service and
fees paid to each director during the years of service. During the year ended
October 31, 2007, the Fund's projected benefit obligations were increased by
$12,045 and payments of $2,203 were made to retired directors, resulting in an
accumulated liability of $68,780 as of October 31, 2007.
The Board of Directors has adopted a compensation deferral plan for
independent directors that enables directors to elect to defer receipt of all or
a portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the Director under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Director. The
Fund purchases shares of the funds selected for deferral by the Director in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of directors' fees under the plan will not affect the net assets of
37 | OPPENHEIMER EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
the Fund, and will not materially affect the Fund's assets, liabilities or net
investment income per share. Amounts will be deferred until distributed in
accordance to the compensation deferral plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
directors and officers with a limited indemnification against liabilities
arising in connection with the performance of their duties to the Fund. In the
normal course of business, the Fund may also enter into contracts that provide
general indemnifications. The Fund's maximum exposure under these arrangements
is unknown as this would be dependent on future claims that may be made against
the Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. 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.
38 | OPPENHEIMER EQUITY INCOME FUND, INC.
- --------------------------------------------------------------------------------
2. SHARES OF CAPITAL STOCK
The Fund has authorized one billion shares of $0.0001 par value capital stock in
aggregate to be apportioned among each class of shares. Transactions in shares
of capital stock were as follows:
YEAR ENDED OCTOBER 31, 2007 YEAR ENDED OCTOBER 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------
CLASS A
Sold 2,387,473 $ 69,105,829 3,428,582 $ 94,959,032
Dividends and/or
distributions reinvested 936,594 25,924,915 1,216,605 31,765,567
Redeemed (4,299,832) (122,891,023) (3,947,226) (108,698,554)
----------------------------------------------------------
Net increase (decrease) (975,765) $ (27,860,279) 697,961 $ 18,026,045
==========================================================
- -------------------------------------------------------------------------------------
CLASS B
Sold 378,962 $ 9,748,673 662,085 $ 16,582,767
Dividends and/or
distributions reinvested 236,460 5,850,009 332,565 7,888,450
Redeemed (1,261,269) (32,592,741) (1,026,360) (25,768,335)
----------------------------------------------------------
Net decrease (645,847) $ (16,994,059) (31,710) $ (1,297,118)
==========================================================
- -------------------------------------------------------------------------------------
CLASS C
Sold 415,826 $ 10,744,598 534,433 $ 13,374,856
Dividends and/or
distributions reinvested 159,042 3,941,060 203,472 4,832,457
Redeemed (549,261) (14,197,069) (500,237) (12,583,296)
----------------------------------------------------------
Net increase 25,607 $ 488,589 237,668 $ 5,624,017
==========================================================
- -------------------------------------------------------------------------------------
CLASS N
Sold 176,220 $ 4,961,134 185,780 $ 5,032,410
Dividends and/or
distributions reinvested 50,259 1,360,013 64,913 1,664,380
Redeemed (228,310) (6,422,433) (195,260) (5,301,527)
----------------------------------------------------------
Net increase (decrease) (1,831) $ (101,286) 55,433 $ 1,395,263
==========================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the year ended October
31, 2007, were as follows:
PURCHASES SALES
-------------------------------------------------------------
Investment securities $ 621,557,297 $ 702,694,002
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of average net assets as shown in the following table:
39 | OPPENHEIMER EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
FEE SCHEDULE EFFECTIVE AUG. 1, 2007 FEE SCHEDULE FROM NOV. 1, 2006 TO JULY 31, 2007
- ---------------------------------------------------------------------------------------------
Up to $400 million 0.70% Up to $400 million 0.85%
Next $400 million 0.68 Next $400 million 0.80
Next $400 million 0.65 Next $400 million 0.75
Next $400 million 0.60 Next $400 million 0.65
Next $400 million 0.55 Next $400 million 0.60
Over $2.0 billion 0.50 Over $2.0 billion 0.50
- --------------------------------------------------------------------------------
SUB-ADVISOR FEES. Prior to August 1, 2007, the Manager retained Oppenheimer
Capital LLC (the "Sub-Advisor") to provide the day-to-day portfolio management
of the Fund. Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor
an annual fee in monthly installments, based on the average daily net assets of
the Fund. The fee paid to the Sub-Advisor under the Sub-Advisory agreement is
paid by the Manager, not by the Fund. The fee is calculated as a percentage of
the fee the Fund pays the Manager. The rate is 40% of the advisory fee collected
by the Manager based on the net assets of the Fund as of February 28, 1997, and
remaining 120 days later, plus 30% of the fee collected by the Manager on assets
in excess of that amount. In each case the fee is calculated after any waivers
of the Manager's fee from the Fund. For the year ended October 31, 2007, the
Manager paid $1,134,266 to the Sub-Advisor for its services to the Fund. This
agreement was terminated on July 31, 2007.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2007, the Fund paid
$1,049,481 to OFS for services to the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Class A shares of the Fund. The Distributor currently uses all of those fees
to pay dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.
40 | OPPENHEIMER EQUITY INCOME FUND, INC.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 0.25% per year under each plan. If either the Class B, Class C or
Class N plan is terminated by the Fund or by the shareholders of a class, the
Board of Directors and its independent directors must determine whether the
Distributor shall be entitled to payment from the Fund of all or a portion of
the service fee and/or asset-based sales charge in respect to shares sold prior
to the effective date of such termination. The Distributor determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at September 30,
2007 for Class B, Class C and Class N shares were $238,298, $689,195 and
$280,307, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ----------------------------------------------------------------------------------------------
October 31, 2007 $ 194,320 $ 890 $ 105,692 $ 3,642 $ 448
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. During the year ended October 31, 2007, OFS
waived $46,080 for Class N shares. This undertaking may be amended or withdrawn
at any time.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the year ended October 31, 2007, the Manager waived $6,141 for IMMF
management fees.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for
41 | OPPENHEIMER EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued
protection from adverse exchange rate fluctuation. Risks to the Fund include the
potential inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of October 31, 2007, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
coun-terparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. If the borrower defaults on its obligation
to return the securities loaned because of insolvency or other reasons, the Fund
could experience delays and cost in recovering the securities loaned or in
gaining access to the collateral. The Fund continues to receive the economic
benefit of interest or dividends paid on the securities loaned in the form of a
substitute payment received from the borrower. As of October 31, 2007, the Fund
had on loan securities valued at $23,979,854, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Collateral of $24,320,897 was
received for the loans, all of which was received in cash and subsequently
invested in approved investments.
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENT
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires
42 | OPPENHEIMER EQUITY INCOME FUND, INC.
the evaluation of tax positions taken in the course of preparing the Fund's tax
returns to determine whether it is "more-likely-than-not" that tax positions
taken in the Fund's tax return will be ultimately sustained. A tax liability and
expense must be recorded in respect of any tax position that, in Management's
judgment, will not be fully realized. FIN 48 is effective for fiscal years
beginning after December 15, 2006. As of October 31, 2007, the Manager has
evaluated the implications of FIN 48 and does not currently anticipate a
material impact to the Fund's financial statements. The Manager will continue to
monitor the Fund's tax positions prospectively for potential future impacts.
In September 2006, ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of October 31, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
- --------------------------------------------------------------------------------
8. SUBSEQUENT EVENT
On November 19, 2007, the Fund's Board of Trustees voted to freeze participation
in the retirement plan for the Board's independent trustees by not adding new
participants to the plan after December 31, 2007. Active independent trustees
who have accrued benefits under the plan prior to the freeze date will elect a
distribution method with respect to their benefits. Benefits already accrued
under the plan for Trustees who were participants prior to that freeze date are
not affected.
43 | OPPENHEIMER EQUITY INCOME FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OPPENHEIMER EQUITY INCOME FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Equity Income Fund, Inc., formerly known as Oppenheimer Quest
Capital Value Fund, Inc., including the statement of investments, as of October
31, 2007, 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 Fund'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 the standards of the Public
Company Accounting Oversight Board (United States). 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, 2007, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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 Equity Income Fund, Inc. as of October 31, 2007, 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 U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 13, 2007
44 | OPPENHEIMER EQUITY INCOME FUND, INC.
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $1.4536 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December 8,
2006. Whether received in stock or in cash, the capital gain distribution should
be treated by shareholders as a gain from the sale of the capital assets held
for more than one year (long-term capital gains).
Dividends, if any, paid by the Fund during the fiscal year ended October
31, 2007 which are not designated as capital gain distributions should be
multiplied by 49.64% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended October 31, 2007 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $8,702,479 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2008, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended October 31, 2007, $132,761 or 29.13% of the ordinary distributions
paid by the Fund qualifies as an interest related dividend and $13,442,380 or
100% of the short-term capital gain distribution paid by the Fund qualifies as a
short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
45 | OPPENHEIMER EQUITY INCOME FUND, INC.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
46 | OPPENHEIMER EQUITY INCOME FUND, INC.
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Directors (the "Board"), including a majority of the
independent Directors, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information, that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services by the Manager and its affiliates,
(v) the extent to which economies of scale are realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (vi)
other benefits to the Manager from its relationship with the Fund. The Board was
aware that there are alternatives to retaining the Manager.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services provided to the Fund and information regarding
the Manager's key personnel who provide such services. The Manager's duties
include providing the Fund with the services of the portfolio manager and the
Manager's investment team, who provide research, analysis and other advisory
services in regard to the Fund's investments; securities trading services;
oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board took account of the fact that the Manager has had over forty
years of experience as an
47 | OPPENHEIMER EQUITY INCOME FUND, INC.
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
investment adviser and that its assets under management rank it among the top
mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's personnel and the size and functions of its staff. In its
evaluation of the quality of the portfolio management services provided, the
Board considered the experience of Michael Levine, the portfolio manager for the
Fund, and the Manager's Value Equity investment teams and analysts. The Board
members also considered their experiences with the Manager and its officers and
other personnel through their service on the Boards of the Fund and other funds
advised by the Manager. The Board considered information regarding the quality
of services provided by affiliates of the Manager, which its members have become
knowledgeable about in connection with the renewal of the Fund's service
agreements. In light of the foregoing, the Board concluded that the Fund
benefits from the services provided under the Agreement and from the Manager's
experience, reputation, personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment performance of the Fund and the
Manager at each Board meeting, including comparative performance information.
The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other retail front-end load and no-load
multi-cap value funds and equity-income funds advised by the Manager and by
other investment advisers. The Board noted that the Fund's five-year performance
had been better than its peer group median. However its one-year, three-year and
ten-year performance was below its peer group median. The Board also noted that
in July and August 2007, the Fund changed its name from "Oppenheimer Quest
Capital Value Fund, Inc." to "Oppenheimer Equity Income Fund, Inc.," along with
taking over the direct investment management of the Funds from its former
Sub-Adviser, changing the Fund's investment objective to seek total return and
changing its portfolio manager.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees paid to the
Manager and its affiliates and the other expenses borne by the Fund. The Board
also considered the comparability of the fees charged and the services provided
to the Fund to the fees and services for other clients or accounts advised by
the Manager. The independent consultant provided comparative data in regard to
the fees and expenses of the Fund, other multi-cap value funds and other funds
with comparable asset levels and distribution features. The Board noted that the
Fund's contractual and actual management fees and total expenses are higher than
its peer group median. Effective August 1, 2007, the Fund
48 | OPPENHEIMER EQUITY INCOME FUND, INC.
began paying the Manager at the following lower annual rates: 0.70% of the first
$400 million of average annual net assets of the Fund, 0.68% of the next $400
million, 0.65% of the next $400 million, 0.60% of the next $400 million, 0.55%
of the next $400 million, and 0.50% of average annual net assets in excess of $2
billion.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund, the extent to
which those economies of scale benefit the Fund's shareholders and the current
level of Fund assets in relation to the Fund's breakpoint schedule for its
management fees. The Board also noted the Fund's breakpoints, which are intended
to share economies of scale that may exist as the Fund grows with its
shareholders.
BENEFITS TO THE MANAGER. The Board considered information regarding the
Manager's costs in serving as the Fund's investment adviser, including the costs
associated with the personnel and systems necessary to manage the Fund, and
information regarding the Manager's profitability from its relationship with the
Fund. The Board considered that the Manager must be able to pay and retain
experienced professional personnel at competitive rates to provide services to
the Fund and that maintaining the financial viability of the Manager is
important in order for the Manager to continue to provide significant services
to the Fund and its shareholders. In addition to considering the profits
realized by the Manager, the Board considered information regarding the direct
and indirect benefits the Manager receives as a result of its relationship with
the Fund, including compensation paid to the Manager's affiliates for services
provided and research provided to the Manager in connection with permissible
brokerage arrangements (soft dollar arrangements).
CONCLUSIONS. These factors were also considered by the independent
Directors meeting separately from the full Board, assisted by experienced
counsel to the Fund and the independent Directors. Fund counsel is independent
of the Manager within the meaning and intent of the Securities and Exchange
Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Directors,
concluded that the nature, extent and quality of the services provided to the
Fund by the Manager are a benefit to the Fund and in the best interest of the
Fund's shareholders and that the amount and structure of the compensation
received by the Manager and its affiliates, are reasonable in relation to the
services provided. Accordingly, the Board elected to continue the Agreement for
another year. In arriving at this decision, the Board did not single out any
factor or factors as being more important than others, but considered all of the
factors together. The Board judged the terms and conditions of the Agreement,
including the management fee, in light of all of the surrounding circumstances.
49 | OPPENHEIMER EQUITY INCOME FUND, INC.
DIRECTORS AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
FUND, LENGTH OF SERVICE, AGE PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH DIRECTOR IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
DIRECTORS 80112-3924. EACH DIRECTOR SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
THOMAS W. COURTNEY, Principal of Courtney Associates, Inc. (venture capital firm) (since 1982); General Partner of
Chairman of the Board of Trivest Venture Fund (private venture capital fund); President of Investment Counseling Federated
Directors (since 2001), Investors, Inc. (1973-1982); Trustee of the following open-end investment companies: Cash Assets
Director (since 1996) Trust (1984), Premier VIT (formerly PIMCO Advisors VIT), Tax Free Trust of Arizona (since 1984)
Age: 74 and four funds for the Hawaiian Tax Free Trust. Oversees 11 portfolios in the OppenheimerFunds
complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Director (since 2005) management company) (since January 2004); President of The Community Reinvestment Act Qualified
Age: 67 Investment Fund (investment management company) (since January 2004); Independent Chairman of the
Board of Trustees of Quaker Investment Trust (registered investment company) (since January 2004);
Director of Internet Capital Group (information technology company) (since October 2003); Chief
Operating Officer and Chief Financial Officer of Lincoln National Investment Companies, Inc.
(subsidiary of Lincoln National Corporation, a publicly traded company) and Delaware Investments
U.S., Inc. (investment management subsidiary of Lincoln National Corporation) (1993-2003);
President, Chief Executive Officer and Trustee of Delaware Investment Family of Funds (1993-2003);
President and Board Member of Lincoln National Convertible Securities Funds, Inc. and the Lincoln
National Income Funds, TDC (1993-2003); Chairman and Chief Executive Officer of Retirement
Financial Services, Inc. (registered transfer agent and investment adviser and subsidiary of
Delaware Investments U.S., Inc.) (1993-2003); President and Chief Executive Officer of Delaware
Service Company, Inc. (1995-2003); Chief Administrative Officer, Chief Financial Officer, Vice
Chairman and Director of Equitable Capital Management Corporation (investment subsidiary of
Equitable Life Assurance Society) (1985-1992); Corporate Controller of Merrill Lynch & Company
(financial services holding company) (1977-1985); held the following positions at the Colonial
Penn Group, Inc. (insurance company): Corporate Budget Director (1974-1977), Assistant Treasurer
(1972-1974) and Director of Corporate Taxes (1969-1972); held the following positions at Price
Waterhouse & Company (financial services firm): Tax Manager (1967-1969), Tax Senior (1965-1967)
and Staff Accountant (1963-1965); United States Marine Corps (1957-1959). Oversees 63 portfolios
in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 63 portfolios in the OppenheimerFunds
Director (since 1998) complex.
Age: 74
LACY B. HERRMANN, Founder and Chairman Emeritus of Aquila Group of Funds (open-end investment company) (since
Director (since 1996) December 2004); Chairman of Aquila Management Corporation and Aquila Investment Management LLC
Age: 78 (since August 1984); Chief Executive Officer and President of Aquila Management Corporation
(August 1984-December 1994); Vice President, Director and Secretary of Aquila Distributors, Inc.
(distributor of Aquila Management Corporation); Treasurer of Aquila Distributors, Inc.; President
and Chairman of the Board of Trustees of Capital Cash Management Trust ("CCMT"); President and
Director of STCM Management Company, Inc. (sponsor and adviser to CCMT); Chairman,
50 | OPPENHEIMER EQUITY INCOME FUND, INC.
LACY B. HERRMANN, President and Director of InCap Management Corporation; Sub-Advisor and Administrator of Prime
Continued Cash Fund & Short Term Asset Reserves; Director of OCC Cash Reserves, Inc. (open-end investment
company) (June 2003-December 2004); Trustee of Premier VIT (formerly PIMCO Advisors VIT)
(investment company) (since 1994); Trustee of OCC Accumulation Trust (open-end investment company)
(until December 2004); Trustee Emeritus of Brown University (since June 1983). Oversees 11
portfolios in the OppenheimerFunds complex.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Director of Special
Director (since 2001) Value Opportunities Fund, LLC (registered investment company) (since September 2004); Member of
Age: 64 Zurich Financial Services Investment Advisory Board (insurance) (since October 2004); Chairman
(since August 2007) and Trustee (since August 1991) of the Board of Governing Trustees of The
Jackson Laboratory (non-profit); Trustee of the Institute for Advanced Study (non-profit
educational institute) (since May 1992); Special Limited Partner of Odyssey Investment Partners,
LLC (private equity investment) (January 1999-September 2004); Trustee of Research Foundation of
AIMR (2000-2002) (investment research, non-profit); Governor, Jerome Levy Economics Institute of
Bard College (August 1990-September 2001) (economics research); Director of Ray & Berendtson, Inc.
(May 2000-April 2002) (executive search firm). Oversees 63 portfolios in the OppenheimerFunds
complex.
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR MR. MURPHY IS AN "INTERESTED DIRECTOR" BECAUSE HE IS AFFILIATED WITH THE MANAGER BY VIRTUE OF HIS
AND OFFICER POSITIONS AS AN OFFICER AND DIRECTOR OF THE MANAGER, AND AS A SHAREHOLDER OF ITS PARENT COMPANY.
THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK,
NEW YORK 10281-1008. MR. MURPHY SERVES AS A DIRECTOR FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of the
Director (since 2005) and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
President and Principal President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
Executive Officer (since 2001) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); Chairman and Director of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July
2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since July 2001); Director of the following investment advisory
subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management
Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real
Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company
(OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding
company parent of Babson Capital Management LLC) (since June 1995); Chairman (since October 2007)
and Member of the Investment Company Institute's Board of Governors (since October 2003). Oversees
102 portfolios in the OppenheimerFunds complex.
51 | OPPENHEIMER EQUITY INCOME FUND, INC.
DIRECTORS AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS OF THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. LEVINE, ZACK,
THE FUND GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY,
CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
MICHAEL S. LEVINE, Vice President of the Manager (since June 1998). A portfolio manager and officer of 2 portfolios
Vice President and in the OppenheimerFunds complex.
Portfolio Manager
(since 2007)
Age: 42
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of the Manager, OppenheimerFunds Distributor, Inc., Centennial Asset Management
Compliance Officer and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983).
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder
Financial & Accounting Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional
Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable
trust program established by the Manager) (since June 2003); Treasurer and Chief Financial
Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant
Treasurer of the following: OAC (since March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 102
portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2004) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2005) Financial Group LLC (May 2001-March 2003). An officer of 102 portfolios in the OppenheimerFunds
Age: 37 complex.
52 | OPPENHEIMER EQUITY INCOME FUND, INC.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Secretary (since 2001) Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel of
Age: 59 Centennial Asset Management Corporation (since December 2001); Senior Vice President and General
Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General
Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director
(since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice
President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director
of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General
Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since
December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments,
Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of OppenheimerFunds International Distributor
Limited (since December 2003); Senior Vice President (May 1985-December 2003). An officer of 102
portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004). An officer of 102
(since 2004) portfolios in the OppenheimerFunds complex.
Age: 39
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First Vice
Assistant Secretary President (2000-September 2004), Director (2000-September 2004) and Vice President (1998-2000) of
(since 2004) Merrill Lynch Investment Management. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 43
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2001) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 42 Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October 2003). An officer of 102
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S DIRECTORS AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
53 | OPPENHEIMER EQUITY INCOME FUND, INC.
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has determined that David Downes, a
member of the Board's Audit Committee, is an audit committee financial expert
and that Mr. Downes is "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $17,000 in fiscal 2007 and $12,500 in fiscal 2006.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $256,236 in fiscal 2007 and $216,204 in fiscal 2006 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: internal control reviews.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years to the registrant's investment adviser or any entity controlling,
controlled by, or under common control with the adviser that provides ongoing
services to the registrant.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and
other services to be provided by the principal accountants of the
registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next regularly
scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid
by the registrant to it principal accountant during the fiscal year in
which services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee
of the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $256,236 in fiscal 2007 and $216,204 in
fiscal 2006 to the registrant and the registrant's investment adviser
or any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h) No such services were rendered.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S AUDIT COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Audit Committee (the "Committee") will evaluate potential Board
candidates to assess their qualifications. The Committee shall have the
authority, upon approval of the Board, to retain an executive search firm
to assist in this effort. The Committee may consider recommendations by
business and personal contacts of current Board members and by executive
search firms which the Committee may engage from time to time and may also
consider shareholder recommendations. The Committee may consider the advice
and recommendation of the Funds' investment manager and its affiliates in
making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met by
a trustee nominee. In evaluating trustee nominees, the Committee considers,
among other things, an individual's background, skills, and experience;
whether the individual is an "interested person" as defined in the
Investment Company Act of 1940; and whether the individual would be deemed
an "audit committee financial expert" within the meaning of applicable SEC
rules. The Committee also considers whether the individual's background,
skills, and experience will complement the background, skills, and
experience of other nominees and will contribute to the Board. There are no
differences in the manner in which the Committee evaluates nominees for
trustees based on whether the nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates to
present to the Board and, in such cases where required, to shareholders.
Recommendations for trustee nominees should, at a minimum, be accompanied
by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person" as
defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in a
proxy statement concerning the person if he or she was nominated; and
o the name and address of the person submitting the recommendation and,
if that person is a shareholder, the period for which that person held
Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under the
Investment Company Act of 1940. In addition, certain other relationships
with Massachusetts Mutual Life Insurance Company or its subsidiaries, with
registered broker-dealers, or with the Funds' outside legal counsel may
cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving as
a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of 10/31/2007, the registrant's principal executive officer and
principal financial officer found the registrant's disclosure controls and
procedures to provide reasonable assurances that information required to be
disclosed by the registrant in the reports that it files under the Securities
Exchange Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure, and (b) is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Equity Income Fund, Inc.
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 12/11/2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 12/11/2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 12/11/2007