-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SOkQAZK07HBlkDEEw+5Kj1hl4nZw1Z3fq1gpf0jwrYDQKBk0RDL428UiwwTET/EB L7Vnh5DWferqSUa2TMNa+A== 0000912057-94-002968.txt : 19940908 0000912057-94-002968.hdr.sgml : 19940908 ACCESSION NUMBER: 0000912057-94-002968 CONFORMED SUBMISSION TYPE: N-30D/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER INTEGRITY FUNDS CENTRAL INDEX KEY: 0000701265 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 042912220 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-03420 FILM NUMBER: 94548210 BUSINESS ADDRESS: STREET 1: 3410 S GALENA CITY: DENVER STATE: CO ZIP: 80231 BUSINESS PHONE: 3036713200 MAIL ADDRESS: STREET 2: 3410 SOUTH GALENA STREET 3RD FL CITY: DENVER STATE: CO ZIP: 80231 FORMER COMPANY: FORMER CONFORMED NAME: MASSMUTUAL INTEGRITY FUNDS DATE OF NAME CHANGE: 19910329 FORMER COMPANY: FORMER CONFORMED NAME: MASSMUTUAL LIQUID ASSETS TRUST DATE OF NAME CHANGE: 19880403 N-30D/A 1 N-30D OPPENHEIMER INVESTMENT GRADE BOND FUND SEMI-ANNUAL REPORT JUNE 30, 1994 [Logo] OPPENHEIMERFUNDS "WE NEED HIGH INCOME, BUT NOT A LOT OF RISK. "WE'RE SATISFIED WITH THIS FUND BECAUSE OF THE INCOME IT HAS GIVEN US. AND WE FEEL COMFORTABLE INVESTING IN A FUND THAT HAS AN INVESTMENT GRADE PORTFOLIO." FUND FACTS IN THIS REPORT: ANSWERS TO TIMELY QUESTIONS YOU SHOULD ASK YOUR FUND'S MANAGERS. - - DID THE FEDERAL RESERVE'S MOVES TO RAISE SHORT-TERM INTEREST RATES AFFECT THE FUND'S INVESTMENT STRATEGY? - - HAS THE FUND CHANGED ITS INVESTMENT MIX SIGNIFICANTLY? FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT OPPENHEIMER INVESTMENT GRADE BOND FUND 1 The Fund's investment objective is to seek high current income, consistent with prudent investment risk and stability of capital. 2 The standardized yield for the 30-day period ended June 30, 1994 was 5.77% for Class A shares and 5.28% for Class B shares.(1) 3 Total return at net asset value for the 6-month period ended June 30, 1994 was -4.52% for Class A shares and -4.82% for Class B shares.(2) 4 Average annual total returns for Class A shares for the 1- and 5-year periods ended June 30, 1994 and since inception of the Fund on April 15, 1988 were -6.77%, 6.59%, and 7.24%, respectively. Average annual total returns for Class B shares for the 1-year period ended June 30, 1994 and since inception on May 1, 1993 were -7.74% and -4.36%, respectively.(3) 5 To meet its investment objective, the Fund has the flexibility to shift assets between sectors of the investment grade fixed income market shown in the portfolio allocation on June 30, 1994:(4) [Graph] U.S. TREASURY NOTES AND BONDS 37.7% U.S. CORPORATE BONDS 27.4% CASH EQUIVALENTS 16.7% MORTGAGE BACKED AND ASSET-BASED SECURITIES 12.7% MUNICIPALS (TAXABLE) 3.5% FOREIGN FIXED INCOME SECURITIES 2.0% 6 "Our outlook for the investment grade bond market is positive. We believe that interest rates should remain relatively stable in the second half of 1994. The U.S. economy is growing at a moderate pace and inflation remains subdued." MARY WILSON, MASSACHUSETTS MUTUAL LIFE INSURANCE CO., THE FUND'S SUB-ADVISOR (1) Standardized yield is net investment income calculated on a yield to maturity basis for the 30-day period ended 6/30/94, divided by the maximum offering price at the end of the period, compounded semi-annually and then annualized. Falling net asset values will tend to artificially raise yields. (2) Based on the change in net asset value per share, without deducting any sales charges. (3) Average annual total returns are based on a hypothetical investment held until 6/30/94, after deducting the maximum initial sales charge of 4.75% for Class A shares and the contingent deferred sales charge of 5% (1 year) and 4% (since inception) for Class B shares. (4) The Fund's portfolio is subject to change. All figures assume reinvestment of dividends and capital gains distributions. Past performance is not indicative of future results. Investment return and principal value on an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. 2 Oppenheimer Investment Grade Bond Fund REPORT TO SHAREHOLDERS We are pleased to report that Oppenheimer Investment Grade Bond Fund met its objective of providing high current income to its shareholders from a diversified portfolio of investment grade fixed income securities. In the past six months, interest rate increases affected the fixed income markets. From early February through mid-May, the Federal Reserve Board increased rates four times in anticipation of rising inflation based on strong economic growth in late 1993. When interest rates rise, bond prices tend to fall; thus, the Fed's actions caused price volatility in the bond markets. And the prices of longer-term bonds fell significantly because they are more sensitive to interest rate changes than shorter-term bonds. While the allocation of the assets in the Fund's portfolio did not change significantly during this uncertain economic period, the managers took steps late in 1993 to prepare the Fund for the possibility of interest rate increases. For example, in the U.S. Treasury sector of the portfolio, they emphasized shorter-term Treasuries to help reduce the impact of rising rates on the Fund. In the corporate bond sector of the portfolio, the Fund's managers maintained investments in or purchased bonds of companies they expected would do well as the economy gradually improves. As the economy strengthens, the credit ratings of these companies should improve and the value of their bonds should then increase. Oppenheimer Investment Grade Bond Fund managers are encouraged by several economic factors that they believe will have a positive effect on the Fund. First, despite recent increases, interest rates should stabilize as investors realize that inflation is not increasing dramatically. Second, U.S. companies have virtually stopped issuing new bonds because increased interest rates make it unattractive to issue new debt. Your managers believe that this can cause the value of many corporate bonds, like those in the Fund's portfolio, to increase because investor demand will be higher than supply. Thank you for your trust in Oppenheimer Investment Grade Bond Fund. We look forward to continuing to help you meet your financial goals. James C. Swain Jon S. Fossel Chairman President Oppenheimer Integrity Oppenheimer Integrity Funds for Oppenheimer Funds for Oppenheimer Investment Grade Bond Fund Investment Grade Bond Fund July 22, 1994 3 Oppenheimer Investment Grade Bond Fund - ------ Statement of Investments June 30, 1994 (Unaudited) Face Market Value Amount See Note 1 - ------ Short-Term Securities: Commercial Paper--17.9% - ------ Borden, Inc., 4.60%, 7/28/94 $2,500,000 $2,491,375 - ------ Detroit Edison Co., 4.55%, 7/7/94 2,285,000 2,283,267 - ------ Electronic Data Systems Corp., 4.32%, 7/19/94 1,215,000 1,214,258 - ------ Indiana & Michigan Power Co., 4.45%, 7/14/94 2,300,000 2,296,304 - ------ Mattel, Inc., 4.43%, 7/1/94 1,535,000 1,535,000 - ------ ORIX America, Inc., 4.50%, 7/12/94 2,415,000 2,411,679 - ------ Public Service Electric and Gas Co., 4.43%, 7/8/94 2,395,000 2,392,937 - ------ Ryder System, Inc., 4.45%, 7/11/94 1,555,000 1,553,078 - ------ TJX Cos., Inc., 4.43%, 7/5/94 2,350,000 2,348,843 - ------ Total Short-Term Securities: Commercial Paper (Cost $18,526,741) 18,526,741 - ------ Government Obligations--59.4% - ------ Agency: Full Faith And Credit--3.8% Allentown, Pennsylvania, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 65,000 68,523 - ------ Babylon, New York, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 115,000 107,933 - ------ Bakersfield, California, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 255,000 239,329 - ------ Boston, Massachusetts, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 795,000 746,144 - ------ Buena Vista Township, New Jersey, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 270,000 253,407 - ------ Buffalo, New York, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 400,000 375,418 - ------ Detroit, Michigan, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 405,000 380,111 - ------ Fajardo, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 300,000 316,261 - ------ New Haven, Connecticut, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 400,000 421,682 - ------ Roanoke, Virginia, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 220,000 206,480 - ------ Sacramento County, California, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 240,000 225,251 - ------ Tacoma, Washington, 5.93% U.S. Government Nts., Series A, 8/1/99 165,000 154,860 - ------ Trenton, New Jersey, 5.93% U.S. Government Gtd. Nts., Series A, 8/1/99 135,000 126,704 - ------ Tujillo Alto, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 235,000 247,738 - ------ 3,869,841 - ------ Collateralized Mortgage Obligations/Government--5.9% Federal Home Loan Mortgage Corp.: 7.50% Collateralized Mortgage Obligation Gtd. Multiclass Mortgage Participation Certificates, 2/15/07 2,000,000 1,980,660 7% Gtd. Multiclass Mortgage Participation Certificates, Series 1460, Cl. 1460-H, 5/15/07 1,500,000 1,430,745 - ------ Federal National Mortgage Assn., 57.10% Interest-Only Collateralized Mortgage Obligation Gtd. Real Estate Mortgage Investment Conduit Pass-Through Certificates, 10/25/22(1) 626,125 472,725 - ------ JHM Acceptance Corp., 8.96% Collateralized Mortgage Obligation Bonds, Series E, Cl. E-6, 4/1/19 2,000,000 2,063,340 - ------ Morgan Stanley Mortgage Trust 28, 8% Collateralized Mortgage Obligation Bonds, Series 28, Cl. 28-5, 12/1/15 118,774 119,064 - ------ 6,066,534 4 Oppenheimer Investment Grade Bond Fund - ------ Face Market Value Amount See Note 1 - ------ Mortgage-Backed Securities--6.9% Federal Home Loan Mortgage Corp.: 13.50%, 11/1/10 $106,405 $120,390 12.50%, 4/1/14 56,069 62,842 9% Certificates of Participation, 3/1/17 873,288 898,430 - ------ Federal National Mortgage Assn., 8% Gtd. Mortgage Pass-Through Certificates, 8/1/17 1,234,522 1,255,694 - ------ Government National Mortgage Assn: 12%, 1/15/99 99,990 108,836 8%, 6/15/05 385,434 392,288 8%, 7/15/05 711,874 724,533 8%, 8/15/05 303,068 308,458 8%, 9/15/05 546,069 555,778 8%, 10/15/05 261,337 265,985 8%, 7/15/06 411,920 418,540 8%, 10/15/06 395,944 402,307 9%, 2/15/09 263,647 275,437 9%, 3/15/09 222,275 232,214 9%, 5/15/09 34,020 35,541 9%, 6/15/09 161,936 169,177 10%, 11/15/09 766,829 821,060 15%, 2/15/12 26,315 30,731 12%, 5/15/14 2,202 2,486 12.75%, 6/15/15 44,390 50,272 - ------ 7,130,999 - ------ Treasury--40.7% U.S. Treasury Bonds: 7.875%, 2/15/21 900,000 913,781 8%, 11/15/21 2,000,000 2,066,250 7.25%, 8/15/22 7,600,000 7,227,120 7.125%, 2/15/23 4,000,000 3,743,748 - ------ U.S. Treasury Nts.: 8.50%, 7/15/97 6,925,000 7,292,891 7%, 4/15/99 11,700,000 11,729,250 5.875%, 2/15/04 10,000,000 8,990,619 - ------ 41,963,659 - ------ Foreign Government Bonds and Notes--2.1% Iceland (Republic of) Nts., 6.125%, 2/1/04 2,500,000 2,208,917 - ------ Total Government Obligations (Cost $64,739,574) 61,239,950 - ------ Asset-Backed Securities--0.9% - ------ Auto Receivables--0.9% General Motors Acceptance Corp., Grantor Trust, Series 1992-E, Cl. A, 4.75%, 8/15/97 631,077 623,479 - ------ Select Auto Receivable Trust, Series 1991-2 Asset Backed Certificates, Cl. A, 7.65%, 7/15/96 314,283 315,767 - ------ Total Asset-Backed Securities (Cost $947,928) 939,246 - ------ Corporate Bonds and Notes--29.5% - ------ Aerospace--2.7% McDonnell Douglas Corp., 8.25% Nts., 7/1/00 2,750,000 2,788,272 - ------ Airlines--1.4% United Air Lines, Inc., 10.11% 1991 Equipment Trust Certificates, Series B, 2/19/06 1,449,687 1,420,205 5 Oppenheimer Investment Grade Bond Fund - ------ Statement of Investments June 30, 1994 (Unaudited) (Continued) Face Market Value Amount See Note 1 - ------ Automobiles, Trucks and Parts--1.1% Chrysler Corp., 10.40% Nts., 8/1/99 $1,000,000 $1,083,190 - ------ Broker/Dealers--1.3% Goldman Sachs Group, L.P., 6.20% Nts., 2/15/01 1,500,000 1,383,750 - ------ Electronics--1.0% Thomas & Betts Corp., 8.25% Sr. Nts., 1/15/04 1,000,000 1,005,759 - ------ Financial/Insurance--3.8% Ford Motor Credit Co., 9.90% Med.-Term Nts., 11/6/97 2,000,000 2,132,998 - ------ Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 1,782,452 - ------ 3,915,450 - ------ Food and Restaurants--1.0% Wendy's International, Inc., 12.125% Debs., 4/1/95 1,000,000 1,038,389 - ------ Healthcare/Medical Products--1.5% Baxter International, Inc., 9.25% Nts., 9/15/96 1,000,000 1,049,847 - ------ Imcera Group, Inc., 6% Nts., 10/15/03 500,000 435,966 - ------ 1,485,813 - ------ Hotels/Motels--1.3% Marriott International, Inc., 6.75% Sr. Nts., Series A, 12/15/03 1,500,000 1,358,592 - ------ Leisure/Entertainment--1.0% Toro Co. (The), 11% Debs., 8/1/17 1,000,000 1,035,000 - ------ Manufacturing: Diversified--0.5% Textron, Inc., 9.55% Med.-Term Nts., 3/19/01 500,000 545,687 - ------ Media--2.3% News America Holdings, Inc., 7.50% Gtd. Sr. Nts., 3/1/00 2,500,000 2,403,287 - ------ Metals/Mining--3.5% AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000 1,080,208 - ------ Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,016,198 - ------ Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,525,525 - ------ 3,621,931 - ------ Oil and Gas: Integrated--3.0% Union Oil Co. of California: 9.625% Gtd. Debs., 5/15/95 1,500,000 1,543,169 8.75%, Nts., 8/15/01 1,500,000 1,569,610 - ------ 3,112,779 - ------ Paper and Forest Products--1.6% Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000 1,654,027 - ------ Railroads/Equipment--2.5% CSX Corp., 9.50% Sr. Nts., 11/15/95 2,500,000 2,606,115 - ------ Total Corporate Bonds and Notes (Cost $31,390,196) 30,458,246 - ------ Total Investments, at Value (Cost $115,604,439) 107.7% 111,164,183 - ------ Liabilities in Excess of Other Assets (7.7) (7,969,106) - ------ ------ Net Assets 100.0% $103,195,077 - ------ ------ - ------ ------ 1. Interest rate resets monthly, inversely related to LIBOR. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities are subject to the risk of accelerated principal paydowns as interest rates decline. The principal amount represents the notional amount on which current interest is calculated. See accompanying Notes to Financial Statements. 6 Oppenheimer Investment Grade Bond Fund - ------ Statement of Assets and Liabilities June 30, 1994 (Unaudited) - ------ Assets Investments, at value (cost $115,604,439)- - -see accompanying statement $111,164,183 - ------ Receivables: Interest 1,780,905 Shares of beneficial interest sold 114,247 Investments sold 17,999 - ------ Other 30,129 - ------ Total assets 113,107,463 - ------ Liabilities Bank overdraft 34,672 Payables and other liabilities: Investments purchased 8,931,250 Shares of beneficial interest redeemed 219,557 Dividends 215,993 Distribution and service plan fees--Note 4 136,189 Deferred trustee fees--Note 5 18,867 Other 355,858 - ------ Total liabilities 9,912,386 - ------ Net Assets $103,195,077 - ------ - ------ - ------ Composition of Net Assets Paid-in capital $110,143,628 - ------ Undistributed net investment income 42,134 - ------ Accumulated net realized loss from investment transactions (2,550,429) - ------ Net unrealized depreciation on investments--Note 3 (4,440,256) - ------ Net assets $103,195,077 - ------ - ------ - ------ Net Asset Value Per Share Class A Shares: Net asset value and redemption price per share (based on net assets of $100,263,452 and 9,727,527 shares of beneficial interest outstanding) $10.31 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $10.82 - ------ Class B Shares: Net asset value, redemption price and offering price per share (based on net assets of $2,931,625 and 284,361 shares of beneficial interest outstanding) $10.31 See accompanying Notes to Financial Statements. 7 Oppenheimer Investment Grade Bond Fund - ------ Statement of Operations For the Six Months Ended June 30, 1994 (Unaudited) - ------ Investment Income Interest $3,833,450 - ------ Expenses Management fees--Note 4 265,913 - ------ Distribution and service plan fees: Class A--Note 4 125,172 Class B--Note 4 11,017 - ------ Transfer and shareholder servicing agent fees--Note 4 112,347 - ------ Shareholder reports 77,393 - ------ Custodian fees and expenses 11,902 - ------ Legal and auditing fees 7,844 - ------ Trustees' fees and expenses 4,649 - ------ Registration and filing fees--Class B 423 - ------ Other 11,515 - ------ Total expenses 628,175 - ------ Net Investment Income 3,205,275 - ------ Realized and Unrealized Loss on Investments Net realized loss on investments (1,069,865) - ------ Net change in unrealized appreciation or depreciation on investments (7,156,380) Net realized and unrealized loss on investments (8,226,245) - ------ Net Decrease in Net Assets Resulting From Operations $(5,020,970) - ------ - ------ See accompanying Notes to Financial Statements. 8 Oppenheimer Investment Grade Bond Fund - ------ Statements of Changes in Net Assets Six Months Ended Year Ended June 30, 1994 December 31, (Unaudited) 1993 - ------ Operations Net investment income $3,205,275 $6,955,080 - ------ Net realized gain (loss) on investments (1,069,865) 3,772,429 - ------ Net change in unrealized appreciation or depreciation on investments (7,156,380) 22,233 - ------ ------ Net increase (decrease) in net assets resulting from operations (5,020,970) 10,749,742 - ------ Dividends to Shareholders Dividends from net investment income: Class A ($.3133 and $.707 per share, respectively) (3,087,280) (7,067,709) Class B ($.2702 and $.420 per share, respectively) (61,921) (33,652) - ------ Beneficial Interest Transactions Net increase (decrease) in net assets resulting from Class A beneficial interest transactions--Note 2 (2,514,034) 802,199 - ------ Net increase in net assets resulting from Class B beneficial interest transactions--Note 2 1,310,897 1,828,205 - ------ Net Assets Total increase 9,373,308 6,278,785 - ------ Beginning of period 112,568,385 106,289,600 - ------ ------ End of period (including undistributed (overdistributed) net investment income of $42,134 and $(56,074), respectively) $103,195,077 $112,568,385 - ------ ------ - ------ ------ See accompanying Notes to Financial Statements. 9 Oppenheimer Investment Grade Bond Fund - ------ Financial Highlights Class A Class B - ------ ------ Six Months Six Months Ended Year Ended Ended Period Ended June 30, 1994 December 31, June 30, 1994 December 31, (Unaudited) 1993 1992 1991 1990 1989 (Unaudited) 1993(1) - ------ Per Share Operating Data: Net asset value, beginning of period $11.12 $10.74 $10.80 $9.86 $10.29 $10.12 $11.11 $11.10 - ------ Income (loss) from investment operations: Net investment income .32 .69 .75 .82 .88(3) .92 .28 .40 Net realized and unrealized gain (loss) on investments (.82) .40 (.05) .90 (.43) .19 (.81) .03 - ------ ------ ------ ------ ------ ------ ------ - ------ Total income (loss) from investment operations (.50) 1.09 .70 1.72 .45 1.11 (.53) .43 - ------ Dividends from net investment income (.31) (.71) (.76) (.78) (.88) (.94) (.27) (.42) - ------ Net asset value, end of period $10.31 $11.12 $10.74 $10.80 $9.86 $10.29 $10.31 $11.11 - ------ ------ ------ ------ ------ ------ ------ - ------ - ------ ------ ------ ------ ------ ------ ------ - ------ - ------ Total Return, at Net Asset Value(4) (4.52)% 10.30% 6.77% 18.28% 4.74% 11.31% (4.82)% 3.91% - ------ Ratios/Supplemental Data: Net assets, end of period (in thousands) $100,263 $110,759 $106,290 $90,623 $87,021 $96,380 $2,932 $1,809 - ------ Average net assets (in thousands) $105,561 $111,702 $98,672 $86,471 $90,065 $100,891 $2,424 $922 - ------ Number of shares outstanding at end of period (in thousands) 9,728 9,963 9,899 8,390 8,829 9,369 284 163 - ------ Ratios to average net assets: Net investment income 6.00%(5) 6.20% 7.00% 8.02% 8.85% 8.85% 5.27%(5) 4.80%(5) Expenses 1.16%(5) 1.06% 1.10% 1.23% 1.24%(3) 1.14% 1.86%(5) 1.90%(5) - ------ Portfolio turnover rate(6) 38.8% 110.1% 116.4% 97.1% 80.4% 41.3% 38.8% 110.1% 1. For the period from May 1, 1993 (inception of offering) to December 31, 1993. 2. On March 28, 1991, Oppenheimer Management Corporation became the investment advisor to the Fund. 3. Net investment income would have been $.87 absent the voluntary expense limitation, resulting in an expense ratio of 1.26%. 4. Assumes a hypothetical initial 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. 5. Annualized. 6. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities) for the six months ended June 30, 1994 were $38,796,999 and $44,109,532, respectively. See accompanying Notes to Financial Statements. 10 Oppenheimer Investment Grade Bond Fund - ------ Notes to Financial Statements (Unaudited) - ------ 1. Significant Accounting Policies Oppenheimer Investment Grade Bond Fund (the Fund) is a separate fund of Oppenheimer Integrity Funds, a diversified, open-end management Investment company registered under the Investment Company Act of 1940, as amended. The Fund's investment advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class B shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own distribution and/or service plan, expenses directly attributable to a particular class and exclusive voting rights with respect to matters affecting a single class. 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. - ------ Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York time) on each trading day. Long-term debt securities are valued by a portfolio pricing service approved by the Board of Trustees. Long-term debt securities which cannot be valued by the approved portfolio pricing service are valued by averaging the mean between the bid and asked prices obtained from two active market makers in such securities. Short-term debt securities having a remaining maturity of 60 days or less are valued at cost (or last determined market value) adjusted for amortization to maturity of any premium or discount. Securities for which market quotes are not readily available are valued under procedures established by the Board of Trustees to determine fair value in good faith. - ------ Allocation of Income, Expenses and Gains and Losses. Income, expenses (other than those attributable to a specific class) and gains and losses are allocated daily 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 Income Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income, including any net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal income tax provision is required. At June 30, 1994, the Fund had available for federal income tax purposes an unused capital loss carryover of approximately $1,400,000, $442,000 of which will expire in 1997 and $958,000 in 1998. - ------ Distributions to Shareholders. The Fund intends to declare dividends separately for Class A and Class B shares from net investment income each day the New York Stock Exchange is open for business and pay such dividends monthly. Distributions from net realized gains on investments, if any, will be declared at least once each year. - ------ Change in Accounting for Distributions to Shareholders. Effective January 1, 1994, the Fund adopted Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. As a result, the Fund changed the classification of distributions to shareholders to better disclose the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, subsequent to December 31, 1993, amounts have been reclassified to reflect a decrease in paid-in capital of $29,803, an increase in undistributed net investment income of $42,134, and an increase in undistributed capital loss on investments of $12,331. - ------ Other. Investment transactions are accounted for on the date the investments are purchased or sold (trade date). Discount on securities purchased is amortized over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. 11 Oppenheimer Investment Grade Bond Fund - ------ Notes to Financial Statements (Unaudited) (Continued) - ------ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows: Six Months Ended June 30, 1994 Year Ended December 31, 1993(1) - ------ ------ Shares Amount Shares Amount - ------ Class A: Sold 581,315 $6,249,881 2,953,788 $33,325,053 Dividends reinvested 142,773 1,519,216 259,953 2,897,712 Redeemed (959,863) (10,283,131) (3,149,098) (35,420,566) - ------ ------ ------ ------ Net increase (decrease) (235,775) $(2,514,034) 64,643 $802,199 - ------ ------ ------ ------ - ------ ------ ------ ------ - ------ Class B: Sold 176,471 $1,897,996 195,606 $2,198,191 Dividends reinvested 4,449 47,055 2,293 25,726 Redeemed (59,397) (634,154) (35,061) (395,712) - ------ ------ ------ ------ Net increase 121,523 $1,310,897 162,838 $1,828,205 - ------ ------ ------ ------ - ------ ------ ------ ------ 1. For the year ended December 31, 1993 for Class A shares and for the period from May 1, 1993 (inception of offering) to December 31, 1993 for Class B shares. - ------ 3. Unrealized Gains and Losses on Investments At June 30, 1994, net unrealized depreciation on investments of $4,440,256 was composed of gross appreciation of $991,366, and gross depreciation of $5,431,622. - ------ 4. Management Fees And Other Transactions With Affiliates Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for annual fee of .50% on the first $100 million of net assets with a reduction of .05% on each $200 million thereafter, to .35% on net assets in excess of $500 million. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions) exceed the most stringent applicable regulatory limit on Fund expenses. For the six months ended June 30, 1994, commissions (sales charges paid by investors) on sales of Class A shares totaled $96,318, of which $46,514 was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. During the six months ended June 30, 1994, OFDI received contingent deferred sales charges of $3,348 upon redemption of Class B shares, as reimbursement for sales commissions advanced by OFDI at the time of sale of such shares. Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and shareholder servicing agent for the Fund, and for other registered investment companies. OSS's total costs of providing such services are allocated ratably to these companies. Under separate approved plans, each class may expend up to .25% of its net assets annually to reimburse OFDI for costs incurred in connection with the personal service and maintenance of accounts that hold shares of the Fund, including amounts paid to brokers, dealers, banks and other institutions. In addition, Class B shares are subject to an asset-based sales charge of .75% of net assets annually, to reimburse OFDI for sales commissions paid from its own resources at the time of sale and associated financing costs. In the event of termination or discontinuance of the Class B plan, the Board of Trustees may allow the Fund to continue payment of the asset-based sales charge to OFDI for distribution expenses incurred on Class B shares sold prior to termination or discontinuance of the plan. During the six months ended June 30, 1994, OFDI paid $81,165 to an affiliated broker/dealer as reimbursement for Class A personal service and maintenance expenses and retained $12,718 as reimbursement for Class B sales commissions and service fee advances, as well as financing costs. - ------ 5. Deferred Trustee Compensation A former trustee elected to defer receipt of fees earned. These deferred fees earn interest at a rate determined by the current Board of Trustees at the beginning of each calendar year, compounded each quarter-end. As of June 30, 1994, the Fund was incurring interest at a rate of 5.22% per annum. Deferred fees are payable in annual installments, with accrued interest, each April 1 through 1995. 12 Oppenheimer Investment Grade Bond Fund - ------ Oppenheimer Investment Grade Bond Fund A Series of Oppenheimer Integrity Funds - ------ Officers and Trustees James C. Swain, Chairman and Chief Executive Officer Robert G. Avis, Trustee William A. Baker, Trustee Charles Conrad, Jr., Trustee Jon S. Fossel, Trustee and President Raymond J. Kalinowski, Trustee C. Howard Kast, Trustee Robert M. Kirchner, Trustee Ned M. Steel, Trustee Andrew J. Donohue, Vice President Mary E. Wilson, Vice President George C. Bowen, Vice President, Secretary and Treasurer Robert J. Bishop, Assistant Treasurer Scott Farrar, Assistant Treasurer Robert G. Zack, Assistant Secretary - ------ Investment Advisor Oppenheimer Management Corporation - ------ Sub-Advisor Massachusetts Mutual Life Insurance Company - ------ Distributor Oppenheimer Funds Distributor, Inc. - ------ Transfer and Shareholder Servicing Agent Oppenheimer Shareholder Services - ------ Custodian of Portfolio Securities The Bank of New York - ------ Independent Auditors Deloitte & Touche - ------ Legal Counsel Myer, Swanson & Adams, P.C. The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors. This is a copy of a report to shareholders of Oppenheimer Investment Grade Bond Fund. This report must be preceded by a Prospectus of Oppenheimer Investment Grade Bond Fund. For material information concerning the Fund, see the Prospectus. 13 Oppenheimer Investment Grade Bond Fund - ------ The Family of OppenheimerFunds - ------ OppenheimerFunds offers over 30 funds designed to fit virtually every investment goal. Whether you're investing for retirement, your children's education, or tax-free income, we have the funds to help you seek your objective. When you invest with OppenheimerFunds, you can feel comfortable knowing that you are investing with a respected financial institution with over 30 years of experience in helping people just like you reach their financial goals. And you're investing with a leader in global, growth stock, and flexible fixed income investments--with over 1.8 million shareholder accounts and more than $26 billion under Oppenheimer's management and that of our affiliates. As an OppenheimerFunds shareholder, you can easily exchange shares of eligible funds of the same class by mail or by telephone for a small administrative fee.1 For more information on OppenheimerFunds, please contact your financial advisor or call us at 1-800-525-7048 for a prospectus. You may also write us at the address shown on the back cover. As always, please read the prospectus carefully before you invest. - ------ Specialty Stock Fund Gold & Special Minerals Fund - ------ Stock Funds Discovery Fund Global Fund Time Fund Oppenheimer Fund Target Fund Value Stock Fund Special Fund - ------ Stock and Bond Funds Main Street Income & Growth Fund Total Return Fund Global Growth & Income Fund Equity Income Fund Asset Allocation Fund - ------ Bond Funds High Yield Fund Champion High Yield Fund Strategic Income & Growth Fund Strategic Income Fund Strategic Diversified Income Fund Strategic Investment Grade Bond Fund Strategic Short-Term Income Fund Investment Grade Bond Fund Mortgage Income Fund U.S. Government Trust Limited-Term Government2 - ------ Tax-Exempt Funds New York Tax-Exempt Fund3 California Tax-Exempt Fund3 Pennsylvania Tax-Exempt Fund3 Florida Tax-Exempt Fund3 New Jersey Tax-Exempt Fund3 Tax-Free Bond Fund Insured Tax-Exempt Bond Fund Intermediate Tax-Exempt Bond Fund - ------ Money Market Funds Money Market Fund Cash Reserves 1. The fee is waived for PhoneLink exchanges between existing accounts. Exchange privileges are subject to change or termination. 2. Formerly Government Securities Fund. 3. Available only to residents of those states. OppenheimerFunds are distributed by Oppenheimer Funds Distributor, Inc., Two World Trade Center, New York, NY 10048-0203. (C) Copyright 1994 Oppenheimer Management Corporation. All rights reserved. 14 Oppenheimer Investment Grade Bond Fund "HOW MAY I HELP YOU?" GENERAL INFORMATION 1-800-525-7048 Talk to a Customer Service Representative. Monday through Friday from 8:30 a.m. to 8:00 p.m., and Saturday from 10:00 a.m. to 2:00 p.m. ET. TELEPHONE TRANSACTIONS 1-800-852-8457 Make account transactions with a Customer Service Representative. Monday through Friday from 8:30 a.m. to 8:00 p.m. ET. PHONELINK 1-800-533-3310 Get automated information or make automated transactions. 24 hours a day, 7 days a week. TELECOMMUNICATION DEVICE FOR THE DEAF 1-800-843-4461 Service for the hearing impaired. Monday through Friday from 8:30 a.m. to 8:00 p.m. ET. OPPENHEIMERFUNDS INFORMATION HOTLINE 1-800-835-3104 Hear timely and insightful messages on the economy and issues that affect your finances. 24 hours a day, 7 days a week. "Just as OppenheimerFunds offers over 30 different mutual funds designed to help meet virtually every investment need, Oppenheimer Shareholder Services offers a variety of services to satisfy your individual needs. Whenever you require help, we're only a toll-free phone call away. "For personalized assistance and account information, call our General Information number to speak with our knowledgeable Customer Service Representatives and get the help you need. "When you want to make account transactions, it's easy for you to redeem shares, exchange shares, or conduct AccountLink transactions, simply by calling our Telephone Transactions number. "And for added convenience, OppenheimerFunds' PhoneLink, an automated voice response system is available 24 hours a day, 7 days a week. PhoneLink gives you access to a variety of fund, account, and market information. You can even make purchases, exchanges and redemptions using your touch-tone phone. Of course, PhoneLink will always give you the option to speak with a Customer Service Representative during the hours shown to the left. "When you invest in OppenheimerFunds, you know you'll receive a high level of customer service. The International Customer Service Association knows it, too, as it awarded Oppenheimer Shareholder Services a 1993 Award of Excellence for consistently demonstrating superior customer service. "Whatever your needs, we're ready to assist you." [Logo] 1993 AWARD OF EXCELLENCE ICSA International Customer Service Association [Photo] Barbara Hennigar Chief Executive Officer Oppenheimer Shareholder Services [Logo] OPPENHEIMER FUNDS Oppenheimer Funds Distributor, Inc. P.O. Box 5270 Denver, CO 80217-5270 Bulk Rate U.S. Postage PAID Permit No. 314 Farmingdale, NY -----END PRIVACY-ENHANCED MESSAGE-----